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Tullow realigns Africa exploration strategy in Q2 report

30th July 2014

Tullow is pulling out of its Liberian and Sierra Leonean plays to focus on success elsewhere on the continent

Tullow realigns Africa exploration strategy in Q2 report
Tullow is pulling out of its Liberian and Sierra Leonean plays to focus on success elsewhere on the continent

“In the first half of 2014, Tullow made further important discoveries in Kenya and Norway and we have a concentrated exploration campaign planned for the next 18 months,” said Aidan Heavey, Tullow CEO. “We have also made good progress with the TEN project in Ghana, with our discussions with host governments on our developments in East Africa and with our financing. With strong revenues and cash-flow from our existing production and a well-funded and diverse balance sheet, Tullow is well placed for the remainder of this year and into 2015.”

Tullow says that revenues and gross profit for the period is in line with expectations, with exploration write-offs and a loss relating to the Uganda farm-down resulting in a loss after tax.

West African oil production averaged 63,900 boepd in the first half; strong underlying performance from core assets offset by non-booking of c.3,000 boepd due to ongoing licence negotiations in Gabon. Full year guidance for the region remains 64-68,000 boepd. In Ghana, the Jubilee field is on target to average full year gross production of 100,000 bopd.

Tullow reported good progress in major West and East Africa developments. The TEN project in Ghana is 30 per cent complete, on budget and on track for first oil in mid-2016, and an important MoU has been signed between the governments of Kenya and Uganda, and the partners are aligned in their ambition to reach project FID for development by the end of 2015/early 2016.

Exploration in Kenya continues with wildcat successes at Amosing-1 and Ewoi-1 supporting the Pmean discovered resource estimate of 600 mmbo; exploration and production campaign continues in the second half and into 2015 with basin and play testing campaigns in Kenya, Norway, Suriname and Gabon.

In Mauritania, the southern Block 1 and Block C-2 licences have been relinquished in order to focus on the diverse oil plays in Tullow’s central, northern and shallower acreage.

Tullow continued its exploration programme in Gabon and in July 2014 discovered a new oil accumulation with the Igongo-1 well.

The well encountered 90 metres of net oil and gas pay and options to bring the discovery quickly on-stream, through existing infrastructure, are being worked on with the operator. Whilst the current expectation of discovered resource volumes is modest, additional appraisal success could enhance the value this discovery has already added to Tullow’s West African portfolio. Drilling is expected to commence imminently at the offshore pre-salt Sputnik-1 exploration well.

After evaluating potential options in Liberia and Sierra Leone, Tullow made the decision not to renew its licence interests and will exit its position. Tullow’s interest in LB-15 in Liberia expired in June 2014 and its interest in SL-07B-11 in Sierra Leone will expire in August 2014, following which Tullow will have no licence interests in either country

Tullow continues to make good progress with its future developments in Kenya. A 3D seismic programme is ongoing over the basin bounding fault play in the west of the South Lokichar basin to gain detailed mapping of the fault trends, better understand the resource potential and progress to the development strategy.

The governments of Kenya, Uganda and Rwanda have signed a memorandum of understanding (MoU) and formed a steering committee to progress a regional crude oil export pipeline from Uganda through Kenya. The Kenya upstream partners have also signed a cooperation agreement with the Uganda upstream partners in support of the same objective.

In Madagascar, a farm-out of Tullow’s 100 per cent owned Mandabe (Block 3109) and Berenty (Block 3111) licences has concluded with OMV taking a 35 per cent stake across the onshore licences. This deal is conditional on OMNIS, the state licensing authority, obtaining the required presidential decree on behalf of the partnership. A seismic programme in the Mandabe licence (Block 3109) will commence later this year or early 2015, after the rainy season, and a well in the Berenty licence (Block 3111) is currently planned for 2015.

Working interest production across the board averaged 78,400 boepd, a decrease of 12 per cent from the corresponding prior year period (88,600 boepd). Sales volumes averaged 73,200 boepd, representing a decrease of 7 per cent.

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