Member Info for xxnjr

It was a pass then?.......

A....... it was a pass then on both counts!

Yes, it was a clean sweep. Tullow comfortably cleared both hurdles, providing a significant "cushion" for their debt holders.

Here is the breakdown of why those results were a solid "pass":

1. NPV Coverage Ratio: The "Safety Margin"

The Test (The Hurdle):

. This is the bank's way of saying: "The value of the oil you still have in the ground must be worth at least

of the money you owe us."

The Actual (The Score):

.

The Verdict: Tullow passed with a

surplus. At

, the 2P NPV (the value of their reserves) is approximately

billion (calculated as

). This shows the lenders that even if oil prices drop or production dips slightly, there is still more than enough "asset value" to cover the

net debt.

2. NPV Guarantor Coverage Test: The "Legal Lock"

The Test (The Hurdle):

. Lenders want to ensure that the actual assets (the oil fields) are held by the specific subsidiaries that "guaranteed" the loan. If the assets were moved to a subsidiary that didn't sign the debt papers, the lenders couldn't seize them in a default.

The Actual (The Score):

.

The Verdict: This is a perfect score. It means every cent of the value (NPV) backing the company's reserves is within the legal "reach" of the lenders. There is no "leakage" of value to entities outside the credit agreement.

Why this matters for the Ghana discussion:

These ratios are the reason Tullow was so desperate to get that license extension to 2040. Without it, those "late-life" barrels would have dropped off the 2P reserve statement, the NPV (Numerator) would have shrunk, and that

ratio would have tightened uncomfortably close to the

limit, potentially triggering a default or forcing a faster debt repayment.

Are you interested in seeing how a

drop in oil price (the standard "sensitivity analysis" in these reports) would impact that

coverage?

Gemini AI which is free seems more coherent to chatGPT (not that I've ever used chat GPT). Let's give gemini a go starting with

https://www.tullowoil.com/application/files/7417/6400/1834/1H_2025_Reserves_Report.pdf

Q?..... can you explain which is the test and which is the actual ratio in these coverage ratios (taken from that reserves report).....NPV Coverage Test

• NPV Coverage Ratio of 2P NPV divided by Net Senior Secured Debt >= 1.1x

• Net Senior Secured Debt = $1,285m (2026 Notes) plus $150m (RCF) less $163m (free cash) less

$307m Gabon disposal proceeds = $966m

• NPV Coverage Ratio = 1.6x

NPV Guarantor Coverage Test

• NPV attributable to the Company and the Guarantors / NPV attributable to the Company and its

Restricted Subsidiaries >= 95%

• NPV Guarantor Coverage = 100%

A........ In coverage ratio calculations, the "Test" represents the minimum legal threshold required by lenders, while the "Actual Ratio" indicates the company's current performance relative to that threshold. For the NPV Coverage Ratio, the test is >= 1.1x and the actual ratio is 1.6x, calculated using the 2P NPV relative to net senior secured debt of $966m. For the NPV Guarantor Coverage Test, the requirement is >= 95% of NPV attributable to the Company and Guarantors relative to NPV attributable to the Company and its Restricted Subsidiaries, with the actual coverage reported at 100%.

Ps..... just checked the 2026 Bond Offer which actually says "as at December 31, 2020, Jubilee had a stock tank oil initially in place (“STOIIP”) of 1,900 mmbbl and recovery factor of 16%." But anyway the point remains the wins will probably come from increasing the RF to a higher number that what is assumed currently in reserves reports today.

Jmax - Fair enough! I'm not quite sure Kosmos have exactly put a number on it. Some of it was to do with JSE but I tend to feel things have gone badly there (contrary to Rahul's whitewashing narrative). I think in the main, reserves additions will potentially come from increasing the recovery factor from the main field..... if OOIP of that is say 1.5bn barrels every extra 1% or recovery adds 15m barrels gross. results of the 4D + OBN hopefully will deliver the upside.....

JMax - Further to your previous "game changer" comments on reserves how or where do you envisage these reserves materialising?

Flavius - At the risk of appearing to be continually banging nails into the coffin, the interest bill on the 1B (suggested 0.5B over 3 yrs).....there's also the Glencore facility 0.4B which would add another $150m of interest over those 3 yrs.

Against that the only positives I can see are

(1) The drilling in the central field seems to be going very well so far and would expect more of the same from the 3rd well. How long these central wells in a mature part of the field can sustain these levels we do not know. But even so TLW's low end 2026 guidance would appear to be nonsense.

(2) The TEN FPSO finance lease cost to buyout is probably a lot less than the accounting liability currently recognised under FRS?? (or whatever accountants call it!). Let's say it's $350m gross buyout. Tullow share 54.84% = $190m. Dunno where that would come from..... maybe MODEC would accept a deferred payment plan. Half now, half later. That would enable Tullow to remove that lease liability from the balance sheet and at the same time they would save $130m annually . In effect the transaction would pay for itself in about 18 months then after that the $130m saving is additional cashflow. The FPSO also becomes an asset but whatever its actual value is that would still be small beer relative to the debt but nevertheless it becomes an asset to be thrown into any debt negotiations.

Then we have the OP. With a bit more oil being produced than the low end Jubilee collapsing output scenario, no further TEN lease payments (from the 10 yr FPSO anniversary effective April 2027) and possibly a return to $70 oil by then the economics might look more encouraging than now. Whether or not thats enough to get to an "amend and extend" or something else done remains to be seen.

Meaning you were the confused party! You are so funny Jmax :)

Jmax - You would seem to be conflating two separate issues. The "failed" merger(s) were just vague preliminary exploratory stuff arising from the briefest of discussions initiated by other companies not Tullow? The SP decline was due to the refinancing saga and 2026 production guidance?

Radio silence tends to happen when heavily indebted companies are up against it with a refinancing cliff wall rapidly approaching. It's not necessarily that the "management are useless" it's more the situation. An easy target for lookers on though!

Fewdollarsmore - there's a few$$$'s missing

"While the $493 million March 1 debt deadline is the immediate focus"

Not sure where those numbers came from but the debt to be refinanced is $1.3bn and is not due until 15 May, 2026

Jmax - "Did someone on here say to expect bad news this week."

Well if that was the bad news you were anticipating one can only assume you noticed said news in the Kenyan press towards the end of last week (verifiable by a quick google search). If that is the case then why sit on it and not share the story here when you first noticed the news?.....

(ooops .....only just noticed the $179m in the thread header. Need a coffee!)

Is there any merit in the claim?

"Determining the "merit" is complex as it is currently a pending legal dispute between the Kenya Revenue Authority (KRA) and Tullow Oil. Both sides present distinct arguments based on Kenyan tax law and the specifics of the transaction.

Arguments for the KRA’s Claim

The KRA bases its assessment on a comprehensive audit from 2020 to 2025:

Recovering Tax Exemptions: KRA officials revealed to Parliament that Tullow previously benefited from KSh 9.9 billion in import tax exemptions.

Transfer Pricing Risks: The Authority is scrutinizing "related party" transactions—such as drilling services and management fees—to ensure they follow the arm’s length principle under Section 18(3) of the Income Tax Act.

VAT and Capital Gains: The bulk of the claim (KSh 18.3 billion in VAT) suggests the KRA may be challenging the tax-exempt status of certain service transfers or asset valuations within the US$120 million sale.

Arguments for Tullow Oil's Objection

Tullow Oil has formally objected to the claim, citing several points of contention:

Valuation Discrepancy: Tullow argues that a KSh 23.1 billion (~US$179 million) tax bill is fundamentally flawed because it exceeds the US$120 million total value of the actual transaction.

Historical Precedents: Tullow has a history of successfully challenging large tax claims in international arbitration. In January 2025, they won an ICC award against Ghana, which nullified a similar US$320 million tax bill.

Contractual Exemptions: The company often operates under Production Sharing Agreements (PSAs) that include specific tax stability or exemption clauses, which they may argue the KRA is now attempting to override retroactively.

The case is currently under review at the Tax Appeal Tribunal."

Gemini AI - Just as a matter of interest.... how much is that in US$?

"The Kenya Revenue Authority's (KRA) tax claim of KSh 23.1 billion against Tullow Oil is approximately US$179 million based on current exchange rates.

This demand follows the sale of Tullow’s Kenyan assets for a total of US$120 million to Auron Energy, a subsidiary of Gulf Energy. The tax assessment is significantly higher than the sale price because it covers a broad audit period from 2020 to 2025 and includes multiple tax categories:

Value-Added Tax (VAT): KSh 18.3 billion (~US$141.8 million).

Capital Gains Tax (CGT): KSh 4.6 billion (~US$35.6 million).

Withholding Tax: KSh 128.5 million (~US$1 million).

Tullow Oil has formally objected to the assessment, arguing that the claim exceeds the minimum value of the actual transaction."

Flavius - Not an expert. Not an accountant. Not employed in oil and gas (ever) but.....

I think you should deduct about $200m as that's what they need to run the business (as Headroom) and secondly they are forecasting pre-financing cashflow for the entire year at $70m to $100m so if we deduct financing of $100m or more there won't be any free cash flow generated in 2026. Apart from that Net Debt usually goes up by about $100m in 1H due to tax liabilities being paid. Just saying.

The filter does not filter out copy and pastes of your old posts!

So the Q is - what was the SP "7 yrs before May 2021"?

Answer) Sort of £7 to £8 methinks....

Or 99X of the current SP.

It's really impressive a loss of 99% could be recovered through trading.

Flavius - Ghana is ONE of the biggest risks. No-one wants to invest there. Look at CDI next door - the rocks are the same and the place is booming from an E&P perspex because the CDI GOV facilitate oil investment. Same as Nigeria does and they are succeeding with recent major FID's from Total (and Shell if I'm not mistaken). Ghana I'm afraid do not facilitate anything they just screw everyone over. That has to change but like the UK they are in denial.

Agree with apples and oranges. In the time TLW has lost 75% of SP value ( from 39p to now) Seplat has more than doubled!

Flavius - please do check Seplat's last Capital Markets Presentation. That's where the info I've quoted came from. I don't recognize your numbers at all. Nor would Seplat.