The oiler, in a trading update, said the pending write-offs will be the result of lower forecasts and a downgraded long-term view of crude oil prices.
Tullow meanwhile reported production in-line with expectations, averaging 77,700 bopd in the first six months of 2020, despite the impacts of the pandemic.
The company said it was narrowing its full-year guidance, setting the new range at 71,000 and 78,000 bopd.
Revenue for the half-year is expected at around US$700mln, with the average realised oil price marked at US$52 per barrel (including US$131mln of hedging receipts). Full-year cash flow is presently anticipated to breakeven.
Some 60% of oil sales revenue for 2020 is hedged with a floor price of US$57 per barrel, and, Tullow retains hedges at US$51 per barrel covering around 44% of next year’s anticipated production.
The company said it expects net debt will amount to around US$3bn when reported for the end of the half-year meanwhile it has around US$500mln of liquidity headroom.
Tullow highlighted that there had been no impact on operated production due to coronavirus (COVID-19), nonetheless, some aspects of the business have been hampered – Kenya notably.
In Kenya, amid COVID-19 and the country’s fiscal framework, Tullow’s joint venture has called ‘force majeure’ which stalls the project’s final investment decision on oil field development as well as progress towards farm-out transactions. The company noted that it is in constructive talks with the Kenyan government.
The agreed US$500mln Uganda asset sale to Total is expected to complete before year end.
Tullow’s capital spending remained unchanged at US$300mln (after cuts earlier this year) and it noted that its planned exploration drill programme in Suriname is presently slated for Q1 2021 with a rig contract expected shortly.
Today’s trading update is Tullow’s first under new chief executive Rahul Dhir who joined at the beginning of this month.
In the statement, Dhir said: “Since becoming CEO on 1 July, I have been impressed by the quality of Tullow’s people and the potential of our assets and I am confident that we can build Tullow into a competitive and successful business once again.
“Despite the challenging external environment in the first half of the year, Tullow has performed well; delivering production in line with forecast, agreeing the sale of the Ugandan assets and re-shaping the group’s structure and cost base.
“In the second half of 2020 our focus will remain on continuing to deliver safe and reliable production from West Africa, reducing debt and building a cost effective and efficient organisation that can compete in a low oil price environment.”
Published at Wed, 29 Jul 2020 07:54:00 +0000-Tullow Oil flags up to US$1.7bn of write offs as it downgrades long-term crude price forecasts