Tullow - comment

Tullow released its trading statement this morning, confirming FY23 production levels and providing guidance for FY24.   Headlines will be dominated by higher-than-expected 2023 cashflows, production is where the real story lies. Jubilee experienced some water injection issues in late 2023, which caused Tullow to miss its original production guidance (ex Jubilee gas).  Tullow have accelerated the drilling program at Jubilee with a further 5 wells to be drilled and come on stream in FY24.  This should result in broadly flat production levels, i.e. no net gain highlighting the decay on existing wells.  Free cashflow should be c. $200-300m (at $80/bbl) which will result in a c.1.0x leveraged entity at year-end.  

However, the bigger issue is the outstanding arbitration court cases re: Ghanian tax claims which need to be dealt with prior to any refinancing of the Senior Secured Notes, due in 2026.  In addition, the Company will have to decide if they purchase or extend the lease on the TEN FPSO.  Ultimately, these two factors will determine future trading levels.