Tullow to drill three new wells at Jubilee field; oil production to average 84,000 bpd in 2022
Crude oil production at the Jubilee field is expected to average between 80,000 and 84,000 barrels of oil per day.
This, Tullow Oil noted in its unaudited financial statements for end-2021, includes the impact of a two week planned maintenance shutdown in production scheduled to take place in the second quarter of 2022.
The projected increment in crude oil production is based on the company’s 2022 outlook underpinned by the drilling of three new wells at the Jubilee field.
Oil production from the Jubilee field averaged 74,900 barrels of oil per day in 2021.
For the TEN field, Tullow projects an average production of between 22,000 and 26,000 barrels of oil per day, a sharp decline from the 32,800 barrels of oil production from the oil field in 2021.
According to Tullow Oil, the projected decline in production is driven by the natural decline in the field’s existing wells.
Drilling in the TEN field for this year (2022), Tullow Oil asserts, will focus on further defining future development plans to maximise production and the field’s value potential.
“Two strategic development wells are to be drilled in the Ntomme river base area and an additional well is planned in the Enyenra area in the second half of the year. The JV is also investing in the infrastructure required to allow these wells be brought on stream from 2023,” it added.
Meanwhile, Tullow Oil, has set aside some $270 million to be spent on the Jubilee and TEN oil fields as capital expenditure for this year.
This is out of a total $350 million set aside as capital expenditure for Tullow Oil’s oil fields in Gabon, Kenya and Ghana.
The set capex for Ghana is contained in the company’s unaudited financial statements for end-2021.
“The increased year-on-year spend in Ghana is primarily due to investment in infrastructure for the Jubilee North East and South East areas that will lead to meaningful growth in production as these undeveloped paths of Jubilee are brought on stream from 2023 onwards,” said Tullow Oil justifying the $270m capex allocation.
Touching on the company’s 2021 performance, Chief Executive Officer of Tullow Oil, Rahul Dhir said, ”2021 was a year of positive change and transformation for Tullow, and we ended the year on a firm financial and operational footing. The delivery of our long-term Business Plan is progressing well with significant improvements in safety, operating efficiency and drilling performance. In 2022, we will build on these firm foundations and focus on investing in our producing assets in West Africa.
“Our plans in Ghana, where we are in the process of increasing our stakes in both the Jubilee and TEN fields, will position us to deliver the free cash flow to reduce gearing to less than 1.5x by 2025. Elsewhere, our Gabon near-field non-operated exploration opportunities, our revised Kenya development project and the Beebei-Potaro commitment well in Guyana also have the potential to be significant value drivers for Tullow. There is much to look forward to this year.”
Expected revenue at end-2021 for Tullow Oil is estimated to be $1.3 billion at a reliased oil price of $63 per barrel.
Year-end 2021 net debt, the company’s unaudited financial statements notes, was reduced to $2.1 billion from the $2.4 billion recorded for end year 2020.
2021 Performance
- Group working interest oil production averaged 59.2 kboepd, in line with guidance, with notable production growth from the Jubilee field in Ghana and Simba field in Gabon but lower production than expected from TEN and Espoir.
- In Ghana, ongoing improvements in operating performance resulted in uptime of >97% on both operated FPSOs and an increase in water injection rates and gas processing capacity.
- Drilling in Ghana restarted in April with four new wells and a workover successfully completed, ahead of plan.
- Revenue is expected to be c.$1.3 billion with a realised oil price of $63/bbl, including hedge costs of c.$150 million.
- Capital and decommissioning expenditure were c.$265 million and c.$70 million respectively.
- Underlying operating cash flow1 is expected to be c.$700 million and free cash flow is expected to be c.$250 million, ahead of guidance, driven by continued focus on costs, supportive oil prices in the latter parts of 2021 and favourable working capital movements.
- Year-end net debt reduced to c.$2.1 billion (2020: $2.4 billion), with liquidity headroom of c.$0.9 billion at the start of 2022.
2022 Outlook
- Group working interest oil production guidance is 55 to 61 kboepd. This forecast is based on Tullow’s existing equity interests in TEN (47.175%) and Jubilee (35.48%) and will be adjusted following completion of the pre-emption of the sale of Occidental Petroleum’s interest in Ghana to Kosmos Energy. The estimated full year impact of the completed pre-emption would be an addition of c.5 kboepd (net) to the Group’s 2022 production forecast, adjusted for completion timing.
- Tullow is prioritising investment in high return opportunities in its producing assets, whilst ensuring the business remains self-funded at c.$65/bbl2 this year. Capital expenditure is forecast to be c.$350 million, split c.$270 million in Ghana, c.$30 million on the non-operated portfolio, c.$5 million in Kenya and c.$45 million on exploration and appraisal. Decommissioning expenditure is expected to be c.$100 million.
- Increased year-on-year spend in Ghana is primarily due to investment in infrastructure for the Jubilee North East and South East areas that will lead to meaningful growth in production as these undeveloped parts of Jubilee are brought on stream from 2023 onwards.
- At $75/bbl, underlying operating cash flow1 is expected to be c.$750 million with free cash flow2 of c.$100 million.
- Debt reduction remains a key priority and the Group remains on track to materially reduce net debt and achieve gearing of less than 1.5x net debt to EBITDAX by 2025.
- A material hedge portfolio protects c.75% of forecast sales volumes to May 2023 and 50% from May 2023 to May 2024.