Tullow - comment

Yesterday, Tullow released a trading statement & operational update, but away from the obvious it included no meaningful new information. The Capital Markets Update is postponed until FY23 - date to be determined from Autumn of this year. This highlights the issue at Tullow: The many outstanding questions surrounding Kenya, future of TEN, Côte d’Ivoire drilling, Ghanaian Gas off-take and Ghana tax liability are no closer to clarity than 6 months prior.

Operationally, similar story to the past. Jubilee performing in line with expectations with recent and expected new wells (4 more, 2 by end of the year, and 2 in H123), increasing production in 2023 and beyond. TEN remains a mixed bag. Two wells drilled earlier this year have helped offset the natural decline in the Enyenra field. However, as previously reported, the second well drilled in the Ntomme river basin found poorer than expected reservoir quality and is not economically developable. Next steps for the TEN field, which is 20% of Tullow’s production (13k boeped of total 62k boeped) is unclear, a further reason for delaying the Capital Market.

Financially, the business is improving. Tullow has confirmed its guidance for leverage to end the year at less than 1.5x. The Company has reduced its CAPEX and Decommissioning Expenditure by $20m each, which in turn has increased the FCF guidance by $50m.