3rd Apr 2020 10:24
(Alliance News) - Tullow Oil PLC on Friday said it has further reduced its planned capital and decommissioning expenditure for 2020 after a review and had USD1.9 billion of debt capacity approved by its lending syndicate.
Shares in Tullow were up 20% at 14.02 pence in London on Friday morning.
Tullow had originally planned an approximately 30% cut to capital expenditure year-on-year for 2020 to around USD350 million but is now planning a further cut to about USD300 million, with planned decommissioning expenditure of approximately USD65 million from the previously expected figure of around USD100 million.
The cost savings will be mainly "through the deferral of activities across the portfolio and through savings that can be realised by ongoing farm-down activities", Tullow said.
Further, Tullow completed the redetermination of its RBL credit facility with USD1.9 billion of debt capacity now approved by its lending syndicate. It now has about USD700 million of liquidity headroom in undrawn facilities and free cash at the start of the second quarter.
"This level of headroom is deemed appropriate by the board considering Tullow's much reduced future capital commitments," the company said.
In addition, Tullow said it has chosen to shrink its facility commitments down to about USD2.2 billion from USD2.4 billion and "effectively accelerating the first scheduled commitment amortisation from October 2020." This should reduce finance costs with the next scheduled amortisation of USD211 million to take plane in April 2021. This schedule will continue every six months until the final 2024 maturity date.
Tullow currently has 60% of its 2020 sales revenue hedged at a floor of around USD57 per barrel for 2020 and 40% hedged for 2021 sales revenue with a USD53 per barrel floor. In January and February, its realised oil price was USD62 a barrel but after the oil price drop is now expects hedging receipts of approximately USD30 million for March.
Chief Financial Officer Les Wood said: "Securing the ongoing support of our RBL lending banks and confirming our debt capacity has been important given the current challenging environment. Today's positive news verifies the strength of our producing assets and robust hedging strategy which underpin the RBL and, combined with the further cost savings we have identified, confirms the strength of our liquidity in the medium-term. Nevertheless, strengthening the balance sheet continues to be a key priority with the group seeking to raise proceeds in excess of USD1 billion through portfolio management.
"Elsewhere in the business, Tullow is responding well to the challenges presented by the coronavirus pandemic with strong controls and processes in place to allow the business to operate as close to normal as possible in spite of these difficult times."
So far, Tullow's production operations in west Africa have been unharmed by Covid-19.
By Anna Farley; [email protected]
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