Tullow Oil launches $1.8bn bond deal in major refinancing

Proceeds will finance repayment of $300m of convertible bonds, early redemption of $650m of senior bonds

Tullow Oil said on Thursday that it is launching a $1.8 billion bond sale and has received a $600 million credit facility from banks as it goes about a major refinancing of its debts.

Tullow Oil said on Thursday that it is launching a $1.8 billion bond sale and has received a $600 million credit facility from banks as it goes about a major refinancing of its debts.

 

Tullow Oil said on Thursday that it is launching a $1.8 billion (€1.48 billion) bond sale and has received a $600 million credit facility from banks as it goes about a major refinancing of its debts.

The Africa-focused explorer said that it will use the proceeds to finance the scheduled repayment in July of $300 million of convertible bonds, the early redemption of $650 million of senior bonds that are due to mature next year, as well as borrowings drawn down on a so-called reserves-based lending facility.

Tullow Oil reported last month that it made a $1.22 billion loss last year as it stomached $1.23 billion of write-offs and impairments against its exploration assets. The company’s debt pile stood at $2.4 billion at the end of December and it said at the time of the results that it was reviewing its business plan and operating strategy with its creditors and their advisers.

Runway

“We consider this refinancing to be transformational for the company,” said Davy analyst Colin Grant.

“Tullow now has a clear financial runway, with the next debt maturity not taking place until the $800 million senior bond in 2025. The fact that this refinancing can be achieved without issuing fresh equity is clearly positive for the share price.”

The group, whose shares are traded in Dublin and London, expects to generate $500 million in net cashflow this year on the basis of an oil price of $50 a barrel, which is about $17 below the current price.

The company said every $10 increase delivers roughly $100 million in “incremental pre-financing cash flow”.

Shares in the company rose by as much as 16.2 per cent by mid-afternoon trading in London on Thursday.