Tullow Oil Share Discussion Threads

[kulvinder] 14/7/2022 15:38

That 57p only a few weeks ago seems a billion light years away in another galaxy.

[kulvinder] 14/7/2022 15:37

Another kick down right at the end to 42p....

[mcsean2164] 14/7/2022 14:13

What the hake is happening?



Seems to be very few short positions and yet Barclays have something called cash derivatives.

(2) Cash-settled derivatives:
13,688,356 0.95% 2,993,823 0.21%

(3) Stock-settled derivatives


Does anyone understand what's happening with the recent RNS holdings?

[thommie] 14/7/2022 09:18

Just found time to listen to the replay.Rahul said "drilling wise we are now where we planned to be at the end of the year". Thats what xxnjrs ship TV also indicated before. Unbelievable pace. Already drilled the 3 uphole sections of the next 3 wells!He also said thats why they havent contracted a 2nd rig yet, as they are so much in front of their initial drilling time table.TEN upside of 50k plus refers only to the oil development, the gas would be on top.Ghana will start to pay for the gas in a few months. Maybe at better terms even for the associated gas after a gas contract is done.

[thommie] 14/7/2022 08:41

badger,

I think many tullow holders see it the other way round and dont want to merge as well.

But in the end it will happen.
Ofc you cant expect to be valued at 100% with your assets and cash, you always have to give some headroom for the partner to profit as well. You cant get 100% and participate in 100% of the possible upside in tullows assets. No company is valued at 100% of their real value. There is always some risk.

I guess your thinking will change when Kenya farm down is announced, if tlw hits oil at their current exploration in the worlds oil hot spot guyana where it holds big working interests. And when the strategic wells at TEN prove a material resource base.

The thing is, that capricorn has nothing better to invest in instead with its cash. Assets are much more expensive now with higher oil price. I doubt capricorn would get a better deal anywhere else with this material upside possibility for less.

For tlw the advantage would be that they can keep a bigger WI in Kenya, fasten the development of TEN in Ghana and refinance their debt at much better terms. Paying money into the shareholder coffer instead of the banks interest rates coffer in the future. + the mentioned 50m cost savings of the combined group.

[badger60] 14/7/2022 07:59

I hope the merger with Capricorn fails BofA now have over a 20% stake in CNE and are either going to try to stop the merger of get more favourable terms ......

[ctc1] 14/7/2022 07:39

Tullow and Capricorn: gushing praise for merger of oil peers
Emma Powell
Thursday July 14 2022, 12.00am, The Times

Tullow Oil is struggling to overcome a credibility problem, with the scars of an overambitious and risky expansion emblazoned on the oil producer’s balance sheet. An all-share merger with its peer, Capricorn Energy, should hasten the reduction in leverage and recovery in free cashflows.

High debt and burdensome interest costs have prevented Tullow from capitalising on the steep rally in the oil price over the past 12 months, with the shares underperforming oil and gas peers. A tie-up with Capricorn would cut Tullow’s net debt of $2.1 billion at the end of last year, to $1.1 billion as part of a combined company, boosted by the near $700 million in cash on Capricorn’s balance sheet after a windfall settlement of a long-running tax dispute in India. Cost savings of about $50 million post-merger would free up extra cash.

Funds could be used to pay down debt quicker and cut interest costs, reinvest in existing assets in the hope of boosting cash returns or a mixture of the two. Higher interest rates might make reducing debt faster an appealing option.

Business briefingIn-depth analysis and comment on the latest financial and economic news from our award-winning Business teams.One-click sign up.
The increased scale and better leverage should make it easier to refinance Tullow’s remaining debt, which can’t be done on better terms before May next year at the earliest. Having more cash is one thing, but to win back investors, Tullow must prove it can generate good returns. Allocating too much to high-risk exploration has been Tullow’s undoing. In 2019, it took the axe to production guidance and ousted its then-boss, sending the shares down more than two-thirds, a level from which they have barely recovered.

With more cash in its back pocket, investors shouldn’t expect an enlarged company to return to the high-stakes speculation in years gone by, according to its boss, Rahul Dhir. By investing in increasing production from Capricorn’s assets in Egypt and Tullow’s oilfields in Ghana, Gabon and Kenya, management reckons free cashflows of $2.4 billion between this year and 2025 if the oil price stays at about $75 a barrel. Tullow’s average price during the first half of the year was $89 after the impact of hedging.



More than 90 per cent of Tullow’s capital is invested in producing assets. Between 2017 and 2019 it was more like 50 per cent, with the remainder ploughed into high-risk exploration projects that destroyed value for shareholders.

Post-2014, cashflow returns have frequently come in below its cost of capital, according to analysis by Quest, a division of brokerage Canaccord Genuity. Without the merger, analysts there forecast that trend will play out this year and the next. Analysts at Investec have factored in an average Brent crude price of $95 for this year, falling to $80 next year.


Full-year group production guidance has been maintained at 59-65 thousand barrels of oil equivalent per day (kboepd), which points to growth on the 59.2 kboepd produced last year. Over the first-half, production was running at 60.9. Increased production, elevated oil prices and the absence of the one-off costs incurred during the first six months should result in free cashflow kicking up to $200 million this year. That is expected to help reduce net debt from $2.1 billion to $1.9 billion by the end of this year.

Securing approval from Tullow’s shareholders for the merger should not be the issue; getting Capricorn investors on board might prove more difficult. The deal values Capricorn shares at about $900 million, calculates Investec, which looks low given its $670 million in net cash, Egyptian assets that are worth about $300 million and net contingent payments of about $175 million that it is in line to receive. But Tullow is a far more worthy partner than it was.
ADVICE Hold
WHY A merger with Capricorn could improve cashflow due to a stronger balance sheet

[thommie] 14/7/2022 07:18

Thx for the discussion. Valueable Infos as usual!Let me share a number I calculated for fun.The impact of the 2 weeks maintanance shut down of the jubilee fpso impacted average net production for tullow by 2800 bopd for the first 6 months.

[adrian j boris] 14/7/2022 06:18

Tullow Oil expects £90m stake in Ghanaian oilfields to pay for itself by the end of 2022 should oil prices remain at present levels

Tullow spent £89.7m purchasing Occidental Petroleum's interests in Ghana

The group has maintained its annual production guidance at 59-65 kboepd

Capricorn Energy recently agreed a £1.4bn merger with the energy explorer

By Harry Wise For This Is Money

Published: 15:54 BST, 13 July 2022 |
Updated: 19:32 BST, 13 July 2022



Tullow Oil has predicted that the acquisition of two stakes in offshore oilfields could pay for itself by year-end due to high oil prices.

The energy exploration firm spent £89.7million purchasing Occidental Petroleum's interests in Ghana's Jubilee and TEN fields, thereby increasing its holding in the two developments to 39 per cent and 54 per cent, respectively.

Should oil prices remain at current levels, around $98 per Brent Crude barrel as of Wednesday, the London-listed group believes it could pay for the cost of the acquisition by the end of the year.

[alfiex] 14/7/2022 06:16

hTTps://www.thisismoney.co.uk/money/markets/article-11009431/Tullow-Oil-Elevated-prices-wipe-90m-investment-year-end.html

[badger60] 13/7/2022 23:50

With any luck the Capricorn merger will get blocked, and won't get poisoned by the inherent Tullow managerial ineptitude to screw the company and it's shareholders.

[xxnjr] 13/7/2022 22:29

Webcast recording is here. Well worth a listen.


Having replayed again lets clarify a few points raised in my and booty chat above.

1. the 4D seismic was indeed new, not re-processed.

2. Current JUB production is "over 90K today".

3. Net debt at 2022 year end projected to be "$1.9bn".
From the rns we can assume this is dependent on OP remaining above $95. (Net debt at y/end 2021 was $2.1bn)

4. Rahal referred to "50% PLUS" IRR opportunity set, not 50% per se.
i.e. IRR's are 50% to 60%, 70%, 80%, 90% or whatever and inline with his previous CMD presentation.

[f56] 13/7/2022 18:36

Tullow = Africa spreading poverty to the rest of the world!

[f56] 13/7/2022 18:34

Tullow. Zero return for shareholders in 30 years!

[f56] 13/7/2022 18:31

Tullow can’t do anything right can it? Why invest in Africa? First rule of investment is don’t invest in despot states. The second rule of investment is don’t forget the first rule!

[xxnjr] 13/7/2022 15:00

thanks booty. Your 1st 2 paragraphs are beyond my pay grade I'm afraid :0) I'll leave it to you to conjecture on the various points you've mentioned.

TEN is kind of phase II, let's say. It made sense to start with Jubilee as (1) the resource was better understood (2) lower OPEX and (3) wells could be tied into existing sub-sea facilities. tbh I doubt if Rahul really knew how the assets would perform under his rebuilding Ghana with continuous drilling program when he first joining the company (given the scale of the debacle with previous management), so we can kind of understand his conservatism with projections.

I do agree Rahul hasn't described exactly what and where the upside in TEN resides. But he's also said that first Tullow needed to better understand the scale of the resource in TEN and any upside. So far it has just been hinted at. But not much granularity. I guess they have a better understanding now. Some of it maybe in deeper horizons than existing production (with a nod to Total's discovery next door in Cote d'Ivoire). we'll hopefully get a lot more about this in the next CMD as sorting out TEN is fundamental to a re-rating of the share price.

4D seismic I'm assuming is re-processing of earlier work as don't recall any new shoots under Rahul.

[bootycall] 13/7/2022 13:04

XXNJR

Firstly, you are a very helpful and resourceful poster, so i have no wish to be defensive or argumentative. Lets start by pointing out the obvious, which is the nameplate capacity of both FPSOs…which dwarfs most other cost items. What assumptions can be made on marginal cost of additional production when computing an IRR ? as opposed to fully costed additional production ?…..thats even before we consider the cost recovery percentages of the PSC, or how deferral of abandonment costs or unit cost of production would materially change NPVS. Then let us remember the basis for existing calculations requires a calculation of life of field recoverable reserves and NOT reserves which are in place but are not likely to be recovered during the existing licence terms. The latter numbers would change materially with a second rig and have not yet been adjusted for the well productivity currently being reported.
Then we have the hairy chestnut of what is maintenance versus growth capex? For example the Company has just spent over a $100m on sub sea facilities, expansion of risers and flow lines.. and topside facilities etc.,….how much of that expenditure been already factored into IRRs on the new wells proposed…not to mention oil prices.
I believe that Rahul has paid relatively little attention to Ten which has a longer unexpired lease term and now has an even higher Working Interest compared to Jubilee. He has recently started to acknowledge Ten’s real potential as he has shot 4D seismic and sought external evaluation of the the resource potential. About 18 months ago, one or two people ridiculed me for suggesting Ten could even raise its production as the field decline rate was so high …now Rahul talks confidently of taking oil production well over 50kbpd gross. So much of the initial Ten reserve downgrade, resulted from the disastrous decision by McCoss and the Board, to drill multi zones horizontal completions in the channel sands of Enyenra which has completely different geology to say Ntomme. Lastly, I will leave you with the thought that Rahul has given more “colour” to investors during his roadshow. Many will be disappointed that his public statements are much more guarded and conservative . None of this will matter longer term…Rahul has impressive skills in project management but I feel his vision is poorly communicated to the market. In my opinion he is managing the asset base like as venture capitalist…much of the longer term asset uplifts are not visible yet because he refuses to let us know the likely uplift to production profile as a result of the new wells. Soon that uplift will become obvious..providing the sweetener to the Capricorn deal that is badly needed .

[eircomnet] 13/7/2022 12:24

Thanks Bootycall.

[waldron] 13/7/2022 10:08

Tullow Oil maintains annual guidance as first half meets expectations

Wed, 13th Jul 2022 10:00
Alliance News

(Alliance News) - Tullow Oil PLC on Wednesday kept its annual production outlook unchanged after what it called a solid first-half performance, while it continues to progress its agreed merger with Capricorn Energy PLC.

The London-based oil and gas company said it performed well in the first half of 2022, with production in line with expectations.

Further, Tullow said the drilling performance across its portfolio was "strong".

In the first half, the company recorded gross production of 82,400 barrels of oil per day at its Jubilee field and 24,300 bopd at its TEN fields, both in Ghana. Net to Tullow was 30,800 and 12,500 bopd, respectively. In Gabon, it produced 6,000 bopd at its Simba field, and it produced 2,100 bopd at its Espoir field in Ivory Coast.

Tullow Oil generated revenue of USD800 million in the period, including the cost of hedging.

The company kept its annual production guidance at 59,000 to 65,000 barrels of oil equivalent per day, including its recent increase in ownership of projects in Ghana. Tullow exercised its pre-emption rights over the sale by Occidental Petroleum Corp of its interest in the Jubilee and TEN fields to Kosmos Energy Ltd. Tullow will now hold a 38.9% interest in Jubilee and 54.8% in TEN.

It also maintained its free cash flow guidance of USD200 million, assuming an average oil price of USD95 per barrels of oil.

Tullow said the process for securing a partner for its oil project in Kenya continues, and it expects to make progress on this in the second half.

In relation to its all-share merger with fellow London listing Capricorn Energy, Tullow said it is currently preparing a circular and prospectus for shareholders.

The company expects this to be available in the fourth quarter ahead of a shareholder vote about the merger.

The vote is expected towards the end of 2022.

"It is two years since I joined Tullow and today, we are in a very different place. A relentless focus on costs, capital discipline and operating performance is ensuring delivery of our business plan," Chief Executive Rahul Dhir said.

"We also continue to make progress on securing a strategic partner for project Oil Kenya, which has the potential to be a key driver of growth, value and diversification for Tullow."

Shares were down 1.4% at 43.24 pence each on Wednesday morning in London.

By Abby Amoakuh; [e-mail]

[xxnjr] 13/7/2022 09:58

Booty - you mean slide 6 of the 2020 CMD Presentation?

The initial 12 to 15 wells all have very high IRR's. That is why these were drilled first! These have mostly been drilled now. The next wells are a mixture of lower IRR infill opportunities plugged into existing manifolds and also new developments JSE, JNE and N'tomme Riser Base which all require new plumbing (sub-sea, manifolds etc etc) which ofc have even lower IRR's again as was illustrated in slide 6 back in 2020.

the OP is higher now but there has also been cost inflation. Rig rates have doubled (for the 2nd rig), supply ships same, steel for manifolds etc etc all cost more today. Same old: High OP = Cost inflation in E&P contracting.

Slide 7 of same presentation has the indicative production profile for 10 years ahead. Basically 63K to 80K for the company. Have been some indicative updates since.

Given recent history of poor reservoir performance with TEN just think they want to drill a few more wells there to see what they actually have before filling in the blank spaces between 2022 and 2025. The last thing Tullow need to do is over promise and under deliver like McDade always did in the past.

"their has been no further information on likely flow rates of wells"...... production guidance was maintained. It is not a case of new well A+B+C = huge number as production decline also a factor, as we discussed once before.

Don't worry! Rahul is doing a brilliant job. Knock Rahul if you want to, but from my perspective he's doing great operationally!

[badger36] 13/7/2022 09:27

If both Boards have approved the deal why such a long lead-in? Surely the in-house number crunchers and legal have already given their verdict This has provided an opportunity for rumours and counter rumours leading to exploitation by traders