Member Info for Tonyb33

Hi xxnjr Many thanks for the information

I cannot help remembering whilst reading about the recent contract extensions that Ghana was very keen on expansion of gas production. I cannot understand why they would do this if they had no ability to use the gas. Further with the recent damage to the Qatar gas removed 17% of their capacity for the next 3 years do you think there would be potential investors eyeing this opportunity? ie a source of gas in a stable environment away from the gulf

Hi xxnjr

Can you lay out the relationship of load to net Tullow take. I understand every one in 2.5 is a Tullow cargo could you explain

Currently

Senior Notes $1,210,000,000 (10.25% cash 3% PIK 1.75% PIYC) = 15%

Junior Notes $426,000,000 (SOFR + 12.75% PIK +0.75% contingent PIK) = 17.15%

PIYC (Pay if you can this is paid on a test of free cash flow)

PIK (Payment in Kind allowing debtor to roll interest payments to debt maturity)

Contingent PIK kicks in at oil over $65 a barrel)

SOFR Secured overnight financing rate currently 3.65%)

So we should have two loads out this month at roughly 1m barrels each. Tullow's cut is 38.98% of the Jubilee field and the tax rate is 35%. I estimate we will get one away at $115 Brent and if the war is still on going then conservatively the next will be at $135. So that will be $50 and $70 above plan. If we knock of the $10 a barrel from the hedging collar that will be $40 plus $60 above plan. That's $25.337m net or $38.98 (Pre finance) earned in a single month above base costs to pay toward liquidating Tullow's debt. That's on a company with a capitalisation of less than £200m.

That's in line with my rule of thumb for Tullow. Guidance was if Brent stayed at $100 until December 2026 then cash generated before financing costs ($150-$180m) would double. ie the last 10 months would average an extra $15m to $18m per month of prefinancing cashflow. But that $180 is subject to a $10 per barrel collar loss on earnings to $100. The average over $100 ( 15+35)/2 ie 25 would not be subject to the collar ie 25/(35-10) X 18 = $36 which is roughly in line with the $38.98 above.

So every $10 on oil between $65 and $100 should generate a gross income of roughly $5m per month and every $10 a barrel over $100 should generate $7.2m per month. As the oil price rises this is going to make large in roads into the junior debt currently paying about 17% interest.

The reality is a month go this stock was a shell designed to recover some of the debtors money at an oil price of $65 a barrel. Last month the senior debt was priced at 70%. Today it is priced at 93%.

The reality is the higher prices only kicked in in March and I believe we will not be seeing that extra money for 60 days. However Brent is now $50 a barrel above plan. On a monthly basis that will start making a big in road into the debt.

In reality all of the Gulf producers with the exception of Saudi (who has 64 days of storage) have shut in production. Saudi will shut in production in April especially if the Houtis start attacking tankers in the Red Sea. To restart the wells after this war is a very slow and complex business. The wells will be cold the oil waxy they will be sealed with clay or concrete plugs that will have to be carefully drilled and gradually brought up to pressure and heat.

The reason why Diesel and aviation fuel have risen faster than oil is because the oil refineries are not designed to stop production and so they have reduced throughput to conserve oil stocks. If they run out and close its a long process to restart them.

The tankers who are allowed out of the Strait are following a route very close to Iran. It is presumed that the Iranians have mined the main channel as such even after a ceasefire we will have to demine the strait and if the Iranians are still angry they will do so under fire.

Even after all clear Lloyd List rules require tankers to stay in place for a minimum of 10 days.

Many of the empty tankers that were waiting to load have ben redirected many to the USA they are in the wrong place.

This whole scenario is based on a peaceful ceasefire (between a set of negotiators who recently killed the Ayatollahs father wife and son in the middle of the last set of negotiations) meanwhile a lot of paratroopers and marines are lining up. If they are attacked the first thing the Iranians will do is to attack oil infrastructure and the last thing will be to destroy their own. So if and when peace is achieved violently there will be a lt of infrastructure destroyed. Qatar produces 20% of the worlds LPG. 17% of their production is offline for 3 years.

The fact that the USA has allowed Russian oil to be sold at market prices has galvanized the Ukrainians they destroyed 40% of Russian oil export capacity last week they will be coming back for the rest this week.

I personally think $200 oil is a given the question is whether it is going to be for one month or 2-6 months. Even one month will make a big dent in the debt six month will transform the company.

I personally believe that Tullow will retire half of its junior debt this year at a saving of $34m pa and the balance next year. The H1 figure in first week of August will be magnificent and will result in an SP in the 35-50 range

Hi xxnjr

Two supplemental questions

1. Are all cargos a universal size do we have any idea how big the tanker are and are the all a uniform size??

2. Looking at the cargos do we have a better idea as to actual versus planned oil volumes??

Hi @xxnjr

We should be very close to shipping a cargo soon do you have any idea as to the price we will be getting

In addition is the rig still on the new well any new on getting that baby pumping

I understand we are drilling 4 more production and one water injector for 2026 do we have any idea when each of these will be live and in what order the water injector will be drilled

Finally I remember your comment about gas from the TEN field having no where to process it. But reading the Tullow commentary there was a statement about a key term of the lease extension was increasing the gas yield. If they wanted more gas they must have a plan how to process it

Tullow at once stage was a $22 billion pound oil company due to debt and oil price declines it dropped into a shell with its debt written down to 70% of par. I believe a lot of people bought in thinking that they were going to earn a quick buck. The reality is the higher oil prices are transforming the company but its going to take some time the higher oil prices only kicked in March. Meanwhile Trump is saying every week that the war will end next week pushing oil prices down. Finally the oil that left the gulf in February has not arrived in the Far East yet.

However there is a lot of good news coming through the system

1. The debt situation is now sorted out and the debt value has risen sharply due to high oil prices in February it was at 70% of Par its now at 93%

2. The 2026 business plan based on $65 oil expected to raise $180 ($100m trading plus $80 debt collection) to contribute to a $200m interest bill. The surplus from March should generate an addition $26m so we have now covered debt interest surpluses for April-Dec 26 will now reduce debt at 17% interest rates

3. In a few more days the tankers that left the gulf in February will have arrived there will be no more oil and oil prices will start to rise Brent hit $115 on Friday.

4. At $150 oil Tullow becomes a cash machine and will make rapid in roads into its debt pile

5. Tullow has had an oil processing platform on an IFRS16 lease at 16.4% interest. IFRS16 at these rates pulls the notional interest charge into early accounting periods. This lease was early terminated in Feb 2026. The impact will be to release the accelerated interest into the 2026 account which will generate a $100m plus credit

6. The Tullow oil fields were valued on the basis of leases to 2036 plus sub $65 oil. Their new valuation will be on their new leases to 2040 plus $100 oil. The revaluation will be shown as a reduction to oilfield depreciation

7. Tullow hedges its book which at depressed oil prices acts as an expense in London and cannot be offset as a deductible for oil profits in Ghana . In these high oil prices the new hedges will be booked at the highest prices in the history of oil. As oil prices fall to historic averages these hedges will begin to produce profits that due to earlier losses will be tax free

8. This war has taken off all spare oil and depleted oil reserves whilst giving a lot of countries an alert that they need larger oil reserves. This will support long term oil prices. Tullow survives at $65 oil but is transformed with $75-85 oil. Oil futures are above $75 a barrel for the next 5 years.

9. This war will last a lot longer that most people think. In addition Iran has just spent 4 years perfecting drone warfare and has a country with a 900 mile coast overlooking the world's oil supply. Even if the war ends the risks will not it will elevate oil prices.

The key thing is Tullow will announce H1 results in the first week of August 2026 this will be a game changer.

@FewDollarsMore

A fair point but you have omitted the junior debt $426m yielding about 17%. The plan at $65 oil projected cash before debt payment of $180m being $80m of asset sales proceeds and shared cost recovery plus £100m trading income. So the plan had a $20m interest payment shortfall (which was addressed by the junior debt being Pay if You can. Now however we have generated sufficient additional income to pay the interest in full.

All extra income from April 2026 onwards will be retiring the $426m junior notes yielding 17%. If we hit $150-200 oil prices even for a month or two we will be able to retire half the debt with an ongoing saving of $34m pa. The projection for 2027 along with the higher projected oil prices show we should be able to retire all of it by end 2027.

That will leave the senior notes. With the income rom the new wells and the better gearing position we should be in a position to refinance at much better terms

@Flavius What I have noticed about Fridays is that a lot of the small shareholders get out on Friday afternoons. However funny enough despite the constant stream of small sales the prices steadily rise in the last two hours of trading. I think that the market makers like to pick up stock on Friday afternoons to cash in on movements from events over the weekend

Management gave a midpoint of production for the year. Gross Jubilee 60 (net 23.388) TEN Gross 12 (Net 6.5808). Although this number contained about 6m barrels equiv of gas. The last well drilled in 2025 comes on stream end March 2026 and there is a further 5 wells (4 production 1 gas injection) to be added over 2026 I suppose the last one will not add to 2026 production figures. Against that is well depletion although the projections for 4 new wells to be drilled a year the depletion appears heavy as the planned production does not appear to rise.

What should be interesting is the plan is based on a midpoint production with a uniform price of $65. But what is happening in reality is a steady rising production over the year as the new wells start production. The reality is that the lowest production will be at the lowest prices in the first two months of the financial year whereas the actual production will be ramping into $100+ oil

@WarrenBuffetisRich

Many thanks that is really interesting. So what you are saying is should the USA put boots on ground or the strait of Hormuz is not opened within 5-10 days the price of oil will accelerate to the $150-$200 range.

I have been working on the latest guidance which stated oil at $100 doubled the $150-$180m prefinancing cashflow (which was budgeted based on $65 a barrel oil). That equated to an extra $18m per month for production $35 a barrel over target ($65/barrel) or roughly $5m per $10 band above $65 per month. The fact that there is this $10 dead band in the collar within these numbers would equate to a prefinancing gain of $8m per $10 band above $100 a barrel.

So at $150 a barrel Tullow would generate a further $40m (in the band 100-150) and in total over plan $58m ($65-150) a month.

At $200 a barrel it would generate a further $80m a month (in the band $100-$200) and $98m a month over plan ($65-$200).

All this in a company currently capitalised at less than $200m.

@WarrenBuffetisRich

Give it time this is currently under the radar

The senior debt was at 69% last month now 93.5%

Most observers have no idea of the financial impact of the early termination of the IFRS16 lease early terminating in Feb 2026 this will add $150m to the bottom line as the accelerated interest is reversed

The new oil prices plus longer oil field lease will revalue the reserves and drop the year on year depreciation charge

Both of the above will add to the accounting profit but not be a taxable effect the result will be more profit without tax hence the tax as a percentage of accounting profit will fall

The key issue is what is going to happen with the Strait of Hormuz. We have an airborne and marine division turning up just as Donald's new 10 day limit ends. If boots go on the ground oil will go to $150-$200 for April/May and still be above $100 for June. That will be a stella sales number for H1. This will all be reported in H1 results first week of August 2026. That's 18 weeks from now. That will be the first inkling of how far this company has changed, the clock is ticking

Tullow seem to do a rolling 12 month floor nearest 6 months at 60% of estimated production and 55% of furthest 6 months production. As such at the end of March 2026 they will be locking in a floor on April 2027 which is currently $80.86. As spot rises into this crisis it will mean it will be cheaper to lock in floors above the current business plan ($65). The impact will be that as prices drop into less volatile ranges the hedges will move into profit and generate tax free income due to prior tax losses

The situation is that only now will the last tankers that left the gulf will actually be arriving in the Far East. Then crickets. After the last tanker has arrived and offloaded I think the prices will adjust rapidly. Whilst each day is important Donald Trump is spoofing the market with a weekly shock announcement that they war will end immediately. He has done this three times in three weeks. Today he putback the endgame by 10 days to 6 April 2026.

For Australia one estimate it has 15 days until it runs out of oil. So that's Donald's 10 days, Lloyds List end of war 10 day no movement after ceasefire rule , 28 days steaming to Australia's refinery in Singapore etc etc. The world is rapidly running out of time. When this is over the new watchword will be oil reserves.

The ability to secure Ghana's oil reserves until 2040 for less than $200m will not go unnoticed. My only worry is someone comes in now at these depressed prices and snaps it up.

Hi

I had a look at the IFRS16 accounting on the 2024 Accounts. The lease was booked at a WACC (Weighted Average Cost of Capital) of 16.4%. This is very high and has the effect of pulling the notional interest charge into the earlier periods of the lease. The accelerated interest can be seen in the 2024 accounts with a

Lease liability of (£650m) and a Right of Use Asset of (£466.30m). This denotes an accelerated P&L charge of £183.70m over and above the physical cost of the lease up until YE 2024. It will be interesting to see the equivalent numbers for YE2025. The equivalent credit will be released as a credit to interest on the sale and lease back in Feb 2026 and so it will appear as a £100m+ profit impact in H1 2026.

Hi xxnjr

My models based on guidance of midpoint gross Jubilee 60 (23.388 net to Tullow) TEN gross 12 (6.5808) net to Tullow Total Net 35.9866 as against an estimate of 34-42

The interesting word is mid point ie the 60 was midpoint production in year.

This is in a year of rolling new wells J74P came onstream in January J75P in supposed to kick in at the end of March, we then have 5 new wells to drill this year 4 production one gas injector to maintain pressure.

The significance of mid point was the original projections were at a uniform price of $65 but what is going to happen is that production will steadily increase with the new wells into a higher price environment.

Your earlier estimates on the USD average prices of 5 cargos shipped (63.93 69.64 67.52 70.76 101.66) shipped this year show that the lower prices in the start of the year hit the lower volumes. Whereas the higher volumes in the latter part of the year will hit the $100 + a barrel prices. Do you have any estimates of how these numbers will be split by month? I am really interested in the Jan-Jun estimates as these will impact the H1 numbers.

The fact that Trump has extended the deadline 10 days to 6th April whilst his troops arrive indicates boots on ground which indicates $150 oil in April May and June. With guidance of $5m extra per month for every $10 a barrel over $65. At $200 a barrel that's an extra $67.5m a month on a $190m oil company. We should be seeing stella H1 results.

Hi MajorTom1

Due to low oil prices Tullow had been reduced to a shell with the objective simply to recover the majority of the funds owed to its debt holders. The low oil prices combined with a series of other factors had affected the company badly. However this war has the possibility to radically change Tullows economic position.

Tullow's 2026 business plan at $65 oil was debt recovery of $80m plus $100m of prefinance income with estimated funding costs of around $200m. During that year one new well would come onstream plus three more production and one gas injection well would be drilled. At $100 oil the new guidance is a further $180m of prefinance cost revenue. However there are some other factors to take into account.

1. The new cashflow has given debt holders confidence the company's senior debt has moved from 70% of par to 93% of par in a single month

2. The extra cash will allow Tullow to retire expensive senior debt at 17% pa driving cost savings into future years

3. Tullow has a drilling platform on an IFRS16 lease (IFRS 16 front loads lease expenses especially if the company is paying high interest rates) this lease is early terminating in YE 26 which will greatly reduce interest charges

4. Tullows 2025 reserves valuation was calculated before its oil field leases were extended and on very (sub$65) conservative future oil price estimates. When the new values are added to this calculation the oil fields will have a significant increase in value (which will in turn decrease YE26 depreciation charges)

5. Tullow drills oil in Ghana but hedges its book in London hence has irrecoverable tax losses in London. The rise in spot oil prices will mean that its new hedges will be at elevated prices as this dispute simmers down as the oil prices fall to more reasonable levels the hedges will generate tax free income in London whilst the taxable profits in Ghana will fall hence overall reducing tax as a proportion of income.

I believe that the H1 results which will be reported in August 2026 will be spectacular especially if this war goes on for another month and we hit $150-$200 oil

Seems to be working now

Hi StanleyPro

On top of that Lloyds Insurance rules states that ships cannot leave until at least 10 days after a ceasefire has been agreed. Further I am reading reports that the empty ships that were waiting in the Gulf of Oman are now being redirected to Steam for the USA. Better certain oil that takes time than uncertain oil. That's 30 days steaming and a 50 day round trip to China. So if and when the strait is opened the requisite ships could be 30 days away.