30th Apr 2015 12:05
LONDON (Alliance News) - Tullow Oil PLC Thursday said revenue, costs and production all remained in line with expectations in the first quarter of 2015 and reiterated its capital expenditure and production guidance for the full year.
The FTSE 250-listed oil and gas company said revenue and cost of sales were on target in the first quarter of 2015, adding that the business is "well funded" with a current net debt of USD3.5 billion and unutilised debt facilities and free cash totalling USD2.3 billion.
The company added that its major simplification project is underway and on track to deliver USD500 million of savings over the next three years but added it will book a USD45 million one-off restructuring charge in the first half of 2015.
"Over the last six months Tullow has reset its business to deal with the fall in the oil price. We have increased our existing debt facilities, amended our banking covenants, suspended our dividend, refocused our capital on near term production and are making substantial cost savings across the group," said Chief Executive Aidan Heavey.
Tullow's average working interest production in the first quarter of 2015 was in line with expectations, with production from West Africa reaching 65,800 barrels of oil per day and 9,000 barrels of oil per day in Europe.
Full year production guidance from West Africa remains unchanged at between 63,000 to 68,000 barrels of oil per day and European production is hitting the top end of the company's guidance of between 6,000 to 9,000 barrels of oil per day.
However, Tullow said that it is also expecting to finalise the sale of non-operated interest in the Netherlands "imminently", which may lead to a change in full year production guidance in Europe.
The Jubilee field "performed well", contributing net production of 36,600 barrels of oil a day to total production. Full year guidance for the Jubilee field remains at around 35,500 barrels of oil per day net to Tullow.
The commissioning period for the onshore gas processing facility in Ghana was completed at the end of March, and the Jubilee FPSO is now exporting around 80 million standard cubic feet of gas per day.
"The initial reliability of the gas plant has been above expectations and Tullow will continue to work with GNGC to increase gas export as domestic power demand increases," the company said.
In Gabon, as a result of the ongoing licence dispute with the government regarding the Onal fields, which is expected to be resolved this year, Tullow has not booked any production for the first quarter 2015.
The company said its capital expenditure budget for 2015 remains unchanged at USD1.9 billion, whilst USD200 million will be spent on exploration which will include "high impact" wells in Norway, Kenya and Suriname.
Tullow also reiterated that the TEN Project is now over 55% complete with all 10 of the wells expected to be online at first oil already drilled. The project remains within budget and on schedule with first oil expected in mid-2016 following a tribunal's decision that the project can continue to move forward despite suspending any further exploration work in a disputed maritime area between Ghana and the Ivory Coast earlier in April.
In March, the FTSE 250-listed company warned that its main project could be impacted or delayed by the maritime boundary dispute between the two countries, after Ghana launched an arbitration in 2014 to try and resolve the border dispute, which was followed by the Ivory Coast requesting provisional measures be put in place until a final decision was made.
All new exploration and exploitation will remain suspended until the International Tribunal makes a final decision on the maritime boundary dispute between the two countries in late 2017. Whilst Tullow can continue to develop the existing project, it will not be able to conduct any further exploration until a final decision is made.
"We are on track to deliver 100,000 barrels of oil per day net production from our West Africa portfolio in 2017 and are identifying exploration prospects to target as part of future drilling campaigns," said Heavey.
In Kenya, Tullow is hoping to produce a draft field development plan before the end of 2015 with the aim of taking the East Africa project, which will include the development of South Lokichar and Lake Albert resources and an export pipeline, for possible sanction by the end of 2016, subject to receipt of all necessary permits and approvals.
"Good progress continues to be made towards development of these oil resources and as part of the ongoing collaboration between the governments of Kenya and Uganda on the oil export pipeline," said the company.
Tullow also continues to undertake hedging in an attempt to protect the business from falling oil prices, which have fallen to around USD66 a barrel from around USD115 a barrel in the middle of 2014.
Currently, Tullow has 34,5000 barrels of oil per day hedged at a price of USD85.98 per barrel and 6.77 million standard cubic feet per day at USD53.90 per therm in 2015. Tullow has also hedged 28,754 barrels per day at USD80.62 per barrel and 620,000 standard cubic feet of gas per day at USD63.0 per therm in 2016, with additional smaller volume hedges also secured in 2017 and 2018.
Tullow shares were up 0.1% at 424.20 pence per share Thursday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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