Tullow has hit financial goals and is looking to farm down its Kenyan operations, as it focuses further on its Ghanaian operations.
Company CEO Rahul Dhir said Tullow had achieved a “strong operational performance” in the first half of the year its debt refinancing had put it on “on a firm footing to deliver our business plan”.
Tullow’s working interest in the first half was 61,230 barrels of oil equivalent per day. Performance in Ghana has been good, the company said, with the first producer in the recent drilling campaign delivering higher volumes than expected.
Tullow reported revenue of $727 million for the first six months of the year, with a post-tax profit of $93mn. Free cash flow was $86mn.
Administrative costs are down 50% year on year, while capital expenditure reached $101mn.
As of the end of June, net debt was $2.3 billion, with free cash of $700mn. Debt refinancing involved the issue of $1.8bn of senior secured notes, with a new $500mn revolver.
Tullow completed the sales of its Equatorial Guinea and Gabon assets in March and June, receiving $133mn. More is on the way.
Dhir said the revised development plan in Kenya created “a robust project that has the potential to deliver material value to the Government of Kenya and other stakeholders”.
The companies working on the South Lokichar project are now seeking a strategic partner to develop this resource. The plan would be to secure a partner ahead of a final investment decision (FID).
The new plan in Kenya involves a higher production plateau, of 120,000 bpd, producing 585mn barrels of oil over the project’s life.
The plan incorporates results from the Early Oil Pilot Scheme, which produced oil from the Amosing and Ngamia fields. Now, the company sees the ratio of producer to injector wells increase from 2:1 to 1:1. This will increase recovery from the reservoir.
Other changes to the plan include addition of the Ekales field to the first phase. This will now cover four fields: Ngamia, Ekales, Amosing and Twiga (NEAT), providing 390mn barrels of the total 585mn.
The facility will have capacity to handle 130,000 bpd, while the pipeline size will rise to 20 inches, versus the previously set out 18 inches.
Tullow’s new plan in Kenya would cost $3.4bn gross. This is an increase from the previous plan, but cuts the cost per barrel to $22, from $31.
Partner Africa Oil has said the costs included $2bn for the upstream and $1.4bn for the pipeline.
The company has also talked up the importance of controlling carbon emissions. Combining heat conservation, associated gas for power and reinjection of gas would improve these metrics. Tullow may go as far as using the Kenyan national grid.
In tandem with development, the company would launch an exploration and appraisal plan around Blocks 10BB and 13T, in addition to Blocks 10BA and 12B.
Kenya has extended Tullow’s licence to the end of 2021. There are certain conditions attached, such as the submission of a technically and commercially compliant field development plan.
Updated with Kenya breakdown costs from Africa Oil at 8:50 am.