Tullow Oil reduces gross debt by $266m in H1 2023 through bond buy back and amortisation

Tullow Oil reduces gross debt by $266m in H1 2023 through bond buy back and amortisation

Tullow Oil, the multinational oil and gas exploration and production company, has released its financial report for the first half of the year, outlining key figures and providing guidance for the remainder of 2023.

According to the oil company, total revenue for the first half of 2023 including hedging costs, reached approximately $0.8 billion. The realized average oil price before hedging stood at around $81 per barrel, while the figure dropped to approximately $74 per barrel after hedging.

In terms of capital expenditure, the company incurred around $200 million during the first half of the year. Tullow Oil’s full-year capital expenditure guidance remains at around $400 million.

Regarding decommissioning expenditure, the company spent roughly $40 million in the first half. However, Tullow Oil has revised its full-year guidance to a reduced figure of around $70 million due to deferrals into 2024.

Additionally, the company plans to allocate around $20 million into escrow in 2023 to cover future decommissioning obligations in Ghana and Gabon.

Free cash flow for the first half of the year was negative, amounting to approximately -$100 million, aligning with expectations. Tullow Oil anticipates a significant reversal in the second half of the year, generating around $200 million in free cash flow at an oil price of $80 per barrel. The full-year free cash flow guidance remains unchanged at approximately $100 million, assuming an oil price of $80 per barrel.

In June, Tullow Oil announced the purchase of approximately $166 million of the 2025 Notes for a cash consideration of around $100 million. This transaction resulted in a value accretion of approximately $86 million, achieved through a net debt reduction of around $66 million and coupon savings of approximately $20 million until maturity.

During the first half of 2023, Tullow Oil managed to reduce gross debt by approximately $266 million through a combination of the 2025 Notes purchase and annual amortization of the 2026 Notes. As of the end of the first half, the company’s net debt stood at around $1.9 billion and is projected to decrease further to around $1.7 billion by the end of the year.

Tullow Oil has reinstated its commodity hedging policy to provide downside protection. The policy ensures 60% protection for the first year and 30% for the second year, while maintaining exposure to upside potential of no less than 60% through appropriate instrument selection.

With these financial updates and strategic decisions, Tullow Oil aims to navigate the volatile oil and gas market and strengthen its position in the industry.