Tullow Oil Plc · LSE:TLW
Tullow Oil — FY2017 Earnings Presentation
37 slides from Tullow Oil's earnings presentation, Feb 7, 2018
Slide 1: Tullow Oil plc 2017 Full Year Results
ie, ™~ oe) Tullow Oil plc 2017 FULL YEAR RESULTS Wednesday 7 February 2018 TULLOW is a
Slide 2: Disclaimer
2017 Full 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: Paul McDade - Chief Executive Officer
AM Tullow Oil plc - 2017 Full Year Results PAUL McDADE - Chief Executive Officer TULLOW Ot
Slide 4: A Balanced E&P Business Focused on Returns
2017 Full 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 5: Delivering on Our Objectives
2017 Full Year Results DELIVERING ON OUR OBJECTIVES Continued strengthening of Balance Sheet FREE CASH FLOW FUNDING PORTFOLIO MANAGEMENT Maximise free cash flow through Complete RBL Progress monetisation options to increased production, efficient capital refinancing achieve maximum value at the allo
Slide 6: CFO Update
Tullow Oil ple - 2017 Full Year Results CFO UPDATE LES WOOD - Chief Financial Officer TULLOW a f ]
Slide 7: Full Year Results Summary
2017 Full Year Results 2017 FULL YEAR RESULTS SUMMARY Underlying cash Revenue Adjusted EBITDAX (Loss) after tax operating costs $1,723million $11.1/boe $1,346million $(189)million FY 2016: $1,270 million FY 2016: $14.3/boe FY 2016: $941 million FY 2016: $(597) million Capital investment Free cash fl
Slide 8: A Step Change in Net Debt and Gearing
2017 Full Year Results A STEP CHANGE IN NET DEBT AND GEARING Gearing reduced to 2.6x – approaching policy target Significant progress towards policy Net debt $4.8bn • Net debt reduced by $1.3bn 5.1x - Equity proceeds of $721 million - Free cash flow of $543 million • Reduced gearing by 50% Net debt
Slide 9: Hedging Strategy - Maintaining Exposure to Oil Price Upside
2017 Full Year Results HEDGING STRATEGY - MAINTAINING EXPOSURE TO OIL PRICE UPSIDE 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 201
Slide 10: Driving Down Costs Across the Business
2017 Full Year Results DRIVING DOWN COSTS ACROSS THE BUSINESS Underlying cash operating costs 20 Low-cost production assets 15 • Cash operating costs of $11.1/boe1 ($/boe) 10 • Targeting ~$10/boe going forwards 5 • Ghana 2017 opex <$8/boe, ahead of 2018 target 0 2013 2014 2015 2016 2017 Net G&A 250
Slide 11: Capital Investment Prioritised on High Return Assets
2017 Full Year Results CAPITAL INVESTMENT PRIORITISED ON HIGH RETURN ASSETS Disciplined capital allocation • Continued focus on balancing deleveraging and growth • Capital allocation screened against strict criteria to maximise returns • Minimise commitments to retain flexibility in response to mark
Slide 12: Maximising Revenue Through Production
2017 Full Year Results MAXIMISING REVENUE THROUGH PRODUCTION 2017 production performance • Strong delivery, exceeding revised guidance • Successful optimisation of TEN production, while maintaining prudent well management • Good production performance, despite no new Ghana drilling and reduced inves
Slide 13: Continuing Our Disciplined Approach
2017 Full Year Results CONTINUING OUR DISCIPLINED APPROACH Disciplined approach Short-to-medium term objectives Deliver financial strategy Monetisation Maximising revenue • Maximise free cash flow through continued cost discipline from production • Balance sheet optimisation; operate below 2.5x gear
Slide 14: Business Update
Tullow Oil ple - 2017 Full Year Results BUSINESS UPDATE PAUL McDADE - Chief Executive Officer TULLOW ¥ a j ]
Slide 15: Operational Progress Across the Business
2017 Full Year Results OPERATIONAL PROGRESS ACROSS THE BUSINESS West Africa East Africa New Ventures Build and extend revenues Progress developments Growth through exploration TEN producing at Uganda deal completion Record year for seismic and 70,000 bopd and FID mid-2018 FTG acquisition Ghana drill
Slide 16: Optimising Ghana Production and Reserves Recovery
2017 Full Year Results OPTIMISING GHANA PRODUCTION AND RESERVES RECOVERY Flexible programme to maximise production • Multi-year programme of infill wells • Initial focus on wells that utilise existing infrastructure • Ongoing optimisation of rig schedule • Single rig programme can drill/complete ~5
Slide 17: Kenya Appraisal Confirms Material Oil Resources
2017 Full 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 well tests, water injection tests and water-flood trials completed • EOPS ready
Slide 18: Developing Kenya's Discovered Resources
2017 Full 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 19: Exploration: Key Part of Long-Term Growth Strategy
2017 Full Year Results EXPLORATION: KEY PART OF LONG-TERM GROWTH STRATEGY Business foundations Disciplined approach Future value generation Basin opening Low-cost, high-impact Active Ventures team Guyana / Suriname Rigorous technical & Focus on high commercial screening Namibia / Mauritania margin l
Slide 20: Multiple High-Impact Campaigns Over Next Three Years
2017 Full Year Results MULTIPLE HIGH-IMPACT CAMPAIGNS OVER NEXT THREE YEARS 2018 2019 2020 ACTIVE VENTURES Guyana / Suriname Mauritania / Namibia NEW VENTURES Côte d’Ivoire Peru INFRASTRUCTURE LED EXPLORATION West & East Africa Drilling Airborne Seismic Firm activity Optional activity Survey Competi
Slide 21: Conclusion
Tullow Oil plc - 2017 Full Year Results CONCLUSION PAUL McDADE - Chief Executive Officer TULLOW } |
Slide 22: Well Positioned for the Future
2017 Full Year Results WELL POSITIONED FOR THE FUTURE • Smooth transition to new Executive team Business • Asset base significantly de-risked foundations • Significantly improved financial foundation • Rigorous focus on costs and strict capital allocation Disciplined • Maximising production revenue
Slide 23: Appendix
Tullow Oil ple - 2017 Full Year Results APPENDIX TULLOW is
Slide 24: A Leading Global Independent Exploration & Production Company
2017 Full 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 • 90 licences across 16
Slide 25: Strategy: Building a Sustainable, Self-Funded Business
2017 Full Year Results STRATEGY: BUILDING A SUSTAINABLE, SELF-FUNDED BUSINESS Tullow's strategy is to create a business where our low-cost, long-life asset base in Africa creates the high-margin cash flow to fund our growth, reduce our debt and deliver shareholder returns Slide 25
Slide 26: Production & Development Asset Base
2017 Full Year Results PRODUCTION & DEVELOPMENT ASSET BASE Mauritania TEN field Kenya • First oil achieved in August 2016 • Significant discoveries in South • FPSO gross capacity of 80,000 bopd Lokichar basin (net WI ~35,000 bopd) Côte • Phased development plan to reach d’Ivoire Ghana 100+ bopd at p
Slide 27: Balance Sheet, Debt Profile and Liquidity
2017 Full Year Results BALANCE SHEET, DEBT PROFILE AND LIQUIDITY $bn 5 Committed Debt Facilities Drawings Liquidity • $1.1bn facility headroom and free cash at YE 17 0.6 3 • No material near term debt maturities Headroom and free cash: 4 • Minimum $0.5bn headroom going forward 0.1 0.2 3 RBL • $2.5bn
Slide 28: Jubilee Field Update
2017 Full 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 4 - 6 weeks in Q1 2018 Rotation & • Rotation of v
Slide 29: TEN Field Update
2017 Full 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 2017 & 2018f Production • 2017 gross average production
Slide 30: Uganda Development
2017 Full 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 31: Exploration: Campaigns Focused on Long-Term Value
2017 Full Year Results EXPLORATION: 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-h
Slide 32: Exploration & Appraisal Activity in 2018
2017 Full Year Results EXPLORATION & APPRAISAL ACTIVITY IN 2018 JAMAICA MAURITANIA Walton Morant (80%) C3 (90%), 3D Seismic Processing 3D C-18 (15%) 3D Seismic KENYA SURINAME GHANA Block 12A (50%) Block 54 (30%) 2D Seismic GUYANA Interpreting Araku Jubilee (35.5%) Processing 4D Kanuku (37.5%) Proces
Slide 33: South America: High-Impact Prospects
2017 Full Year Results SOUTH AMERICA: HIGH-IMPACT PROSPECTS • Guyana: attractive acreage up-dip of Liza-1 oil discovery; ongoing processing of seismic • Suriname: low-cost oil plays; Araku-1 drilled in 2017; further prospects for future drilling • Peru: new country entry announced in Jan 18*; six li
Slide 34: Guyana-Suriname: Excellent Position in New Oil Province
2017 Full Year Results GUYANA-SURINAME: EXCELLENT POSITION IN NEW OIL PROVINCE Guyana: • 3D seismic programme completed in 2017; data processing ongoing • Multiple high-quality, shallow water prospects being matured and ranked for potential drilling in 2019 Suriname: • Araku-1 in Suriname drilled in
Slide 35: Africa: High-Impact Leads and Prospects
2017 Full Year Results AFRICA: HIGH-IMPACT LEADS AND PROSPECTS • Namibia: material oil play in low-cost shallow water setting; drilling of Cormorant prospect in 2018 • Mauritania: exploration focus shifted to low-cost shelf-edge oil plays, 3D seismic acquired in 2017 • Zambia: extension of East Afri
Slide 36: New Côte d'Ivoire Acreage
2017 Full Year Results NEW CÔTE D’IVOIRE ACREAGE • Extensive 8,600 sq km onshore acreage position built over 2017 and early 2018 • Seven onshore blocks cover transform basin fault play; FTG planned for 2018; 2D seismic in 2019 • Offshore CI-524 sits alongside the maritime border with Ghana, next to
Slide 37: Tullow Oil plc
2017 Full 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 37