11th Nov 2015 08:29
LONDON (Alliance News) - Tullow Oil PLC on Wednesday said revenue and costs are currently in line with expectations for the full year, but the company said full-year production from its West African operations will be at the lower end of its previous guidance.
Tullow said 2015 production from West Africa is expected to be in the range of 66,000 to 67,000 barrels of oil per day compared to its previous range of 66,000 to 70,000 barrels. Full year production from the Jubilee field in Ghana is still expected to be around 100,000 barrels per day.
Tullow upped its guidance for the Jubilee field earlier this year but reverted back to its original 100,000 barrel per day target halfway through 2015 following short-term production constraints due to a gas compression issue on the floating production, storage and offloading vessel.
Tullow is currently focused on developing its TEN project in Ghana, which will push production from West Africa up to 100,000 barrels per day in 2017. The project is currently three-quarters completed and on schedule to begin producing in the middle of 2016.
Trading since the start of 2015 has remained on track, Tullow said, with revenue and cost of sales currently in lien with expectations for the full year. The company said full-year operating cashflow before working capital and tax will be around USD1.00 billion, exiting 2015 with net debt of around USD4.20 billion.
Tullow reiterated 2015 capital expenditure is expected to be around USD1.90 billion, which will then drop to USD1.20 billion in 2016.
"The business remains well funded with un-utilised debt capacity and free cash expected to be approximately USD1.70 billion at the year end," said the company.
Tullow's cost reduction programme to save USD500.0 million over three years continues to progress, but said it will book a USD40.0 million one-off restructuring cost in the current full year, of which USD25.0 million was booked in the first half.
Heading back to production and sales, Tullow's hedging programme currently has a net positive mark-to-market value of around USD450.0 million, meaning Tullow will make that much more compared to selling its oil at spot prices.
As of October-end, Tullow had 34,500 barrels of oil per day hedged at USD85.98 per barrel in 2015. That is a very favourable price compared to the current Brent price, which was trading a smidgen above USD47 per barrel on Wednesday morning.
For 2016, Tullow has 36,011 barrels per day hedged at USD75.45 a barrel, with a further 22,500 barrels per day hedged in 2017 at USD73.44 a barrel. For 2018, Tullow has 9,000 barrels a day hedged at USD62.67 per barrel.
"Our East African developments are progressing steadily with final investment decisions for both Kenya and Uganda now expected in 2017. As we approach the end of the year, we are focused on our priorities of generating steady cashflow from our operations, completing TEN on schedule and on budget, ensuring we retain appropriate liquidity and building on our exciting exploration prospect inventory for the future," said Tullow Chief Executive Aidan Heavey.
Tullow shares were down 0.3% to 213.0 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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