Tullow Oil Plc · LSE:TLW
Tullow Oil — H1 2015 Earnings Presentation
35 slides from Tullow Oil's earnings presentation, Jul 29, 2015
Slide 1: Tullow Oil plc 2015 Half Year Results
2015 HALF YEAR RESULTS Tullow Oil plc 29 July 2015
Slide 2: Disclaimer
2015 HALF YEAR RESULTS 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
Slide 3: Aidan Heavey
2015 HALF YEAR RESULTS TULLOW OIL PLC – 2015 HALF YEAR RESULTS AIDAN HEAVEY
Slide 4: Business re-set for $50 oil price environment
2015 HALF YEAR RESULTS 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
Slide 5: Ian Springett
2015 HALF YEAR RESULTS TULLOW OIL PLC – 2015 HALF YEAR RESULTS Ian Springett
Slide 6: Good progress in 1H 2015
2015 HALF YEAR RESULTS 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 7: 2015 Half Year Results summary
2015 HALF YEAR RESULTS 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
Slide 8: Net income 1H 2015 v 1H 2014
2015 HALF YEAR RESULTS 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
Slide 9: Sources and uses of funds
2015 HALF YEAR RESULTS 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 Ca
Slide 10: 2015 capital expenditure
2015 HALF YEAR RESULTS 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 • Uganda and Kenya: Pre-development activities
Slide 11: Strong liquidity position through TEN first oil
2015 HALF YEAR RESULTS Strong liquidity position through TEN first oil Debt maturity profile Key metrics $m Commitment size Maturity $m 30 June 2015 31 Dec 2014 RBL 3,700 Oct 2019 Cash and cash equivalents 488 319 Corporate Facility 1,000 Apr 2017 Debt outstanding 6% Senior Notes 650 Nov 2020 RBL Fa
Slide 12: Oil Hedging
2015 HALF YEAR RESULTS 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
Slide 13: Financing Strategy
2015 HALF YEAR RESULTS 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 be
Slide 14: Paul McDade
2015 HALF YEAR RESULTS TULLOW OIL PLC – 2015 HALF YEAR RESULTS Paul McDade
Slide 15: Strong delivery across West Africa production portfolio
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 120 100 80 ‘000 bopd 60 40 20 0 2013 2014
Slide 16: Future project pipeline making significant progress
2015 HALF YEAR RESULTS Future project pipeline making significant progress Future Development Projects Countries with ongoing operations Key oil producing countries TEN Development East Africa Development • ~65% project completed • Kenya appraisal programme • On track for first oil in mid-2016; almo
Slide 17: Stable low-cost portfolio of non-operated oil production
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 opport
Slide 18: Jubilee development options present growth opportunities
2015 HALF YEAR RESULTS 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
Slide 19: TEN project on schedule and on budget for first oil mid-2016
2015 HALF YEAR RESULTS 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 (4
Slide 20: Kenya appraisal progressing well in 2015
2015 HALF YEAR RESULTS 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 c
Slide 21: Adding value through regional integration & capex deflation
2015 HALF YEAR RESULTS 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 d
Slide 22: Angus McCoss
2015 HALF YEAR RESULTS TULLOW OIL PLC – 2015 HALF YEAR RESULTS ANGUS McCOSS
Slide 23: Adapting our E&A strategy to current environment
2015 HALF YEAR RESULTS 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 no
Slide 24: New venture campaigns focused on long term value
2015 HALF YEAR RESULTS 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-he
Slide 25: Finding oil onshore East Africa
2015 HALF YEAR RESULTS 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 26: Upside in Kenya: Basin testing wildcats & new play testers
2015 HALF YEAR RESULTS 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
Slide 27: Caribbean-Guyanas Atlantic Margin: shift to shelf
2015 HALF YEAR RESULTS 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 Q3 2015 • Seismic evaluation ongoing to high-grade prospects for future selective drilling Strong acreage positio
Slide 28: Aidan Heavey
2015 HALF YEAR RESULTS TULLOW OIL PLC – 2015 HALF YEAR RESULTS AIDAN HEAVEY
Slide 29: Re-setting the business for lower oil price
2015 HALF YEAR RESULTS 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 remove
Slide 30: Tullow Oil plc – 2015 Half Year Results
2015 HALF YEAR RESULTS TULLOW OIL PLC – 2015 HALF YEAR RESULTS
Slide 31: 2H 2015 Exploration and Appraisal Programme
2015 HALF YEAR RESULTS 2H 2015 Exploration and Appraisal Programme EAST AFRICA mmboe Country Block Prospect/Well Interest Gross Mean Net Mean Spud Date 12A Cheptuket (ex-Lekep) 65% (op) Potential basin opener Q3 2015 Kenya 10BB Amosing-5 appraisal 50% (op) Q3 2015 South Lokichar Appraisal Programme
Slide 32: Proactive steps taken in 4Q 2014
2015 HALF YEAR RESULTS 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 c
Slide 33: Oil Hedging
2015 HALF YEAR RESULTS 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
Slide 34: Appraising & testing oil wells onshore East Africa
2015 HALF YEAR RESULTS Appraising & testing oil wells onshore East Africa Location Activity Uganda Lake Albert • 80+ exploratory appraisal wells drilled Basin • Excellent porosities & permeabilities • Anticipated production rates between 3,000 - 5,000 bopd per well Kenya South • 13 appraisal wells L
Slide 35: Tullow Oil plc
2015 HALF YEAR RESULTS 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]