Tullow Oil Plc · LSE:TLW
Tullow Oil — H1 2008 Earnings Presentation
54 slides from Tullow Oil's earnings presentation, Aug 27, 2008
Slide 1: Tullow Oil plc – 2008 Half-yearly Results
Tullow Oil plc – 2008 Half-yearly Results 27 August 2008
Slide 2: Disclaimer
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 in light of the informa
Slide 3: Contents
Contents Section Page Introduction 4 Finance 6 Production and Development 13 Exploration 22 Conclusions and Q&A 33 Appendix 1 – Strategy 35 Appendix 2 - Africa 38 Appendix 3 - Europe 45 Appendix 4 – South Asia 48 Appendix 5 – South America 52 2008 Half-yearly Results Slide 3
Slide 4: Introduction – Aidan Heavey
Introduction – Aidan Heavey 2008 Half-yearly Results Slide 4
Slide 5: Entering a phase of major growth
Entering a phase of major growth • Strong underlying business performance • Portfolio management demonstrates financial strength • Exceptional progress in Ghana and Uganda • Major programmes over the next 12 months • Building our team for the long term 2008 Half-yearly Results Slide 5
Slide 6: Finance – Tom Hickey
Finance – Tom Hickey 2008 Half-yearly Results Slide 6
Slide 7: 2008 Half-yearly Results summary
2008 Half-yearly Results summary 1H2008 1H2007 Change Sales revenue £378.0m £284.9m + 33% Operating profit before exploration activities £224.9m £124.2m + 81% Net profit £126.0m £36.6m + 244% Basic earnings per share 17.23p 5.12p + 237% Dividend per share 2.00p 2.00p Nil Capital investment £187m £17
Slide 8: Operational performance
Operational performance £m Revenue up 33% to £378m • Production up 1% to 70,550 boepd* Revenue • Revenue mix – Oil 69%:Gas 31% 400 £378m • Realised oil price - $80.1/bbl (1H07: $56.1/bbl) • Realised gas price – 51.7p/th (1H07: 36.9p/th) Revenue £285m Operating Profit up 81% to £225m 300 • Cash Opera
Slide 9: Cash flow, interest and hedging
Cash flow, interest and hedging £m Operating cash flow - £295m (1H07: £201m) • £187m reinvested in capital programmes £2.6m • Proposal to maintain interim dividend at 2.0p/share £35.0m 300 Interest charge - £21.2m (1H07: £23.2m) • Reduction in net debt by £62.2 million • Portfolio management is expe
Slide 10: Portfolio management and long-term financing
Portfolio management and long-term financing Jubilee Financing Plans in preparation • Net Tullow Capex to first Oil $1.2 billion - Attractive Fiscal terms - Strong long-term gearing potential • Refinancing planned Q408 - Approx $2 billion capacity - Substantial “development” tranche • RFP issued to
Slide 11: Capital programmes
Capital programmes • £187m invested in 1H08 with significant 2008 £480m increase planned for 2H08 • 2008 capital split 45:55 between 2007 £370m Development and Exploration/Appraisal, focused on key assets 0 100 200 300 400 500 • Africa represents 75% of investment, with Exploration Development Ghana
Slide 12: Finance supporting long term growth
Finance supporting long term growth • Record 1H08 results - Sales revenue up by over 30% - Net profit up by over 200% • Financial Strategy in place for 2010 and beyond - Operating cash flow funding 2008 capital investment - Portfolio management proceeds to reduce net debt - Refinancing to provide op
Slide 13: Production and Development – Paul McDade
Production and Development – Paul McDade 2008 Half-yearly Results Slide 13
Slide 14: Outstanding operational performance
Outstanding operational performance P&D business in excellent shape • 1H 2008 Production - 70,550 boepd • 2008 forecast: 68,000 to 70,000 boepd • Successful portfolio management in UK and Africa • First gas achieved from Wissey development • Development opportunities across portfolio • Positive revi
Slide 15: World-class Jubilee field development
World-class Jubilee field development Overview • Ghana licences signed – March 2006 • Jubilee Field discovery – June 2007 • Tullow designated as field Operator – Feb 2008 • M-2 establishes major upside – May 2008 • Phase 1 sanction - Q4 2008 Exceptional field characteristics • Large continuous accum
Slide 16: Rig capacity and initial drilling plan
Rig capacity and initial drilling plan Contracted Deepwater Rigs Jubilee Appraisal Programme • Blackford Dolphin – October (220 days) • Eirik Raude – November (3-5 years) • Aban Abraham – February 2009 (1 slot) • Atwood Hunter – April 2009 (3x9 months) Contracted Jack-up Rig (Tano Shallow) • West Ce
Slide 17: Jubilee development – first oil 2H 2010
Jubilee development – first oil 2H 2010 Jubilee development concept • Simultaneous appraisal and development • Multiple FPSO/subsea developments • Phased approach - accelerate first oil, manage uncertainty Phase 1 scope • Production capacity -120,000 bopd • Water injection – 230,000 bwpd • Gas injec
Slide 18: Uganda - Early Production System
Uganda - Early Production System Mputa EPS Development plan defined • Appraisal data incorporated • Production capacity 4,000 bopd • Topping plant to deliver product • HFO utilised for power generation - Manve power plant Kampala – 50MW - Local power generation – 50MW • FEED under way – Wood Group T
Slide 19: Development activity continues across African portfolio
Development activity continues across African portfolio • Production continues at record levels - 42,000 bopd • Sustained drilling and development activity Equatorial Guinea – 16,000 boepd net - Okume development drilling ongoing - Further Ceiba infill drilling under review Gabon – 13,000 boepd net
Slide 20: Plans for increased 2009 UK investment
Plans for increased 2009 UK investment Southern North Sea – 23,550 boepd net • Effective portfolio management - Non-core CMS assets sale (£35m) – Q2 2008 - Hewett-Bacton asset sale (£210m) – Q4 2008 • Record gas pricing driving increased investment in 2009 - Bure N, K4, Harrison and Epidote projects
Slide 21: Significant progress across the business
Significant progress across the business • Steady production delivery • Potential for material upgrades to resources • World class progress on Jubilee phase 1 deepwater development • Increased investment planned for gas business • Maintain entrepreneurial approach to portfolio management • Continue
Slide 22: Exploration – Angus McCoss
Exploration – Angus McCoss 2008 Half-yearly Results Slide 22
Slide 23: 75% global exploration success rate in 2008 to date
75% global exploration success rate in 2008 to date UK 1 well 2 Doris 282km 2D Portugal Mauritania 807 km 2D Bangladesh 2wells 3 Banda NW 252 sq km 3D 2 Khop 411 sq km 3D India 1 well 2 C1 Senegal 624 sq km 3D Uganda 6 wells Ghana/CDI 3 Ngassa-1 (gas) 2 wells 3 Taitai -1 3 Ngege-1 3 Odum-1 3 Karuka-
Slide 24: Ghana exploration drilling recommencing Q3 2008
Ghana exploration drilling recommencing Q3 2008 Exploratory appraisal • Three to five wells aim to extend and define the limits of the Jubilee field • Mahogany-3 will explore deeper fans below proven reservoirs Frontier drilling • Odum-1 (February 2008) successfully opens Campanian oil play • Tweneb
Slide 25: Potential Jubilee analogue in Côte d’Ivoire
Potential Jubilee analogue in Côte d’Ivoire Tullow hold equity in three blocks CI-103 (85% op) • CI-102 – reprocessing progressing - well in 2010 • 600 sqkm 3D acquired, processing in 2008 • CI-103 – New 3D acquired - well in 2010 • “Ako” Albian structure – Baobab analogue • CI-105 – 3D reprocessed,
Slide 26: Uganda – major progress on four exploration fronts
Uganda – major progress on four exploration fronts 100% success record in Lake Albert Basin • 14 wells drilled, all encountered hydrocarbons • Oil discovered over a range of 150 km Kaiso Tonya • Mputa-5 & 6 appraisal wells end 2008 (OGEC 750) • Post 3D seismic Ngambwa prospect 2009 Butiaba • 18+ pro
Slide 27: Nearshore exploration proving up additional resources
Nearshore exploration proving up additional resources KF-2 KF-1 KF-3 Pelican KF-North Kingfisher OWC ? Kingfisher Mid - Excellent reservoir Kingfisher Deep - not charged • KF-2 drilled to a depth of 3,906m in August • Good seal & reservoir encountered in deep interval • 3 zones equivalent to KF-1 in
Slide 28: High impact programme in Butiaba, Blocks 1 & 2
High impact programme in Butiaba, Blocks 1 & 2 Immediate success from Butiaba campaign • 2D seismic delivers prospects and discoveries: • Taitai in May (Escarpment fan play) • Ngege in June (Victoria Nile delta play) • Karuka in July (Escarpment fan play) • Kasamene in August (Victoria Nile delta pl
Slide 29: Kasamene-1 de-risks up-dip prospects
Kasamene-1 de-risks up-dip prospects • Significant Kasamene discovery de-risks Victoria Nile delta play in Butiaba • Kasamene encountered 31m of net oil pay and an oil column of 75m+ 2008 Half-yearly Results Slide 29
Slide 30: India: 4-well campaign in proven rift basin commenced
India: 4-well campaign in proven rift basin commenced Exciting region with high impact potential • CB-ON/1 on trend between two proven basins to the north and south • 2006/2007 seismic identified a number of prospects Programme commenced in Q2 2008 • Four firm wells followed by two contingent • Firs
Slide 31: 50 exploration wells to be drilled by the end of 2009
50 exploration wells to be drilled by the end of 2009 Europe 1 well Pakistan Mauritania 1 wells 3 wells Côte d’Ivoire 1 well India 3+ wells Suriname 10 wells Uganda French Guiana 15+ wells 1 well Ghana 9+ wells Gabon Tanzania 4 wells 2 wells 2008 Half-yearly Results Slide 31
Slide 32: Exploration programme
Exploration programme Country Licence/Block Prospect/Campaign Interest Gross Upside Date/Status EUROPE Netherlands SNS Prospect 20-50% 10 mmboe Q4 2009 AFRICA 22.9- Ghana Jubilee Field Jubilee Exploratory Appraisal 1,000 mmbo Q3 2008 – Q3/4 2009 49.95% Tweneboa/Onyina/Owo Ghana Deepwater Tano 49.95%
Slide 33: Conclusion – Aidan Heavey
Conclusion – Aidan Heavey 2008 Half-yearly Results Slide 33
Slide 34: Entering a phase of major growth
Entering a phase of major growth • Strong underlying business performance • Portfolio management demonstrates financial strength • Exceptional progress in Ghana and Uganda • Major programmes over the next 12 months • Building our team for the long term 2008 Half-yearly Results Slide 34
Slide 35: Appendix 1 - Strategy
Appendix 1 - Strategy 2008 Half-yearly Results Slide 35
Slide 36: The Tullow Footprint
The Tullow Footprint Europe Africa Europe • ~22,000 boepd Angola Netherlands • 3 countries Congo (Brazzaville) Portugal Congo (DRC) United Kingdom • 35 licences Côte d'Ivoire • 20 producing fields Equatorial Guinea Gabon Ghana Africa Madagascar Mauritania • ~42,000 boepd Namibia • 13 countries Seneg
Slide 37: Tullow’s long term growth strategy
Tullow’s long term growth strategy PRODUCTION and DEVELOPMENT ● A track record of production growth and asset enhancement ● Strong reserves and resources growth over the last three years ● Gearing up for a major expansion in African operations EXPLORATION ● Near-infrastructure and high impact explor
Slide 38: Appendix 2 - Africa
Appendix -2 Africa 2008 Half-yearly Results Slide 38
Slide 39: Africa: developing a truly pan-African business
Africa: developing a truly pan-African business A continent with many opportunities • A number of largely-unexplored basins • Mature basins where majors are exiting • Significant areas currently unlicensed Strong knowledge base • Over 20 years of experience in Africa • Detailed understanding of Afri
Slide 40: Mauritania/Senegal: maturing the next campaigns
Mauritania/Senegal: maturing the next campaigns Overview • Tullow has a material position in Mauritania • 9 blocks in Mauritania/Senegal - Producing Chinguetti oil field - Tiof and Tevet oil discoveries - Banda and Pelican gas discoveries - Significant exploration potential Key operational highlight
Slide 41: Continued strong performance from African assets
Continued strong performance from African assets Equatorial Guinea Okume and Ceiba • Production performance continues to exceed expectations at over 110,000 bopd • 25 wells drilled to date on Okume • Ceiba infill drilling programme completed Congo (Brazzaville) M’Boundi • Production stabilised at 41
Slide 42: Gabon: production stable, developments ongoing
Gabon: production stable, developments ongoing Overview • Region where Tullow can apply its expertise in revitalising mature assets • Portfolio of offshore and onshore acreage - 12 producing fields - Two new developments - 4 exploration licences - Back-in rights to 10 additional licences Key Operati
Slide 43: Kudu: focus on Gas-to-Power development
Kudu: focus on Gas-to-Power development Overview • Offshore gas field with over 3 TCF of 2P resources • 70% working interest • Namibia need to develop at least 300MW of indigenous power • Currently working with Namibians on gas-to power options • Alternative options such as marine CNG also being con
Slide 44: Tanzania and Madagascar: campaigns for the future
Tanzania and Madagascar: campaigns for the future Madagascar Tanzania • Leads identified and ranked, seismic planned • Completed seismic interpretation of Ruvuma Basin for mid-2009 to coincide with weather window • Prospect inventory developed and two selected for • Obtained environmental permits to
Slide 45: Appendix 3 - Europe
Appendix 3 - Europe 2008 Half-yearly Results Slide 45
Slide 46: SNS Gas Basin: Adding value in a challenging market
SNS Gas Basin: Adding value in a challenging market Market environment • Strengthening gas prices in UK • Contractor environment remains tight • Onerous UK tax regime for gas Strong pricing refocusing capital towards UK • 1H 2008 production averaged 137 mmscfd • Wissey first gas achieved on 22 Augus
Slide 47: Portugal: potential extension of Mauritanian play
Portugal: potential extension of Mauritanian play Overview • 3 blocks in Alentejo Basin awarded in 2007 • Tullow 80%, with 2 local Portuguese partners • Basin is undrilled, oil shows encountered in wells in the onshore Lusitania Basin • Geological analogue to Mauritania • Regional seismic data shows
Slide 48: Appendix 4 – South Asia
Appendix 4 – South Asia 2008 Half-yearly Results Slide 48
Slide 49: South Asia: Reinvesting for growth
South Asia: Reinvesting for growth A growth region for Tullow • Region of growing energy demand • Major high-impact exploration potential • Relatively low-cost exploration/operations • Limited competition for assets Developments to fund exploration • Exciting high impact exploration licences • Devel
Slide 50: Bangladesh: strong production growth
Bangladesh: strong production growth Overview • Current energy demand is significant • Established gas pricing provides stability Key Operational Highlights • Block 9 - Bangora steady at 70mmscfd - Facility upgrade to 120 mmscfd and tie-back of Bangora-3 to complete in September - Production expecte
Slide 51: Pakistan: production growth and exploration
Pakistan: production growth and exploration Overview • Production from Chachar and Sara/Suri fields • Five exploration blocks • Security issues have delayed exploration work High Impact Exploration • Kohat seismic interpretation complete • Two prospects selected • First well expected to commence in
Slide 52: Appendix 5 – South America
Appendix 5 – South America 2008 Half-yearly Results Slide 52
Slide 53: Future significant high impact potential
Future significant high impact potential French Guiana • Tullow operated offshore licence - 97.5% • Licence contains substantial Matamata prospect and potential Jubilee look-alikes • Currently seeking a farm-in partner and a rig Suriname • Second phase of exploration on Uitkijk to commence imminentl
Slide 54: Tullow Oil plc
Tullow Oil plc 3rd Floor, Building 11 Chiswick Park, 566 Chiswick High Road London, W4 5YS Tel: +44 20 8996 1000 Fax+44 20 8994 5332 2008 Half-yearly Results Slide 54