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StanleyPro…the only way to properly derisk is to hedge. Production means zilch if the oil price collapsed. Tullow’s capex programme may have peaked …unless Kenya and Ten are developed at the same time which would be a high quality problem . In my opinion the share price is a joke. Once the bonds maturities have been extended the Company could buy in its shares and the price will take care of itself :)

@HappyInvestor That is such bad analysis..particularly on capex and forward run rate…where do I start…second half guidance was impacted by the performance of two water injectors (8-10k combined? ) which is a pretty standard operating issue for FPSOs. To avoid future disruption Tullow is drilling wells in 2024 to build in “redundancy” into their guidance. In future years the Company will always keep 1-2 wells as back up for any disrupted production..If you wish to confirm this , I suggest you listen to the Q&A of the Kosmos webcast where it was confirmed that in 2024 the Jubilee will be producing at close to capacity with production in reserve. I understand one of the injectors is already functional again and the other should be operational by the end of the year. Meanwhile , as we have just had confirmed in the trading statement. production is currently running at 100kbopd. May I remind you that at Africa Oil week Rahul Dhir was quoted as saying production was running at 107kbpd…so they are already able to exceed the 100kbopd before the addition of two new wells coming on stream at the start of the new year. As a result of a 2 months delay starting up Jubilee South East, the 2nd half of 2023 should be easily surpassed by the 1st half of 2024. Regarding capex, there is no concrete guidance other than to say, Tullow only needs approx $100-150m p.a. net to maintain its current production levels . In fact , I believe that it will spend a good part of the year, well in excess of 100k, but production will fluctuate, with the latter outcome being a low base level scenario. The additional capex ,which might result in a total capex spend of $525m? ,is a provisional total, over the next two years combined ( it will largely depend on the likely approval of the Ten FDP in Ghana) . It is possible that this capex might be weighted more 2024 than 2025 or vice versa …but let me make this clear …we are not referring to replacement capex, this is growth capex…and if the money is spent we will see an uplift in production, as the FPSO and much of the subsea infrastructure is already positioned . Most of the analysts realised that there capex numbers were too high at the interim CC (listen to Mark Wilson of Jeffries in the Q&A) but obviously your observations were based on the old guidance. Do not also forget that decommissioning costs fall substantially in 2024/5 and most of the old unfavourable hedging programme falls away in the new year as well.

So why the delay with Ten? Wawa and greater Ntomme is primarily a condensate play and gas pricing and offtake agreements are critical . I would also expect Tullow will want a watertight commercial contract because of the problems currently facing the Ghanaian economy . I am sure Ghana will want to attract substantial investment from international players to develop its hydrocarbons as evidenced by the latest changes to royalties on new production . DYOR

Perhaps then you can find me a single stock on the London Exchange that has a comparable prospective free cash flow multiple ?. I also understand there is past cost recovery of between $1-2bn on the Kenyan assets…assuming a successful development approval . You got lucky with small company fund redemptions causing pressure on the Tullow ordinaries whilst the appreciation in the Tullow bond prices showed the real underlying picture. Now the bonds are close to parity the short equity /long bond strategy is potentially going to unwind viciously. You have been warned .

@PNuman Do us all a favour? Hang around to see if there is a Kenyan partnering deal and/or approved FDP for Ten. Then you can change your name to Roger The Rogered. Meanwhile the FTSE250 beckons ? Lots of lovely index tracker demand in prospect if shares stay at current prices.

@Power

Did you listen to the Kosmos analysts call last week? Please do so…because I believe you are misleading investors. Kosmos says the current drilling programme will bring production levels up to the capacity of the rig in 2024 . Are you saying that just because the water injection suffered a temporary setback we should ignore this up to date guidance ?

Pathetic attempt to downramp.

This is brilliant news..although obviously the devil is in the detail and we have a trading statement tomorrow which I think will show production at very low end off guidance for this year (because of the water injection pumps malfunctioning for a few months..which should be straightforward to fix with spare parts) …but next year might be upgraded because of advancement of the drilling programme.

The new facility appears to me to be a mezzanine layer (hence the premium on the interest margin as it is subordinate to the 2026 bonds). If the facility is a drawdown it can be used to flex so interest is only paid when utilised ? It probably avoid the ridiculous charges and fees which were extracted by advisors for the last refinancing. If we are fortunate, it may also allow an extension of the 2026 facilities without any great fuss ..but that is mere speculation on my behalf . The whole point is that the 2026 bond holders no longer are able to seek a pound of flesh from the company for agreeing to changes to refinance the 2025 bonds…in effect the management are finally master of their own destiny. It can now renegotiate the 2026 bond maturities with Glencore facilty subordinated to it…allowing in theory a lower cost of finance .

Until we get more clarity on precise terms and the full extent of the companies plans for the 2026 bonds , this is speculation on my behalf. It should not be relied upon for any investment decision . I , however, am hugely impressed. This , in my view, is the turning point in the shares, unless the oil price fall below $60.

Oh yes, the nameplate capacity limit for the Jubilee FPSO is 120k bopd , although I am sure the Company will want to have a little wiggle room , so they are likely to guide 110-115k in my opinion . The price is a joke .

@StanleyPro

The Kosmos Energy conference call this week drew attention to the addition of two extra wells for 2023which were brought forward which would come on stream in early 2024…., together with further wells in the first 6 months of 2024 which would allow Jubilee to reach capacity limits AND leave some reserve capacity so that issues such as water injection pumps could be dealt with without lost production . The argument over current average production is a red herring . What matters is the exit run rate and can it be sustained . This will drive NPV calculations of cash flow from production . Tullow might be a fraction of forecast average production but next year it looks like upgrades are in prospects. We may have to wait, though, until new guidance is issued in Feb 2024.

@Flavius Cash operating costs of $11 per barrel in Jubilee with $19 depreciation (non cash)per barrel..perhaps you can run everyone through your numbers ? Or do you like pretty chart thingys ? Production has gone up 50% from its low and the failure of a couple of water injectors makes you want to halve the share price. Well everyone is entitled to their view .

Tullow reported current Jubilee gross production at 107k BOPD in September analysts call. Why are we having this inane discussion ..none of you listened i suppose ? Now you’re working yourself into a froth? May I suggest you look at slide 6 of the last investor presentation…they could defer $150-200m of capex and still maintain current levels of production . SO who gets the dunces cap today ? Step forward ! Hope it’s not me ! :) Also hope all the poor P.I. ‘s reading this board have not sold expecting bad news next week.

@Scrodingerscat.

“Rahul did say Jubilee would be poducing 100K plus and it's currently not”

I believe it currently is. Let’s see what the Kosmos conference call says. The Jubilee water injectors to help optimise production started post the quarter end date..the objective is to achieve stabilised production which can be extended several years..whether we are delayed one or two months getting there is really immaterial to NPV . The scheduled shut down of Ten has cost us a few thousand barrels in this quarter .

@POWER A few small delays in hitting production guidance..but the suggestion that forward guidance for Jubilee will be upgraded for next year and the years ahead. I know which i prefer. You should never invest looking in the rear view mirror .

@antonvb

The nameplate capacity on the Jubilee FPSO is 120kbopd. If you read page 11 of the 2012 earnings transcript (link below) you will see the operational constraints. With current oil prices , funding rates, individual well productivity and the limitation on the licence period, I would certainly hope Rahul reaches it shortly.

https://www.tullowoil.com/application/files/3015/7960/2227/2012-tullow-full-year-results-webcast-transcript.pdf

I sincerely doubt that Exxon would show interest in Ghana licences without them seriously wanting to dominate the region. I suspect Tullow must have an amazing opportunity to divest …watch this space.

@TrebleTreble. I think you will find that this does not affect Tullow . The background to the dispute is covered by this article.

https://www.trtafrika.com/africa/nationwide-power-outage-hits-ghana-15570174

Tullow of course supplies gas at sub market rates so is unlikely to messed around….other operators charge almost as much as three times per standard cubic feet. If Tullow was in anyway affected it would promptly make a public RNS to that affect.

@Anton let’s be honest. Rahul had the opportunity to lock in production at $90 per barrel for 12 months. If he was that concerned about the debt …that’s IMO is what he should have done. When you are trading on one times projected cash , you have to throw shareholders a bone. Repayment of debt is the priority …no point paying dividends, but a buyback to take out a few obvious loose holders (like the bonds ) would have worked wonders for everyone. I cannot believe the share price…but what concerns me now is a clown in America who insists on running such a high budget deficit that the worlds bond and debt markets are in disarray . Until the Fed acknowledges the risk of a depression, the cost of debt repayments will cripple economies bloated with debt . I suspect the macho central bank response is currently leading to a severe recession. When the Fed changes tack we will all breathe a big sigh of relief.. but it is getting seriously dangerous to invest in the absence of market liquidity. It is only the macro that worries me now…Tullow has never been more attractive .

@Supercooper Do you honestly think international arbitration works that way ? that is why PSC contracts are adjudicated elsewhere. All the issues at stake will have been dealt with in previous judgments that have been handed down…they don't make it up as they go along you know !

As soon as Tullow can put a fraction of its internally generated cash flow to buybacks ..the shares will recover . Rahul talks now about “jam today” …those looking in the rear view mirror could miss out handsomely. Renegotiating the outstanding bond maturities might well transform this Company.

@Flavius

On one and a half times cash flow, with the ability to sell forward production , interest rate movements and ESG are affecting sentiment to an unprecedented degree. As the balance sheet recovers off debt restructuring , the opportunity to buyback will trump all else. The same applies to many other oil production companies with strong cashflow ..just like it did to tobacco companies forty years ago….in my opinion of course !

If oil prices stay high and Tullow sell production forward for 16 months ..the refi will be a walk in the park. Any extension of maturity will wipe out the shorters. If the Company starts to expand its operations on 60% ROI projects instead of paying down debt , the shares should be very well. DYOR.

@Tambo

hTTps://www.tullowoil.com/media/case-studies/successful-end-early-oil-pilot-scheme-eops/

Tullow have many ways of monetising the field that people forget about. The optimal way is of course by pipeline ..but there are various permutations…just with a refinery, just with a pipeline , with both …even trucking large volumes . The reserves are waiting in the ground to be lifted. The only real technical challenge is the need for heated pipelines for a waxy crude …but this has been overcome in subsea developments so should not be a real problem for onshore logistics.

hTTps ://www.sciencedirect.com/science/article/abs/pii/S0377025717300903

I can understand why people might be cynical about progress in Kenya. The Government sent all the wrong signals out a few years ago by trying to increase the level of taxes once a commercial discovery was made. The multinationals baulked at such behaviour as they had so many alternative high value projects to pursue elsewhere . Kenya shot itself in the foot and have had to backtrack to get some sovereign governments interested. I believe the project is very robust at $70..per barrel . Let’s see how this involved …it a high stakes game of chess…and by holding 100% of the licence (before Government back in rights) Tullow can make timely decisions .

@Gingy The market is being played by the shorters. They are getting into your head…or maybe you are one of them trying to get into mine :) Let me remind you , that just a few months ago , Mark Wilson of Jeffries was questioning if they could even raise gross production at Jubilee to 100k gross per day. Currently, production is at 107k …with further wells planned . Let’s remember other nuggets …the $75m free cash flow in the July/Aug excluded the latest well which came on stream in September. Furthermore, some of the existing wells are being constrained by having no outlet for associated gas …a problem which will likely be resolved by the expanded gas contract which should more than double off takes in the future . In fact Rahul indicated that based on graded well inventory we may be able to keep gross production in Jubilee to over 100k for several years. Meanwhile costs are falling and the oil price is surging . Sounds like as total disaster to me !