Page 12 - LatAmOil Week 11 2020

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Specifically, it reported that it had hedged a sig- nificant part of its production.
“Tullow prudently manages its commodity risk and is well hedged, with 60% of 2020 pro- duction hedged at a floor price of $57 per barrel and 40% hedged at a floor price of $52 per barrel for2021,”itsaidinthestatement.Thisappearsto have been a prudent move, given that Brent and WTI crude prices have sunk from the $50-55 per barrel range to around $30-35 since March 6.
It also has the potential to keep Tullow ahead until the end of next year, if current forecasts for oil prices prove accurate. “[The] forward curve for 2020 and 2021 [has fallen] to approximately $38 per barrel and $43 per barrel respectively,” the report explained.
Tullow stressed, though, that these hedges would not protect it against low prices indef- initely. “If oil prices remain at or below their current levels for an extended period of time, this would adversely impact our future financial results,” it commented.
Cost cuts and coronavirus
In the meantime, the company is taking steps to reduce its operating expenses in 2020. In the report, Tullow explained that it had recently concluded a business review that took account of its resources and organisational structure.
One of the recommendations arising from the review involves a 35% reduction in staff, it said. These redundancies could bring the com- pany’s cash general and administrative expenses down by $200mn over the next three years, but they will also necessitate a re-organisation that will entail costs of about $50mn, it stated.
Tullow went on to say that it was taking steps
to protect its expatriate and local employees from the coronavirus (COVID-19) pandemic. “In both Ghana and Kenya, Tullow’s in-country teams have set up their EID (Emerging Infec- tious Disease) management committees in response to the current COVID-19 outbreak,” it said. “These EID committees steer the local management response to the outbreak, includ- ing ensuring that our contractors have imple- mented appropriate measures. We have also implemented ‘self-declaration’ forms for all per- sonnel travelling to our offshore assets in Ghana that require people to sign off that they have not been to the ‘specified locations’ as defined by the UK Foreign & Commonwealth Office in the last 30 days, as well as implementing business travel restrictions to and from these ‘specified locations’.”
It added: “In the event that the COVID-19 outbreak escalates, the country-specific busi- ness continuity plans set out how Tullow will continue to operate, recover quickly from and effectively manage the response.”
In West Africa, Tullow operates the Jubilee and TEN (Tweneboa-Enyenra-Ntomme) block in Ghana and also holds non-operating stakes in fields in Cote d’Ivoire, Equatorial Guinea and Gabon. In East Africa, it is leading pro- jects in Uganda’s Lake Albert region and Ken- ya’s Lokichar Basin. Elsewhere in Africa, it has acquired a majority stake in assets in Namibia and Comoros and has exited projects in Mauri- tania and Zambia.
In South America, the company serves as operator of the Orinduik block offshore Guyana. It has non-operating stakes in fields in Argen- tina, Peru and Suriname and is also a partner in the Walton-Morant project in Jamaica. ™
BRAZIL
Petrobras CEO says low oil prices will hit his company’s finances
ROBERTO Castello Branco, the CEO of Petro- bras, has said he expects the plunge in world crude prices to affect his company’s finances this year.
Recent market fluctuations are sure to have a negative impact on state-owned Petrobras’ per- formance, Castello Branco told CNN’s Brazilian affiliate on March 16.
“Petrobras is in good shape financially. But our results will be hit, it is clear,” he said. “As an oil company, its profitability is affected by oil prices.”
Under these circumstances, he said, the national oil company (NOC) may have to revise plans for paying down $87bn worth of debts in
2020, up from $24bn in 2019. “We were plan- ning to do this [reduce debt] this year ... Let’s see if it will be viable or not. There is a question mark over it that did not exist before,” he told CNN Brasil.
He also stressed, though, that Petrobras was determined to lighten its debt portfolio so that it could obtain the financing it needs on more favourable terms. Doing so will help keep the company going, he said.
“Just to maintain our reserves, we have to
spend billions of dollars,” he remarked. “We
have to maintain our reserves to maintain pro- duction capacity and, as far as possible, to grow.
We have good projects to do that.” 
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