Member Info for Slift

L3Trader,

I can't comment on HBR's performance. I have stopped following HBR as a whole since the merger. However, Tolmount has been a disappointment for HBR.

Timeline for Kenya..
FDP Dec 21
Sale of stake Dec 21 - May 22
FID Jun-Aug 22

The longer Kenya is sat waiting for, the less economical and less attractive it becomes. Tullow and partners already know this considering the significant delay in the project. Majority of the work for FID is already complete, and it's just the FDP that requires negotiation with all the contractors that have submitted bids for the project.

Debt Structure:
$800m due 2025
$1800m due 2026
$500m +$100m RCF due 2024 (Majority undrawn and used for working capital movements)

But to answer your question, yes Tullow will have to repay $100m. This will directly come from cash in hand and FCF.
As at HY21, Tullow had c. $160m free cash. The additional Ghana stake will be c. $110-125m consideration for Tullow.
So $160m cash - $120m Ghana stake - $100m repayment + FCF (H2 21) = Cash in hand at FY21.
Tullow should be able to fund for the Ghana stake and the $100m repayment with ease, whilst maintaining $500-600m liquidity for operations from undrawn facilities.

DestituteBroker,

The OPEC+ supply is still below what it was in 2019. One thing to remember is that OPEC+ only account for approx. 40% of the crude supply. The current agreement is an incremental increase of 400k bopd per month throughout 2022. OPEC+ requires unanimous agreement for increase and if an extra 400k bopd can be supplied by OPEC members than they will in the current market. It's no secret that Russia and Saudi have spare capacity to increase supply, but the same cannot be said for the other nations. Years of lack of investment will prevent OPEC+ as a whole to increase throughout 2022.

Outside of OPEC+ (the 60%), due to CAPEX savings and green policies, the supply has been declining due to lack of investment. This includes Tullow (in Ghana, 2020), and other major oil companies that are outside of OPEC+.
What OPEC+ are trying to achieve here is take back the market share that are lost by non-OPEC+.

Now the US.. The problem with shale is that it was prepared for a downturn with a huge number of drilled ("ready" but incomplete) wells that were drilled over several years. The US has been tapping into these wells to maintain production. 2020 and 2021 has seen a significant number of these wells being tapped into to maintain production. Even with the increase in US rig count, there is a decline in "ready" wells to be used to maintain production. These wells have reduced from 8760 in Aug 2020 to 5104 in October 2021. There are still plenty of wells to take down Shale production, but there has been some damage done to it and will require several years for it to recover.

As for Tullow.. 2021 was when the business strategy of developing Jubilee and TEN was put in place. And results of this can be seen going forwards from 2022. There is also Kenya and increased stake in Ghana to look forward to. So all in all, with the hedging in place (for 2022), there is a significant increase in cashflows for Tullow at elevated oil prices from both increased production and better hedges.

As for share price forecast, can't say for sure, but there needs to be continued success of drilling in Ghana and increased production to reflect forecasted share prices. The balance sheet also needs to be fixed and with the acquisition of the Ghana stake, that should be done.

Canarywharfy, Jubilee, OrinduikUP..

You're never right :)

The US Strategic reserves are currently at 602m barrels.
The last time this was at 602m barrels was in 2003.

US will look to restock on reserves over the next 5 years. The "short term" spike in crude has just become med-term.

Even if there is a transition to green energy and little investment in oil, there is no mistaking the increase in future cashflows due to a longer than expected sustained oil price.

In the meantime, looking forward to:
- Completion of Ghana stake
- Kenya FDP
- 2021 success for Tullow in turning the business around
- Net positive balance sheet
- 2022 projected work plan and forecasts
- Uganda FID payment
- and more!

"Expect FCF for 2022 to be $300m+."*
*all else equal - i.e. CAPEX, Decom, Financial expenses etc.

2021 is also at an end. What this means is that the current hedges will expire in another month.
2022 hedges are significantly higher for Tullow and with production expected to be significantly higher (than in 2021), we can expect a material cashflow generation (assuming oil prices stay high) for 2022.

Material enough such that the current share price can be considered "cheap".

Expect FCF for 2022 to be $300m+.

do*

You don't think so you Jubileey?

It's quite hard to forecast decline out to 2025 without Tullow's future plan or actual figures. But with the help of the newly drilled injector in Ntomme, production from Ntomme should be stable around 20-25k bopd for 2022. The remainder (Enyenra) will have a decline as per the above explanation on pressure decline.

The rest depends on TLW's plan for TEN in 2022. I believe that Tullow plans to drill 2 wells in TEN in 2022. If one of these is an injector in Enyenra South or North and if it's going to have an impact on Enyenra Central production, then that would offset the decline significantly.

However, it's more than likely going to be an Ntomme producer well + an injector in Ntomme. If that's the case, Ntomme production will likely increase to 30k by YE2022, and that will offset the Enyenra portion of the TEN decline --> giving a net positive increase by YE22.

Time will tell when Tullow releases approved CAPEX and plans for 2022.

@Roxbury,

For 2019, TLW's drill plan for TEN was supposed to increase production to ABOVE FPSO capacity (over 80k bopd). The development plan was centered around Enyenra. Two wells had mechanical and operation issues during/following drill, and two further wells were deferred.
The so-called mechanical and operational issues were due to the complexity of the field. The Enyenra field is complex such that each drill needs to be perfect and completed at an angle to pinpoint the optimal location. The two wells failed to do that - This was discussed in detail previously on this board a year or so ago.

There is significant amount of oil in Enyenra (more than Ntomme) but development of the field is a high risk due to the geology complexity. Which is also why the projected recovery of oil in TEN is much lower than Jubilee. Tullow is also reluctant to drill in Enyenra, which is also understandable due to the risks.

There hasn't been a successful Enyenra well (producer or injector) for 3 years now. This adds to the constant decline in production due to loss of pressure support.

I don't believe Enyenra will be fully neglected though (Enyenra Central most likely until further work on complexity). Over the next 2 years, I expect drills in Enyenra North and Enyenra South to somewhat offset decline and even provide pressure support if the fields reach that far to Enyenra Central. Ofcourse, there will also be Ntomme drills, with the Ntomme Far West development expected to be around 2023-2024 with a secondary rig (maybe). These will offset decline and increase production in TEN and I expect a positive net increase in production by 2023.

As for decline in fields, it's not quite "running out of oil" but rather decrease in pressure support. Each barrel you produce leads to a pressure decrease (say x Psi) in the field. Lower pressure = lower production = less pressure decrease.
So even if nothing is done to the Enyenra fields and assuming the flow is controlled for GOR (gas to oil ratio) and watercut, then the decline in production from Enyenra should become smaller (i.e you're only producing 9k bopd, so decline in pressure is 9kx Psi, rather than say 15k bopd and 15kx Psi)

Approx 9-10k bopd of TEN's production as at end of Q2 2021 was from Enyenra.
Which is approximately 1/3 of TEN.

The TEN decline is inevitable.

A good portion of TEN's production is/was from Enyenra. Tullow had spent a lot of CAPEX in 2018/2019 and prior to this developing Enyenra. However, Enyenra is a much more complex field, so Tullow has decided to let it "die" for the time being. All production from Enyenra has been in constant decline since 2019 and currently no current or future CAPEX is allocated to reduce decline.
Going forwards, the Ntomme fields will have good production. CAPEX has been allocated to maintain production in 2022 with a couple? drills Ntomme, and then there are several production wells planned in 2023.

Bottom line - The decline in TEN won't stop until Enyenra portion of the production is dead, or Ntomme production is boosted. The gas injection well drilled this year will sustain production in Ntomme.

Personally, only 2021 hedges are dumb.. but majority of 2021 hedges were done in 2020 when the direction of oil price was unknown.

2022 with current hedges should yield Tullow with upwards of $300-350m+ FCF (or c. $375-425m including Uganda FID).
Ofcourse, assuming all else is equal (OPEX/CAPEX) and with the help of increased Ghana stake etc.

Assuming rest of year oil price averages $81/barrel..

Estimated Revenue for YE21: $1420m
Estimated FCF (excluding Uganda FID): Approx. $140m
Estimated net debt YE21: $2.25-2.35b

I'm really struggling to understand why Tullow has stated c. $100m. At $81/barrel for the rest of the year, forecasted FCF will be higher.
Only explanations would be working capital movements (or lower than forecasted oil price for rest of year).. but assuming every barrel is sold as soon as it's produced, FCF will be higher. Nonetheless, if FCF is stated at $100m due to working capital movements for 2021, the remainder will be transferred over to 2022.

Y2022 Production guidance forecast (assuming Pre-emption completes by year end and continued success of drilling plan): 67-69k bopd

"the world hasn't produced enough crude this year"

How can the world produce crude if no-one is willing to fund the projects? With the drive towards green, there is a significant lack of funding for oil and gas projects. Majority of the projects that are going ahead are those that are funded entirely by cashflows and equity.
Covid along with green policy on investments has crippled the oil and gas industry and it will take many years to increase production or maintain production.

The fact that strategic reserves are released across the world is only adding to the upcoming "supercycle" in oil and gas. Significant investments are required to meet the demand and unless policies are relaxed or investment firms start investing in oil and gas, the supply will struggle to meet demand.

As it stands, only the big producers (SA, Russia, USA) can increase production with FCF at current oil prices.

"steady as she goes" Tullow.
Even Tullow was late in investment into Jubilee/TEN, the business plan was put in place in 2021 (so 2020 was a big miss). However, compared to competitors and other O&G business', Tullow is now seemingly one step ahead with carrying out investment into the producing fields.
There are very large companies out there that have missed this over the past couple years due to COVID, Green policies and cost control. But are now paying the price with reduced production and just about managing the debt (ENQ is a good example).

"So GE was a panic purchase"

GE is the only thing going good for ENQ atm imo. Which should protect future revenues.

Magnus and Kraken in constant decline from problems + lack of investment.
2022 will be have Magnus somewhat back on track, but I see huge underperformance of Kraken in 2022 unless ENQ accelerate CAPEX to the field - which following this year's bad performance is hard to justify (unless strong(er) oil prices in 2022)

GLA.

"How did they manage to buy these c15m shares without the share price increasing materially, particularly in view of the low volume of trades over that period? Any ideas?"

The threshold (9%) was crossed on 11/11/21.
They didn't buy 14.84m shares on that day, but they did buy at least 0.042% of the shares on that day.

Best guess would be that they bought overtime in small amounts - ever since they crossed 8%.

Exactly seekingalpha.

2C resources will have been transferred to 2P reserves as part of the gas injector boosting pressure and hence production.
However, the oil find at the base of the well as you say would extend the field and also derisks future wells in the area. This find would be a boost to the 2C resources.

The Gas injector was essentially drilled in between Ntomme, Ntomme Far West and Tweneboa.
It's no secret that there is significant amount of oil in Ntomme. However, the development of Ntomme Far West isn't till late 2022 or even 2023.
But what the Gas injector also shows is that there may be more oil than first thought in Tweneboa (which is currently predominantly gas).

Positive.. However, it would be good if Tullow could enlighten us more on their development plan in TEN, especially now that they've bought additional 7.7% stake in the fields. 54.84% stake, with a significant amount of recoverable oil still left in place is definitely material for the transformation of this company.
I don't believe that current production of TEN will "self fund" development. Jubilee will be "self funding" the JV for development of TEN.

2022/2023 will reveal more on the progress of the business plan.

Entered 3rd March 2021.
Exit 1st September 2021

Re-entry 1st Dec 2021?

Isn't that common sense?