Tullow Oil PLC (LON:TLW) has redetermined its reserves based lending facilities, confirming US$1.9bn of capacity and US$700mln remaining headroom.
This is in-line with Tullow’s expectations, previously revealed in last month’s financial results statement.
Tullow also told investors that it has voluntarily reduced its facility commitments to US$2.2bn from US$2.4bn – which brings forward amortisation otherwise due in October and will reduce financing costs. The next scheduled amortisation (via reduced commitment not repayment) of US$211mln will be due in April 2021.
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The company noted that its next contracted debt maturity is July 2021, for US$300mln of convertible bonds.
"Securing the ongoing support of our RBL lending banks and confirming our debt capacity has been important given the current challenging environment,” said Les Wood, Tullow chief executive.
“Today's positive news verifies the strength of our producing assets and robust hedging strategy which underpin the RBL and, combined with the further cost savings we have identified, confirms the strength of our liquidity in the medium-term.
“Nevertheless, strengthening the balance sheet continues to be a key priority with the group seeking to raise proceeds in excess of $1 billion through portfolio management.”
Tullow repeated that it has already measures that will reduce capex for 2020 by 30%, and, now following another review of its business has detailed further savings targeting anther US$50mln of capex savings in 2020, taking its budget to US$300mln from US$350mln.
The company is deferring a number of activities across its portfolio along with savings that can be realised through ongoing farm-out activities - for example, in Ghana it will terminate a contract for the Maersk Venturer rig and defer some well activity.
It meanwhile, added that it will continue to invest in projects yielding good returns. For example, it has greenlighted the next phase of the Simba development in Gabon, which is due to achieve pay-back by the end of 2021 based on US$30 per barrel crude.
Operating costs in production businesses are marked below US$12 per barrel, and, for Ghana it is cheaper at around US$9 per barrel.
It has around 60% of 2020’s production hedged, with a floor price of US$57 per barrel, and, 40% of next year’s output is covered at US$53 per barrel.
Tullow said it would have a free cash flow breakeven oil price of c.$35/bbl for the rest of the year, based on production between 70,000 and 80,000 bopd.
The company continues to take steps to operate through the pandemic including, for example, fourteen-day self-isolation for staff prior to their deployment on offshore installations to minimise the risk of spread at its facilities.
Production in West Africa has not yet been affected. It noted that, as a result of experience gained through 2014’s Ebola outbreak, it has significant contingency planning in place.