Tullow Oil will unveil plans next month on how it can lower its $3 billion (€2.55 billion) net debt pile amid depressed oil prices. The group warned four weeks ago that it faces a potential cash shortfall if no action is taken.
The Irish-founded but Africa-focused exploration company will hold a so-called capital markets day (CMD) on November 25th, it said in a statement on Wednesday.
Tullow flagged on September 9th, as it reported a $1.3 billion loss for the first half of the year driven by asset write-downs, that it planned to hold a CMD by the end of the year, at which its new chief executive, Rahul Dhir, will lay out plans to "unlock material value" from its assets portfolio. This is being read by analysts as signalling further sales of assets and stakes in projects as well as refinancing.
The company confirmed on Wednesday that it had passed, as expected, a biannual test of its liquidity projections by its group of lenders behind a $1.8 billion reserve-based lending (RBL) facility and maintained $500 million of liquidity headroom as of the start of October. This is comprised of undrawn debt facilities and free cash.
However, it had warned last month that a scheduled repayment of $650 million of senior bonds in April 2022 could lead to a “liquidity shortfall” as its financial projections are tested next January and March for 18-month periods under the terms of the RBL facility.
Shares have plunged
Shares in Tullow Oil have plunged more than 90 per cent in the past 12 months as a result of exploration and production disappointments, the exit of its then chief executive and exploration director, and as beaten-down oil prices triggered a $1.4 billion writedown in the value of assets in the first half of this year.
The company expects to receive $500 million by the end of the year from the agreed sale of Ugandan assets. However, it has halted the sale of a portion of its Kenyan onshore oil fields pending the outcome of a review.
"The end of 2019 and 2020 so far has been a difficult period for the group with reserve and resource writedown on the back of extremely depressed oil and gas prices," said Job Langbroek, an analyst with stockbroker Davy, saying that the CMD is "more important" than the expected, but "encouraging", news that Tullow had passed its latest bi-annual liquidity assessment.