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Tullow advances Guyana drilling programme after major ExxonMobil discoveries

Reproduced from Milbank Monitor

The Tullow-Eco Atlantic concession in the Orinduik Block offshore Guyana.

Tullow Oil has brought forward its drilling programme in Guyana, where ExxonMobil has racked up discoveries of billions of barrels.

The Dublin-listed company originally planned to start drilling wells at the end of this year, but is now set to begin in the second quarter because of the excitement over Exxon‘s nearby discoveries, Tullow CEO Paul McDade has said.

“We felt it would be good to try and accelerate the programme,” he said.

While Tullow acquired new licences off Ivory Coast, Suriname, Comoros and Peru in 2018, its focus this year will be on Guyana – where Exxon has found five billion barrels of recoverable oil.

In a trading update yesterday Tullow, which was founded 34 years ago by Aidan Heavey, said it will drill the Jethro prospect in the second quarter of 2019 as the first of two planned wells on the Orinduik block in Guyana.

A prospect called Carapa will be tested on the Kanuku licence, also in Guyana, in the third quarter of this year.

Tullow expects production to be in the region of 93,000-101,000 barrels of oil per day in 2019.

This is an increase on the 88,200 barrels of oil per day produced by the company in 2018, the majority of which came from the Ghanaian fields.

Tullow plans to drill seven wells in Ghana this year, where it estimates output will eventually reach as much as 180,000 barrels a day.

Increasing production in Ghana means it will likely remain Tullow‘s output hub, though a discovery in Guyana could create another focus area, Mr McDade said.

The company has around a 20pc chance of making a significant discovery in Guyana, Tullow‘s director of exploration Angus McCoss said in November.

The group said yesterday that full-year revenue for 2018 is expected to be around $1.8bn (€1.6bn).

Tullow expects gross profit to be approximately $1.1bn (€961m) for 2018.

Tullow had free cash flow of about $410m in 2018, which was slightly lower than previous guidance, due to ongoing talks with the Government of Uganda to finalise the sale of its stake in a project there, which is now expected to be completed in the first half of 2019.

Meanwhile, net debt at year-end was approximately $3.1bn, gearing the company at 1.9 times.

Job Langbroek, analyst at Davy Stockbrokers, said that while the guidance from Tullow ensured there were no real surprises, “the update underlines the fact that better oil prices and a growing production profile builds significant cash flows.”

“Moreover, future scheduled production growth from discovered resources is substantial. All this is a platform for the re-start of the new ventures business in the group,” Mr Langbroek added.

(Additional reporting Bloomberg)