21st Mar 2022 11:59
(Alliance News) - Tullow Oil PLC on Monday said it increased its interest in the Jubilee and TEN fields in Ghana for USD118 million via a pre-emption right and subsequently increased its production guidance for 2022.
Tullow exercised its rights over the sale by US oil firm Occidental Petroleum Corp of its interest to Kosmos Energy Ltd. In October last year, Kosmos had agreed to acquire an additional 18% stake in the Jubilee field and an additional 11% interest in the TEN fields in Ghana from Occidental Petroleum Corp for USD550 million.
Tullow first said that it had exercised its pre-emption rights to the fields, which are offshore Ghana, in November, stating that this would raise its daily attributable production by 10%. The extra cash from higher production between 2022 and 2026, which is expected to be around USD250 million, will be used for paying down debt, Tullow said at the time.
Tullow, which is a West Africa-focused oil and gas producer, has now completed the pre-emption right which bumped up it equity interests to 38.9% in the Jubilee field and 54.8% in the TEN fields, both of which it operates. This will add around 5,000 barrels of oil to its daily production.
Hargreaves Lansdown Equity Analyst Laura Hoy said: "Tullow are making good on plans to expand its Ghana operations with an increased stake in two key fields and are taking advantage of buoyant oil prices, aiming to up production and get a larger slice of the growing pie."
"Given the supply constraints at the moment, things shouldn't drop off anytime soon and this should help Tullow recoup the cost of the investment, and then some, relatively quickly. However, that's entirely dependent on oil prices, so volatility can't be ruled out."
Tullow has increased its production guidance for 2022 to between 59,000 and 65,000 barrels of oil per day. Its previous guidance was 55,000 to 61,000 barrels a day.
Chief Executive Rahul Dhir commented: "I am delighted that this important transaction has been completed and I am grateful for the continued support of the government of Ghana and, in particular, the Honourable Minister of Energy whose leadership has been paramount in getting to completion."
The consideration for the deal was paid to Kosmos in cash in the first quarter.
Tullow shares were up 5.6% to 50.39 pence each in London on Monday morning. Kosmos shares were down 0.8% to 470.08p each.
"With its finances largely under control, Tullow's finally able to make some strategic moves. Hopefully this is the first of many. But the fact remains that Tullow is behind the curve compared to peers, who are using current conditions to shore up clean energy operations. Tullow risks being stuck clawing its way back to profitability while the rest of the industry marches ahead," Hoy said.
Kosmos said separately that South Africa's national oil company, PetroSA, also is in the process of exercising a pre-emption right on the two assets for around USD10 million. Kosmos plans to accelerate its debt reduction with the proceeds.
After its purchase of additional interests in the fields in October, Kosmos held 42% stake in Jubilee and a 28% in TEN. However, following the transactions, Kosmos' interest in Jubilee will be reduced by 3.8 percentage points to 38.3% while its interest in TEN will be reduced by 8.3 points to 19.8%.
Kosmos is a Texas-based deep water oil exploration and production company with assets in Ghana and the US.
The net 2022 production impact of the pre-emption exercise for Kosmos is a reduction of around 4,000 barrels of oil per day and is expected to result in one less Ghana cargo lifting this year and a reduction in 2022 capital expenditure of about USD30 million.
By Abby Amoakuh; [email protected] and Greg Roxburgh, [email protected]
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