2015 HALF YEAR RESULTS. Tullow Oil plc. 29 July 2015

Transcription

1 Tullow Oil plc 29 July 2015

2 Disclaimer This presentation contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst Tullow believes the expectations reflected herein to be reasonable in light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Group s control or within the Group s control where, for example, the Group decides on a change of plan or strategy. The Group undertakes no obligation to revise any such forward-looking statements to reflect any changes in the Group s expectations or any change in circumstances, events or the Group s plans and strategy. Accordingly no reliance may be placed on the figures contained in such forward looking statements. Slide 2

3 TULLOW OIL PLC 2015 HALF YEAR RESULTS AIDAN HEAVEY

4 Business re-set for $50 oil price environment 1H 2015 financials in line with expectations Major cost cutting completed Funding in place with significant liquidity & headroom Growing high margin cash flow underpinned by hedging Major projects on schedule and on budget Slide 4

5 TULLOW OIL PLC 2015 HALF YEAR RESULTS Ian Springett

6 Good progress in 1H 2015 Delivery of high margin production / capital allocation West African Production Strong performance 67 kbopd 1H15 vs 63 kbopd in 1H14 Oil hedging Delivered $146m revenue benefit in 1H15, Mark-to-market position of $0.3bn at 30 June 2015 Bbl $109/bbl Operating Cash Flow Down only $26/bbl, despite market prices being down $51/bbl, due to benefit of hedging and increased PSC entitlements 80 Capex Remains within budget of $1.9bn Cost and liquidity management 60 $58/bbl $107/bbl Cash operating costs FYF $15/bbl vs $18/bbl 2014 (excluding impact of royalties) Cash overhead costs Bank redetermination Exploration write-offs Uganda CGT dispute On track for delivery of $500m savings over the next three years Successful $450m increase in committed bank facilities, maintenance of debt capacity and relaxation of debt covenants 1H15 write offs of $88m significantly reduced vs $402m 1H14 Resolution in Uganda, $108m incremental cost $71/bbl $64/bbl $38 /bbl 1H15 1H14 Realised oil price net of hedging Market oil price Op CF/bbl Focused on production, hedging and actions to reduce capital, costs and dividend provides significant liquidity beyond TEN first oil Slide 6

7 2015 Half Year Results summary 1H H 2014 Sales revenue $820m $1,265m Gross profit $342m $681m Administrative expenses Restructuring costs Loss on disposal Exploration costs written off 1 Impairment of property, plant and equipment ($100m) ($25m) ($44m) ($88m) $11m ($120m) - ($115m) ($402m) ($8m) Operating profit $97m $36m Loss before tax ($10m) ($29) Uganda CGT charge Other tax credits/(charge) ($108m) $50m - ($66m) Loss after tax ($68m) ($95m) Capital investment $783m $1,048m Cash generated from operations 2 $515m $905m Net debt 3 $3,610m $2,802m 1 Before tax refunds 2 Before working capital movements 3 Net debt is financial liabilities less cash and cash equivalents Lower oil prices and impact of UK gas asset sales, but revenue and cash flow substantially underpinned by strong West Africa oil production and hedging Slide 7

8 $m 2015 HALF YEAR RESULTS Net income 1H 2015 v 1H * Net income 1H14 Price Hedging Oil Volume/ PSC entitlements Gas Volume/ Disposals Operating and other costs Reduced Impairments loss on disposal Exploration write-offs Net financing Tax 1H15 excl. exceptionals Uganda CGT & restructuring costs Net income 1H15 Lower realised oil and gas prices and Uganda CGT settlement more than offset by hedging, oil volumes and decreased exploration write-offs. Slide 8

9 Sources and uses of funds Cash inflow $1,191m Operating cash flow $450m * (1H 2014:$726m * ) Disposals $57m (1H 2014:$nil) Net loan draw down $684m (1H 2014:$944m) Cash outflow $1,026m Cash Capex $833m (1H 2014:$1,196m) Cash tax paid $80m (1H 2014:$162m) Finance Costs & fees $113m (1H 2014:$219m, including dividends) Disposals nil (1H 2014: $36m) Net cash inflow $167m Increase in cash balances $m 1,200 1, H 2015 Net cash inflow $167m Sources Uses $57m $389m $113m $80m $684m $833m $450m 0 Cash Inflow Cash Outflow * After working capital Operating Cash flow Net loan draw down Capex Cash tax paid Finance costs Disposals Slide 9

10 2015 capital expenditure $1.9 billion capex for full year 2015 Ghana: Jubilee & TEN developments - $1,210m 2015 $250m $1,650m $1,900m Other West Africa: Non-op production - $190m Europe: Maintaining mature production - $25m 2014 $800m $1,220m $2,020m Uganda and Kenya: Pre-development activities supporting FID - $225m Kenya: Exploration & appraisal drilling - $100m New Ventures exploration activities - $150m 2013 $990m $810m $1,800m 1H 2015 capital split: $186m East Africa $76m New Ventures 2012 $1,060m $810m $1,870m 1H 2015 $783m ,000 1,500 2,000 2,500 Exploration & Appraisal Development & Operations Notes: i) 2013 Capital Expenditure excludes the Spring acquisition expenditure ii) 2013, 2014 & 2015 Exploration expenditure is net of Norwegian tax refund $521m West Africa 2016 Capex guidance: $1.2 to $1.4 billion Slide 10

11 Strong liquidity position through TEN first oil Debt maturity profile $m Commitment size Maturity $m 4,000 3,000 RBL 3,700 Oct 2019 Corporate Facility 1,000 Apr % Senior Notes 650 Nov ¼% Senior Notes 650 Apr 2022 EFF 1 ~280 Dec 2018 RBL 2 3,700 Facility headroom Drawings Key metrics $m 30 June Dec 2014 Cash and cash equivalents Debt outstanding RBL Facilities 2,634 1,987 EFF Corporate Facility - - Senior Notes 1,300 1,300 Total debt 4,098 3,422 Net debt 3,610 3,103 Facility headroom plus free cash 2,348 2,381 2,000 1,000 0 Corporate Facility 1,000 EFF ,634 Senior Notes (1) Norwegian Exploration Finance Facility, NOK2.25bn (2) Final maturity; RBL amortises linearly from October Senior Notes H 2015 Financing Initiatives Liquidity: $450m increase in bank facilities RBL: draw capacity maintained Financial covenant: relaxed ~$2.3bn of facility headroom plus free cash end 1H 2015; Expect ~$1bn debt facility headroom mid-2016 Slide 11

12 Oil Hedging Hedge strategy Hedge strategy is approved by the Board and reviewed quarterly Hedges are executed rateably on a three year forward rolling basis Hedge by purchasing a mix of Dated Brent options (puts, collars, 3-way collars) Current Portfolio Approximately 60% of 2015 oil entitlement volumes is hedged at ~$86/bbl MTM as at 30 June ~$0.3bn Hedge Position (as at 30 June 2015) 2H Oil Volume (bopd) 34,500 31,257 19,500 5,000 Average floor price protected ($/bbl) MTM value at 30 June 2015 ($m)* *Net of hedge premium The hedging programme has helped to significantly mitigate the impact of lower oil prices; $146m benefit to 1H 2015 revenues with ~$300m mark-to-market value looking forwards Slide 12

13 Financing Strategy Proactive measures already taken to manage business in a low oil price environment Quality assets and hedging programmes have allowed us financial flexibility and headroom; Financial strategy going forwards to significantly deleverage company beyond benefit from TEN production: - Continued focus on high margin production and active hedging, cost and capital management - Active portfolio management and farmdown activity - Management of East Africa development capex - Target Net Debt / EBITDAX <2X De-leveraging will create capacity to reinstate the dividend and increase exploration capital expenditure up to $400 million per annum Slide 13

14 TULLOW OIL PLC 2015 HALF YEAR RESULTS Paul McDade

15 000 bopd 2015 HALF YEAR RESULTS Strong delivery across West Africa production portfolio Strong 1H 2015 West Africa oil production: 66,500 bopd FY 2015 West Africa oil production guidance: 66-70,000 bopd 2017 West Africa oil production growing to around: 100,000 bopd H F 2016 F 2017 F Gabon Eq Guinea Cote d'ivoire Congo (Brazz) Mauritania Ghana 1H 2015 North Sea actual gas production: 8,100 boepd 2015 North Sea gas production guidance: 6-8,000 boepd* * Full year production guidance adjusted to reflect completion of Netherlands asset sale in 1H 2015 Key producing areas Slide 15

16 Future project pipeline making significant progress Future Development Projects Countries with ongoing operations Key oil producing countries TEN Development ~65% project completed On track for first oil in mid-2016; FPSO gross capacity of 80,000 bopd (net ~35,000 bopd). Greater Jubilee Integration of MTA discoveries under review; Greater Jubilee Full Field Development Plan submitted by year end 2015; Potential to sustain production (net ~40,000 bopd) through West Africa Non-operated Continued investment in portfolio of non operated oil fields; Low operating costs and break-even per barrel; Potential to sustain production (net ~30,000 bopd) towards end of the decade. East Africa Development Kenya appraisal programme almost complete; Uganda Field Development Plans submitted; Kenya plan submitted by year end 2015; Integrated pipeline being progressed with routing decision imminent; Gross production ~300,000 bopd (net ~100,000 bopd). World-class assets with c.200k bopd potential provide significant portfolio opportunities Slide 16

17 000 bopd 2015 HALF YEAR RESULTS Stable low-cost portfolio of non-operated oil production Portfolio of 24 non operated fields across 5 countries Low operating cost c.$15/bbl and cash break-even c.$30-40/bbl Increased focus on efficient operations and cost reduction Attractive capital investment opportunities; 2015 capex c.$200m Non-operated West Africa net oil production CÔTE D IVOIRE Espoir infill drilling ongoing, up to 12 well program First three wells above expectations Strong 2014 Gas Sales. EQUATORIAL GUINEA Okume Complex infill drilling finalising. As with last Ceiba program, 4D seismic giving 100% success H F 2016 F 2017 F Gabon Eq Guinea Cote d'ivoire Congo (Brazz) Mauritania GABON Igongo - Production flow test commenced Q strong initial indications with studies ongoing. Niungo - 4 well short radius side track program Etame complex - 6 well infill program Limande - 5 well infill program completed. Two further Turnix wells and one Tchatamba well programmed. Regional portfolio with potential to sustain c.30,000 bopd net production Key producing areas Slide 17

18 Jubilee development options present growth opportunities Strong Jubilee performance year-to-date 1H15 average gross production: 105 kbopd FY15 guidance: 100 kbopd; impacted by short term gas compression issue Gas export averaging c.80mmscfd since commissioning Reduced gas injection allowing FPSO capacity to rise to ~115kbopd Strong focus on cost management 1H15 opex per barrel: $10.9/bbl On-track to meet FY15 target: <$10/bbl TEN provides opportunity to further reduce Ghana opex/bbl Future investment opportunities Additional infill well being drilled this year in JUA Greater Jubilee Development Plan submission by end Optimal integration of MTA discoveries under review - Long term infill drilling plans to extend production plateau - Reviewing options to expand FPSO capacity Slide 18

19 TEN project on schedule and on budget for first oil mid-2016 Project c.65% complete FPSO Conversion (92%) - All major installation work complete - On track for sailaway around year-end - Field installation completion 2Q15 DRILLING Subsea Fabrication (95%) & Installation (45%) - All major fabrication complete - Subsea installation campaign underway - Optimisation of program to first oil underway Drilling (100%) and Completions (25%) - All eleven start-up wells drilled - 2 of 10 well completions installed, third underway US$bn TEN Gross Development Capex Plateau production targeted early Slide 19

20 Kenya appraisal progressing well in 2015 Extensive appraisal program nearing completion 6 wells successfully drilled year to date All wells have met or exceeded expectations 2 wells remaining for 2015; Twiga 3 underway then Amosing 5 3D seismic key to successful 2015 campaign Reservoir quality & deliverability confirmed Amosing EWT confirmed significant connected volumes; injection testing underway Ngamia 8, 3 & 6 initial clean up completed Ngamia EWT and water injection tests to be completed in 2015 Working towards FID end 2016 On schedule to submit draft development plans to GoK end 2015 Conceptual & pre-feed development work being completed Preparing to start FEED in early 2016 Appraisal delivers robust 600mmbo gross plus additional upside potential Slide 20

21 Adding value through regional integration & capex deflation Integrated regional pipeline Conceptual studies completed on Northern and Southern Route Governments working with technical advisor to select route FEED, ESIA and commercial structure targeted in 2016 Upstream developments Uganda/Kenya FDP submissions complete early 2016 Upstream FEED start-up early 2016 Recent market study suggests potential to further reduce Uganda capex of ~$6/bbl by around 20% Kenya development engineering and capex estimates ongoing 40% 30% 20% 10% 0% First oil Year Slide 21 Annual percentage capex over life of East Africa upstream development H 2H 1H 2H 1H 2H Pipeline routing decision Kenya appraisal & Extended Wells Testing programme Refine pipeline studies pre FEED Kenya Draft FDP Uganda Production Licences approved Pipeline and Kenya/Uganda upstream FEED Kenya & Uganda ESIA's Commercial and financial structuring agreements Regulatory Approval Period Option to sanction development East Africa development progressing towards sanction Development capex commences

22 TULLOW OIL PLC 2015 HALF YEAR RESULTS ANGUS McCOSS

23 Adapting our E&A strategy to current environment Adapted to mitigate risks & expense Reduce cost exposure: Farm-out early to spread risk & earn carries Revised risk screening: High-grade exploration programmes to tougher decision thresholds Avoid complex wells: Target normally pressured oil plays in onshore & simple offshore settings Focused human resources: Deploy Geoscientists to portfolio rejuvenation & oil field development Consistent long-term focus on high-impact exploration portfolio Conventional Light Oil: materially-valuable core play campaigns using cost-effective technologies Africa & Atlantic: in-house geological experience & strong above-ground relationships Infrastructure-led exploration: building on our West Africa & East Africa hubs Finding the next hub: frontier new ventures to open new plays or basins Investing for our future: drill high-graded trigger wells & replenish portfolio with new ventures Slide 23

24 New venture campaigns focused on long term value Off-limits Exploration Ultra-deepwater Deepwater gas Shale oil Arctic Over-heated bid rounds Above ground too difficult Complex wells Poor rocks Significant over-pressures Over-explored Dispersed resources Commercial Screening Tested at $50/bbl Low cost of supply Value accretive Capital & Risk Screening Low capital exposure Acceptable risk / reward Control over JV spend Geology Screening Materiality Campaign NPV >$1Bn New play / territory High Margin Oil Onshore Rifts East Africa Light Oil Simple Offshore Africa Margin Latin America Margin Production Heartlands West Africa Light Oil Slide 24

25 Finding oil onshore East Africa Location Activity Uganda Lake Albert Basin 17+ oil fields discovered (90% success) 1.7 billion barrels of oil discovered Kenya South Lokichar Basin Kerio Basin North Turkana Basin 9/11 wildcat oil discoveries + 2 technical discoveries (tight oil plays) Discovered 600 mmbo resources (Pmean) New plays & prospects to be tested Basin margin play unsuccessful at Kodos-1 Epir-1 established a working petroleum system Independent plays in main basin untested Basin margin play unsuccessful at Engomo-1 Independent plays away from basin margin untested Ethiopia Omo Basin Chew Bahir Basin Working petroleum system seen (oil shows) Dry hole Reviewing potential away from volcanics Exciting basin & new play testing wildcats Several undrilled basins being tested Q to end 2016 Cheptuket (Kerio Valley Basin), Tausi (North Lokichar Basin) Slide 25

26 Upside in Kenya: Basin testing wildcats & new play testers Northern Area Central Core Area Southernmost Area Multiple opportunities to build upon South Lokichar Basin success Slide 26

27 Caribbean-Guyanas Atlantic Margin: shift to shelf Three major basins with proven oil systems Shelf edge plays lower cost to develop Spari (non-op) drilling Q Seismic evaluation ongoing to high-grade prospects for future selective drilling Strong acreage positions in new industry hot spot Slide 27

28 TULLOW OIL PLC 2015 HALF YEAR RESULTS AIDAN HEAVEY

29 Re-setting the business for lower oil price COMPLETED ONGOING Reduce costs Cut near term annual exploration budget to c.$200m Restructured and simplified the business Non core projects removed from portfolio Dividend suspended Target opex and capex reductions across group Deliver $500m cost savings over 3 years Disciplined capital allocation Ensure efficient project delivery Enhance cash flow Strong oil production from West Africa Revenue protected through prudent hedging programme Uganda CGT resolved Grow West Africa oil production to 100,000 bopd net in 2017 c.65% of TEN completed on schedule and on budget Progress East Africa pipeline and FEED Appropriate capital structure Secured additional funding headroom and liquidity Diversified debt structure Target net debt / EBITDAX ratio <2x Create capacity to re-instate dividend Focused exploration Implement a focused exploration programme Exploring new basins with appropriate equities Build portfolio for when market conditions improve Create capacity to increase annual E&A budget up to $400m Slide 29

30 TULLOW OIL PLC 2015 HALF YEAR RESULTS

31 2H 2015 Exploration and Appraisal Programme EAST AFRICA Country Block Prospect/Well Interest Gross Mean Net Mean Spud Date 12A Cheptuket (ex-lekep) 65% (op) Potential basin opener Q mmboe Kenya 10BB Amosing-5 appraisal 50% (op) South Lokichar Q T Twiga-3 appraisal 50% (op) Appraisal Programme In progress NEW VENTURES Country Block Prospect/Well Interest Gross Mean Net Mean Spud Date mmboe Norway PL642 Hagar 10% Q PL650 Salander 25% In progress Suriname Block 31 Spari 30% In progress Pakistan Kalchas Kup 30% In progress Slide 31

32 Proactive steps taken in 4Q 2014 Allocated capital to high-margin cash generating West Africa assets Prioritised future production and development activities in West Africa; low breakeven prices Significant reduction to $250m for exploration and appraisal activities; but continue to build options for longer term Targeted delivery of cash savings through simplification of our organisation c.$500m of cash savings over a 3 year period (capex, opex and G&A) Suspended dividend in current climate Prudent steps taken to manage short term cash flow Action taken to deliver robust funding strategy Planned to address Financing ahead of time at March 2015 Bank Redetermination Ensure significant debt facility headroom and liquidity through TEN first oil Continue with active hedging Slide 32

33 Oil Hedging Hedge strategy Hedge strategy is approved by the Board and reviewed quarterly Hedges are executed rateably on a three year forward rolling basis Hedge by purchasing a mix of Dated Brent options (puts, collars, 3-way collars) Current Portfolio Approximately 60% of 2015 oil entitlement volumes is hedged at ~$86/bbl MTM as at 30 June ~$0.3bn Hedge Position (as at 30 June 2015) 2H Oil Volume (bopd) 34,500 31,257 19,500 5,000 Average floor price protected ($/bbl) MTM value at 30 June 2015 ($m)* *Net of hedge premium The hedging programme has helped to significantly mitigate the impact of lower oil prices; $146m benefit to 1H 2015 revenues with ~$300m mark-to-market value looking forwards Slide 33

34 Appraising & testing oil wells onshore East Africa Location Activity Uganda Lake Albert Basin 80+ exploratory appraisal wells drilled Excellent porosities & permeabilities Anticipated production rates between 3,000-5,000 bopd per well Kenya South Lokichar Basin 13 appraisal wells Early appraisal delineated field margins Subsequent appraisal hit good oil sands Appraisal & well testing ongoing Current potential unconstrained flow rates of 5,000 bopd per well Slide 34

35 Tullow Oil plc 9 Chiswick Park 566 Chiswick High Road London, W4 5XT United Kingdom Follow Tullow on: Tel: +44 (0) Fax: +44 (0) ir@tullowoil.com