Tullow Oil Update

16 Jan 2019
Tullow Oil issued a statement to summarise recent operational activities and to provide trading guidance in respect of the financial year to 31 December 2018, in advance of the Group’s Full Year Results on 13 February 2019. The information contained herein has not been audited and may be subject to further review and amendment.

PAUL MCDADE, CHIEF EXECUTIVE OFFICER, TULLOW OIL PLC, COMMENTED :‘Tullow is well-placed to deliver on its growth ambitions. In 2019, we will increase oil production in West Africa, target Final Investment Decisions in East Africa and drill the first wells in an exciting exploration campaign in Guyana. Despite a volatile oil price, Tullow’s improved balance sheet, low cost production and strong cash flow generation, even at lower oil prices, will allow us to both invest for growth and pay a sustainable dividend.’

Trading Update summary

• 2018 full year oil production of 88,200 bopd;
• 2019 oil production forecast of 93,000-101,000 bopd
• Full year revenue of c.$1.8 billion, additional proceeds of c.$0.2 billion from
• Corporate Business Interruption insurance
• Strong 2018 free cash flow of c.$410 million, net debt at year-end of c.$3.1 billion and gearing of c.1.9x
• Seven wells to be drilled and completed in Ghana in 2019 delivering annual gross production of c.180,000 bopd
• Targeting FIDs for Uganda and Kenya developments in 2019; Uganda farm-down negotiations ongoing
• Guyana drilling to commence in mid-2019 with three wells planned to test this high potential acreage

Operational Update

GROUP PRODUCTION

In 2018, Tullow’s West Africa oil assets performed solidly and delivered net production of 88,200 bopd in line with expectations. This includes production-equivalent insurance payments of 8,600 bopd from Tullow’s Corporate Business Interruption insurance. Working interest gas production averaged 1,800 boepd for the full year resulting in overall Group net production of 90,000 boepd.

In 2019, overall working interest oil production, including production-equivalent insurance payments, is expected to average between 93,000 and 101,000 bopd. Working interest gas production exported from TEN is expected to average 1,000 boepd. Overall Group net production is therefore expected to be in the range of 94,000 to 102,000 boepd.

WEST AFRICA
Ghana ,  Jubilee

Gross production from Jubilee in 2018 averaged 78,000 bopd (net: 27,700 bopd) slightly below the Group’s November forecast. This was due to minor operational issues in December, which have now been resolved. Tullow’s net production from Jubilee in 2018, including estimated production-equivalent insurance payments of 8,600 bopd, was 36,300 bopd.

Tullow expects 2019 average gross oil production from the Jubilee field to increase to around 96,000 bopd (net: 34,000 bopd). Tullow’s Corporate Business Interruption insurance is expected to provide around 1,000 bopd of net production-equivalent insurance payments, resulting in expected total 2019 Jubilee full year average net production of 35,000 bopd.

TEN

The TEN fields performed well throughout 2018 with gross production averaging 64,500 bopd (net: 30,400 bopd) in line with expectations.

Tullow expects gross oil production from the TEN fields in 2019 to step up significantly to around 83,000 bopd (net: 39,000 bopd). Gross gas production is expected to be around 2,100 boepd (net: 1,000 boepd).

Ghana Drilling

The 2018 drilling programme was successfully executed with two drilling rigs operating in tandem across both fields. The results from drilling were in line with, or exceeded, pre-drill expectations. Two new producer wells were drilled and completed at Jubilee and an existing water injection well was completed. At TEN, two new producing wells and one water injection well were drilled. The first new producer well, NT05-P, was brought online in August 2018 and is performing very well. The second new producer, EN10-P, is currently being completed and is expected to be online in February.

In 2019, Tullow expects to drill and complete seven new wells across the TEN and Jubilee fields allowing gross oil production from Ghana to rise to approximately 180,000 bopd in line with the 2019 production forecast.

Non-Operated Portfolio

2018 West Africa non-operated production was 21,500 bopd, well ahead of the Group’s initial 2018 forecast of 19,000 bopd. Gas production from the UK in 2018 was 1,700 boepd with production ceasing as planned in September 2018.

Net production from the non-operated portfolio is expected to increase in 2019 and average between 22,000 and 24,000 bopd.

EAST AFRICA
Kenya

Tullow made substantial progress in Kenya in 2018 and continues to target FID in late 2019 and First Oil in 2022. This will require several key milestones to be achieved throughout 2019 including land acquisition, commercial frameworks and contract awards.

The transfer of stored crude oil from Turkana to Mombasa by road continues as part of the Early Oil Pilot Scheme with an average of eight trucks being dispatched every two days, transporting approximately 600 bopd. This is expected to increase to 2,000 bopd from April 2019. Currently, there are 60,000 barrels of oil stored in Mombasa with a maiden lifting expected in the first half
of 2019.

Uganda

Tullow and its partners in Uganda, Total and CNOOC Ltd, continue to work with the Government of Uganda to finalise the farm-down which is now expected to complete in the first half of 2019. Negotiations with the Government are ongoing. The Operators of the Uganda development continue to target FID in the first half of this year once agreements with the Governments of Uganda and Tanzania have been completed.

NEW VENTURES

In 2018, Tullow acquired new licences in Côte d’Ivoire, Suriname, Comoros and Peru – the latter two are subject to Government approval. The Cormorant wildcat well, which did not encounter hydrocarbons, was drilled offshore Namibia in September 2018, at a net cost to Tullow of less than $3 million. Geophysical surveys were completed in Mauritania, Jamaica and Côte d’Ivoire.

Guyana will be the focus for Tullow’s exploration drilling programme in 2019 and the Group will drill the Jethro prospect in the second quarter of 2019 as the first of two planned wells on the Orinduik block. The Carapa prospect will be tested on the Kanuku licence in the third quarter of 2019. Elsewhere, Tullow will undertake geophysical surveys in Côte d’Ivoire, Comoros and around its current assets in West Africa. Tullow will high-grade other prospects in the portfolio for consideration for drilling in 2020 and seek to add further exploration acreage to the Group’s portfolio.

Financial Update

Solid production performance, sustained cost discipline and higher oil prices during periods of the year resulted in strong revenues and cash flow generation in 2018. With a realised post-hedge oil price of $68/barrel, Tullow expects full year total revenue to be c.$1.8 billion (excluding Corporate Business Interruption insurance proceeds of c.$0.2 billion).

For the full year 2018, the Group is expected to deliver strong free cash flow of c.$410 million. This includes the exceptional payment of approximately $200 million associated with the Seadrill litigation in July 2018 but excludes certain positive working capital items forecast for late 2018 which moved into early 2019. In addition, the receipt of $208 million of Uganda farm-down proceeds is now expected in the first half of 2019.

Net debt reduced from $3.5 billion at the beginning of the year to c.$3.1 billion at the end of 2018 with gearing expected to be 1.9x, in line with the operating range of 1-2x as set out in the Group’s capital allocation framework.

Capital expenditure in 2018 associated with operating activities is expected to be c.$425 million, $35 million lower than forecast in January 2018 following savings, farm-downs and some work programme deferrals. The Group’s 2019 capital expenditure is expected to total approximately $570 million, comprising Ghana capex of c.$250 million, Exploration and Appraisal spend of c.$140 million, West Africa non-operated capex of c.$100 million, Kenya pre-development expenditure of c.$70 million and Uganda post-completion Tullow costs of c.$10 million.

In November 2018, the Board established a capital returns policy to start from the 2019 financial year and expects to pay an annual dividend of no less than $100 million.                 Source: Tullow Oil

Wood Mackenzie

ExxonMobil’s discovery offshore Guyana, the Pluma-1 well, could very well produce around 300 million barrels of oil equivalent of recoverable reserves, according to Wood Mackenzie, a global leader in commercial intelligence for the energy, metals and mining industries, in its preliminary estimation of the well.
(https://soundcloud.com/woodmackenzie/guyana-deepwater-discoveries-hit-double-figures). Pluma is another Cretaceous sandstone discovery. Of 10 discoveries, eight have been in the Cretaceous play.

The Research Director said, “And of course, we have had two discoveries in other plays. One in the carbonate play for the north Ranger and one in the Miocene play and that was the Hammerhead…The consortium is talking about a further 18 or more prospects on the block. I suspect that the majority of those are Cretaceous. Now what is remarkable about the block is that 12 exploration wells have been drilled and only two have been a miss. That is an incredible success rate, but not unprecedented in new provinces like this opening up…We saw similar success rates in other places like Angola and Mozambique. What we might see as the operator works down the prospect list is that we might begin to see more dry holes. So the success rate might fall away a little bit as they start to drill riskier prospects. And I expect them as well to target other Miocene prospects…But the resource estimate has increased to over five billion barrels of oil equivalent of recoverable resource and that’s not all in the Pluma discovery… So our preliminary estimate for Pluma is 300 million barrels of oil equivalent of recoverable resource…”

This is a remarkable story and one that is highly successful for the participants. At this rate, Guyana could easily end up producing one million barrels of oil per day.
“Guyana is the gift that keeps on giving.”
The Pluma-1 well is ExxonMobil’s tenth discovery on the Stabroek Block. The discovery was announced in December 2018. Pluma was drilled in a new reservoir and encountered approximately 121 feet (37 metres) of high-quality hydrocarbon-bearing sandstone.

The Noble Tom Madden drillship began drilling it on November 1, last. The well is located approximately 17 miles (27 kilometres) south of the Turbot-1 well.

The gross recoverable resource for the Stabroek Block is now estimated to total more than five billion oil-equivalent barrels, including Liza and other successful exploration wells such as Payara, Liza deep, Snoek, Turbot, Ranger, Pacora, Longtail, and Hammerhead.
The Noble Bob Douglas continues to drill the Liza Phase One development wells and will continue drilling exploration wells. It moved to drill the Tilapia-1 prospect located 3.4 miles (5.5 kilometres) west of the Longtail-1 well.
The Stena Carron drillship was docked in November last for scheduled 10-year maintenance, during which new K-Pos Dynamic Positioning, K-Chief Automation, K-Thrust Thruster Control, and a Kongsberg Riser Management System will all be installed, after which it will return to Guyana.

ExxonMobil Begins Drilling Haimara-1 Exploration Well Offshore

• First of two wildcat wells to be drilled in January
• Growing Turbot area offering significant development options
• Liza Phase 1 development progressing toward first oil production in early 2020

Public Company Information:
ExxonMobil said today that it has begun drilling the Haimara-1 exploration well offshore Guyana, the first of two planned wells in January. The Stena Carron drillship is drilling the well, which is located 19 miles (31 kilometers) east of the Pluma-1 discovery in the southeast Stabroek Block.
The Noble Tom Madden drillship is expected to drill the second well, Tilapia-1, about three miles (five kilometers) west of the Longtail-1 discovery. The Tilapia-1 well is located in the growing Turbot area.

“We continue to prioritize high-potential prospects in close proximity to previous discoveries in order to establish opportunities for material and efficient development,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Like the Liza and Payara areas, the Turbot area is on its way to offering significant development options that will maximize value for Guyana and our partners.”

[ BREAKING NEWS

On 6 February ExxonMobil announced two
additional discoveries offshore at the Tilapia-1 and Haimara-1 wells,
bringing the total number of discoveries on the Stabroek Block to 12.   ]

ExxonMobil is progressing the Liza Phase 1 development, which has moved into its peak execution phase ahead of expected startup in early 2020. Drilling of development wells in the Liza field is continuing using the Noble Bob Douglas drillship, subsea equipment is being prepared for installation, and the topside facilities modules are being installed on the Liza Destiny floating, production, storage and offloading (FPSO) vessel in Singapore.

Preparations are underway for the commencement of pipe-laying activities in the Liza field in the spring. The Liza Destiny FPSO is expected to sail from Singapore to arrive offshore Guyana in the third quarter of 2019.

The potential exists for at least five FPSOs on the Stabroek Block producing more than 750,000 barrels of oil per day by 2025. Liza Phase 2 is expected to start up by mid-2022. Pending government and regulatory approvals, project sanction is expected first quarter 2019 and will use a second FPSO designed to produce up to 220,000 barrels per day. Sanctioning of a third development, Payara, is also expected in 2019 with start up as early as 2023.

ExxonMobil also plans to deploy a seismic vessel operated by Petroleum Geo-Services (PGS) to the Turbot area to acquire 4-D seismic data similar to a 4-D campaign conducted in the Liza area in 2017. A second PGS vessel has been released after seismic acquisition activities were suspended on Dec. 22 when vessels were approached by the Venezuelan navy in the northwest portion of the Stabroek Block.

Drilling and development operations offshore Guyana are unaffected by the incident, which occurred more than 110 kilometers from the Ranger discovery, the closest of 10 discoveries made by ExxonMobil in the southeast section of the Stabroek Block.

ExxonMobil operates the Stabroek Block offshore Guyana under license from the government of Guyana. The acquisition of seismic data was being conducted under license from the government of Guyana in the country’s exclusive economic zone. ExxonMobil is evaluating next steps for the seismic program.

Throughout its activities, ExxonMobil continues to emphasize and promote direct benefit to local business. More than 50 percent of the Guyana affiliate’s employees, contractors and subcontractors are Guyanese, a number that will continue to grow as operations progress. ExxonMobil, its partners and its contractors spent about US$65 million with more than 300 local suppliers during the first three quarters of 2018. The Centre for Local Business Development, established by ExxonMobil in 2017 to promote the establishment and growth of small- and medium-sized local businesses, continues to enable access to training and capacity-building. More than 1300 local businesses have registered with the centre.

ExxonMobil affiliate Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.

About ExxonMobil

ExxonMobil, the largest publicly traded international energy company, uses technology and innovation to help meet the world’s growing energy needs. ExxonMobil holds an industry-leading inventory of resources, is one of the largest refiners and marketers of petroleum products, and its chemical company is one of the largest in the world. For more information, visit www.exxonmobil.com or follow us on Twitter www.twitter.com/exxonmobil.

Cautionary Statement: Statements of future events and conditions in this release are forward-looking statements. Actual future results, including project plans and timing, production rates and resource recoveries could differ materially due to factors such as changes in oil and gas prices and other market factors affecting the oil and gas industry; the outcome of future exploration and development projects; the outcome of commercial negotiations; the occurrence and duration of economic recessions; changes in political or legal factors including tax and environmental requirements and relations among governments; obtaining necessary government permits; the actions of competitors; unforeseen technical difficulties; and other factors discussed here and under the heading “Factors Affecting Future Results” on the Investors section of our website at www.exxonmobil.com. References to barrels of oil and similar terms include quantities that are not yet classified as proved reserves under SEC regulations but that are expected ultimately to be produced and moved to the proved reserve category.

Who’s Who In Guyana’ business directory launched

[In the photo, from left] Action Invest Caribbean, Executive Chairman Vishnu Doerga, Action Invest Caribbean Administrative Director, Davitri Doerga, GoInvest Chairperson Patricia Bacchus and British High Commissioner, Greg Quinn.

Action Invest Caribbean in collaboration with the British High Commissioner, Greg Quinn launched the ‘Who’s Who in Guyana’ business directory at the British High Commissioner’s Bel Air residence, Executive Chairman of Action Invest Caribbean, Vishnu Doerga said the launching comes at an opportune time.

“There has never really been a more pertinent time to provide critical information on the Guyanese economy and companies serving Guyana as now,” he remarked.

Doerga explained the directory features key insights from industry related leaders and economic reviews. These reviews, local and international, focus on the benefits of investing and provides insight into how to make the best investment decisions in Guyana. While delivering remarks, GoInvest Chairperson Patricia Bacchus said the launch of the Business Directory reflects growth and diversity in Guyana’s economy.

The GoInvest Chairperson pointed out that the development of systems and tools, and the strengthening of institutions which “ensure that such entrepreneurial spirit is adequately facilitated” is also of equal significance. “The ‘Who’s who in Guyana’ business directory is one example of the development of tools to aid in the navigation of the local business landscape,” Bacchus noted. An online edition of the directory is currently being developed. It was noted that once operational, sectors on the website will be individually managed so they can be updated as new information becomes available.