Tullow hopes to conclude Capricorn merger before year end

Tullow Ghana Limited GRA
Rahur Dhir, CEO-Tullow Oil PLC

Tullow Oil Plc is optimistic of completing its merger with Capricorn Energy before end of year.

In its half-year report, Tullow said it will host a Capital Markets Day for investors and issue a circular and prospectus in connection with the recommended merger in the fourth quarter, ahead of a shareholder vote to pave the way for the transaction to be concluded.

It said the merger will enable the new entity to develop and implement a fresh business plan that accelerates the development of new, material opportunities; realise meaningful cost synergies; and deliver a combined group with robust cash generation and a resilient balance sheet.

“The combined group will also have a sustainable capital returns programme and a deep commitment to environmental stewardship, social investment, development of local content and its national workforces,” Tullow said in its half-year report.

The merger process was announced in June this year.

The deal requires approval from at least 75 percent of Capricorn shareholders; a threshold that many market watchers believe could be in jeopardy if hedge fund investors who have been critical of the deal turn their derivative investments into direct shareholdings.

Ghana in focus 

The report said the ongoing drilling programme started in April 2021 has delivered eight new wells – six at Jubilee and two at TEN at an average cost of US$50million per well: more than 10 percent below the average expected cost for these wells and ahead of schedule.

In addition, two existing wells have been completed; one at Jubilee (J12-WI) and one at TEN (En16-WI).

If the current pace of drilling continues, the next phase of drilling at Jubilee – which includes wells to be tied into Jubilee South East infrastructure, it added – is expected to be accelerated into the fourth quarter of 2022.

“At current performance levels, we will be able to deliver the planned programme of wells through next year with one rig. Accordingly, the joint venture partners have agreed to defer a decision regarding a second rig in Ghana,” it further noted

In terms of production, net production from the Jubilee field averaged 30.8 kbopd in first-half of the year, representing an increase of more than 15 percent compared to first-half 2021.

This, the report noted, is due to good well and operational performance – which included successful completion of the planned biennial maintenance shutdown of the Jubilee FPSO in May.

Its full-year net production guidance for Jubilee is 32kbopd. Half-year net production from the TEN field averaged 12.5 kbopd in line with expectations.

Full-year net production guidance for TEN is 13kbopd, with the expectation of an increase in production rates when a new well comes on-stream in the fourth quarter.

On the Jubilee FPSO, it said a handover of Operations and Maintenance (O&M) from the O&M contractor to Tullow was successfully completed at the end of June.

“This transition allows Tullow to deliver sustained FPSO safety and reliability performance for the long-term, as well as help deliver planned reductions in the operating cost base and emissions,” it said.

Group half-year performance

The group’s working interest production for the first half of 2022 averaged 60.9 kboepd, in line with expectations according to the half-year report.

On its half-year financial performance, the report said the company achieved revenue of US$846million with realised oil price of US$87/bbl after hedging; gross profit of US$620million; profit after tax of US$264million; and underlying operating cash flow of US$165million.

Its free cash flow for the first six months was negative US$205million, which includes an arbitration payment of US$76million, Uganda FID payment of US$75 million and Ghana pre-emption consideration of US$126million.

Tullow however said this excludes the benefit of over US$200million revenue relating to two Ghana liftings, which took place in early June but for which cash was received shortly after 30th June 2022 – on 1 and 5 July respectively.

Capital investment in the first half of 2022, meanwhile, was US$156million plus decommissioning costs of US$29million. Its net debt at 30th June 2022 was US$2.3billion.


Tullow is projecting guidance for full-year free cash flow of US$200million at an oil price of US$95 a barrel.

Full-year production is forecasted at 60-64 kboepd. The company also expects its net debt to core profit ratio, or gearing, will fall to 1.5 times by year-end.

Leave a Reply