Africa-focused oil company, Tullow Oil, has placed premium on its Ghana assets for the 2022 operational year, allocating more than 77 per cent of projected capital expenditure to its Jubilee and TEN operations.
Out of a total capex of $350 million, Tullow has earmarked $270 million in Ghana, $30 million on non-operated portfolio, $5 million in Kenya and $45 million on exploration and appraisal, with decommissioning expenditure expected to be $100 million.
Highlighting the reason for this allocation, Tullow indicated it will prioritize “investment in high return opportunities in its producing assets”, whilst ensuring the business remains self-funded at $65/bbl this year.
Following the slump in operations during the COVID-19 pandemic, Tullow’s expenditure on its Ghana assets have increased on a year-on-year basis primarily due to investment in infrastructure for the Jubilee North East and South East areas, the company said in press release.
Notably, these investments are expected to yield meaningful growth in production as these undeveloped parts of Jubilee are brought on stream from 2023.
Tullow’s Projected Cashflow for 2022
The company projected an operating cash flow of $750 million with free cash flow of $100 million, pegged at $75/bbl.
Having managed to sell a number of its assets to retire its maturing debts in the past year, the company continues to prioritise debt reduction, which it noted “the Group remains on track to materially reduce net debt and achieve gearing of less than 1.5x net debt to EBITDAX by 2025”.
By adopting a material hedge portfolio, Tullow is seeking to protect 75 per cent of its sales volumes to 2023 and 50 per cent from May 2023 to May 2024.
The company projected oil production guidance of 55,000 to 61,000 barrel of oil equivalent per day (boepd) based on the group’s existing equity interests in TEN (47.175%) and Jubilee (35.48%).
Meanwhile, this is subject to an adjustment following the completion of the pre-emption of the sale of Occidental Petroleum’s interest in Ghana to Kosmos Energy, the statement highlighted.
Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented:
“2021 was a year of positive change and transformation for Tullow, and we ended the year on a firm financial and operational footing. The delivery of our long-term Business Plan is progressing well with significant improvements in safety, operating efficiency and drilling performance.
“In 2022, we will build on these firm foundations and focus on investing in our producing assets in West Africa. Our plans in Ghana, where we are in the process of increasing our stakes in both the Jubilee and TEN fields, will position us to deliver the free cash flow to reduce gearing to less than 1.5x by 2025.
“Elsewhere, our Gabon near-field non-operated exploration opportunities, our revised Kenya development project and the Beebei-Potaro commitment well in Guyana also have the potential to be significant value drivers for Tullow. There is much to look forward to this year.”
Rahul Dhir, CEO, Tullow Oil
Outlook of Jubilee and TEN Production
Considering the outlook of its Jubilee operations for the year, Tullow projected production to average between 80,000 to 84,000 boepd (net: 28 to 30 kboepd). This includes the impact of a planned maintenance shutdown of approximately two weeks, scheduled to take place in the second quarter.
Planned production will involve the drilling of three new wells at Jubilee, a water injector due onstream in the first quarter, then a producer and a second water injector.
With respect to outlook of operations in the TEN field, production is projected to average between 22 to 26 kboepd (net 11 to 12 kboepd), driven by natural decline in existing wells.
Meanwhile, the JV Partners have identified material potential across TEN and are considering to ramp up field performance in order to accelerate production from undeveloped resources in the Greater Ntomme and Tweneboa (GNT) areas.
Accordingly, drilling rounds for the year will focus on further defining future development plans to maximize production and the field’s value potential, Tullow said.
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