Tullow Oil Plc · LSE:TLW
Tullow Oil — H1 2016 Earnings Presentation
33 slides from Tullow Oil's earnings presentation, Jul 27, 2016
Slide 1: 2016 Half Year Results
2016 HALF YEAR RESULTS Tullow Oil plc 27 July 2016
Slide 2: Disclaimer
2016 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
2016 HALF YEAR RESULTS TULLOW OIL PLC – 2016 HALF YEAR RESULTS AIDAN HEAVEY
Slide 4: Well-positioned for growth
2016 HALF YEAR RESULTS Well-positioned for growth Decisive action taken Financially robust Fit for new oil era Re-set to deal with Step change for Tullow Flexible portfolio with low oil prices: with TEN first oil: major growth potential: Moved early and decisively; Increase in oil production and Pro
Slide 5: Ian Springett
2016 HALF YEAR RESULTS TULLOW OIL PLC – 2016 HALF YEAR RESULTS IAN SPRINGETT
Slide 6: Proactive financial management
2016 HALF YEAR RESULTS Proactive financial management Realising the benefits of early actions Significant cost savings • Gross G&A of $215m, down 32% from 1H 2015 • Net admin expenses of $69m, down 31% from 1H 2015 • Good progress on underlying operating costs Capex reductions • Capex c.$1.0bn forec
Slide 7: Half Year Results Summary
2016 HALF YEAR RESULTS 2016 Half Year Results Summary 1H 2016 ($m) 1H 2015 ($m) Sales revenue 541 820 Gross profit 182 342 Administrative expenses (69) (100) Restructuring costs (7) (25) Loss on disposal (3) (44) Exploration costs written off 1 (59) (88) Impairment of property, plant and equipment -
Slide 8: Generated first half profit in a challenging environment
2016 HALF YEAR RESULTS Generated first half profit in a challenging environment 200 115 100 85 53 30 30 0 (68) 49 -100 63 29 $m (144) 18 32 -200 IMPACT OF JUBILEE $m Lower volumes (175) 109 (196) -300 30 Higher opex costs (18) Reduced DD&A 62 55 -400 Tax 46 TOTAL (85) -500 June 2015 Price Volume Hed
Slide 9: Jubilee turret insurance expectations
2016 HALF YEAR RESULTS Jubilee turret insurance expectations Spread moor Claims Loss Root Cause FPSO Install notified to adjusters Analysis Temporary Permanent Deepwater insurers appointed commenced heading heading Offloading Buoy ✓ ✓ ✓ Feb 2016 Feb 2016 Apr 2016 2016 2017 2018 Costs (Tullow net) –
Slide 10: Industry leading hedge position
2016 HALF YEAR RESULTS Industry leading hedge position Hedge strategy unchanged • Tullow has proactively hedged production to protect revenues over the last 10 years • Significant liquidity benefit through protecting future revenues and generating RBL debt capacity • Prudent during periods of higher
Slide 11: Managing balance sheet, debt diversification and liquidity
2016 HALF YEAR RESULTS Managing balance sheet, debt diversification and liquidity Committed Debt Facilities Drawings $bn Overall • $1.0bn facility headroom plus free cash at mid-year $1.3bn 6 0.3 liquidity 2016 ($1.3bn including the $300m convertible bond) Headroom incl. convertible 0 1.0 $1.0bn bon
Slide 12: Significant Capex reduction in 2017 post TEN project
2016 HALF YEAR RESULTS Significant Capex reduction in 2017 post TEN project 2500 Jubilee Turret 2016 Capex of c.$1bn Exploration • Includes Jubilee turret project c.$35m East Africa 2000 • Final year of TEN first oil capex of c.$600m West Africa non-op (incl Europe) TEN Jubilee 2017 Capex reduction
Slide 13: Financial strategy provides flexibility for future growth
2016 HALF YEAR RESULTS Financial strategy provides flexibility for future growth • Continuing to drive down Opex and G&A • Significant hedging in place for 2H 2016 and 2017 Financial • Capex flexibility post TEN; 2017 potential below c.$300m resilience • Jubilee turret project being managed; insuran
Slide 14: Paul McDade
2016 HALF YEAR RESULTS TULLOW OIL PLC – 2016 HALF YEAR RESULTS PAUL McDADE
Slide 15: Significant West African oil production growth post TEN
2016 HALF YEAR RESULTS Significant West African oil production growth post TEN 1H 2016 West Africa oil production: 51,800 bopd FY 2016 guidance: 62-68,000 bopd • Jubilee turret project impacting physical production West Africa Oil Production 120 Jubilee Turret Ghana CWA 100 80 60 40 20 0 2015 1H 201
Slide 16: West Africa portfolio: low underlying opex and flexible capex
2016 HALF YEAR RESULTS West Africa portfolio: low underlying opex and flexible capex Ghana underlying operated Opex/bbl 15 Strong underlying opex performance in Ghana • Underlying Ghana opex reduced to ~$9/bbl in 1H 2016 10 - Contract renegotiations and efficiency improvements Opex $/bbl • Targeting
Slide 17: Jubilee turret project under way
2016 HALF YEAR RESULTS Jubilee turret project under way Spread moor Identification Revised Long-term FPSO Install of operating solution Temporary Permanent Deepwater issue procedures designed heading heading Offloading Buoy ✓ ✓ ✓ Feb 2016 April 2016 June 2016 2016 2017 2018 Costs Gross Capex c.$85m
Slide 18: Jubilee – long-term asset with flexible investment opportunities
2016 HALF YEAR RESULTS Jubilee – long-term asset with flexible investment opportunities Performance in 2016 • 1H 2016 average gross production: 63 kbopd • FY 2016 guidance: 74 kbopd (2H 2016: 85 kbopd) • Gas exports continue to onshore processing facility Greater Jubilee Full Field Development • GJF
Slide 19: TEN Project – industry leading project execution
2016 HALF YEAR RESULTS TEN Project – industry leading project execution First Oil achieved on 18 August 2016 • Production steadily ramping up • Project delivered on time and within budget Exceptional project delivery • Focused and empowered Tullow project team • Robust project execution and contract
Slide 20: Firming-up Kenya’s oil resources ahead of development
2016 HALF YEAR RESULTS Firming-up Kenya’s oil resources ahead of development Appraisal to continue • South Lokichar resource - 750 mmbo; 1 bnbo upside • Successful extended well tests in Amosing & Ngamia • Water injection testing 3Q 2016 • 3D seismic highlights additional upside in Amosing & Ngamia
Slide 21: Progressing Uganda’s Lake Albert basin development
2016 HALF YEAR RESULTS Progressing Uganda’s Lake Albert basin development Upstream developments progressing towards FEED 30% Annual percentage life of field capex of 25% • Project definition is mature; de-risked resource of 1.7 billion barrels Uganda upstream development 20% • Targeting 200 to 230 k
Slide 22: Portfolio with significant future production potential
2016 HALF YEAR RESULTS Portfolio with significant future production potential TEN Project delivery Industry leading project execution, first oil on 18 August 2016 Significant resource upside, low cost incremental Ghana upside options investment options across Jubilee and TEN Jubilee Turret project E
Slide 23: Angus McCoss
2016 HALF YEAR RESULTS TULLOW OIL PLC – 2016 HALF YEAR RESULTS ANGUS McCOSS
Slide 24: Exploring in the current environment
2016 HALF YEAR RESULTS Exploring in the current environment Strategy steadily evolves • Exploration continues to be central to Tullow’s value growth strategy • Strong portfolio & attractive programmes adapted for current environment & long- term upside Focus on material low-cost oil plays • Exciting
Slide 25: Guyana-Suriname: excellent position in new oil province
2016 HALF YEAR RESULTS Guyana-Suriname: excellent position in new oil province • Liza-1 deepwater oil discovery significantly de-risks the basin & Tullow’s regional acreage • Araku: 500mmbo prospect in four-way closure, good seismic amplitude support • Araku estimated well cost of c.$14 million net
Slide 26: Guyana: prospects up-dip of Liza-1 discovery, in shallow water
2016 HALF YEAR RESULTS Guyana: prospects up-dip of Liza-1 discovery, in shallow water Exploration activity commenced • Preparing to acquire 3D seismic • Jubilee-like setting up-dip of Liza oil discovery • Kaieteur estimated well cost of c.$15 million net to Tullow (non-op 30%) • Shallow water concep
Slide 27: Onshore East Africa: exploring regional oil play
2016 HALF YEAR RESULTS Onshore East Africa: exploring regional oil play Location Activity Uganda Lake Albert • 17+ oil fields discovered (90% success) Basin • 1.7 billion barrels of oil discovered Kenya North • Basin margin play unsuccessful at Engomo-1 Turkana Basin • Independent plays away from ba
Slide 28: Kenya: E&A drilling programme in South Lokichar Basin
2016 HALF YEAR RESULTS Kenya: E&A drilling programme in South Lokichar Basin Material proven oil basin • 9 oil accumulations discovered • 750mmbo resource base confirmed by tests Significant upside potential • Billion barrel basin potential • 20 oil prospects & leads yet to drill • Further new plays
Slide 29: Africa: Long-term future upside & portfolio replenishment
2016 HALF YEAR RESULTS Africa: Long-term future upside & portfolio replenishment LAKE MWERU WANTIPA BASIN • Mauritania: exploration shifted to low-cost shelf-edge oil plays • Zambia: extension of East African Rift Basin Play; reconnaissance started • Namibia: material turbidite oil play in low-cost
Slide 30: Exploration is central to our growth
2016 HALF YEAR RESULTS Exploration is central to our growth Game-changing opportunities Guyana-Suriname: low-cost, multiple prospect potential Africa: Growth options Oil prone acreage in Namibia, Mauritania and Zambia Kenya: Discovering more oil South Lokichar new E&A campaign starts Q4 2016 Ghana:
Slide 31: Tullow Oil plc – 2016 Half Year Results
2016 HALF YEAR RESULTS TULLOW OIL PLC – 2016 HALF YEAR RESULTS
Slide 32: Latin America: Long-term future upside
2016 HALF YEAR RESULTS Latin America: Long-term future upside • Jamaica: early stage of frontier exploration, interpreting new 2D seismic data • Guyana: attractive acreage up-dip of material Liza-1 oil discovery • Suriname: amplitude-supported low-cost offshore oil plays • Uruguay: material explorat
Slide 33: Tullow Oil plc
2016 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: ir@tullowoil.com Web: www.tullowoil.com