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bransonbull,

Regarding your question about the CEO and the CMD, it all comes down to future strategy I suppose.

My interpretation (IN MY OWN OPINION and JUST MY THOUGHTS) of the future strategy from the Interim Presentation: Tullow will focus on producing assets and exploration portfolio that have highest potential, and then develop them to increase their value.
IMO, this is crucial for Tullow to develop and "grow". Here's why:

Ghana
1. Rahul talks about recovery of oil in TEN and Jubilee. i.e. tapping into STOIIP (oil initially in place) which was previously deemed non-recoverable due to economics.
These findings and ideas to tap into the STOIIP has probably come from the last competent persons report from YE19 (which determined the reserves/resources of Tullow's assets).
Increasing Tullow's current 2C resources through this method obviously adds "material" value to the assets. Furthermore, turning these 2C resources into reserves through drilling wells and producing from these "harder to recover oil" further increases the value of the Ghana assets due to increased cashflow.
One setback here is that these "harder to recover oil" resources/reserves Tullow are looking to tap into from STOIIP will be at a higher production cost to current reserves (Remember, Ghana OPEX atm is $9/barrel). However, as Rahul mentions - since the infrastructure is already there, it will still be economical. Also, from a balance sheet perspective it will still add material value to the assets.

2. Drilling further wells in Jubilee South East in 2021 will convert current 2C resources into 2P reserves. Tullow owns 35.48% of Jubilee SE, this will add material value to the assets on a balance sheet perspective. Furthermore, any new wells will add to production and provide cashflow. (Phase 1 of Jubilee SE and Ntomme-9 (from TEN) added material value to Ghana assets, this has pretty much offset depreciation costs to assets for H1)

3. Completing and drilling further wells in TEN in 2021 will again add material value as Tullow owns 47.18% of TEN. Depending on forecasted production of Ntomme-9 well, further resources --> reserves allocation here.

All the above could be done whilst being able to take advantage of higher oil prices (and recovering impairments). And so, the negative net assets can quickly be turned positive and increased.
Also, IMO there is an investment case for this as reserves/resources could be increased and hence production. Also be able to borrow more from RBL if reserves increased. Basically, growth potential is high.

Kenya
I don't know what Tullow's strategy for Kenya is, but if they are really able to make Kenya more valuable, Tullow might end up keeping Kenya or reduce their stake for sale.

ALL JUST MY INTEPRETATION. Wait until CMD.

Bransonbull,

"Slift, you won't believe my bad luck, guess where my other major investment is? TLW!!"
Whether good luck or bad luck, I don't think we'll know just yet. If Tullow is able to survive and restructure/refinance the debt in January, I think most holders here will benefit. That's the risk you're going to have to take if you're in here, forget the 3% up or down on daily basis.
So far, oil is keeping good but there's still stages Tullow has to accomplish between now and then.

"1 billion asset sales commitment to get the RBL. My question is what if Kenya can't be sold, where will shortfall come from?"
The $1b portfolio management was probably just a decision made by Tullow to delever and reduce net debt so that they are able to meet financial commitments and liquidity tests.
It would have worked or given Tullow enough headroom in normal circumstances with oil at $65+/barrel.
But COVID19/Saudi War happened plummeting oil prices.

What's happened now is Tullow has delevered a little (i.e. YE20, net debt will be c. $2.3-2.4b with Uganda). This will give Tullow some room for negotiation with lenders to restructure/refinance some debt or seek new investment with whatever Tullow's plans are (folllowing CMD).

"Is there a risk of RI, and how dilutive?"
Tullow is exploring all options. There's always a risk to RI in these circumstances.
Tullow cannot keep selling/farming down assets. This isn't sustainable. They will need to either
1. Raise cash (through investors, selling assets, RI, etc) or
2. Restructure/refinance debt (in some cases restructuring debt involves raising cash if lenders feel that the company isn't delevered enough).

"Or could farm downs in Guyana Suriname be sufficient?"
I posted a while back regarding RBL and what the likely shortfall in liquidity is. Farmdowns in Guyana/Suriname will probably give Tullow maybe 6 months (if oil price/production doesn't improve).

"What does new CEO have in mind for CMD?"
Improve production, continuous improvement, increase value, attract investors at a best guess!

mole_man99,

I think there is a lot of volatility to come this winter should COVID cases and deaths continue rising. But oil will certainly have it's time to shine in the markets yet again.

For the long term future of oil, there are concerns regarding demand and the need for energy transition. Yes, there will be electric cars and other alternatives to the transport sector in the future. We have already seen electric cars to be viable (although pricy and less practical for the average Joe atm).

Unless you convert every single vehicle in the world to electric (cars, planes, lorries, motorbikes, etc.) and every other petroleum product to a more alternative green solution, there is always going to be a demand for oil. I think we're over 50 years away for full conversion in the more economically developed countries, and more than 100 years away for lower economically developed countries.

The current proven reserves will last c. 49 years at 100m barrels/day consumption rate. Obviously it's naive to think that demand will stay at 100m barrels/day for the next 49 years. Demand will certainly start dropping gradually overtime as more and more alternative solution is invented and produced.

With big majors focusing and moving to renewable sources, the rate of increase in reserves will decline. The biggest finds in recent time (Guyana) contains estimated resources of 8b barrels. This is a mere +0.44% to the worlds current proven reserves (or 2-3 months of oil at current consumption rates).

There are 3 things to oil exploration and production that make oil risky but also attractive:
1. Exploration is very costly, even with today's technologies --> oil companies attempt wild cat drills at high cost in hopes of finding oil.
2. Development is very costly, even with today's technologies --> From discovery of oil to first production and then full field production requires huge amounts of funding and investments.
3. Production of oil can be very profitable, even in today's markets --> Transformation of Dubai in the 1990s as an example, or companies paying dividends almost every year.

The point i'm making is: The above 3 points are influenced by each other.
So even if demand falls and as long as it doesn't fall to 0, oil HAS to be profitable and expensive. So if demand falls, oil price has to rise to offset exploration/development costs. Otherwise, there will be no exploration or development.

ALL IMO.

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