West Africa-focused Tullow Oil has reported another year of loss, making a third since 2019, though losses over the years continue to trend downwards.
Tullow Oil recorded a loss after tax of $81 million, down from $1.222 billion dollars in 2020 and $1.694 billion in 2019 due to exploration costs being written off, impairments, restructuring costs and other provisions. The company’s revenues for the year fell to $1.273 billion from $1.396 billion in 2020 and $1.683 billion in 2019.
For FY2021, Tullow Oil reported a free cash flow of $245 million, about 45 per cent down the previous year and broadly in line with guidance of $250 million. The company’s operating cash flow for the year was $711 million.
The company reiterated that its free cash flow would reach $100 million at an oil price of $75 per barrel, while it plans to spend a chunk of its capex amounting to $350 million in Ghana, and guided by an overall output of 55,000 to 61,000 barrels of oil equivalent per day. Meanwhile, this output guidance will be adjusted following the pre-emption of the sale of Occidental Petroleum’s interest in Ghana to Kosmos Energy.
That said, Tullow plans to operate three new wells at Jubilee and three new wells at the TEN fields, including two strategic wells at TEN to further define future development plans, as well as investment in infrastructure for the undeveloped Jubilee South East and North East areas.
Furthermore, the company plans to self-operate the Jubilee FPSO from mid-2022 onwards, following the scheduled end of the contract with MODEC, while enabling the Group realize efficiency improvements and cost savings.
Tullow expects that by year’s end, it will secure a gas commercialization agreement in Ghana which will come into effect once all foundation gas have been delivered.
Tullow Hedges Oil Price
Oil prices have risen to 14-year highs in recent months, with current benchmark price at around $130 per barrel, but Tullow hedges most of its price floors and ceilings to guard against price volatility. As a result, in 2021 it lost out on $153 million in revenue due to hedges, reporting a net debt of $2.1 billion, down from $2.376 billion in 2020.
Tullow averaged 42,500 bpd of its 2022 output at an average floor of $51/bbl and a ceiling of $78/bbl and around 33,100 bpd of next year’s output at $55 and $75 per barrel, with smaller production volumes hedged into 2024.
Rahul Dhir, Chief Executive Officer, Tullow Oil plc, said:
“Following a transformational 2021, in which Tullow successfully refinanced its balance sheet, drilled highly productive wells in Ghana and demonstrated operational excellence and financial discipline across the Group, we are now concentrating on the successful delivery of our long-term business plan.
“This year will see a great deal of activity at our flagship Jubilee field with investment in new infrastructure and new wells to grow production in the near term and we are taking on the operation and maintenance of the FPSO.
“At TEN, we will drill two important, strategic wells that will help define our future plans for the fields and we will continue to build production in Gabon. I also expect us to make tangible progress towards our ambitious target of achieving Net Zero by 2030.
“With additional opportunities to deliver value across our portfolio, including gas commercialisation in Ghana, our revised Kenya development project and an exciting well in a proven play in Guyana, we are well-placed to deliver value from our assets and to grow our business.”
Rahul Dhir
In its outlook for 2022, Tullow’s work plan in place to progress towards Net Zero target, will focus on gas compression facilities on the Jubilee FPSO. The company has signed an MOU with the Ghana Forestry Commission to identify and develop nature-based carbon offset projects in Ghana to offset residual emissions.
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