Tullow Oil (TLW)

[subsurface]

Hi XX,
With the back drop of world events its looking like survival of the fittest in every sence.Tullows fortunes seem to rest on If they can get deals done and sell down but the problem is the time frame,a tax issue drags on everytime they try to cut a deal. They need to cut more costs they still have circa 600 staff.
I sent you an Email last week ,Keep an eye on your inbox.
best regards

[johnhemming]

Tullows position also depends upon how long the oil price war goes on for. They are 60% hedged for 2020 and have a reasonable hedging portfolio for 2021. However, something needs to change.

[xxnjr]

Tullows position also depends upon how long the oil price war goes on for. They are 60% hedged for 2020 and have a reasonable hedging portfolio for 2021. However, something needs to change.

TLW should be able to muddle through this year. They say they should make $50m to $75m FCF on current spending 'if' TLW hit 75K bopd at $50 oil price. Crunching hedging numbers and assuming unhedged at $62 Jan & Feb, Mar to Dec at $32 results in $49.17 ave for year. So looks achievable. In addition, TLW say they are looking at deferring some spending..... so should survive, provided the Reserves Based Lending Redetermination happening now gets through. If lead banks say 'no' then will get interesting. 2021 becomes more problematic as ave of hedging and $32 for rest production results in $44. Will need some asset sales as the covenant on the debt is 3.5 debt/ebitdax and as the latter goes down with OP that ratio increases.

In summary, we need

Successful RBL redetermination.
Asset Sales.
Amongst other stuff to go right!

[subsurface]

Good morning gents.
Thanks for your posts enjoy reading them,After seeing events in Italy and the spread of the virus and its impact on the world its my number one concern for family, friends and Tullow.

Does the virus change the landscape for Tullow investors? under normal circumstances and the volitility in the Oil market those with the deepest pockets survive,but does the virus change all that? if we take the super majors are they more at risk?, due to having so many staff around the world.

Crucial that we keep production going and the FPSOs virus free that must be the focus for Tullow,lock down FPSO,S! or what ever it takes and full Risk Assessment.to include tankers coming for loading,supply/ ships etc. and then we have the none operated too. and stores/parts to think about.
We need to get through this without loss of production.

Worst case senario,that world ends up like Venezuela super inflation, money in the bank worthless.. and my other concern is that the virus falls into the wrong hands.

Sorry to sound so alarmist.but just too many variables to make a good call at the moment so I,m keeping my head down and trying to plan ahead for my children. Hunker down ,Risk management is the key!
best wishes to all,
SS
.

[subsurface]

In the Tullow Q/A The first guy up Chris asked about the Business interuption insurance in relation to the Virus,they did not reply to that part of the question ,but when they were asked directly later in the Q/A Les said it was Unlikely,then made a note in his book.look at the replay.

[xxnjr]

Hello SS, I read that Trafigura Group, now expects oil demand to contract by as much as 10 million barrels a day due to the coronavirus outbreak. Bit of an issue for exporting countries like Ghana, Cote d'Ivoire and Gabon. With OPEC+ ramping up production at the same time as demand collapses. Where will they store all this oil? Storage tanks in the world have a finite capacity. TLW not being able to sell the stuff is potentially the biggest risk.

[dspp]

Hello SS, I read that Trafigura Group, now expects oil demand to contract by as much as 10 million barrels a day due to the coronavirus outbreak. Bit of an issue for exporting countries like Ghana, Cote d'Ivoire and Gabon. With OPEC+ ramping up production at the same time as demand collapses. Where will they store all this oil? Storage tanks in the world have a finite capacity. TLW not being able to sell the stuff is potentially the biggest risk.

That would correspond to about a 10% global economic downturn. That is about the ballpark I think likely. I couldn't believe the traders & journos on a recent videocon saying just a one million bbls or so max downturn.

regards, dspp

[xxnjr]

Hello SS, I read that Trafigura Group, now expects oil demand to contract by as much as 10 million barrels a day due to the coronavirus outbreak. Bit of an issue for exporting countries like Ghana, Cote d'Ivoire and Gabon. With OPEC+ ramping up production at the same time as demand collapses. Where will they store all this oil? Storage tanks in the world have a finite capacity. TLW not being able to sell the stuff is potentially the biggest risk.

That would correspond to about a 10% global economic downturn. That is about the ballpark I think likely. I couldn't believe the traders & journos on a recent videocon saying just a one million bbls or so max downturn.

regards, dspp

Some choice quotes from
https://www.ft.com/content/546f14dc-684 ... 70cff6e4d3

".....The world could run out of oil storage capacity within months, according to the biggest energy traders, as the coronavirus pandemic crushes demand for fuel at the same time as the Saudi-Russia price war boosts supplies."

".....Traders such as Gunvor are predicting demand could fall by at least 5m barrels a day in April — the equivalent of 5 per cent of global demand — as nations grapple to control the virus."

".....But as the economy slows, many traders are starting to say that number could rise sharply. Eurasia Group, a consultancy, said global demand could drop by a quarter, or 25m barrels a day, at various points this spring."

".....One concern for traders looking beyond onshore storage may be that using supertankers to float oil offshore may be more difficult this time.

Saudi Arabia’s determination to flood the market in an attempt to hurt weaker rivals has caused tanker rates to soar, as the kingdom scrambles to charter ships to get the additional oil to market."

All of this may backfire on Saudi Arabia. A fair amount of US Shale production is hedged for 2020, which will prevent US production falling off a cliff. When storage capacity eventually runs out, where does that leave MBS/Saudi? A night of the long knives perhaps?

[subsurface]

Report from 11th March Hammerhead that extends into Tullow,s Block , Exxon can bring operations for Hammerhead on stream by mid-2024


Hess maintained that there was no need for investors to be concerned while noting that ExxonMobil, which is the operator of the block, has drilled three wells in the Hammerhead area and would not have done so if it were not deemed commercial.
The CEO said, “…As you go into the shallow waters, Hammerhead is an indicator of this, the oil is definitely heavier. But what we have there is a pretty big tank of oil and…that is going to be a commercial development. Plans are going ahead with that.

I remember Gil Talking about a very large pool of Oil, but we have the Sulfur to contend with.


hTTps://www.kaieteurnewsonline.com/2020 ... l-per-day/

[subsurface]

Ghana news
Tullow Oil has terminated a drilling contract with the Maersk Venturer in Ghana, in line with the operator’s plans to save cash amid a difficult year.
Work ends in June.

hTTps://www.energyvoice.com/oilandgas/a ... -in-ghana/

[johnhemming]

https://www.proactiveinvestors.co.uk/co ... 16564.html

[wanderer101]

Entire Uganda stake being sold for $575m, $500m payable on completion.

https://www.investegate.co.uk/tullow-oi ... 00035703K/

In the current context this seems to be a huge deal, potentially company-saving.

[xxnjr]

Well yes, but pro-rata it's a 42% discount to the original 2017 deal that Gov.UG torpedoed. Bit of a bargain for Total and CNOOC if latter exercise their option. The cash will get TLW debt down but will still be a huge $2.4bn after $500m comes in, assuming deal goes through.

"The Cash Consideration consists of US$500 million payable at completion and US$75 million payable following FID of the Lake Albert Development Project"

"Additional cash consideration may be received by Tullow in the form of contingent payments which will be payable on upstream revenues from the Lake Albert Development Project, depending on the average annual Brent price once production commences........"

However if Brent <$62 %=zero

Who knows what the OP will be when Uganda production commences. $62 may be optimistic. If above they get

1.25% contingent payment >$62
2.50% contingent payment >$70

on 28.33% of Lake Albert Development revenues. Could be a 200K bopd development.

[28.33% is the stake TLW are selling post Gov.UG back in]

What will the OP be in 2025+?

[BobGe]

Bit of a writedown coming:

"Following completion of the Transaction, the Group's gross assets will, before receipt of cash proceeds, reduce by US$992.2 million , being the gross asset amount of the Uganda Interests as at 31 December 2019 ."

[johnhemming]

The 2022 bonds are trading at around 55%. It all depends on the oil price in the end (inevitably, but the situation is more extreme currently)

[subsurface]

Good morning ,
Hope you are all keeping safe.

A new presentation on Uganda asset sale and current capital structure, also lawyers and banks selected

hTTps://www.tullowoil.com/application/f ... _FINAL.PDF

hTTps://iclg.com/ibr/articles/11729-tul ... oject-exit

sale subject to approval just hope the process does not drag on.

[xxnjr]

Ghana transaction came up on Total's Q1 webcast. As we already knew, MOZ LNG OXY deal was waived through by Mozambique authorities. However Algeria.Gov have said "Non!'' to their part of the OXY-Total deal. Ghana.Gov yet to give a decision. Patrick Pouyanne said the Ghana assets were the least interesting of the three, as a non-operated position. Maybe Patrick would be more attracted if OXY reduced the price (as a distressed seller of an underperforming asset) and TLW threw in some of their position with Total taking over as operator? Was also asked about Total's potential upstream FID's for 2021/22. Uganda seems top of the list and early results from Suriname "look promising". No other projects mentioned but at the end of the day will all be down to economics of individual projects.

Somewhere else I read/heard GNGC are now taking gas on a more regular basis, sometimes up to 100mmscfd. If maintained, will help Jubilee oil output.

[xxnjr]

And on OXY's Q1 call there was a recognition that there's an increasing risk that the Ghana transaction may not complete.

[xxnjr]

1Q today from Kosmos. Seems TLW will install an additional w/inj pump and GNGC doing there bit to help out with gas offtake. My take - TLW functions better without their ex-CEO.

"Production in Ghana was unaffected by COVID-19 and averaged approximately 26,500 barrels of oil per day (bopd) net in the first quarter of 2020, slightly ahead of expectations. As forecasted, Kosmos lifted one cargo from Ghana during the first quarter. Full year guidance of ten cargos remains intact.

The Jubilee gas enhancement project was successfully completed in February with subsequent production rates of around 90,000 bopd being achieved. The operator is also increasing water injection capacity from two pumps, which is expected to provide the necessary pressure to support the reservoir while providing redundancy with a third pump available as needed. In addition, we have seen consistent gas offtake from the Ghana National Gas Company of around 90,000-100,000 mscf/d, which should help maintain higher oil production in the future.

On TEN, the field is currently producing over 50,000 bopd. The Ntomme-09 producer well has been drilled successfully and completion operations are now underway with the well scheduled to come online later this quarter.

Full year net production guidance in Ghana of 27,000-29,000 bopd is unchanged."

[subsurface]

Thanks for your udates xx much appreciated ,Hope you are keeping well.

Kosmos were very complimentary about Tullows Operations during these difficult times which is good to hear.

Looks like Ghana government are pushing ENI and Springfeild with compulsory unitisation ENi appears to have rejected the suggestion that Sankofa is connected to Afina. The Italian company was reported as stating that such an assertion was premature,

hTTps://www.energyvoice.com/oilandgas/a ... itisation/

I also noted that Hess are paying for Super Tankers to store oil until later in the year when they expect the oil price to recover.