Tullow revises west African oil production guidance

Irish-founded oil and gas explorer Tullow has said its Ten project in Ghana remains on schedule with first oil expected within the next three to six weeks.

In a trading update issued on Thursday, the company forecast first-half revenues of $500 million versus $800 million for the same period a year earlier. It also revised production guidance for west Africa oil production levels following the extended shut down at the Jubilee field in late March and April.

Tullow said its 2016 capital expenditure guidance remains at $1 billion with further savings being offset by additional capex associated with the Jubilee turret issue ahead of potential insurance payments and the start of a new drilling campaign in Kenya.

The group said net debt at the end of June was estimated at $4.7 billion with unutilised debt capacity and free cash of $1 billion.

Tullow said production at its flagship Jubilee field, also in Ghana, has stabilised with a gross rate in June of around 90,000 barrels of oil per day (bopd). Production was suspended at the field in late March after a fault was discovered in a bearing ont he turret which is moored to the seabed. The extended shut down led to the company’s west Africa oil production average coming in at 51,900 bopd, lower than its previous guidance.

Output restarted at Jubilee in early May with production having ramped up since then.

“The group expects to continue producing from Jubilee at similar levels through the remainder of 2016 with the exception of short periods of reduced production to commence work on the long-term turret solution. As a result, Jubilee gross average production in the second half of 2016 is expected to be around 85,000 bopd. Tullow therefore expects average gross production for the Jubilee field in 2016 to be around 74,000 bopd,” it said.

The Africa-focused oil explorer said work to turn an offloading vessel into a permanent facility at Jubilee would cost bewteen $100 million and 150 million and further work could cost $115 million this year with another $80 million in 2017.

Jubilee will also have to undergo an 8 to 12 week shutdown period in the first half of 2017 to carry out work on the offloading vessel.

The explorer’s west Africa oil production guidance range has now been revised to between 62,000 and 68,000 bopd net.

Tullow said business interruption insurance is in place to recover the shortfall in production and revenues.

In Europe, working interest gas production for the first half of 2016 was above expectations averaging 6,800 boepd. Full year guidance has been revised to 6,000 to 7,000 boepd.

Exploration and appraisal drilling is due to recommence in Kenya at the end of the year.