Tullow Oil Plc · LSE:TLW
Tullow Oil — H1 2017 Earnings Presentation
40 slides from Tullow Oil's earnings presentation, Jul 26, 2017
Slide 1: 2017 Half Year Results
Tullow Oil plc 2017 HALF YEAR RESULTS Wednesday 26 July 2017 TULLOW j |
Slide 2: Disclaimer
2017 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: CEO Update
Tullow Oil plc - 2017 Half Year Results CEQ UPDATE PAUL McDADE - Chief Executive Officer TULLOW a j |
Slide 4: A New Management Team – The First 90 Days
2017 Half Year Results A NEW MANAGEMENT TEAM – THE FIRST 90 DAYS Management change Listening & reflecting Planning & actions New CEO & CFO Gauging perceptions Objectives set for the from our investors short to medium-term Extended Executive team Collecting feedback Driving business from our staff pe
Slide 5: A Balanced E&P Business Focused on Returns
2017 Half Year Results A BALANCED E&P BUSINESS FOCUSED ON RETURNS Business foundations Disciplined approach Future value generation Highly experienced Monetisation team Maximising revenue Proven operating from production capability Enhance & replenish Portfolio portfolio Low-cost production manageme
Slide 6: Key Short to Medium-Term Objectives
2017 Half Year Results KEY SHORT TO MEDIUM-TERM OBJECTIVES Continued strengthening of Balance Sheet Free cash flow Funding Portfolio Management Maximise free cash flow Progress monetisation options through increased production, Complete RBL refinancing to achieve maximum value at efficient capital a
Slide 7: CFO Update
Tullow Oil ple - 2017 Half Year Results CFO UPDATE LES WOOD - Chief Financial Officer
Slide 8: Financial Strategy Built on Firm Foundations
2017 Half Year Results FINANCIAL STRATEGY BUILT ON FIRM FOUNDATIONS Financial foundations Disciplined approach Future value generation Strong team with key relationships Minimum $0.5bn Re-set business with liquidity headroom Strong balance sheet a low cost base RCF extended Delivering significant De
Slide 9: Half Year Results Summary
2017 Half Year Results 2017 HALF YEAR RESULTS SUMMARY Underlying cash Revenue Adjusted EBITDAX Profit/(Loss) after tax operating costs $788 million $11.9/boe $544 million $(309)million (1) 1H 2016: $541 million 1H 2016: $13.4/boe 1H 2016: $330 million 1H 2016: $29 million Capital investment Free cas
Slide 10: A Step Change in Gearing
2017 Half Year Results A STEP CHANGE IN GEARING 1H 2017 gearing reduced to 3.3x Good progress in the first half 5.1x • Net debt reduced by $1bn to $3.8bn • Reduced gearing achieved through: - Equity proceeds of $0.7bn 3.3x - Free cash flow of $0.2bn - EBITDAX increased by $0.2bn 2.5x Net debt reduct
Slide 11: Rigorous Focus on Costs
2017 Half Year Results RIGOROUS FOCUS ON COSTS Underlying 1H 2017 cash operating costs compared to production A leaner, more efficient business 60,000 60 Exit/Decom Core • $415m delivered of targeted $500m cash cost savings 50,000 50 • Now targeting $650m savings over same three year period 40,000 4
Slide 12: Considerable Capex Flexibility
2017 Half Year Results CONSIDERABLE CAPEX FLEXIBILITY Disciplined capital allocation • Capital allocated to strike the right balance between deleveraging and growth • All investment screened against strict commercial and technical criteria • Minimise commitments to maximise flexibility in response t
Slide 13: Foundations for Growth
2017 Half Year Results FOUNDATIONS FOR GROWTH Actual and forecast future oil production Good progress made in the first half Ghana • On a pathway to <2.5x gearing 150 Jubilee BI insurance • Sustained cost reductions CWA 125 Future estimated potential production • Ongoing capex flexibility kbopd 100
Slide 14: Business Update
Tullow Oil plc - 2017 Half Year Results BUSINESS UPDATE PAUL McDADE - Chief Executive Officer
Slide 15: West Africa – Cash Generating Production Business
2017 Half Year Results WEST AFRICA – CASH GENERATING PRODUCTION BUSINESS Business fundamentals • Material production base from Ghana • Low operating costs, targeting c.$8/bbl • Significant resource base underpins future production Reaching full production potential • TEN production optimisation deli
Slide 16: East Africa – Discoveries Leading to Material Production
2017 Half Year Results EAST AFRICA – DISCOVERIES LEADING TO MATERIAL PRODUCTION Business fundamentals • Over 2 billion bbls of resources discovered • Low-cost material resource developments • Track record of monetisation Progressing developments • Uganda deal completion and FID targeted by end 2017
Slide 17: New Ventures – Value Generating Exploration Portfolio
2017 Half Year Results NEW VENTURES- VALUE GENERATING EXPLORATION PORTFOLIO Business fundamentals • Approach focused on building value • Oil-focused acreage in known geology & geographies • Strict commercial and technical screening of prospects High-impact exploration opportunities • Lessons learnt
Slide 18: Conclusion
Tullow Oil plc - 2017 Half Year Results CONCLUSION PAUL McDADE - Chief Executive Officer TULLOW a a
Slide 19: Conclusion – Well Positioned for the Future
2017 Half Year Results CONCLUSION – WELL POSITIONED FOR THE FUTURE Strong business foundations Delivering shareholder returns Experienced, broader Disciplined investment focused management team on returns High-quality, low-cost asset Enhancing & replenishing base with growth potential asset base Sel
Slide 20: Appendix
Tullow Oil ple - 2017 Half Year Results APPENDIX
Slide 21: A Leading Global Independent Exploration & Production Company
2017 Half Year Results A LEADING GLOBAL INDEPENDENT EXPLORATION & PRODUCTION COMPANY Established record of delivering successes • The business has developed organically and through acquisitions since 1985 Diversified world-class asset base • Focus on Africa and South America • Over 85 licences acros
Slide 22: Production & Development Asset Base
2017 Half Year Results PRODUCTION & DEVELOPMENT ASSET BASE TEN field East Africa Development • First oil achieved in August 2016 • Estimated 750m bbls of discovered • FPSO gross capacity of 80,000 bopd resources in Kenya; targeting 80- 120k bopd gross production (net WI ~35,000 bopd) • Gross product
Slide 23: Ghana – Material, Long-Life and Low-Cost Fields
2017 Half Year Results GHANA – MATERIAL, LONG-LIFE AND LOW-COST FIELDS Operating cost reductions Ghana underlying cash operating costs/bbl 15.0 • Underlying cash opex of ~$8.7/bbl in 1H 2017 Opex/bbl • Targeting underlying cash opex in 2018+ of ~$8/bbl Opex $/bbl 10.0 Strong resource base $/bbl • Si
Slide 24: Jubilee Field Update
2017 Half Year Results JUBILEE FIELD UPDATE Turret remediation project Interim • Temporary heading completed spread moor ✓ • All equipment installed • Tugs removed Stabilise turret • Turret modifications for long-term bearing operations • Downtime of 5 - 8 weeks in late 2017 Rotation & • Rotation of
Slide 25: TEN Field Update
2017 Half Year Results TEN FIELD UPDATE Successful project execution and completion • Project delivered on time and on budget • FPSO tested in excess of design capacity (80,000 bopd) • Production data supports oil in place and reserves 2017 Production • 1H 2017 average gross production – 48,000 bopd
Slide 26: Uganda Development
2017 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 1st oil • Sup
Slide 27: Kenya Development
2017 Half Year Results KENYA DEVELOPMENT Continuing to de-risk and build on resources • South Lokichar E&A programme ongoing • Successful water injection tests support water flood & recovery Progressing Full Field Development • Targeting 80 - 120,000 bopd gross production via pipeline • Expected low
Slide 28: South Lokichar Basin Exploration & Appraisal
2017 Half Year Results SOUTH LOKICHAR BASIN EXPLORATION & APPRAISAL Proven oil basin • 14 exploration prospects drilled • 11 oil accumulations discovered • Over 20 appraisal wells drilled for delineation & testing • Tullow estimates 750 mmbo mean resource* Significant upside potential • Multiple oil
Slide 29: East Africa: Exploring Regional Oil Play
2017 Half Year Results EAST AFRICA: EXPLORING REGIONAL OIL PLAY Location Activity Uganda Lake Albert Basin • 17+ oil fields discovered (90% success) • Estimated 1.7 billion barrels of oil discovered Kenya North Turkana Basin • Basin margin play unsuccessful at Engomo-1 • Independent plays away from
Slide 30: Exploration: Central to Long-Term Growth Strategy
2017 Half Year Results EXPLORATION: CENTRAL TO LONG-TERM GROWTH STRATEGY • Focus on low-cost, high-margin, light oil plays • Portfolio of high-impact prospects suited to current environment • Working on our seismic and geological assets to create & high-grade prospects • Adding attractive exploratio
Slide 31: New Ventures: Campaigns Focused on Long-Term Value
2017 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 32: Exploration & Appraisal Activity in 2017
2017 Half Year Results EXPLORATION & APPRAISAL ACTIVITY IN 2017 JAMAICA MAURITANIA KENYA Walton Morant (100%) C3 (90%), C-10 (76.5%) Block 12A (50%) 2D Seismic 3D Seismic 2D Seismic Block 10BB/13T (50%) 3D Seismic SURINAME South Lokichar Basin (50%) E&A programme Block 54 (30%) Araku wildcat GUYANA
Slide 33: South America: High-Impact Prospects
2017 Half Year Results SOUTH AMERICA: HIGH-IMPACT PROSPECTS • Jamaica: early stage of frontier exploration, interpreting new 2D seismic data • Guyana: attractive acreage up-dip of Liza-1 oil discovery; acquiring 3D seismic in 2017 • Suriname: low-cost offshore oil plays; drilling Araku in Q4 2017 •
Slide 34: Guyana-Suriname: Excellent Position in New Oil Province
2017 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: Estimated 500mmbo prospect in four-way structural closure, good seismic amplitude support • Araku-1 well cost estimate
Slide 35: Guyana: Prospects Up-dip of Liza-1 Discovery
2017 Half Year Results GUYANA: PROSPECTS UP-DIP OF LIZA-1 DISCOVERY Exploration activity commenced • 3D seismic programme under way • Jubilee-like setting up-dip of Liza oil discovery in shallow water • Estimated well cost of c.$14 million each net to Tullow (non-op 30%) • Shallow water prospects &
Slide 36: Africa: High-Impact Leads and Prospects
2017 Half Year Results AFRICA: HIGH-IMPACT LEADS AND PROSPECTS • Mauritania: exploration focus shifted to low-cost shelf-edge oil plays, 3D seismic acquisition in 2017 • Zambia: extension of East African Rift Basin Play; High Gravity survey to commence in August 2017 • Namibia: material turbidite oi
Slide 37: Capital Allocation
2017 Half Year Results CAPITAL ALLOCATION 1800 Ghana 2017 Capex of c.$0.4bn 1600 West Africa non-op (incl Europe) • FY 2017 capex forecast lowered from Exploration $0.5bn to $0.4bn East Africa 1400 Uganda (offset by farm-down) • Low Ghana spend due to absence of drilling 1200 • Exploration and Appra
Slide 38: Hedging Strategy
2017 Half Year Results HEDGING STRATEGY Prudent approach provides significant benefits to the business • Tullow has proactively hedged production to protect revenues over the last 10 years • Significant liquidity benefit through protecting future revenues and preserving RBL debt capacity • Cumulativ
Slide 39: Balance Sheet, Debt Profile and Liquidity
2017 Half Year Results BALANCE SHEET, DEBT PROFILE AND LIQUIDITY $bn Liquidity • c.$1.2bn facility headroom and free cash at 30 Committed Debt Facilities Drawings June 2017 6 • Minimum $0.5bn headroom going forward 5 RBL • Successful routine redetermination March ‘17 0.8 3 • $345m accordion effectiv
Slide 40: Tullow Oil plc
2017 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 40