Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tullow Oil PLC (XGHA:TLW, Financial) reported a 180% increase in profit after tax to $196 million, driven by higher production and realized oil prices.
- The company has reduced net debt compared to June 2023, despite negative free cash flow in the first half of the year.
- Operational performance at the Jubilee field has been strong, with around 99% uptime at the FPSO and record highs in water injection rates.
- TEN field production has exceeded expectations, averaging about 19,000 barrels of oil per day in the first half of the year.
- Tullow Oil PLC (XGHA:TLW) has made significant progress towards its net zero by 2030 goal, including a nature-based carbon offset program in Ghana.
Negative Points
- The J69 well at the Jubilee field has underperformed, producing significantly less than expected and impacting overall production and reserves.
- The company expects to be at the lower end of its production guidance for 2024 due to the performance of the J69 well.
- There were two losses of primary containment resulting in oil spills to the sea, although these were managed without major impacts.
- The Simba field in Gabon has been shut in due to a serious incident, impacting production until investigations and remediations are completed.
- A planned maintenance shutdown at the Jubilee field in 2025 will result in a temporary halt in production, affecting output during that period.
Q & A Highlights
Q: How long can you sustain Jubilee production at 90,000 barrels a day without more drilling? Should we assume no more drilling at Jubilee until the second half of 2025?
A: We expect to sustain 90,000 barrels a day through this year and anticipate a decline starting in 2025. We are focusing on reservoir management and production optimization to manage the decline. We plan to restart drilling in the second half of 2025 or early 2026.
Q: How does the maturity of the RCF impact your plans in the second half? Do you need liquidity headroom in place ahead of the RCF maturity?
A: We have $700 million of liquidity headroom and expect significant cash generation in the second half. We are considering various refinancing options and will act opportunistically when the time is right, which may include extending the RCF or other measures.
Q: Are you considering M&A options or new entries in Africa?
A: Yes, we are exploring opportunities to extract value from mid- to late-life assets in Africa. We will remain disciplined in capital allocation, focusing on both organic and inorganic opportunities with a commitment to returns and profitability.
Q: What is the timeline for the Ghana arbitration verdict? Is the $600 million free cash flow guidance for '24-'25 still on the table? Can you elaborate on the planned Jubilee maintenance shutdown in 2025?
A: We expect the Ghana arbitration verdict by November. Our focus is on achieving $1 billion of net debt and 1x gearing, which aligns with our cash flow guidance. The Jubilee maintenance shutdown will last approximately two weeks, during which production will be halted.
Q: Could the Ghana branch profits tax arbitration result in a smaller liability or a binary outcome?
A: There is a range of possible outcomes. We expect to be successful with no liability. If ruled against, the panel may specify a number or push the case into the Ghana court process. We have avenues to continue disputing the claim if necessary.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
