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As per transcript, one of the items I found interesting was the cashflow guidance doesn't include any physical premium to dated Brent. If I'm assuming correctly, they could achieve an average of $5 premium on the 8 cargos for the remainder this year. 900k x 8 x $5 = $36m additional unguided cashflow.

James Hosie, Analyst, Shore Capital:

Hi. Good morning. Just a couple from me. Just merely clarification on the cash flow guidance. Is that based on the realized prices of $70-$100 per barrel or the average Brent price? If it’s on Brent, what sort of premium are you assuming for the remainder of the year?

Richard Miller, Chief Financial Officer, Tullow Oil PLC:

Yeah, thanks, James. Yeah, it’s a really good question. They’re based on Brent prices and we haven’t adjusted our forecast diff to Brent. Diffs have been sort of have increased materially this year. I mean, West African differentials peaked at about $12 a barrel earlier this year, but there is a lot of volatility in them. We’re maintaining our sort of budget differential to Brent, which is broadly flat.

Will hopefully get some further insight on FCF and what impact they expect the current oil environment to have on their current business plan.

I'm hopeful we will see updated 26/27 net debt and gearing guidance too.

Less than 2 weeks away, so I'm expecting to see upward pressure on the share price on the run in.

I think we have realised additional $50m+ FCF to date. One more cargo and we are now looking at $75-90m FCF. This is my best guess.

Interesting to see dated and futures Brent widening further. You guys might find Sankey Research videos interesting..

https://youtu.be/Eu9hsyCnAwE?si=il3GY8cugPbrUiz_

GLA

Thought it was pretty clear Jmax... Assumes we realise average >$100 for rest of year

From 9th March:

Oil price update

"Tullow's 2026 pre-financing cash flow guidance of $150-180 million was issued at $65/bbl. Based on realised oil prices in January and February, and an average oil price of $100/bbl for the remainder of 2026, pre-financing cash flow guidance would double."

Given the average Brent price so far must be over $100, we are looking at free cash flow north of $360m.

It's all about the oil price and Tullow's focus on delivering guidance production! As each day, week and month passes, the closer we to realising >$360m FCF.

This is (imo) transformational for the equity value, and I'm waiting this one out.

The management do very little to inspire confidence. The question is why are they like this.....

@JMAX,

What would you expect to see from management?

I ask because from what I can see, they report on the dates required and have added further information when the chance arises (such as the indicative FC number when the 2nd Kenya receipt was received).

If you can provide a picture of what you would expect that would inspire more confidence?

Thanks

That's right xxnjr, and Tony,

Really interesting points being made.

hedging policies are lower than 100% and one of the reasons is the risk of being over hedged.

To that end, if the high oil prices continue, it does create an opportunity to lock in great prices. Management should revisit visit their policy and increase it for 2027/28. What is vital for Tullow is not FY26, but FY26&27 (and of course beyond, but 26/27 is vital) the whole period up to refinancing.

They should use this opportunity to lock in a high floor (assuming future prices are good) and along with good production, guarantee FCF. I would sacrifice some of 26 windfall cash too pay for high quality put options, leaving no/little exposure on the upside and no worries about over hedging (as it's a straight sell option). Another benefit is this instrument doesn't require counterparty credit approval if they could pay premium up front.

I just hope Tullow don't ignore this opportunity. These high energy prices will eventually destruct demand, it's just when will the prices crash, and if prices continue, Tullow could be sitting pretty if they act.

I'm hoping they would go 80% 2027, 60%2028 and 40-50% out to 2030. To me this sounds sensible in a high price environment and securing enough FCF ahead of bond maturity. And when I say enough, it could be transformative number.

Hadn't seen your posts xxnjr on hedging sorry. I do agree with you fully that I think a lot would have been given away on the upside if they have completed the hedging, I can't see them paying a lot of premium.

Additionally, I'm hoping they might have paused at least some of the hedging until re-financing was complete, and if that is true, then I hope they are catching this wave.

That's right, 50-60% hedged on the floor, but at what cost on the upside. No one knows until results so we all just have to wait to find out.

I would hope they learnt from last time not to hedge and give away so much of the upside.

WTI weekend future prices now at $94.5. Expect another jump for Brent on Monday, may even see it test $100.

Tullow definitely need 3 months of sustained higher prices for it to make a material difference to cash flow. However , all this assumes that Tullow's hedging programme is well placed at these higher price levels and don't suffer high opportunities costs.

According to Gemini, Tullow realised $87 (against average $102) in 2022, with hedging costs at $319m.

https://www.ig.com/en/indices/markets-indices/weekend-oil---us-crude

Metric (FY 2022) Value

Realized Price (Before Hedging) ~$102/bbl

Realized Price (After Hedging) $87/bbl

Total Hedging Cost (Loss) $319 million

Percentage of Production Hedged ~75%

So while higher prices are good for Tullow, we can't assume a linear/straight line increase in free cash flow with higher oil prices (like you can for the majors), but there may of been some lessons learned as their hedging strategy has changed since then:

. Hedging Levels: Lower but Still Significant

​Tullow has gradually reduced the percentage of production they hedge as their balance sheet has stabilized.

​Past Strategy (2021-2022): Hedged roughly 75% of production to satisfy strict debt covenants.

​Current Strategy (2025-2026): They have shifted toward a target of approximately 60% of sales volumes. This allows them to participate in 40% of any market upside while maintaining a "floor" to protect their cash flow.

I guess the number one priority is to protect the downside, but hopefully not giving away so much on the upside this time!

GLA

I will be watching for any change price/value of the bonds post cash received (over the share price). This could be an indicator for the price of our next re-financing.

Does this average also include the days for the shutdown on Jubilee?

Agree, as long as the new interest % is not too high and they resolve the remaining GRA abitrations. Market conditions might force their hand to delay the re financing but we should know within a couple of months. This provides a platform for SP growth but it could still go either way at this point. Tlw have done well this year with the asset sales, so in my eyes, I'm bullish they can pull it off

https://www.upstreamonline.com/field-development/uganda-final-investment-decision-imminent-ceremony-set-for-kampala/2-1-1160065