Tullow’s creditors agree to extend refinancing discussions

Exploration group says move will allow for additional time to review business plan

Storage tanks at Tullow Oil’s Ngamia 8 drilling site in Lokichar, Turkana County, Kenya. Photograph: Reuters/Baz Ratner

Storage tanks at Tullow Oil’s Ngamia 8 drilling site in Lokichar, Turkana County, Kenya. Photograph: Reuters/Baz Ratner

 

Tullow Oil’s refinancing discussions with lenders have been extended by up to one month.

“This will allow for additional time to review the business plan and operating strategy,” the company said in a trading statement.

In September, Tullow had warned of a possible cash squeeze unless it lowered its €2.4 billion debt pile.

“Following the capital markets day, at which Tullow’s senior management presented a new business plan and operating strategy, the group has started discussions with its creditors with regards to its debt refinancing options,” it said.

“As part of these discussions Tullow and its lending banks have agreed to extend the redetermination of the group’s reserve base lending facility, which was due to complete in January, by up to one month.”

In a trading update the exploration company also said it expects its operating cash flow to reach $500 million this year if oil prices stay above $50 a barrel.

The company said the impact of Covid-19 has been managed effectively across the group, with negligible impact on production.

“Despite the challenges that 2020 presented, Tullow delivered production in line with expectations, executed major reductions to its cost-base and reduced net debt through the Uganda asset sale,” chief executive Rahul Dhir said.

2020 full-year revenue is expected to be $1.4 billion with a realised oil price of $50.8 a barrel.

Tullow said its year-end debt reduced to $2.4 billion, down from $2.8 billion in 2019, as a result of $430 million free cashflow on the back of the $500 million gained from selling its Ugandan assets.

“Tullow has a busy year ahead as we begin implementing the business plan that we laid out at our capital markets today. The plan is focused on ensuring that Tullow’s producing assets in West Africa reach their full potential,” Mr Dhir said.

“We will leverage the new plan and our reduced cost base to generate positive free cash flow at current commodity prices, drive down our net debt and deliver a robust balance sheet.”