Tullow records losses in 2016 as Jubilee field shuts down for 12 weeks

For the third consecutive year, Tullow Oil plc has, at the end of 2016, reported an operating loss of $754.7 million, which is, however, 31percent better than the $1.09 billion loss it posted in 2015.

Tullow’s 2016 full year report, released yesterday, shows sales revenue for 2016 dropped by a negative 21%, from $1.61 billion in 2015 to $1.27 billion in 2016, despite its TEN oilfields in Ghana coming on stream, with weak oil prices impacting on the value of sales.

The company, in 2016, had a total of $424 million exploration costs written off the net of tax as against the $472 million written off in 2015. This included write-offs in Norway ($18 million) and New Venture costs ($18 million).

Also, the Group has written off $366 million in relation to prior years’ expenditure primarily as a result of the farm-down in Uganda ($248 million), the disposals in Norway ($61 million) and its exit out of Madagascar ($22 million).

Meanwhile, the company's net debt stood at US$4.78 billion at the end of 2016, against the US$4.02 billion deficit recorded in 2015.

In the West Africa region, net working interest on oil production, including production-equivalent insurance payments, averaged 65,500 bopd in 2016, and 2017 is expected to average between 78,000 and 85,000 bopd.

In Ghana, the full year 2016 production from the Jubilee field averaged 73,700 bopd (netting around 26,200 bopd). Also, under its Corporate Business Interruption insurance, the Group received insurance payments equal to 4,600 bopd of net equivalent production.

But Tullow expects 2017 production from the Jubilee field to average 68,500 bopd (net: 24,300 bopd), assuming 12 weeks of shutdown associated with the next phase of remediation works.

Tullow’s Corporate Business Interruption insurance policy is expected to reimburse it for the equivalent of 12,000 bopd of annualised net production for this shutdown period, increasing the Group’s effective net production to around 36,300 bopd in 2017.

According to the lead oil producer, the TEN development was delivered on time and on budget in August 2016, as the 2017 gross forecast is to ramp up to 50,000 bopd.

“Due to some issues with managing pressures in the Enyenra reservoir and because no new wells can be drilled until after the ITLOS ruling, which is expected in late 2017, Tullow is managing the existing wells in a prudent and sustainable manner. Gas production from the TEN fields is currently being re-injected. The gas export line between the TEN and Jubilee developments is expected to be connected this month with gas export expected to commence later in 2017.”

The company further said: “Proceedings at ITLOS about the maritime border dispute between Ghana and Côte d’Ivoire continue, with oral hearings scheduled for this month, and a final ruling anticipated in the fourth quarter of 2017. Drilling is expected to resume in 2018 after the final ruling.”

Per the 2016 full year results, Tullow has tightened its investment budget to just $500 million in 2017, of which $125 million will be covered by Total which has agreed to buy over most of Tullow's stake in a Uganda project.

“Tullow has agreed to transfer 21.57% of its 33.33% Uganda interests to Total for a total consideration of $900 million. Upon completion, the farm-down will leave Tullow with an 11.76% interest in the upstream and pipeline projects. This is expected to reduce to a 10% interest in the upstream project when the Government of Uganda formally exercises its right to back-in,” the company said.