Tullow - comment

Tullow had already given us the headline numbers about FY23, so our main focus was production guidance for FY24 and beyond. Guidance is 62-68k boepd, up from 62.7 Actual for 2023, driven mainly by additional gas sales and the sustainability of the Jubilee production. The Jubilee Production is key, as we had to see production levels fall in the later months of 2023 after hitting 100,000 boepd gross production in September. This was a result of water injector issues and appears to have stabilised following additional wells that have come on stream in Q1. 

The business continues to deleverage, with net debt likely to reduce by another $200-300m in FY24. The Company commenced talking about shareholder returns from FY26 onwards, although in our opinion this is very premature given the uncertainty over production and more importantly in the short term the potential contingency liabilities arising from tax claims in Ghana and Bangladesh. 

This morning’s results don’t change the outlook for the bonds. The 2025 Unsecured Bonds are money good, underwritten effectively by the Glencore facility and are attractive at 11%YTM. The 2026 Secured Bonds are not covered by the facility and therefore more sensitive to production issues and tax litigation, but given their seniority, 15% YTM is ample return.