Tullow Oil Share Discussion Threads

[oilretire] 25/8/2018 01:04

Pretty much standard practice throughout the industry, inc. the UK.

Probably a lot to do with competition law etc

[xxnjr1] 25/8/2018 00:06

each individual company are indeed bizarrely assigned their own liftings in rotation

I think that maybe standard practice with PA's, at least in Africa, and maybe elsewhere. This can lead to 'under lift' and 'over lift' when reporting the numbers.

[bootycall] 24/8/2018 17:41

xxnjr1. Thanks for your very detailed post. In the link i provided, you will see that each individual company are indeed bizarrely assigned their own liftings in rotation. I think the tax computations for Tullow are also beyond my pay grade ! I was always impressed that the Company claimed to be entitled to 80%-85%? cost recovery in Ghana( from memory ). I never get too worked up about tax. I am pleased Tullow will pay reasonable rates going forwards because it diffuses political heat against the E&P sector.

[xxnjr1] 24/8/2018 17:25

Thank you very much for the link Bootycall. Haven't had a chance to sift through the report yet. That will require several evenings when time permits, and several bottles of Red! Looking at it from another angle, there could be tax differences arising from the jurisdictions Kosmos(US?) and TLW are based in. At a local level in Ghana, I'd assumed taxation would have been governed by the relevant PSC's, the Joint Operating Agreements, and any unitisation agreements;etc. Anomalies may subsequently arise if farm in/out(s) have taken place, and carried interests vary. WCTP was originally signed by Kosmos(op), GNPC, +minor partners, with a subsequent farm in by TLW and Anadarko. DWT was jointly signed by Tullow(op), Kosmos, + 1 minor partner, with a subsequent farm in by Anadarko. After that there was a lengthy Foreign Corrupt Practises Act investigation into Kosmos, the WCTP agreement, and the politically connected EO Group(?), but the investigation was eventually dropped. Unitisation is a complex matter. To get things on the road, the main partners TLW/APC/KOS/GNPC agreed an ad hoc determination of the reserves split on Jubilee between the two blocks, with revenues being determined by respective nett entitlement percentages each company held in the two blocks and the reserves split for Jubilee between WCTP/DWT being applied. And to complicate matters further, each lifting wasn't carved up between the main parties, rather one lifting went to TLW, the next to APC, then KOS received a shipment (I may be wrong on this point). After several years of production data, and a better understanding of the Jubilee reservoir, there was a redetermination of the reserves split between WCTP/DWT. Redeterminations happen every 1, or 2 yrs apparently. All very complicated, way above my pay grade.

You are quite right about the insurance. I think there was a general Machinery & Hull Insurance on the FPSO itself, that would have been agreed under the JOA. 'Loss of Profits' seems to be down to individual companies. TLW still have cover, but Kosmos's ran out some time last year I believe.

Caveat: (?) means it's a long time ago & a bit hazy in my mind.

[bootycall] 24/8/2018 12:19

For general information , I found the following document very useful in detailing deductible costs allowable for both Ten and Jubilee fields ( see tables of page 4-10).
hxxp://www.reportingoilandgas.org/wp-content/uploads/PIAC-2017-Half-Year-report.pdf

[bootycall] 24/8/2018 11:58

I am lead to believe Tullow, historically, had a different tax position from the other partners, which is obvious when you look at the actual tax rates paid. It is a sensitive subject for our friends at Kosmos ! I understand Tullow also had better insurance cover with the turret remediation issue. Can’t win em all! I did try to research when the unitisation changes occurred because I remembered an article commenting on this. Sadly I am travelling on a train and my mobile makes hard work of it !

[xxnjr1] 24/8/2018 11:23

Maybe I've misunderstood your post Bootycall; Jubilee unitised as part in WCTP, and part in DWT. All of TEN in DWT - so not unitised, TEN terms apply.

[frazboy] 24/8/2018 10:59

Agree with everything you say Bootycall although I didn't realise TEN and Jubilee were ever unitised in terms of cost recovery (it's not how I understood the PAs on Tullow's website) - I had just assumed that Jubilee had paid back its dues long ago, and that because the TEN FPSO is leased the Capex to the project partners was not as great as the $4.9bn figure quoted (that number I had presumed included the Capex on the FPSO for which there is no relief) hence we were starting to pay a high marginal rate of tax now that costs have been recovered. Having said all that, when I got the spreadsheet out I wasn't convinced that TEN had recovered all its costs (say 50000 bopd average for 2 years approx @55/bbl?), but time was too short to investigate further. The marginal tax rate is what it is.

[bootycall] 24/8/2018 10:01

Frazboy . Tullow had been paying virtually no tax to date in Ghana because they were getting very favourable cost recovery terms relative to their partners. Previously Jubilee and Ten were unitised but this arrangement between fields ceased I believe in 2017 so Jubilee as a mature field was always going to pay normalised tax rates because costs are fully amortised. The new drilling programme on both fields will of course provide a small amount of offset in the current year.

[frazboy] 24/8/2018 09:49

I'm not sure I agree with that BootyCall. For me the most important revelation was that the effective tax rate had gone from the 20 something to 40 something - and perhaps what was most disappointing was that it received little or no mention (it is stated in the accounts) apart from the last few minutes of the investor Q&A session when one analyst asked if this was the new norm. I had expected to rise, but not that quickly.

[xxnjr1] 23/8/2018 13:11

wasn't the Aramco IPO one of the bull arguments for a higher oil price?
given SA now acquiring Saudi Basic Industries Corp can't really see the IPO happening any time soon, if ever. too much disclosure required for listing. Insiders, vested interests etc.

[zingaro] 23/8/2018 11:45

Maybe Aramco putting its IPO on hold has helped.

[ifthecapfits] 23/8/2018 10:29

Bounced off the 200 and through the 26 & 50 - so going back in the right direction.

[mcsean2164] 23/8/2018 10:23

Looks like we're breaking out!

[bootycall] 22/8/2018 17:06

Tullow's share price performance has been dampened in recent years by the discipline of selling forward a large proportion of production to meet its Reserve Based Lending obligations. The forward price curve has been at a major discount compared to historical norms because a large number US shale producers have been forced to sell forward to ensure they are able to service debt obligations as opposed to making any positive cash flow. I am pleased to note that the forward curve in the last few months has been looking far more favourable for Tullow. Combine this fact ,with dollar strength, the two Ghana FPSO's reaching nameplate capacity in the relatively near future and Guyana looking as though it might be one of the hot spots in world E&P right now.....



The only disappointment is only one "exploration" well be drilled by Tullow this year but with two rigs now operating in Ghana, I would expect reserve upgrades to drive share price appreciation. DYOR

[alfiex] 22/8/2018 16:10

Not performing so good considering oil up again today.

[billy_buffin] 22/8/2018 15:13

Poseidon back in port after sea trials

[jimarilo] 20/8/2018 20:24

Excellent Cannacord note on Namibia out today

The scale of the potential that has attracted these companies is difficult to
assess from available public information. However, the presence of
companies as large as Exxon, together with certain competent person’s
reports (CPRs), and various company presentations, point to a multi-billionbarrel
potential across Namibia.

[rationaleee] 20/8/2018 18:25

Does anyone know if there is a possibility to pay off the convertible bondholders sooner?

I know the convertible bond interest is much lower than most of the debt facility but these convertible arbitraguers definitely seem to know how to keep the equity price in a range for their risk free return. In my opinion, if we don't payoff the converts, we will be in a very tight range churning and churning, until the overhang of c.100 mn convertible shares that could be issued doesn't disappear.

[xxnjr1] 20/8/2018 14:16

thx Jimarilo. long overdue ss. TLW had a lot of success with drill bit in Ghana , then came a "reversion to mean" with dramatic under-performance offshore. We could do with the pendulum swinging back to "fair" or "good"!

[subsurface] 20/8/2018 08:47

Lets hope its the start of the long awaited change in Tullow,s fortunes.

[jimarilo] 20/8/2018 08:35

Don't know if anyone has noticed, but the Poseidon has left Walvis Bay and heading offshore to Cormorant

Game on !

[frazboy] 16/8/2018 17:15

Yep, I had decided to ignore the comment. Thanks for the numbers for h1 tho xx, it would be extremely disappointing if the 56k number was genuine decline