Tullow Downgrades 2019 Ghana Gas Output

UK-Irish explorer Tullow Oil said gross gas output from the Jubilee and TEN blocks in Ghana had not met expectations and would be lower than expected this year.

At Jubilee, gross full year 2019 production is forecast to be around 89,000 barrels of oil/day (about 31,500 barrels/day net). The lower than forecast full year outcome is predominantly due to topside issues which have constrained water injection and gas handling, it said in a November 13 trading statement. 

At TEN, gross full year 2019 production is forecast to be around 62,000 b/d (about 29,000 b/d net). During 2019, production has been impacted by the suspension of the EN14-P well and therefore production has drawn on fewer wells than planned. TEN associated gas sales are forecast to average around 125 boepd for the full year, it said.

There was less demand from the Ghana National Petroleum Company (GNPC). It said discussions on increasing gas offtake were ongoing with GNPC with an increase anticipated towards year end. Sustaining increased levels of gas offtake will reduce the amount of gas being reinjected into the fields, improving oil production over time.

It said it continued to assess "the appropriate investment programme in 2020 to improve the performance of the fields and their facilities. This includes re-assessing both the infill drilling programme and future development plans to ensure that the significant remaining reserves and resources at Jubilee and TEN are produced in the most cost-effective and efficient manner in 2020 and beyond." 

Full year free cash flow is forecast to be around $350mn, subject to year-end working capital movements. Free cash flow generation has been adversely affected by lower production, and by lower oil prices for much of the second half of the year.

CEO Paul McDade said Tullow expected to deliver robust free cash flow for the full year. supported by disciplined capital investment. Its two oil discoveries in Guyana at Jethro and Joe were sulphurous heavy oil, but he said that the company remained confident about the broader light oil potential of the Orinduik and Kanuku blocks located in this prolific oil basin.

Despite lower than forecast free cash flow from all operations, Tullow continues to focus on debt reduction, and net debt at the end of 2019 is expected to be around $2.8bn (from $3.1bn at the beginning of the year), it said.