Page 5 - LatAmOil Week 02 2020

LatAmOil COMMENTARY LatAmOil
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The team also described Tullow’s announce- ment as “broadly in line with expectations.”
For their part, analysts at JP Morgan said in a note that they expected the re-organisation of the management team and developments in Africa to influence Tullow’s performance this year, Reuters reported. “Looking forward, alongside the CEO and other organisational changes we anticipate through 2020, we look for greater clarity on realistic timeframes to pro- gress in both Uganda and Kenya, which hold thekeytomedium-termgrowthpotential,”they wrote.
Stumbling blocks
There seems to be a consensus among observers that Tullow has the potential to overcome the setbacks it has suffered in recent months. But the company is anticipating a 20,000 barrel per day (bpd) drop in output this year, and it faces other hurdles, some of which will be listed below.
For example, Tullow has fallen behind schedule in Kenya, where it is trying to launch crude oil production in the Lokichar Basin. “In Kenya, the early oil pilot scheme (EOPS) is sus- pended due to severe damage to roads caused by adverse weather in the fourth quarter of 2019,” it explained in its trading update. “Trucking remains on hold until all roads are repaired to a safe standard. Work continues with joint ven- ture partners and the government of Kenya to progress the development project.”
Mark MacFarlane, Tullow’s chief operating officer, told shareholders during a conference call this week that the company was still hoping to make a final investment decision (FID) on the Kenya project this year. He warned, though, that achieving this aim would be “challenging.”
In Uganda, the company seems to have made no significant progress in its efforts to arrange a new farm-out deal, following the collapse of negotiations with France’s Total and China National Offshore Oil Corp. (CNOOC) last year. In its trading update, it said only two things: that discussions with the Ugandan government were continuing and that it was still committed to
reducing its equity stake in its oil-bearing licence area near Lake Albert.
Western Hemisphere
Tullow also had little to say about the disap- pointment it has encountered offshore Guyana, where it found sour crude in the Carapa-1 well.
The trading update indicated that the com- pany now sees its main task in that country as one of taking a closer look at the information available. “Next steps will include the integration of the Carapa result into geological and geophys- ical models and high-grading of the Cretaceous portfolio across both the Kanuku and Orinduik blocks,” it said.
Meanwhile, Tullow is also under a certain amount of pressure in Jamaica. Its AIM-listed partner United Oil & Gas said in a statement on January 14 that Jamaican authorities had agreed to extend the term of the initial exploration period for the offshore Walton Morant licence area by six months. It also noted, though, that the investors would have to make a “drill or drop” decision within those six months in order to secure an additional extension.
Tullow and its partner are looking to sign a farm-out deal with another investor for Walton Morant, which includes the Colibri prospect, so that they can manage to begin exploration drill- ing on schedule in 2021. They have yet to strike a deal with any other company, though United Oil & Gas said in its statement that several unidenti- fied parties had expressed interest.
Hopeful signs?
But the news is not all bad.
Tullow did say in its trading update that its
search for a new CEO was “well under way” and noted that it was preparing to spud a new well offshore Peru in late January. It also said that its free cash flow was likely to hit $150mn or more.
In the meantime, the company’s share prices have risen slightly since the publication of the trading report. This is a welcome sign, given that Tullow’s stock dropped by nearly 70% in the fourth quarter of last year.™
“ be a consensus
There seems to
Tullow remains committed to reducing its stake in its Ugandan fields (Photo: Tullow Oil)
among observers that Tullow has the potential to overcome the setbacks it has suffered
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