Member Info for Slift

deeko,

Tullow hasn't made it easy for investors to pick up on this.
From the CMD RNS:
"Group working interest production to date in 2020 has averaged 75,000 bopd in line with expectations."
To date being 25th November.

But here's a breakdown:
Production at H2 20 (so Q1 and Q2 combined) = 77,700 bopd (see half year results)

Production at Q3 (between July --> end of September) = 76-76.5k bopd approx. (see Kosmos results)
Tullow hasn't provided Q3 production results, but instead combined it with "to date to 25th Nov" results.

For Q1 + Q2 + Q3 = (77.7k + 77.7k + 76k)/ 3 = 77.1k bopd average

Then all of a sudden between September --> 25th November, production to date has averaged 75k bopd.

Now if you work out backwards, to maintain 75k bopd average over 4 quarters:

75,000 * 4 quarters = 77,700 *2 quarters (H1) + 76,000 * 1 quarter (Q3) + X * 1 quarter (Q4 results)
X (Q4 results) = 68,600 bopd

Let's say there are some contingencies and errors in calculation and say that Q4 results has to be 70k for 75k bopd average for the year.

But we're half way through Q4 and already declined to 75k bopd at 25th November, and on the current decline, Tullow will end the year with <75k bopd average.
Q4 production will be <70k bopd.

Hope that explains it.

Tornadotony,

As others have said, please make your own decisions and do not follow my decisions.
I MAY BE WRONG with my decision in reducing my stake. Who knows, but whether refinancing is positive or negative for Tullow, i'm willing to accept it with my current stake.
I reduced to de-risk, not to de-invest as no doubt that Tullow will grow immensly between 2021 and 2025.

But just for reference, I still hold 40% of my original holding prior to CMD.

JUST IMO. GLA.

Davstock,

Majority of the cuts take effect next year onwards.
Don't get me wrong, Tullow will be a very good investment following the RBL Re-determination.

But the significant drop in production for Q4 i did not consider at all. There's still plenty of upsides, and obviously oil price is a big factor. I still have my projection of $48-51 between now and end of Jan.
I will likely re-invest back to my original holding when things are a lot more clearer or at a point where I'm willing to take that risk following new information.

JUST IMO.

Davstock,

If that's addressed at me, No turn around in opinion.
I'm just not that confident following -£30m in cashflow (from reduced production) as well as potential further shortfall given lower than expected production for 2021 (if RBL takes 2021 as negative cashflow).

Tullow can still farm out exploration assets, or meet liquidity in other ways that will provide shareholders with more confidence.
But there could also be a hit to shareholders.

I reduced my stake to cover for the uncertainty, but still am invested here should there be an upside.

JUST IMO.

Also, what's interesting is Les mentions net debt being $1.5b in 2025.

Think for yourself, how do you get a net debt of $1.5b in 2025 when ALL current debt (all $3255m) has maturity of <= 2025.
$300m bond - July 2021
$650m senior note - July 2022
$1505m RBL - Sept 2024
$800m senior note - March 2025

And the fact that Les mentioned "good relationship with our banks and bondholders" in the CMD points to both a refinance of a bond/senior note ASWELL as a restructure of the RBL.

This is just reading between lines, but yeah take what you want from it.

JUST IMO. GLA. DYOR.

"and production can increase with an increase in oil prices increasing EBITDAX and cashflow."
Yes, this is an uncertainty to the upsides.

But unfortunately at RBL re-determinations, they will use the assumed oil price and assumed production rate (guidance) for their assessment.

2021: $45/barrel base case, and I think they will be using CMD production guidance (or if Tullow specifies production guidance at year end).
2022: $50/barrel base case, and again will be using production guidance specified by Tullow.

The restructure is 100% positive to Tullow. The restructure will allow Tullow to meet convenants and tests. If Tullow can get away without any consequences to this restructure/refinance, then expect SP to jump.

Just IMO. GLA.

2/2

But if you want to know more, do your own research. The information is all available for everyone here on tullow.com/investors

ALL IMO. GLA. DYOR.

Canarywharfy,
Only because YOU ASKED and can't be bothered to do research yourself:

"What uncertainty are you talking about? The one in which we go from 3.1 billions in net debt to 2.4 billions in net debt or the ability to repay our bond maturities in 2021 and 2022, two years ahead of schedule?"
1. Let's start with production.
Production has dropped from 77.7k bopd at H1 2020 --> to c. 76-77k bopd at Q3 2020 (See Kosmos results) --> to less than 70k bopd in Q4 (October --> Present). This reduces cashflows for YE, and therefore adds to the uncertainty that Tullow will produce enough cashflow for breakeven, let alone positive cashflow.

2. Liquidity forecast test January RBL.
You never learn. Here's an extract for Tullow's Liquidity forecast test:
As part of the bi-annual RBL Facility redetermination process in March and September each year, the Group is required to demonstrate to the reasonable satisfaction of the relevant majority of its lenders under the RBL Facility that it has, or will have, sufficient funds available to meet the Group’s financial commitments for a period of 18 months from 1 April or 1 October following the relevant RBL Facility redetermination (the“Liquidity Forecast Test”)."

The liquidity test is for 18 MONTHS in the future at time of RBL. Here's what Tullow needs to satisfy:
January (July 2022): $950m
March (Sept 2022): $1111m
Sept (March 2023): $1322m

Tullow currently has $700-750m in cash and $300m in undrawn facilities (as at 10 Nov).
The $300m in undrawn facilities (as it stands) EXPIRES in March 2022. Tullow will not have access to this for when it comes to July 2022 (the 18 month liquidity test at January).
So as at 10 Nov, for the RBL test, Tullow has a liquidity of $700-750m. They will produce some cashflow from 10th Nov to end of year (approx $100-150m), taking their liquidity to around $850m.

The RBL liquidity forecast test is done assuming the oil prices provided ($45/barrel base case for 2021).
In the assumptions, they will not take into account positive or negative cashflows (if any, due to the oil price assumptions).

Now the $100m shortfall in liquidity can come from:
- $75m Uganda FID
- $25m free positive cashflow from this year

3. Production decline to 60-70k bopd for Y21
This further complicates things regarding the liquidity forecast and gearing covenant (lower EBITDAX, and no positive cashflow for Y21). This adds uncertainty to the March RBL (and other RBLs thereafter) in which case Tullow is to show $1111m liquidity ($161m shortfall from January)

4. Uncertainty regarding restructure/refinance
No information was given regarding this by Les. Les simply mentioned "we are in a good positon with talks with both our banks and the bondholders".

5. Others
Such as uncertainty regarding Uganda FID (Expected H1 2021, could be Jan, could be June, etc.)

But if you want to know more, do your own research. The information is all available for everyone here on tullow.com/i

Canary,

I reduced my stake so that I am prepared for any consequences (if any). That's my choice in doing so. I still hold some here.

You are correct Dr Kaboom,

The January VOLUNTARY RBL redetermination is to ensure the RBL banks have fully taken into account Tullow's future plans for cashflow and to raise confidence. But in fact, there's a benefit to Tullow for doing a January RBL redetermination - almost as if minimising the requirements as March RBL will become harder.

There is still a possibility that Tullow will pass the January RBL liquidity test if they receive Uganda FID (and cashflow positive for the year by c. $20-25m). But Uganda FID is less than likely and production has declined.

Even if Tullow passes the January RBL and meets liquidity, they will fail the March RBL redetermination via a liquidity test by approx. $100-150m+.

So what Tullow have done to restructure/refinance with an early RBL is the best situation atm. But at what costs?
Following the January RBL restructure, I think Tullow would be a great company to invest.

JUST IMO. GLA.

Canary,

Regarding your comments yesterday on production..
Following a second look at the presentation, the guidance for Y2021 will likely be 60-70k bopd.

But in reality, the forecasted production for Y21 is 64.7k - 67.7k depending on production from Non-op (OPEC compliance in 2021).
Obviously there are upsides and downsides to this depending on actual performance from Ghana, hence why it'll be 60-70k.

I'll let you work it out using Slide 13 and Slide 23 from the presentation.

ALL IMO. GLA.

@Tornadotony,
Yup, I wouldn't be surprised if majority of the exploration assets are farmed down. I think Tullow's strategy was still to farm down exploration so that drills are conducted at <30% stake.
Suriname GVN-1 being an exception.. unless there are ongoing talks to farm down before the drill.

Guyana drills being 2022+ gives Tullow plenty of opportunities and time to farm those blocks as well as other exploration assets down so that they can be managed in line with the new 10 year plan.

@toothache,
Yes, possible to see Brent at $54 sometime because of the weekly candle, but as it stands there is no support to maintain those prices for long periods of time.
The OPEC 3 months delay is likely already priced into Brent following recent rise. But there could be surprises at the OPEC meeting.

don't see Brent having support in the mid 50's until stockpiles are reduced further. Good progress being made in reducing the stockpile, but demand and supply won't support $55 until further declines in stockpiles and improvement in demand. If recent rates of decline continue, I'm thinking mid Q1.

JUST IMO. GLA.

YoungEngineer,

Agree regarding short term support and oil price. Whilst people are optimistic currently on oil prices, I too think $55+/barrel is unlikely for some time. There is still enough stocks available to keep oil prices volatile. I think $48-51/barrel is likely between now and for majority of Q1, but prices also depend on OPEC.

With refinancing, there is approximately a shortfall of c. $85m+ for the January RBL re-determination if no Uganda FID. So for any restructure of the debt, the RBL will ask for AT LEAST the shortfall amount and this will either be a Debt for Equity swap provided to the banks, or a cash raise via investors imo. To reduce leverage and risks, the banks will probably ask for a little bit more.
Unless ofcourse Tullow are currently working on exploration farmdowns between now and then to secure the shortfall (which would explain the lack of exploration?).

I agree that there's uncertainty near term until there's some clarity on the refinancing structure in January. I had also reduced my stake here yesterday due to the uncertainty. But strongly feel that most uncertainties will be resolved following the refinance/restructure. Even 60-65k bopd for 2021 wouldn't matter thereafter. Going to be interesting until then.

JUST IMO. GLA.

Sorry Cl524 is the one west of jubilee offshore.

One of the two from onshore is likely kept*, the other is the offshore Cl524:
Cl302 - central with pipeline to Espoir
Cl521/522* - eastern near to Jubilee

Subsurface,

Dropped as in write-off or license relinquishment. Majority (if not all) has been taken into account at half year results, but the CMD provides more clarity on which licenses Tullow has relinquished.

On Cote D'Ivoire, the onshore blocks kept are likely the central license Cl302 (with pipeline infrastructure in place connecting to Espoir) and an eastern block that is closer to the Jubilee field (Cl524).

Davstock,
It's unlikely to be higher than 65k bopd, but hopefully with the drilling activity Tullow are able to perform to the upper end of the guidance for the FY.

Phoenixy,
The $49/barrel is floor price. So Tullow should be able to benefit from upsides. I.e. if oil price is $60, they will get $60/barrel for 100% of the production. There is an upside limitation though.
I think the upside limitation will be above $65+ for 2021 as approx 30-40% of the hedges are from 2019/early 2020 (with those hedges having upside limitation of c. $74/barrel).

GordonAlbert,
No problem!
Tullow remains a very good investment on a 3-5 year plan if they can make this strategy work by investing in their producing assets. This has always been the way forward to creating value.
Good luck with your holdings too!

Davstock,
Slide 7 on the presentation - chart on the right.
Decline mainly driven by lack of investment in 2019 and 2020.
Current productions are (for Tullow's stake) c. 28k Jubilee, c. <21k TEN, and c. <21k bopd from non-op (due to OPEC compliance)
Jubilee and TEN will continue to decline until new wells are drilled unfortunately. Furthermore Tullow has a planned shutdown in late 2021 which will also contribute to the low production.

But hopefully oil prices recover to offset the loss in production.

JUST IMO.

Have been reading this board and have only just managed to catch up on the capital markets day presentation and webcast due to work commitments!

It's good to see production has been in line with expectations. But with production declines, uptime efficiency or OPEC compliance, Q4 so far has been underperforming significantly thus far in comparison (Q4 current c. <70k bopd estimated?)

Overall, the CMD sounds like short term pain, long term gain. Tullow have been very open in terms of what their strategy is for both Ghana and Kenya (usually these projects would be considered confidential).
Short term:
- Production at 60-65k bopd in Y21
- No information on refinancing - to be revealed
- Little exploration activity
- Kenya - as expected and previously talked about before on here
- 54% hedged at $49/barrel

Long term:
- Stable production and cashflow
- Will be impressive to see 41% recovery from Jubilee
- Exploration in Guyana deferred to 2022 is a disappointing, but required
- Tullow as a business will be very robust if they can deliver that much cashflow at $55/barrel - A very investable opportunity
- <$11/barrel opex

It seems like Tullow will be doing the bare minimum to explorations unless oil price rises significantly. Raises the question of whether Tullow can maintain the commitments of these licenses for long periods of time.
Something to note for exploration licenses:
Cote D'Ivoire - 6 licenses/blocks dropped here, leaving 2 for future exploration (including one next to Jubilee field)
Comoros - All 3 blocks dropped here
Namibia - 2 blocks, pending Venus-1 wildcat well in Q2 2021

Refinancing of debt is a little bit more concerning now with lower production and delay of Uganda FID.
Whilst not provided in the CMD, but it's easy to guess what this refinancing might be.
Les mentions that the company is looking to reduce net debt to $1-1.5b by 2025.
- Refinance of $300m bond OR $650m note for a maturity 2025 --> 2030
- AND Restructure of RBL with final maturity around 2029-2030.
The question is at what cost?

JUST IMO. GLA.

Ok mate, last post from me for a while here then.
Just to clarify, both your points (1 and 2) are wrong. I only provide my opinions.
I simply replied to your post as you were misleading with your post (YET AGAIN).

And to answer your question: False.

Tullow has approximately $700-750m in cash following Uganda sale (as at 10 Nov 2020).
Tullow has approximately $300m in undrawn credit facility from RBL which Tullow will no longer have when it comes to the maturity of 2022 senior note.

P.S. Go read up on debt maturities and good luck to you.

And ofcourse, JUST IMO.

Neversellshell22,

All options laid out there will be positive assuming the following:
- No consequences of refinancing bond/senior notes other than maybe a small increased interet rate
- No consequences from agreeing better technical/economical assumptions and amending commercial terms (highly unlikely of no consequence of amending commercial terms.. the banks would want something here - if it's just an increased RBL interest rate then that's a good outcome)
- No share issues for new liquidity
- No fire sale of raising proceeds from portfolio

Regarding production and operations, I expect it to be positive for Q3.

JUST IMO.