Tullow Oil plc · LSE:TLW
Tullow Oil — Investor Presentation (December 2015)
39 slides from Tullow Oil's investor presentation, December 2015
Slide 1: Tullow Oil plc Overview presentation
Overview presentation Tullow Oil plc November / December 2015
Slide 2: Disclaimer
Overview presentation 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 i
Slide 3: Overview presentation
Overview presentation OVERVIEW PRESENTATION
Slide 4: A leading global independent exploration & production company
Overview presentation A leading global independent exploration & production company 22 329mmboe 861mmboe 74,600 boepd 2C Contingent Countries 2P Reserves Resources production Figures at 1H 2015 Established record of delivering successes • The business has developed organically and through acquisitio
Slide 5: The Tullow strategy
Overview presentation The Tullow strategy Additional cash flow from new production Monetisation High Margin Exploration Selective Options & Production and Development Portfolio Cash flow Appraisal Management Costs & Dividends Additional Surplus Cash Exploration, Cash Distribution • Increasing capita
Slide 6: Future project pipeline making significant progress
Overview presentation Future project pipeline making significant progress Future Development Projects Countries with ongoing operations Key oil producing countries TEN Development East Africa Development • ~75% project completed • Kenya appraisal programme • On track for first oil in mid-2016; almos
Slide 7: New venture campaigns focused on long term value
Overview presentation New venture campaigns focused on long term value Commercial Screening Off-limits Exploration Tested at $50/bbl Low cost of supply Ultra-deepwater Value accretive Deepwater gas High Margin Oil Shale oil Onshore Rifts Arctic Capital & Risk Screening East Africa Light Oil Over-hea
Slide 8: Re-setting the business for lower oil price
Overview presentation Re-setting the business for lower oil price COMPLETED ONGOING Reduce costs Cut near term annual exploration budget to c.$200m Target opex and capex reductions across group Restructured and simplified the business Deliver $500m cost savings over 3 years Non core projects removed
Slide 9: Overview presentation
Overview presentation OVERVIEW PRESENTATION
Slide 10: 2015 Half Year Results summary
Overview presentation 2015 Half Year Results summary 1H 2015 1H 2014 Sales revenue $820m $1,265m Gross profit $342m $681m Administrative expenses ($100m) ($120m) Restructuring costs ($25m) - Loss on disposal ($44m) ($115m) Exploration costs written off1 ($88m) ($402m) Impairment of property, plant a
Slide 11: Good progress in 1H 2015
Overview presentation Good progress in 1H 2015 Delivery of high margin production / capital allocation Bbl West African Strong performance 120 Production 67 kbopd 1H15 vs. 63 kbopd in 1H14 $109/bbl Oil hedging Delivered $146m revenue benefit in 1H15, Mark-to-market position of $0.3bn at 30 June 2015
Slide 12: Net income 1H 2015 v 1H 2014
Overview presentation Net income 1H 2015 v 1H 2014 100 116 65 133 $m 0 18* 41 68 95 -100 315 -200 -300 573 90 -400 70 48 103 -500 171 -600 -700 Net income Price Hedging Oil Volume/ Gas Volume/ Operating and Reduced Exploration Net financing Tax 1H15 excl. Uganda CGT & Net income 1H14 PSC Disposals o
Slide 13: Sources and uses of funds
Overview presentation Sources and uses of funds Cash inflow $1,191m 1H 2015 Net cash inflow $167m $m • Operating cash flow $450m* (1H 2014:$726m*) Sources Uses 1,200 • Disposals $57m (1H 2014:$nil) $57m $389m • Net loan draw down $684m (1H 2014:$944m) 1,000 $113m Cash outflow $1,026m $80m • Cash Cap
Slide 14: Capex reductions expected over coming years
Overview presentation Capex reductions expected over coming years $1.9 billion capex for full year 2015 • Ghana: Jubilee & TEN developments - $1,210m 2016 (F) $1,200m • Other West Africa: Non-op production - $190m • Europe: Maintaining mature production - $25m • Uganda and Kenya: Pre-development act
Slide 15: Strong liquidity position through TEN first oil
Overview presentation Strong liquidity position through TEN first oil Debt maturity profile Key metrics $m Commitment size Maturity $m 30 Sep 2015 31 Dec 2014 RBL 3,700 Oct 2019 Cash and cash equivalents 282 319 Corporate Facility 1,000 Apr 2017 Debt outstanding 6% Senior Notes 650 Nov 2020 RBL Faci
Slide 16: Oil hedging
Overview presentation 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 • MTM as at 30 Oc
Slide 17: Financing strategy
Overview presentation 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 ben
Slide 18: Overview presentation
Overview presentation OVERVIEW PRESENTATION
Slide 19: Strong production and development business
Overview presentation Strong production and development business Strong production and development business robust to low oil prices • Production: significant near-term production growth of high margin oil • Operating costs: low opex cost per barrel with potential for further reductions • Incrementa
Slide 20: Strong delivery across West Africa production portfolio
Overview presentation Strong delivery across West Africa production portfolio Strong 1H 2015 West Africa oil production: 66,500 bopd FY 2015 West Africa oil production guidance: 66-67,000 bopd 2017 West Africa oil production growing to around: 100,000 bopd 120 100 80 ‘000 bopd 60 40 20 0 2013 2014 1
Slide 21: Stable low-cost portfolio of non-operated oil production
Overview presentation 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 opportu
Slide 22: Jubilee development options present growth opportunities
Overview presentation Jubilee development options present growth opportunities Strong Jubilee performance year-to-date • 1H15 average gross production: 105 kbopd • FY15 guidance: 100 kbopd • Gas export rates of up to 120 mmscfd • Reduced gas injection allowing FPSO capacity to rise to ~115 kbopd Str
Slide 23: TEN development to deliver significant cash flow in 2016
Overview presentation TEN development to deliver significant cash flow in 2016 Base case development • 300 mmboe reserves being developed - 80% oil • 24 well development - 10 wells on-stream at start up • Gross development capex of $4.9 billion • Leased FPSO, facility capacity of 80,000 bopd Signifi
Slide 24: TEN project on schedule and on budget for first oil mid-2016
Overview presentation TEN project on schedule and on budget for first oil mid-2016 Project c.75% complete • FPSO Conversion (94%) - All major installation work complete - On track for arrival offshore Ghana in Q1 2016 - Mooring piles and lines now installed ready for FPSO arrival DRILLING • Subsea F
Slide 25: Ghana: focus on high margin oil – Big fields get bigger
Overview presentation Ghana: focus on high margin oil – “Big fields get bigger” Material resource base : long-term value growth Industry experience: “Big oil fields get Bigger” • Development geoscience & engineering targeting the upside Integrating use of new technologies • Value growth through inno
Slide 26: East Africa regional integration & capex deflation
Overview presentation East Africa regional integration & capex deflation Integrated regional pipeline • Conceptual studies completed on Northern and Southern Route • Governments announced joint decision on northern route in August 2015 • FEED, ESIA and commercial structure targeted in 2016 Upstream
Slide 27: Overview presentation
Overview presentation OVERVIEW PRESENTATION
Slide 28: Adapting our E&A strategy to current environment
Overview presentation 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 nor
Slide 29: Finding oil onshore East Africa
Overview presentation Finding oil onshore East Africa Location Activity Uganda Lake Albert • 17+ oil fields discovered (90% success) Basin • 1.7 billion barrels of oil discovered Kenya South • 9/11 wildcat oil discoveries Lokichar • + 2 technical discoveries (tight oil plays) Basin • Discovered 600
Slide 30: Kenya appraisal progressing well in 2015
Overview presentation Kenya appraisal progressing well in 2015 Extensive appraisal program nearing completion • 10 wells successfully drilled year to date • All wells have met or exceeded expectations • Appraisal wells remaining for 2015; Etom-2 • 3D seismic key to successful 2015 campaign Reservoir
Slide 31: Upside in Kenya: Basin testing wildcats & new play testers
Overview presentation 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 31
Slide 32: Caribbean-Guyanas Atlantic Margin: shift to shelf
Overview presentation Caribbean-Guyanas Atlantic Margin: shift to shelf • Three major basins with proven oil systems • Shelf edge plays – lower cost to develop • Seismic evaluation ongoing to high-grade prospects for future selective drilling Strong acreage positions in new industry hot spot Slide 3
Slide 33: Africa Atlantic Margin: shift to simple lower-cost plays
Overview presentation Africa Atlantic Margin: shift to simple lower-cost plays Shelf edge plays: lower-cost to develop • Vast acreage positions - Mauritania to Namibia • Oil plays proven - diversity in prospect inventory Experience, lessons & know how • Keep it simple - basic plays - no complex well
Slide 34: Overview presentation
Overview presentation OVERVIEW PRESENTATION
Slide 35: Key financial metrics
Overview presentation Key financial metrics Adj. EBITDAX ($mm) Capital investment ($mm) 1 2,020 1,847 1,908 1,870 1,900 1,779 1,800 1,565 1,432 1,172 1,235 800 2010 2011 2012 2013 2014 LTM to 30 2010 2011 2012 2013 2014 2015 F Jun'15 Net debt / Adj. EBITDAX (x) 2 Total Assets ($mm) 2.7 11,849 2.4 11
Slide 36: High margin production and competitive cost base
Overview presentation High margin production and competitive cost base Realized oil price per bbl ($)1 Operating costs per boe ($)2 Brent avg. 79.5 111.3 111.7 108.7 98.9 57.8 18.6 16.5 16.2 108.0 108.0 105.7 97.5 14.6 13.5 78.0 12.5 70.6 2010 2011 2012 2013 2014 1H 2015 2010 2011 2012 2013 2014 1H
Slide 37: 2015 Exploration and Appraisal Programme
Overview presentation 2015 Exploration and Appraisal Programme EAST AFRICA mmboe Country Block Prospect/Well Interest Gross Mean Net Mean Spud Date 13T Emesek (ex-Tausi) 50% (op) Potential basin opener In progress South Lokichar Kenya 13T Etom-2 (cont) 50% (op) Appraisal Programme Q4 2015 12A Cheptu
Slide 38: Strategic E&A value options as cash becomes available
Overview presentation Strategic E&A value options as cash becomes available Finding Commercial Oil: New Frontiers & Frontier Exploration Core E&A Exploration Business Higher-Risk Lower-Risk Balanced investment Development Campaigns Campaigns across E&A portfolio Drill out basins & mature East Africa
Slide 39: Tullow Oil plc
Overview presentation Tullow Oil plc 9 Chiswick Park 566 Chiswick High Road London, W4 5XT United Kingdom Follow Tullow on: Tel: +44 (0)20 3249 9000 Fax: +44 (0)20 3249 8801 Email: [email protected] Web: www.tullowoil.com