Tullow - comment

Tullow - No CEO, quickly becoming a one-trick pony. Tullow has sold its working interest in Gabon for $300m (to close over the summer), which leaves Tullow increasingly exposed to its Ghanaian assets. Worryingly for investors, Tullow has revised its 2P reserves at Jubilee downwards due to water breaking through in certain producing wells earlier than previously expected. Although TEN production exceeded expectations, it does not compensate for the issues at Jubilee. 

2025 Production will be lower, even adjusting for the sale of Gabon, due to the Jubilee issues and the planned maintenance of the FPSO which starts today for 16 days.  Net Debt should reduce to $1bn at year-end, based on $70/bbl oil price which should aid a refinancing.   

As of this morning, the senior bonds trade at c. 94%, yielding 15%+ to maturity in May 2026. 15%+ is insufficient to compensate for the single asset risk, two remaining arbitration cases, which are due to start in July and November, and volatile oil prices. Senior secured bondholders should be questioning the value of their springing maturity, as the sub-bonds have been repaid at par earlier this month from cash on balance sheet and a drawdown of the remaining balance on the Glencore facility.