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02.11.2019 Oil and Gas

Ghana Still Has Economically Attractive Oil And Gas Production — Tullow

Ghana Still Has Economically Attractive Oil And Gas Production — Tullow
NOV 2, 2019 OIL AND GAS

Executive Vice President, Tullow Ghana, Kweku Awotwi disclosed that since safety is core to the company’s operations offshore and onshore, good safety performance reflected in no lost-time injuries this year.

He mentioned that it encountered technical challenges on two TEN wells which are EN-10 and En-14 but completed the technical issues of En-10 promptly and went on to produce 15,000 bpd while EN-14 completion had mechanical problem which had the well suspended and taken out of forecast.

“The challenges with En-10 and En-14 are disappointing, however all the other completions went very well, giving us a very resilient well inventory, and those reserves at TEN will get produced. The investment by Tullow is substantial and will not only underpin our production as we head into 2020 and beyond but also help us define where next we need to drill wells to maintain consistent field performance,” he emphasised.

Speaking on production activities, he mentioned that Tullow’s core assets, the Jubilee and TEN fields in Ghana, both continue to make very significant production contributions of high-quality, high-margin, light, sweet, oil.

Mr. Awotwi explained that beyond infill drilling in the centres of these fields, the company sees numerous economically attractive opportunities to extend production longer-term.

The Executive Vice President outlined inadequate nomination of Jubilee gas, reinjection impacting wells, impacting oil production levels/revenues generated to Ghana and over supply of gas with potential other sources i.e. Sankofa Gas, importation of domestic gas.

Speaking on Tullow’s economic contribution to Ghana, he said “We're very proud of the economic contribution the oil and gas industry has made to Ghana. We were a pioneer in Ghana and it remains one of our proudest achievements that Tullow was responsible for Ghana’s first and second major oil and gas developments”.

He revealed that some 72 students have benefited from graduate and postgraduate scholarships.

Chief Executive Officer (C.E.O) of Tullow Ghana, Les Wood revealed that Tullow in an exciting position has a strong financial base built through FCF generation from it production assets in Ghana and elsewhere in West Africa.

He noted that despite having a mixed first half of 2019, it is confident that the company will ensure continuous progress in its activities in the Oil and Gas industry.

According to him, aside Tullow Ghana providing evidence of its continued progress, the company’s finances are in good shape, with solid FCF generation, stronger balance sheet and re-established returns to shareholders.

Speaking at the ‘Facts behind the Figures’ in Accra, Les Wood said “Despite our presence in South America, we see ourselves as an African business. Africa remains one of the four pillars of our vision. It’s where we deploy the bulk of our capital and we are ambitious to grow our business here in Africa”.

He added that in 2018, Tullow Ghana laid out ‘Africa’, ‘Oil’, ‘Sustainability’ and ‘Progressive’ as four pillars of its vision.

Les Wood noted that demand for oil will be present for decades to come, but Tullow Ghana recognizes the need for society to reduce emissions and restrict global warming.

The Chief Executive Officer explained that it is fully committed to playing its part in energy transition but believes there will be a role for responsible producers of oil to meet ongoing global demand over the coming decades.

“Developing nations have the right to benefit economically and socially from their natural resources as developed economies have and critically, that we at Tullow have the experience and values to assist developing nations maximise their potential,” he explained.

On access and competition for Capital for E&Ps, he mentioned that Tullow Ghana has also seen what happens to companies that find itself in unloved sectors and must learn the lessons of the coal and tobacco sectors in particular.

He also mentioned that Tullow is proud of its strong performance across the broad sustainability agenda hinged on Environmental Stewardship, Responsible Operations, Equality & Transparency and Shared Prosperity.

He explained that these four pillars cover the issues most material to its host countries, employees and investors.

Explaining the summary of 2019 progress and performance, Mr. Wood added that Tullow’s production forecast for the year was revised lower, but the Jubilee, TEN and its non-operated assets continue to produce low cost oil, which provides Tullow with a solid base for growth.

“The reason for not meeting our original production forecast was due to a significant mechanical issue with the EN-14P well. Clearly lower production means lower revenue, but our underlying FCF remains robust: this is a result of low operating cost per barrel, low break-evens and a disciplined approach to all our expenditure," he stated.

Mr. Wood explained that a couple of other factors to consider that impact FCF includes Oil price ($5/bbl in 2H 2019 (+/- $75m FCF) and working capital movements

He mentioned that in Uganda, the farm down deal was terminated at the end of August, leading to further delays to what remains an excellent project.

He also stressed that in Kenya, Tullow Ghana also signed the Heads of Terms in June which sought to help the company frame the project with the GoK and allows it talk to banks and other potential partners about their interest in this project.

“In Non-op portfolio, we still forecast to spend around $100m this year, weighted to the 2H based on the work programme. We have drilled two wells in Guyana and a third is underway in a programme costing around $70m net but we are within the $150m cap we set ourselves,” he stressed.

He noted that to take advantage of the lack of cost inflation in the oil services sector, particularly in the rig market, its modest capital expenditure in Uganda is included following the termination of the deal with Total and CNOOC.

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