RE: Excellent Rns3 Apr 2020 08:34
Tullow Oil Business Update
RBL redetermination confirms debt capacity of $1.9 billion and headroom of c.$700 million
Further cost savings identified
3 April 2020 - Tullow Oil plc (Tullow) provides this update following the successful completion of its RBL redetermination and identification of further cost savings as the company continues to adapt to the challenging external environment.
Les Wood, Chief Financial Officer, commented today:
“Securing the ongoing support of our RBL lending banks and confirming our debt capacity has been important given the current challenging environment. Today’s positive news verifies the strength of our producing assets and robust hedging strategy which underpin the RBL and, combined with the further cost savings we have identified, confirms the strength of our liquidity in the medium-term. Nevertheless, strengthening the balance sheet continues to be a key priority with the Group seeking to raise proceeds in excess of $1 billion through portfolio management.
“Elsewhere in the business, Tullow is responding well to the challenges presented by the Coronavirus pandemic with strong controls and processes in place to allow the business to operate as close to normal as possible in spite of these difficult times.”
Reserves Based Lending (RBL) facility
Tullow is pleased to confirm that it has completed the bi-annual redetermination of its RBL credit facility with $1.9 billion of debt capacity approved by the lending syndicate. As a result, the Group has c.$700 million liquidity headroom of undrawn facilities and free cash at the start of the second quarter of the year. This level of headroom is deemed appropriate by the Board considering Tullow's much reduced future capital commitments.
Tullow has voluntarily reduced facility commitments from $2.4 billion to c.$2.2 billion, effectively accelerating the first scheduled commitment amortisation from October 2020. The reduction in debt capacity and commitments will result in a reduction of finance costs. The next scheduled amortisation of $211 million (commitment reduction, not repayment) will therefore be in April 2021. This amortisation schedule continues every six months until final maturity in 2024. The next contractual maturity in Tullow's capital structure is the $300 million Convertible Bond in July 2021.
Cost savings
As previously announced, Tullow took actions to reduce its planned capital expenditure (capex) for 2020 by c.30% year-on-year. Following another review of planned activity, the business has identified further savings and is now targeting capex of c.$300 million in 2020 (down from c.$350 million) and decommissioning expenditure of c.$65 million (down from c.$100 million).
Savings have been identified primarily through the deferral of activities across the portfolio and through savings that can be realised by ongoing farm-down activities. In Ghana, for example, savings will be made through the early term
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