Tullow Oil Plc · LSE:TLW
Tullow Oil — H1 2018 Earnings Presentation
34 slides from Tullow Oil's earnings presentation, Jul 25, 2018
Slide 1: 2018 Half Year Results
Tullow Oil plc f , t 2018 HALF YEAR RESULTS Wednesday 25 July 2018 TULLOW j ]
Slide 2: Disclaimer
2018 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: Well-positioned in an improving operating environment
2018 HALF YEAR RESULTS WELL-POSITIONED IN AN IMPROVING OPERATING ENVIRONMENT EXTERNAL ENVIRONMENT • Stronger oil price outlook VALUE CREATION • Sustained industry cost deflation • Sustainable free cash flow • Long-term demand for low cost oil generation • 60% production growth from current assets IN
Slide 4: CFO Update
CFO UPDATE LES WOOD - Chief Financial Officer | Tullow Oil plc - 2018 Half Year Results TULLOW a is
Slide 5: Results Summary
2018 HALF YEAR RESULTS 2018 HALF YEAR RESULTS SUMMARY Underlying cash Revenue Adjusted EBITDAX Profit/(loss) after tax operating costs $905million (1) $10.9/boe $764million $55million 1H 2017: $788 million 1H 2017: $11.9/boe 1H 2017: $544 million 1H 2017: $(348) million Capital investment Free cash
Slide 6: Production growth through existing assets
2018 HALF YEAR RESULTS PRODUCTION GROWTH THROUGH EXISTING ASSETS Oil production growth Strong 1H 2018 production Ghana • TEN continues to produce above expectations 150 Jubilee BI insurance Non-op Portfolio • Non-operated portfolio - Gabon, Equatorial Guinea 125 Future estimated production & Côte d’
Slide 7: Maintaining cost discipline across the business
2018 HALF YEAR RESULTS MAINTAINING COST DISCIPLINE ACROSS THE BUSINESS Cash costs savings Cash cost savings exceed target • Initial target set in mid-2015 to remove Staff costs $500m cash costs over three years General Corporate costs $708m Travel • Delivered $708m exceeding increased IT target of $
Slide 8: Capital expenditure
2018 HALF YEAR RESULTS 2018 CAPITAL EXPENDITURE MAXIMISING GROWTH FROM FINDING PRODUCTION DISCOVERED RESOURCES NEW OIL 1H 2018 $76m $12m $29m $28m $145m Ghana Non-op Kenya Exploration FY 2018 $250m $40m $80m $90m $460m Ghana Non-op Kenya Exploration 1H 18: FY 18: Uganda Excluded from totals as expec
Slide 9: Free cash flow
2018 HALF YEAR RESULTS 2018 FREE CASH FLOW $m Free cash flow movements Factors impacting 2018 free cash flow 800 $650m Production delivers strong underlying operating cash flow $250m $(200)m $600m 600 $543m Cash flow boosted by high oil price ($70/bbl assumed) 2H One-off cash inflow expected from Ug
Slide 10: Capital allocation framework
2018 HALF YEAR RESULTS CAPITAL ALLOCATION FRAMEWORK Debt & gearing Investing in our assets Shareholder returns Apply strict criteria to allocate Current position: capital across the portfolio: Capital growth Net debt $3.1bn, Gearing 2.0x and dividend focus Maximising production: Gearing policy <2.5x
Slide 11: CEO Update
Tullow Oil ple - 2018 Half Year Results CEO UPDATE PAUL McDADE - Chief Executive Officer TULLOW ¥ a is
Slide 12: Organic investment opportunities to grow our business
2018 HALF YEAR RESULTS ORGANIC INVESTMENT OPPORTUNITIES TO GROW OUR BUSINESS MAXIMISING GROWTH FROM FINDING PRODUCTION DISCOVERED RESOURCES NEW OIL Jubilee and TEN infill wells East Africa development projects Exploration in emerging basins Non-op investment opportunities West Africa near-field tie-
Slide 13: Ghana production: a long-term source of cash generation
2018 HALF YEAR RESULTS GHANA PRODUCTION: A LONG-TERM SOURCE OF CASH GENERATION Good results from drilling programme • 5 new wells online over the next 6 months • Targeting Ghana production of ~180 kbopd by early 2019 Maximising production • Options to drill up to 8 infill wells in 2019 • Rig agreeme
Slide 14: Non-operated portfolio: material net production across West Africa
2018 HALF YEAR RESULTS NON-OPERATED PORTFOLIO: MATERIAL NET PRODUCTION ACROSS WEST AFRICA Non-operated Portfolio (net) Material high value production from existing assets • Invest appropriately to sustain material high-value production from Gabon, Equatorial Guinea & Côte d’Ivoire • Upside potential
Slide 15: Development momentum continues in East Africa
2018 HALF YEAR RESULTS DEVELOPMENT MOMENTUM CONTINUES IN EAST AFRICA Uganda - Lake Albert development Kenya - South Lokichar development • Finalisation of farm down ongoing • Operating Early Oil Pilot Scheme − Approval from Government expected 2H 18 − Targeting 2,000 bopd around year-end Incremental
Slide 16: Multiple high-impact campaigns over next three years
2018 HALF YEAR RESULTS MULTIPLE HIGH-IMPACT CAMPAIGNS OVER NEXT THREE YEARS Drilling Seismic 2H 2018 2019 2020 Guyana / Suriname Mauritania / Namibia Peru Côte d’Ivoire West & East Africa Optional activity Cormorant-1 well 2019+ programme • Spud Sept 2018; ~125 gross mmbo • Portfolio of robust prosp
Slide 17: Conclusion
Tullow Oil plc - 2018 Half Year Results CONCLUSION PAUL McDADE - Chief Executive Officer TULLOW x a f ]
Slide 18: Well-positioned in an improving operating environment
2018 HALF YEAR RESULTS WELL-POSITIONED IN AN IMPROVING OPERATING ENVIRONMENT EXTERNAL ENVIRONMENT • Stronger oil price outlook VALUE CREATION • Sustained industry cost deflation • Sustainable free cash flow • Long-term demand for low cost oil generation • 60% production growth from current assets IN
Slide 19: Appendix
Tullow Oil ple - 2018 Half Year Results APPENDIX TULLOW is
Slide 20: Our portfolio of assets
2018 HALF YEAR RESULTS OUR PORTFOLIO OF ASSETS EAST AFRICA - development NEW VENTURES - exploration Kenya • Extensive acreage in Africa and South America, in • Significant discoveries in South well-known plays Lokichar basin • Multiple high-impact frontier campaigns planned • Phased development plan
Slide 21: Proactive management of balance sheet maturities
2018 HALF YEAR RESULTS PROACTIVE MANAGEMENT OF BALANCE SHEET MATURITIES • Diversified capital structure with a balanced mix of commercial bank facilities and capital markets $bn Debt Facilities and Headroom (as of June 30, 2018) 5 debt • No material near-term debt maturities following 0.4 3 RBL refi
Slide 22: Hedging strategy - maintaining exposure to oil price upside
2018 HALF YEAR RESULTS HEDGING STRATEGY - MAINTAINING EXPOSURE TO OIL PRICE UPSIDE 2H 2018 Hedge position Long-term financial risk management 60% exposed • Proactively hedged production over last to upside* 10 years to protect revenues • Cumulative realised revenue of ~$850m $75 from hedging during
Slide 23: Infill drilling programme to optimise Ghana production
2018 HALF YEAR RESULTS INFILL DRILLING PROGRAMME TO OPTIMISE GHANA PRODUCTION Flexible programme to maximise production Average gross cost per well $60 - 70m • Multi-year programme of infill wells • Initial focus on wells that utilise existing infrastructure Duration to drill & complete 60 - 70 days
Slide 24: TEN field update
2018 HALF YEAR RESULTS TEN FIELD UPDATE Successful project execution and completion • Project delivered on time and on budget in 2016 • FPSO tested in excess of design capacity (80,000 bopd) • Production data supports oil in place and reserves DRILLING Drilling recommenced March 2018 • ITLOS boundar
Slide 25: Jubilee field - turret remediation project in final stages
2018 HALF YEAR RESULTS JUBILEE FIELD - TURRET REMEDIATION PROJECT IN FINAL STAGES Turret remediation project phases Interim • Temporary heading completed spread moor ✓ • All equipment installed • Tugs removed Stabilise turret • Turret secured to a newly installed bearing ✓ bearing plate • Successful
Slide 26: Kenya appraisal confirms material oil resources
2018 HALF YEAR RESULTS KENYA APPRAISAL CONFIRMS MATERIAL OIL RESOURCES Successful exploration & appraisal programme South Lokichar basin resources • 11 successful exploration wells, 21 appraisal wells drilled • Extended injection and production testing continues Substantial resources underpin develo
Slide 27: Developing Kenya's discovered resources
2018 HALF YEAR RESULTS DEVELOPING KENYA'S DISCOVERED RESOURCES South Lokichar development plan Erut Agete • Discovered resources support development via export pipeline to Lamu Etom Ekales • Phased development approach planned Twiga Water & Power • Incremental developments to follow initial CPF Foun
Slide 28: Uganda development
2018 HALF YEAR RESULTS UGANDA DEVELOPMENT Farm-down to Total announced • $900m consideration: - $200m cash - $100m on completion, $50m at FID, $50m at first oil - $700m in deferred consideration • Deferred consideration exceeds Tullow’s estimated share of upstream and pipeline capex to first oil • S
Slide 29: New Ventures: campaigns focused on long-term value
2018 HALF YEAR RESULTS NEW VENTURES: CAMPAIGNS FOCUSED ON LONG-TERM VALUE Commercial screening Off-limits Exploration Tested at $50/bbl Ultra-deepwater Low cost of supply Value accretive Deepwater gas High margin oil Shale oil Arctic Capital & risk screening Onshore rifts East Africa light oil Over-
Slide 30: South America: high-impact prospects
2018 HALF YEAR RESULTS SOUTH AMERICA: HIGH-IMPACT PROSPECTS • Guyana: attractive acreage up-dip of Liza-1 oil discovery; multiple prospects being matured • Suriname: low-cost oil plays; Araku-1 drilled in 2017; further prospects for future drilling • Peru*: Farm-in to Block Z-38; Marina prospect pot
Slide 31: Guyana-Suriname: excellent position in new oil province
2018 HALF YEAR RESULTS GUYANA-SURINAME: EXCELLENT POSITION IN NEW OIL PROVINCE Guyana: • Acreage position up-dip of Liza discoveries, 3D seismic programme completed in 2017 • Multiple high-quality, shallow water prospects being matured and ranked for potential drilling in 2019 Suriname: • Araku-1 we
Slide 32: Africa: high-impact leads and prospects
2018 HALF YEAR RESULTS AFRICA: HIGH-IMPACT LEADS AND PROSPECTS • Namibia: material oil play in low-cost shallow water setting; drilling of Cormorant prospect in 2H 2018 • Mauritania: low-cost shelf-edge oil plays, 3D seismic acquired; 2019 drilling candidates identified • Zambia: extension of East A
Slide 33: Côte d'Ivoire - extensive position acquired
2018 HALF YEAR RESULTS CÔTE D’IVOIRE - EXTENSIVE POSITION ACQUIRED • Extensive 8,600 sq km onshore acreage position built over 2017 and early 2018 • Seven onshore blocks cover transform basin fault play; FTG completed in 2018; 2D seismic in 2019 • Reprocessing of 3D seismic data of offshore Block CI
Slide 34: Tullow Oil plc
2018 HALF YEAR RESULTS Tullow Oil plc 9 Chiswick Park 566 Chiswick High Road London, W4 5XT Follow Tullow on: United Kingdom Tel: +44 (0)20 3249 9000 Fax: +44 (0)20 3249 8801 Email: ir@tullowoil.com Web: www.tullowoil.com Slide 34