Member Info for Slift

I previously thought Tullow should be okay for 6 months (i.e. until the liquidity forecast test in March 2021). I had imagined that in March Tullow would start discussions with the RBL facility to restructure the RBL facility to meet the liquidity shortfall. I was also expecting a cash raise via Debt for Equity later in the year (Q3/Q4 2021) to meet the $650m senior notes maturity.
However, the Half-Year results regarding the Jan 2021 VOLUNTARY re-determination completely threw my thinking off.

I personally think this is probably the single most significant update from the Half-Year Results - the voluntary RBL re-determination.

I really don't know how this will play out, but if things don't go well from now up until January 2021, there is a big risk of defaulting (restructure of RBL or forced cash raise within Q1/Q2 with significant dilution). But if it does go as planned for Tullow, then I believe we will start to see real results here. If not here, then in March 2021 when the going concern assessment period ends.

The only things de-risking January 2021:
- Completion of Uganda sale (MAJOR derisk to Tullow's liquidity)
- the CMD and the confidence provided by Tullow in VOLUNTARILY requesting the RBL redetermination
- any discussions to be had between now and then in terms of refinancing/seeking liquidity from investors/ammendment of RBL terms and/or increase of debt capacity
Discussions and CMD - we aren't privy to until January 2021..

The fact that they are also evaluating and early engaging lenders to refinance senior notes or waive the RBL tests is definitely a positive sign. I think lenders will definitely consider extending or increasing debt capacity here, mainly because Tullow has voluntarily reduced commitments and have continued to pay interests. But obviously, it is still in the hands of the lenders.

Also good to see Tullow looking at all options to address liquidity shortfall.

There are several reasons to voluntarily request RBL re-determination following CMD in Jan 2021. Trying to guess what this might be is pure speculation. Could be good or bad.

ALL IMO.
Slift.

"Sounds promising"
I disagree, the water injection was the secondary reason why I sold.
$70m for water injection system? What a waste of money.

Like they said, it will only increase the longevity of the production.. but the negatives of this is that the watercut will continue to increase in well 6. They will also need another solution for this.

Just my opinion.
Slift.

Cashflow
Half-Year results show a cashflow of -$212.5m. This is due to the earlier drawing (and spending) from the RBL facility (which I had missed and written off by saying net debt was $3b). i.e. the increase in borrowings from $3094m to $3255m (or the net debt from $2.8b YE19 to $3b HY20).

Expected breakeven FCF for FY20 at the forward curve --> this means that this current cashflow of -$212.5m will be reduced to $0 at the base case of FCF breakeven. Or in otherwords, Tullow expects +$212.5m free cashflow in H2. This means that from operations alone, net debt will be reduced to c. $2.8b.

Personally, with the difficult circumstances we are currently in with oil price, unless oil price recovers to c. $42+/barrel (allowing for contingencies) for long periods of H2, I think we will likely still see a negative cashflow for YE20 at a low case, although significantly less than -$212.5m, probably between $0 and -$50m. (This would still be a net increase of c. $150-200m from current levels and would contribute to net debt reduction).

Obviously, if oil price does recover to $42+ for extended periods and production is in line, we may see the best case in which there's positive cashflow for YE (and in excess of $213+m for H2).

Debt
Not much to say here tbh. Borrowings at $3255m (as provided in June 2020), unchanged.
As above regarding cashflow, and following Uganda sale at $500m --> net debt will be c. $2.3-2.4b by YE20.

ALL IMO.
Slift.

Well.. Not much for me to say here tbh.
I have sold out of here today at a loss. Oh wells, not to worry.

I had previously posted that 1P reserves at "worst" following downgrade would be 21mmboe. This downgrade is much more significant than what I had initially thought.. with 2P reserves downgraded to 16mmboe.

GLA.
Slift.

Late to the party due to account being blocked, but oh wells for what it's worth:

Positives
A lot of updates we've already known about. But the ones that we didn't:
- Ntomme-9 well adding circa 5k bopd to TEN, c. 2350 bopd working interest production to Tullow. i.e. Ntomme-9 no longer a concern for me at least.
- Production guidance has been narrowed - I think we can be confident in production for the rest of the year
- Impairments/write-offs at lower end of the estimation. With majority of this recoverable with oil price.
- Further cost savings - This will be beneficial to meet liquidity forecasts and keep costs low.
- Good business strategy going forwards IMO, with Ghana drilling to restart 2021
- Assets aren't sold off in a firesale (or how I heard it - $1b portfolio management is on hold)
- Kenya license extension (until 31st December 2021)
- Evaluation of refinancing alternatives (to be progressed sufficiently by end of Jan 2021)
- CMD January 2021 (+ VOLUNTARY? RBL redetermination - The board is confident to do this?)

Negatives
A lot of this we've already known. But the ones that we didn't know:
- Impairments/write offs of exploration licenses (could be a good thing going forwards - less CAPEX requirement, but still wasted cash)
- Gabon impacted due to OPEC+ cuts
- RBL redetermination in January 2021 (Can be problematic if things don't go well from now and then)

Neutral
- Likely no exploratory wells next year apart from Goliathsberg Voltsberg in Suriname.

Not much else in the Half Year results. Very impressed with Rahul's delivery of the half year results with his expertise, but also the view for Tullow in terms of the forward strategy.

All IMO.
Slift.

Oilheadgame,
"Where are you?!!
Lololol"

My account was blocked from posting until today due to replying to posters such as yourself lol. I think that pretty much sums my reply to you. You're pretty childish for being a "doctor".

"I believe they need to find there own platform to sustain themselves !"
Daddy, could I have a Porsche for Christmas this year? :)

DiveCentre,
Lmao, chill! I respect you enough to provide proper replies!
But yes, I cba for the majority of this toxic BB.

Thanks for the reference. This is prior to first oil, and I'd imagine the new board aren't concerned about data collection anymore following the issues lol. But we'll know more by Friday!

Slift.

Casper,
"Do we know if they are even mining at full capacity in SA at the moment?"
Yes they are, as of 1st June or thereabouts.

DiveCentre,
Could you direct me to where HUR have said that it was the least preferred option?

I think prior to the watercut, and prior to the faster than expected decline of static BHP (see edison report), there was no need to reinject the gas, and HUR would have benefitted more from selling this gas instead.

But now, with these issues, the reinjection of gas resolves all issues, whilst also reducing gas flaring. Not to mention the environmental benefits associated with it.

Ffs, can HUR just rise a little so i can just sell and get out of here? lol.
Slift.

SpruceGoose2,
"perhaps installation of a 'blue hydrogen' unit onboard the AM with CO2 returned to reservoir might work.....cheaper than wosps connection??"
Above is a potential solution, but I personally think it wouldn't be that effective. You will still require some kind of pipeline or compressed storage for the hydrogen if you're looking to sell that off. What's more is that I wouldn't be comfortable having compressed hydrogen in large quantities on an oil storage vessel... That's basically asking for an explosion risk! But I wouldn't know what's acceptable and what isn't for oil and gas.
Furthermore, CCS is actually a very expensive process. The separation process of hydrogen and CO2 likely involves expensive carbon capture amines, which require recycling (and they also lose effectiveness overtime so will need replacing every so often).

I still think the cheapest and most effective solution would be to just reinject the natural gas following compression. I think connection to WOSPs is needed either way - if HUR are going to really expand and fully develop fields. I.e. re-inject the gas and then export the excess.

Just IMO.
Slift.

The potential reasons for rise:
- Offer for Williamson Mine
- Takeover offer for Petra
- Agreement of a further deal with bondholders, and possibly even an extension of maturity of senior notes
- Exceptional diamond find
- Other

ALL IMO.
Slift.

Na see triple bond N?

Deadly stuff that.

@deeko

The thread below:
https://www.lse.co.uk/ShareChat.asp?ShareTicker=TLW&share=Tullow-Oil&page=4&thread=EB1D4C78-3B51-4DA6-9DB1-54350844AEBB

Good post deeko,

Tornadotony posted details on the mechanical issue sometime ago. Worth reading up :)
As far as I'm aware, EN14-P and EN16-WI are still suspended. But who knows at this stage with lack of updates.

As you say, the 11,000 bopd loss is from two wells (as well as the likely decline in pressure drop or increase in watercut). Easy to ramp up production if problems resolved.

Good post deeko,

Tornadotony posted details on the mechanical issue sometime ago. Worth reading up :)
As far as I'm aware, EN14-P and EN16-WI are still suspended. But who knows at this stage with lack of updates.

As you say, the 11,000 bopd loss is from two wells (as well as the likely decline in pressure drop or increase in watercut). Easy to ramp up production if problems resolved.

"I would like to think that it is the first of many new wells in the area?"
Well.. I think that the Ntomme-9 well is the last well of the "7 well programme" implemented in 2019 within the TEN and the Jubilee fields. Could be wrong.

But we'll know more about future well drill activities and business strategy from the interim results.

"Any guesses to current cash in bank?"
An educated guess: $115-125m

PlantedBHA,

Can you break that down for me?
How is Lancaster doing 20 million a month in revenues for this month?

"It’s irrelevant"
I agree. I'm pretty impartial whether i'm in or not.
But in this case, I am in and have been topping up recently in the 20s, not that it matters.

Always been clear about my position here, but been pretty hard to make minds up with the lack of information provided by Tullow recently.
But given the information they have subtly provided, I'm NOT THAT concerned about this company. The only things i'm concerned about is the Uganda sale, the future business strategy and the Ntomme-9 well. Otherwise, IMO this company should still be good for the next 6-12 months.

TLW is still my bet (as it stands) for the future recovery of oil. But this may change depending on the business strategy going forwards for Tullow - which hasn't really been clear recently with the board changes.

ALL IMO.
Slift.