Tullow - limited progress made

All,

Please find our unchanged analysis here.

We are a little disappointed that Tullow have not achieved a full re-scheduling of their upcoming maturities and just pushed the timeframe out another 6 months. The redetermination of the RBL facility has concluded with the overall size of the facility reduced to $1.7bn. Given that is was only $1.5bn drawn, this will have no impact on the Company, but removes one of the levers to engage with the convertible bondholders to seek an extension to their upcoming maturities in July.

The RBL facility previously started to amortise from April 2021 (no details given if this has changed, so assuming no changes to amortising schedule), leaving the capital structure unsustainable beyond April 2022. Given oil is above $65/bbl, the Company may seek to raise a straight 2026/2027 maturity bond which will enable a rescheduled RBL facility to be arranged.

Full-year results are due on the 10th March, where further details of CAPEX spend for FY21 and FY22 are likely to be discussed. But July 2021 Convertible holders are unlikely to care - they will mature in July 2021 as planned. The 2022 and 2025 bondholders will wait for the details and examine what the next steps are.

Although the convertibles are now trading close to par, our thesis that the impact on the 25’s would be greater has proven to be the case. We maintain our position in the 2022 and 2025 bonds on the expectation that post numbers the Company will attempt to raise a new bond to extend maturities.

Happy to discuss.

Tomás
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