Tullow Oil Plc · LSE:TLW
Tullow Oil — H1 2014 Earnings Presentation
63 slides from Tullow Oil's earnings presentation, Jul 30, 2014
Slide 1: 2014 Half-Yearly Results
2014 HALF-YEARLY RESULTS Tullow Oil plc 30 July 2014
Slide 2: Disclaimer
2014 HALF-YEARLY 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 reasonabl
Slide 3: Contents
2014 HALF-YEARLY RESULTS Contents Section Page Introduction 4 Finance 6 Development and Operations 13 Exploration and Appraisal 19 Conclusion 28 Appendix 30 Slide 3
Slide 4: Aidan Heavey
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS AIDAN HEAVEY
Slide 5: Good progress made during 1H 2014
2014 HALF-YEARLY RESULTS Good progress made during 1H 2014 West Africa • Stable Jubilee production – 103,000 bopd • TEN development on time and on budget • Onshore discovery at Igongo in Gabon East Africa • Kenya discoveries support development plans • MoU signed with Government of Uganda • Project
Slide 6: Ian Springett
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS IAN SPRINGETT
Slide 7: Business and funding strategy
2014 HALF-YEARLY RESULTS Business and funding strategy Business Strategy Funding Strategy Financing Initiatives Additional cash flow from new production Commercial Bank Facilities Operating Cash High Monetisation Exploration Selective Flow Margin Options & $3.5bn RBL Production and Appraisal Develop
Slide 8: Half-yearly results summary
2014 HALF-YEARLY RESULTS 2014 Half-yearly results summary 1H 2014 1H 2013 Comments Sales revenue $1,265m $1,347m Unchanged from 1H 2013 after adjusting for Bangladesh Gross profit $673m $764m asset sale and Gabon production deferral Administrative Expenses ($120m) ($89m) Loss on disposal ($115m) - C
Slide 9: Sources and uses of funds
2014 HALF-YEARLY RESULTS Sources and uses of funds Cash inflow $1,672m $m 1H 2014 Net cash inflow $59m 2,000 • Operating cash flow $728m* (1H 2013:$1,030m*) • Net loan draw down $944m $944m (1H 2013:$901m) 1,500 $219m $161m Cash outflow $1,613m $37m $1,196m • Cash Capex $1,196m (1H 2013:Capex $847m)
Slide 10: Debt capital structure has evolved in 1H14
2014 HALF-YEARLY RESULTS Debt capital structure has evolved in 1H14 Debt maturity profile Key metrics $mm Commitment size Maturity $mm 30 June 2014 RBL 3,500 Dec 2019 Cash and cash equivalents 411 Corporate Facility 750 Apr 2017 Debt outstanding 6% Senior Notes 650 Nov 2020 RBL Facilities 1,632 6¼%
Slide 11: 2014 capital expenditure
2014 HALF-YEARLY RESULTS 2014 capital expenditure $2.1 billion capex for full year 2014 • Ghana: Jubilee Phase 1A & TEN developments ($760m) • Kenya: Exploration and appraisal drilling ($310m) 2014 $720m $220m $1,160m $2,100m • Uganda: Appraisal drilling and development progress towards FID ($200m)
Slide 12: Highlights
2014 HALF-YEARLY RESULTS Highlights Financial performance Strong Revenue and Cash Flow generation from core West African production Strong balance sheet Second successful $650m bond issue, re-financing of $750m corporate RCF plus new $300m LC facility Portfolio management Sale of non-core European a
Slide 13: Paul McDade
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS PAUL McDADE
Slide 14: Core West African production on track to meet FY 2014 target
2014 HALF-YEARLY RESULTS Core West African production on track to meet FY 2014 target West African production KENYA South Lokichar Basin • 1H 2014 actual: 63,900 boepd Development studies underway; single basin has potential to produce in excess of 100,000 bopd gross. • FY 2014 guidance: 64-68,000 b
Slide 15: Ghana projects on track to enhance production and cash flow
2014 HALF-YEARLY RESULTS Ghana projects on track to enhance production and cash flow Ghana gross production profile 250 • Jubilee production on track to meet 2014 FY TEN being developed (80:20 oil:gas) TEN Upside (45:55 oil:gas) production guidance of 100,000 boepd 200 - Jubilee 1H 2014 gross produc
Slide 16: West African production generating strong cash flows
2014 HALF-YEARLY RESULTS West African production generating strong cash flows • Significant incremental investment activity across non-operated assets • Strong pre-tax operating cash flow generation across West African portfolio in 1H 2014 Equatorial Guinea • Okume Complex infill drilling; 4 wells -
Slide 17: Progressing oil resources towards development in East Africa
2014 HALF-YEARLY RESULTS Progressing oil resources towards development in East Africa • Full life cycle regional scale E&P business • Two basins discovered; over 300,000 bopd gross potential • Large yet-to-find from basin opening campaigns • GoU, GoK & partners aligned for earliest possible first oi
Slide 18: Highlights
2014 HALF-YEARLY RESULTS Highlights Core West African production Core West African production on track; generating 1H pre tax operating cashflow $916m TEN development TEN development mid-2016 first oil on track; building to a 100,000bopd regional business East Africa progress Kenya E&A progressing;
Slide 19: Angus McCoss
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS ANGUS McCOSS
Slide 20: Finding oil in 2014
2014 HALF-YEARLY RESULTS Finding oil in 2014 H1 E&A Commercial Technical Dry Hole • We continue to find our own oil Outcomes Discovery Discovery EAST AFRICA • Cost-effective feedstock for value creation Exploration Ewoi-1 Emong-1 Shimela-1 • Campaign approach hedges annual variability Amosing-1 Gard
Slide 21: Campaign approach to finding oil in Africa & the Atlantic
2014 HALF-YEARLY RESULTS Campaign approach to finding oil in Africa & the Atlantic We find oil in Africa & the Atlantic Value added through finding our own New Oil Drilling Out Successful Core Plays & Basins Exploration Business Campaigns focus delivery Development • High success rates in drill out
Slide 22: Balancing investment across the portfolio
2014 HALF-YEARLY RESULTS Balancing investment across the portfolio We find oil in Africa & the Atlantic Frontier Core 5 1 South Atlantic Margins 4 East African Rift Basins Low cost options give exposure to upside 10 Bbo STOIIP found in 40 Bbo potential 3 Older turbidites beneath shelf (low cost) 2
Slide 23: Shifts of emphasis within exploration portfolio for value
2014 HALF-YEARLY RESULTS Shifts of emphasis within exploration portfolio for value Uruguay Ghana Liberia, Sierra Leone Guyana Suriname Gabon Namibia Netherlands Uganda Guinea Norway Ethiopia Mauritania Kenya Madagascar Higher cost / Lower non-technical risk Lower cost / Higher non-technical risk Pas
Slide 24: Kenya – Ethiopia: World-class oil province potential
2014 HALF-YEARLY RESULTS Kenya – Ethiopia: World-class oil province potential E&A campaign delivery – parallel approach 1. South Lokichar Basin drill-out, appraisal & testing • Discovery of over 600 mmbo Pmean gross resources • Flow tests confirm good productivity • 8/9 wildcat wells discover produc
Slide 25: Near infrastructure & Frontier opportunities in North Atlantic
2014 HALF-YEARLY RESULTS Near infrastructure & Frontier opportunities in North Atlantic Barents Sea - Frontier • Major oil finds continue at Wisting prospect cluster • Hassel & Bjaaland target cluster potential up to 500 mmbo Norwegian Sea - Near Infrastructure • Zumba - Upper Jurassic exciting new
Slide 26: West African near-field exploration in producing heartlands
2014 HALF-YEARLY RESULTS West African near-field exploration in producing heartlands Oil field & production plateau extensions • Numerous near-field & near-infrastructure exploration & appraisal prospects in Ghana, Gabon (e.g. Igongo), Equatorial Guinea, Côte d’Ivoire, Congo B • High value & cost ef
Slide 27: Highlights
2014 HALF-YEARLY RESULTS Highlights Good progress year to date Successful Exploration & Appraisal outcomes in first half of 2014, continuing to add value to portfolio Campaign approach Campaign approach hedges annual variability, phases risk & focuses delivery Shift of emphasis Investment in success
Slide 28: Aidan Heavey
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS AIDAN HEAVEY
Slide 29: Delivering on our strategy
2014 HALF-YEARLY RESULTS Delivering on our 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 • Materia
Slide 30: Tullow Oil plc – 2014 Half-Yearly Results
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS
Slide 31: Net income 1H 2014 v 1H 2013
2014 HALF-YEARLY RESULTS Net income 1H 2014 v 1H 2013 $m 400 300 2 84 43 27* 55 200 313 100 226 0 107 115 95 53 -100 1H 2013 Price Volume Operating Other costs Exploration Net Finance Tax Loss on 1H 2014 costs (*Other cash (*Other cash Write-offs disposal Costs) costs) Slide 31
Slide 32: Development & Operations
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS DEVELOPMENT & OPERATIONS
Slide 33: Potential to increase Jubilee FPSO capacity
2014 HALF-YEARLY RESULTS Potential to increase Jubilee FPSO capacity FPSO capacity improvements • Current oil capacity Work Work Work - Constrained by gas export infrastructure completed in progress outstanding - On track to deliver 100,000 bopd in 2014 Oil optimisation Run down Run down Pumps and i
Slide 34: Visible future growth – TEN development overview
2014 HALF-YEARLY RESULTS Visible future growth – TEN development overview Base development case • 300 mmboe reserves being developed • 24 well development • Gross development capex of $4.9 billion • Leased FPSO, capacity of 80,000 bopd Mid-2016 start up • 10 wells on stream at start up; 7 drilled to
Slide 35: Visible future growth - TEN Project on track
2014 HALF-YEARLY RESULTS Visible future growth - TEN Project on track Execution schedule with strategic milestones 2013 2014 2015 2016 • Over 2 million man-hours ACTIVITY Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 worked to date General Milestones All Major Contracts Awarded Mobilise 1st URF Vesse
Slide 36: Non-operated - strengths and opportunities
2014 HALF-YEARLY RESULTS Non-operated - strengths and opportunities Material portfolio of high margin resources High margin oil fields give broad technical base with potential to drive future value growth Influencing non-operated activities Learning from and challenging operators to transfer knowled
Slide 37: Non-operated – sustaining high margin production
2014 HALF-YEARLY RESULTS Non-operated – sustaining high margin production • Good technical work has delivered investment opportunities High value incremental • High return investments compete strongly for capital within investments can sustain Tullow’s portfolio net production around • Medium term i
Slide 38: Non-operated case study: Gabon
2014 HALF-YEARLY RESULTS Non-operated case study: Gabon Gabon net production profile 16,000 14,000 • High value infill drilling has offset decline 12,000 10,000 • Tullow technical influence impacting boepd 8,000 Operator decisions 6,000 • Sputnik, pre-salt exploration opportunity, 4,000 2,000 offers
Slide 39: Non-operated case study: Equatorial Guinea
2014 HALF-YEARLY RESULTS Non-operated case study: Equatorial Guinea • Use of 4D seismic data to optimise infill drilling - First iteration in 2010 (learning ahead of use at Jubilee & TEN) - Next campaign planned for late 2014/15 (Ceiba) • Outstanding results achieved on Ceiba - Initial 20,000 bopd g
Slide 40: East Africa Business highlights
2014 HALF-YEARLY RESULTS East Africa Business highlights • Full life cycle regional scale E&P business • Two basins discovered with over 300,000 bopd potential • Large yet-to-find upside from basin opening exploration campaign • Governments and partners aligned for earliest possible first oil • Good
Slide 41: Uganda – development status
2014 HALF-YEARLY RESULTS Uganda – development status Project definition being finalised 250 • Appraisal programme completed • Development costs reduced by 30% 200 200 • Kingfisher PL awarded, all EA2 Field Gross Production (kbopd) Development plans submitted to GoU , remaining EA1 plans to be submit
Slide 42: Uganda development optimisation and Capex savings
2014 HALF-YEARLY RESULTS Uganda development optimisation and Capex savings • Development optimisation and Capex reduction $3bn Capex cost reduction 4% programme in 2013/14 Reduction in 9% Facilities Capex Reduction in • Capex reduced from c.$11bn to c.$8bn Well & Pad Costs - Tullow’s c.$6/bbl compet
Slide 43: Shortening appraisal timelines in Kenya
2014 HALF-YEARLY RESULTS Shortening appraisal timelines in Kenya ASSET 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Kingfisher EA2 Buliisa EA1 Buliisa Kaiso Tonya Kaiso Tonya Kingfisher Buliisa FID Uganda Energy Africa purchase South Lokichar Sth. Lokichar FID Kenya Tullow Farm-i
Slide 44: Focus on driving down Kenya well costs
2014 HALF-YEARLY RESULTS Focus on driving down Kenya well costs Kenya well costs Since 2004 50 • 104 exploration and appraisal wells & sidetracks - 77 as operator • 40 wells tested both production & injection 40 Total well costs (US$ million)* • 57,700 sq km of FTG surveys – all as operator • 12,362
Slide 45: Exploring Kenya & Ethiopia’s significant resource potential
2014 HALF-YEARLY RESULTS Exploring Kenya & Ethiopia’s significant resource potential The following basins will be tested in 2014/2015 Date North Kerio Basin: Kodos 3Q 2014 Turkana Central Basin: Epir 3Q 2014 Turkana North Basin: Engomo 4Q 2014 North Lokichar Basin 1H 2015 Kerio Valley Basin 1H 2015
Slide 46: Kenya development plans rapidly advancing
2014 HALF-YEARLY RESULTS Kenya development plans rapidly advancing Explore, appraise and develop simultaneously • Exploration and appraisal drill out by end 2015 - 600 mmbo Pmean gross resources discovered to date • Appraisal Area of Interest (AOI) established • Extended well tests being planned • D
Slide 47: East Africa regional crude oil export pipelines
2014 HALF-YEARLY RESULTS East Africa regional crude oil export pipelines • Regional pipeline agreed - Governments across region supportive 600 km • Significant progress on technical design 860 km - Routing and environmental screening completed - Conceptual design studies completed - Buried pipeline
Slide 48: Exploration & Appraisal
2014 HALF-YEARLY RESULTS TULLOW OIL PLC – 2014 HALF-YEARLY RESULTS EXPLORATION & APPRAISAL
Slide 49: 2014 Exploration and Appraisal activities
2014 HALF-YEARLY RESULTS 2014 Exploration and Appraisal activities NETHERLANDS - 1 well NORWAY - 6 wells Seismic Key Vincent (E11-1) Langlitinden (7222/11-2) Gotama (31/2-21) Acquisition Hanssen (7324/7-2) Butch SW (8/10-6) Butch East & ST (8/10-5) Lupus (31/10-1) Processing/ Re-proces
Slide 50: 18 month Exploration and Appraisal programme
2014 HALF-YEARLY RESULTS 18 month Exploration and Appraisal programme mmboe Country Block Prospect/Well Interest Gross Mean Net Mean Spud Date WEST & NORTH AFRICA Gabon Arouwe Sputnik-1 35% 206 72 Imminent In addition to our planned exploration wells, Tullow’s exploratory appraisal drilling in Gabon
Slide 51: 18 month Exploration and Appraisal programme
2014 HALF-YEARLY RESULTS 18 month Exploration and Appraisal programme mmboe Country Block Prospect/Well Interest Gross Mean Net Mean Spud Date SOUTH & EAST AFRICA Etom 21 8 In progress 13T Ekales appraisal 50% (op) 53 20 Q4 2014-2015 Tausi 35 14 1H 2015 Engomo (formally Kiboko) 50 23 Q4 2014 10BA 50
Slide 52: 18 month Exploration and Appraisal programme
2014 HALF-YEARLY RESULTS 18 month Exploration and Appraisal programme mmboe Country Block Prospect/Well Interest Gross Mean Net Mean Spud Date EUROPE, SOUTH AMERICA & ASIA PL 494 Heimdalshø 15% 140 21 In progress PL 591 Zumba 80% (op) 254 203 1H 2015 PL 642 Hagar 20% 491 98 1H 2015 Norway PL537 Hass
Slide 53: Exploring for high value oil
2014 HALF-YEARLY RESULTS Exploring for high value oil Higher profitability associated with higher oil reserve mix Oil finding principles 100% • Focus on finding high value producible light oil 80% • Oil is multiples more valuable than gas High Value Oil 60% • Oil is easier to commercialise Return on
Slide 54: How we explore: our process works
2014 HALF-YEARLY RESULTS How we explore: our process works $600M $1,000M Risked upside* Monte Carlo simulation of Prospect & Lead Inventory (P10 = 4.3 Bbo) within full potential of plays & basins (6.6 Bbo) Slide 54
Slide 55: Cost efficient exploration $3.3/boe (2007-2013)
2014 HALF-YEARLY RESULTS Cost efficient exploration $3.3/boe (2007-2013) 900 Potential “Kick” in East African Rift Basins 3 core campaigns < $3.3/boe 800 Creaming Curve • East African Rift Basins $1.95/boe Net Contingent Resources Additions from E&A (mmboe) - Investing in a major winner 700 3 core c
Slide 56: Net contingent resource additions from E&A
2014 HALF-YEARLY RESULTS Net contingent resource additions from E&A 900 Ekales-1 & Agete-1 • 200mmboe / year, steady average performance 800 • Strong run of success in Uganda & Ghana Twiga-1 & Etuko-1 • New basins campaigns deliver continuity Ngamia-1 700 • Low cost Kenya & Norway extend the trends
Slide 57: Kenya overview: volumes, maps & cross-sections
2014 HALF-YEARLY RESULTS Kenya overview: volumes, maps & cross-sections Slide 57
Slide 58: Kenya exploration in 2014
2014 HALF-YEARLY RESULTS Kenya exploration in 2014 Three basin opening wells in 2H 2014 Slide 58
Slide 59: Guinea phase of West African Margin Campaign
2014 HALF-YEARLY RESULTS Guinea phase of West African Margin Campaign Targeting the elusive upside of the Jubilee play • Regional geology points to turbidite sands deposited by an ancient delta of the Niger River • Potential scale of opportunity on a par with Ghana • Fatala selected for drilling; 37
Slide 60: Central Atlantic Margin Campaign
2014 HALF-YEARLY RESULTS Central Atlantic Margin Campaign Mauritania Outboard Plays Mauritania deepwater turbidites (1st phase) • Fregate-1 discovers over 30m light oil & condensate • Commercialisation options under review (high costs) • Follow-up potential of new oil play being high-graded • Campai
Slide 61: Next growth – frontier exploration examples
2014 HALF-YEARLY RESULTS Next growth – frontier exploration examples Namibia reachable turbidites • Older turbidites beneath shelf (low cost) • Oil system established by Wingat-1 (HRT) • New 3D survey highlights 2015 prospect • Albatross prospect; 422 mmbo (gross unrisked mean), 1093 mmbo (P10), CoS
Slide 62: Guyanas: extensive “Jubilee play” potential plus upside plays
2014 HALF-YEARLY RESULTS Guyanas: extensive “Jubilee play” potential plus upside plays • Non-operated E&A lacks success after Zaedyus-1, turns to de-risked oil plays and new attractive lower geo-pressured prospects on Eastern Slope • Regional campaign shifts to operated Suriname venture & to lower-c
Slide 63: Tullow Oil plc
2014 HALF-YEARLY RESULTS Download the Tullow Investor Relations and Media App from the Apple and Android stores: 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: ir@tullowoil.com Web: www.tu