Tullow Oil reported a post-tax loss of US$1.22 billion for 2020, but is confident that its Ghana business, where it plans to drill four wells this year, will deliver sustainable and profitable production.
“We will start a multi-year, multi-well drilling programme in Ghana next month to deliver sustainable and profitable production growth,” says its CEO, Rahul Dhir during his presentation of the oil producer’s 2020 Full Year Result.
He said a Maersk Venturer has been contracted to carry out a multi-well programme over at least four years, with four wells to be drilled in 2021. These include two Jubilee production wells, one water injector and on Tweneboa Enyenra Ntomme (TEN), a gas injector, which will support two Ntomme producers. The company expects this to significantly offset near-term production decline.
While it sees output materially recovering in 2022, the oil producer added that it expects to reduce drilling costs by 20 percent in this drilling programme. “Our self-help initiatives will deliver US$1 billion, including over US$700 million from asset sales in the past year. Strong business delivery, increased liquidity and improving commodity prices support constructive refinancing discussions,” adds Mr. Dhir.
Last year, Tullow took major write downs on its Kenyan and Ugandan operations, of US$430 million and US$451 million respectively. A decision to cut long-term oil price expectations drove the Kenyan cut, it said at the time, while it completed the sale of its Ugandan assets to Total.
According to Tullow, the effects of the COVID‐19 pandemic on its operations in the country have been managed safely across the business with no impact on production. This, the company noted, was achieved through close collaboration with the government and its effective testing and quarantine measures.
It, however, added that this led to an increase in net cost of operations by US$10 million in 2020. The Jubilee field averaged 83,600 barrels of oil per day and the TEN field averaged 48,700 barrels of oil per day, in line with 2020 production guidance.
“This production performance was supported by increased and sustained gas offtake nominations from the government, approval from the Ministry of Energy to increase flaring, higher than forecast facility uptime of over 95 percent at both FPSOs and improved well optimisation and water injection facility performance on the Jubilee FPSO.”
Production and outlook
This year, Tullow expects to produce 60,000-66,000 barrels per day, down from 74,900 bpd last year after asset sales. As of end-2020, it had hedged 40,000 bpd of its 2021 output at a floor price of just over US$48 a barrel. In terms of cash flow, it hopes to generate US$500 million in operating cash flow this year at an oil price of US$50 a barrel, which is around US$15 a barrel below the current price.