Clean Audit Report - Hidden in the RNS Asset Sale.24 Feb 2021 07:21
Use of proceeds of the EG Transaction
Net proceeds from the EG Transaction will be used to strengthen Tullow's balance sheet as part of its strategy to reduce its net debt and focus its capital on high-return investment opportunities within its current portfolio.
If completion of the EG Transaction occurs, capital expenditure of the Group will reduce by US$12 million approximately for 2021. Had completion occurred on 30 June 2020, the Group's total assets would have, before receipt of cash proceeds, reduced by US$101.2 million, being the total amount of the EG Interests as at 30 June 2020. The loss in respect of the EG Interests for the six-month period ended 30 June 2020 was US$ 88.5 million.
Tullow announced its full year results for the year ended 31 December 2019 on 12 March 2020. In these results, the Directors assessed that the Group was a going concern for 12 months from the date of approval of Tullow's annual report and accounts for the financial year ended 31 December 2019.
At the time of issuing Tullow's annual report and accounts for the financial year ended 31 December 2019, there were unprecedented market conditions relating to COVID-19 and Brent oil prices. These conditions increased the risk that the Group may not be able to sufficiently progress planned portfolio management activities, as a result of which its lenders may not approve the bi-annual liquidity assessments or covenant amendments under a secured revolving credit facility (RBL Facility) if subsequently required. Therefore, the Directors concluded that there was a material uncertainty that may cast significant doubt that the Group will be able to operate as a going concern.
This assessment of going concern by the Directors was repeated in Tullow's half year results for the six months ended 30 June 2020 which were announced on 9 September 2020. At that time the Directors once again concluded that there was a material uncertainty that may cast significant doubt that the Group will be able to continue as a going concern due to the Company forecasting a breach of the gearing covenant under the RBL Facility in both December 2020 and June 2021 and a potential liquidity shortfall under the periodic liquidity assessment contained in the RBL Facility at the redetermination dates in January 2021 and March 2021.
Since publication of Tullow's half year results for the six months ended 30 June 2020, the Company has agreed an amendment with the lenders under the RBL Facility in respect the gearing covenant as at 31 December 2020. As a result, there was no breach of the covenants under the RBL Facility in December 2020. Furthermore, Tullow announced in its Trading Statement and Operational Update issued on 27 January 2021 (the "Trading Statement") that it has agreed with the lenders under the RBL Facility to an extension of the January 2021 redetermination date by up to one month, with the result that the redetermination is expected to complete by the end of February 2021.
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