Tullow - comment

Tullow is a frustrating name for us as we were unable to convince clients about the merits of a long position in the name over the summer. Tullow announced the tender results yesterday (Thursday) with $130m of the subs tendered at 92% and $115m of the senior secured at the maximum price of 90.5%. The Company have extended the tender for the sub notes to December 14th (total consideration of $300m), and any subsequent tenders will receive the early tender consideration, to make 92% in total. 

This is the right thing for the Company to do, continue to deleverage the business with cashflow and position themselves for a refinancing in late 2024. We had expected the rating agencies to comment on the tender process, as there was potential for it to be treated as a distressed tender. 

Underlying oil prices remain volatile, but as we have often mentioned concerning this name, consistency in production is key to the credit story. We were a little disappointed in production guidance for H2 23, but still view there is sufficient cashflow generation to assist a refinancing in 2024 which would result in a YTC of c.17% to November 2024.