Tullow identifies gas resources in Jubilee, TEN fields
emption in Ghana.
In Ghana, the ongoing drilling programme, that started in April 2021 has delivered seven new wells, six at Jubilee and one at TEN, at an average cost of less than $50 million per well, more than 10% below the average expected cost for these wells. In addition, two existing wells have been completed, one at Jubilee (J12-WI) and one at TEN (En16-WI).
The Jubilee field has performed well with production of c.82.4 kbopd gross (c.30.8 kbopd net) in the first half of the year, in line with expectations. This year two new water injection wells and one new producer well have been drilled and brought onstream in the Jubilee field, helping to offset natural decline. The current pace of drilling in Ghana is expected to result in an acceleration of the next phase of drilling at Jubilee into the fourth quarter of 2022. These wells will be tied into the Jubilee South East infrastructure in 2023.
The TEN fields produced c.24.3 kbopd (c.12.5 kbopd net) in the first half of the year. No new wells were drilled in TEN in the first half of 2022, however active reservoir management has helped slow the natural decline. A previously drilled water injection well at Enyenra (En16-WI) has been completed and will come onstream later this year to provide pressure support for existing producers. A further Enyenra producer is planned to be drilled and completed later this year. The rig is currently drilling the first of the two strategic Ntomme Riser Base producer wells, which are due to be tied in and brought onstream in the second half of 2023, following installation of a Riser Base manifold.
Production performance has also been supported by strong FPSO uptime of c.99% at TEN and c.95% at Jubilee, including a planned maintenance shutdown of the Jubilee FPSO, which was successfully completed in May. On 1 July 2022, Tullow took over Operations and Maintenance (O&M) of the Jubilee FPSO from MODEC.
In Gabon the Simba expansion project has resulted in increased production from the Simba field of c.6.0 kbopd net to Tullow in the first half of the year. A long-term appraisal well test at the Tchatamba field is on track to start in August, and infill drilling campaigns at the Ezanga and Oba fields are progressing to plan.
In Côte d’Ivoire, production from the Espoir field averaged c.2.1 kboepd in the first half of the year. A two-month shutdown which had been planned for March has been postponed to August. Required cargo tank maintenance work is progressing well and Tullow continues to engage with the operator, CNR International, on identifying development drilling opportunities.
Total net production from the non-operated portfolio in Gabon and Côte d’Ivoire averaged c.17.6 kboepd in the first half of the year, in line with expectations.
In Kenya, as reported above, the Joint Venture Partners continue to make good progress with the farm-down to a strategic partner and the approval of the Field Development Plan (FDP) for Project Oil Kenya. The project is expected to be a key driver of growth, value and diversification for Tullow.
In Guyana, our partner Repsol is currently drilling the c.200mmbbls Beebei-Potaro prospect on the Kanuku Block, in which Tullow has a 37.5% equity, with results expected in the third quarter of 2022.
Financial update
In February, Tullow received $75 million in contingent consideration in relation to Tullow's sale of its assets in Uganda to TotalEnergies, which completed in November 2020. Tullow will continue to have exposure to the Tilenga Project through additional cash consideration which may be received in the form of contingent payments if the average annual Brent price exceeds $62/bbl once production commences.
Also in February, a panel of arbitrators delivered an award in favour of HiTec Vision (HiTec), judging that discoveries made in the PL-537 Licence (Offshore Norway) between 2013 and 2016 had triggered a further payment under the SPA between Tullow and HiTec regarding the purchase of Spring Energy in 2013. As a result, Tullow made a payment of c.$76 million to HiTec.
In March, Tullow completed the pre-emption related to the sale of Occidental Petroleum's interests in the Jubilee and TEN fields in Ghana to Kosmos Energy for a total consideration of $126 million, consisting of $118 million upfront and a subsequent post-completion adjustment payment of $8 million. The transaction took Tullow's equity interests to 39.0% in the Jubilee field and to 54.8% in the TEN fields and added c.4 kbopd of annualised unhedged production to Tullow’s portfolio for 2022. At current oil prices it is expected that this acquisition of additional equity in the Jubilee and TEN fields will have paid for itself by the end of the year.
The Group generated revenue, including the cost of hedging, of c.$0.8 billion in the first half of the year, with a realised oil price of c.$106/bbl before hedging and c.$87/bbl after hedging. Capital expenditure in the first half of the year was c.$155 million.
Taking into account the contingent consideration ($75 million inflow), the arbitration payment ($76 million outflow) and the pre-emption payment ($126 million outflow), and after adjusting for revenues of over $200 million relating to two Ghana liftings which took place in early June but for which cash was received shortly after 30 June 2022, on 1 and 5 July respectively, free cash flow1 in the first half of the year was neutral.
Full year capital expenditure is expected to be c.$380 million, including c.$30 million related to the additional equity interests in Ghana. Full year free cash flow1 guidance remains c.$200 million assuming an average oil price of $95/bbl.
The mandatory prepayment of $100 million of Senior Secured Notes due 2026 in May reduced total debt to $2.5 billion.