TIDMTLW
RNS Number : 2277M
Tullow Oil PLC
13 September 2023
Tullow oil PLC - 2023 Half Year Results
First half revenue of $777 million, gross profit of $351 million
and profit after tax of $70 million
Start-up of Jubilee South East marks major step up in production
and free cash flow
Business plan on track to deliver c.$800 million free cash flow
between 2023-2025
13 September 2023 - Tullow announces its Half Year results for
the six months ended 30 June 2023. Tullow will host a webcast
presentation at 9am this morning, details of which can be found
below and online at www.tullowoil.com .
Rahul Dhir, Tullow Chief Executive Officer, commented today:
"We are at an important inflection point in the evolution of our
business plan. For the last two and a half years we have
relentlessly focused on capital discipline, operational performance
and appropriate investment in our assets. This has resulted in a
much-improved business, material debt reduction and most recently,
the delivery of Jubilee South East which has substantially
increased production. We now switch to harvesting mode as our
business is set to generate c.$800 million of free cash flow
between 2023 and 2025, whilst we will continue to run our business
with the same discipline. This will enable us to further reduce our
debt, put in place a sustainable capital structure and grow our
business to create value for our investors, host nations and
employees."
Delivering strategic priorities
-- First half working interest production of 53.5 kboepd;
additional 7.3 kboepd net gas production from Ghana.
-- Start-up of Jubilee South East project , with gross
production from the Jubilee field surpassing 100 kbopd.
-- Commercialisation of Ghana gas through interim gas sales
agreement; represents a new revenue stream for Tullow.
-- Strong operational and safety performance; 97% average uptime
at Jubilee and TEN FPSOs; four new Jubilee wells online year to
date.
-- Gabon portfolio optimisation through cashless asset swap
agreement with Perenco and licence extensions.
-- Unlocked value from sale of Tullow Guyana B.V., including the
Orinduik licence, to Eco Atlantic for cash and contingent
consideration.
-- Accelerated deleveraging through purchase of c.$166 million
of 2025 Notes for c.$100 million cash consideration.
First Half financial Results
-- Revenue of $777 million; realised oil price of $73.3/bbl
after hedging; gross profit of $351 million; profit after tax of
$70 million.
-- Underlying operating cash flow of $188 million(1) ; free cash flow of $(142) million(1) .
-- Capital investment of $187 million and decommissioning costs of $44 million.
-- Net debt at 30 June 2023 of $1.9 billion(1) ; Gearing of 1.7x
net debt/EBITDAX(1) ; liquidity headroom of $0.7 billion.
Full Year Outlook
-- Full year oil production guidance narrowed to 58 to 60 kbopd
(from 58 to 64 kbopd); additional c.7 kboepd gas production
expected from Ghana.
-- Unchanged full year capex guidance of c.$400 million and
decommissioning spend of c.$70 million.
-- Significant free cash flow reversal in the second half with
c.$200 million (1) generated at $80/bbl. Unchanged full year free
cash flow guidance of c.$100 million(1) at $80/bbl.
-- Year-end net debt expected to be c.$1.7 billion(1) and
gearing expected to be c.1.5x (net debt/EBITDAX)(1) .
-- Continued delivery of business plan to generate c.$800
million of free cash flow(1) from 2023 to 2025, supported by strong
production outlook and capex flexibility.
-- Progressing a range of options to address debt maturities and
position the business for a successful refinancing.
****
Webcast - 9:00 BST
Access the webcast using the following link and follow the
instructions provided: https://web.lumiconnect.com/156469303
Contacts
========================== ===================================
Tullow Investor Relations Camarco (Media) (+44 20 3781 9244)
ir@tullowoil.com Billy Clegg
Nicola Rogers Andrew Turner
Matthew Evans Rebecca Waterworth
========================== ===================================
(1) Alternative performance measures are reconciled on pages 36
to 39.
Operational UPDATE
Production
Group working interest production averaged 53.5 kboepd in the
first half of 2023. In addition, 7.3 kboepd of gas was sold under
the Ghana Interim Gas Sales Agreement. Full year oil production
guidance has been narrowed to 58-60 kbopd (previously 58 to 64
kbopd), driven by Jubilee first half performance slightly below
expectations and the timing of the Jubilee South East start up in
the second half of the year. Full year gas production in Ghana is
expected to average c.7 kboepd.
Ghana
Jubilee
Gross oil production from the Jubilee field averaged 72.4 kbopd
(net: 28.2 kbopd) in the first half of the year. This was slightly
below expectations largely due to reduced water injection in late
2022 and into the first quarter of 2023, which has since been
rectified in February 2023. In addition, Jubilee South East
starting up in July has shifted the tie in and contribution of new
wells to slightly later than planned. While this timing impacts the
full year forecast, the anticipated ramp up remains unchanged and
the field is expected to exit the year over 100 kbopd, as initially
forecast at the start of 2023. Full year 2023 gross oil production
from Jubilee is expected to average c.90 kbopd (net: c.35 kbopd),
reduced from c.95 kbopd gross (net: c.37 kbopd).
Four wells have been brought on stream year to date - a Jubilee
main producer in May, two JSE producers in July and another JSE
producer this month. Two further wells - both water injectors - are
scheduled to be brought on stream before year end. The wells are
performing in line with expectations and the start-up of JSE has
quickly increased gross production rates, with the field currently
producing over 100,000 bopd. The start-up of JSE marks a
significant milestone that underpins future growth and cash flow
delivery, and the Group looks forward to continued project
delivery.
Tullow and its partners aim to maintain the increased level of
production at Jubilee through an ongoing infill drilling programme.
The partnership has identified multiple future drilling locations
and further opportunities to extend the plateau towards the end of
the decade and realise the full potential of the significant
Jubilee resource base.
TEN
Production from the TEN fields averaged 20 kbopd (net: 11 kbopd)
during the first half of 2023, with improved pressure support from
injection wells put online during 2021-22 resulting in negligible
decline. Full year gross production remains c.20 kbopd gross (net:
c.11kbopd). A planned shutdown was carried out in July and work was
completed to improve asset integrity, enhance production through
increased gas injection and higher liquids recovery, and reduce
flaring in line with our Net Zero commitment. The TEN flare has
reduced by around 50% compared to before the shutdown and with a
plan to further reduce flaring at TEN into 2024.
Gas commercialisation
Net gas production in Ghana averaged 7.3 kboepd in the first
half of the year. The Interim Gas Sales Agreement, initially valued
at $0.50/mmbtu, was amended in July 2023 to a price of $2.90/mmbtu
until the end of the third quarter of 2023. The commercialisation
of Jubilee gas represents a new revenue stream for Tullow of c.$4
million per month, while commercial discussions continue for the
long-term gas sales agreement. Full year net gas production in
Ghana is expected to average c.7 kboepd.
Non-operated portfolio
Net production from the non-operated portfolio averaged 14.3
kboepd in the first half of 2023, in line with expectations, and
full year net production forecast remains c.14 kboepd.
Production from Gabon averaged 12.8 kbopd net in the first half
of 2023. In April 2023, a cashless asset swap was agreed with
Perenco Oil and Gas Gabon S.A. to optimise Tullow's equity
ownership across key fields in Gabon. The deal delivers a more
balanced portfolio of discovered resources, appraisal and
exploration assets, with the Tchatamba facilities placed as a core
hub for Tullow.
Tullow announced in August that it had gained Government
approval for the extension of several of its Gabon licences to 2046
reflecting the future potential of these Gabon fields and the
longevity of the Tchatamba facilities. The extension is expected to
add c. 5mmbbls net 2P reserves, which would deliver c.100% 2P
reserves replacement in Gabon this year .
Production from Tullow's fields in Gabon remains unaffected by
the ongoing political activity in the country and the Group
continues to work closely with the operators of its fields to
ensure the safe continuation of operations.
ILX drilling continued in Gabon with the Akoum B appraisal well
which was plugged and abandoned in the second quarter of 2023 after
encountering insufficient resources to justify development. Within
the Simba and DE8 licences, several low-risk and compelling
investment options are being high-graded for near term drilling
programmes.
Production from Espoir in Côte d'Ivoire averaged c.1.5 kboepd
net in the first half of 2023. Tullow and its Joint Venture (JV)
Partners exercised the option to purchase the Espoir FPSO for a
gross consideration of c.$20 million (c.$5 million net). Tullow
continues to work with the operator to establish the best way
forward for the asset.
Exploration
In August, Tullow announced the sale of Tullow Guyana B.V,
including the 60% operated Orinduik licence, to Eco Atlantic. The
sale consists of $0.7 million cash payment upon completion and
contingent considerations of $4 million on commercial discovery and
$10 million on issuance of a production licence. Furthermore,
royalty payments on potential future production of 1.75% of the
working interest entitlement revenue net of capital expenditure and
lifting costs will be due to Tullow. This transaction is in line
with Tullow's strategy to optimise its portfolio and unlock value
from its positions in emerging basins. Tullow and Eco Atlantic are
working to secure the required approvals before the end of the
year.
Decommissioning
Decommissioning expenditure in the UK and Mauritania was $44
million during the first half of the year and full year guidance
was lowered to c.$70 million, following the deferral of certain
activities into 2024. The majority of operational work is expected
to be completed by the end of 2025, with environmental and
monitoring surveys to continue from 2026. The expected remaining UK
and Mauritania decommissioning exposure over 2024-26 is c.$70
million. A further c.$10 million will be paid into escrow in 2023
for future decommissioning obligations in Ghana.
Kenya
Following the withdrawal of its minority partners from Project
Oil Kenya in the first half of 2023, Tullow is now the sole partner
in the project (refer to Note 11 for more detail). This has created
a more flexible proposition for a strategic partnership and
discussions continue with several interested parties. The Kenyan
energy regulator (EPRA) has recently engaged third party
consultants to assist with the review of the Field Development Plan
(FDP) and Tullow continues to work with the Government of Kenya and
EPRA on the approval of the FDP.
Environment, Social and GOVERNANCE (ESG)
As part of Tullow's decarbonisation programme towards Net Zero
in 2030, good progress is being made to eliminate routine flaring
on Tullow's FPSOs in Ghana. Increased gas handling capacity work is
underway on Jubilee, whilst t he TEN flare has reduced by around
50% compared to before the shutdown, with a plan to further reduce
flaring at TEN into 2024.
Tullow is progressing its carbon offset project with the Ghana
Forestry Commission. The project is set to mitigate Tullow's hard
to abate, residual, emissions whilst also supporting Ghana in
meeting its Nationally Determined Contributions under the Paris
Agreement. The Forestry Commission has started to engage initial
stakeholders involved with the project.
Tullow continues to support education and skills development in
our local communities. So far this year under Phase III of the
Senior High Schools programme construction has been completed on
facilities that will enable c.1000 students to access accommodation
and senior high school education, and Phase IV construction is
underway that will support over 1,000 additional students.
On local content, a focus area this year has been on developing
Ghanaian supplier community awareness; in July, 73 indigenous
Ghanaian companies and 11 officials of the Petroleum Commission
graduated from the "Tullow Supply Chain Academy Programme" run in
partnership with Accenture. Tullow continues to focus on increasing
procurement spend with indigenous and JV companies in Ghana. In the
first half of 2023, 95% of total procurement spend was with
indigenous and JV companies compared to 88% over the same period
last year.
At Tullow's Annual General Meeting on 24 May 2023, c.27% of
votes were cast against Resolution 19. The Resolution sought the
authority for the Company to purchase its own shares, pursuant to
section 701 of the Companies Act 2006 (the Act) (within the meaning
of section 693(4) of the Act) on such terms and in such manner as
the Board of Directors of the Company may from time to time
determine. As a special resolution it therefore did not pass. The
Board has continued its dialogue with our major shareholders who
voted against the resolution and has an understanding of the
concerns raised, which relate to the potential impact on their
existing shareholdings.
Mike Daly stepped down from the Board following the 2023 AGM,
having served nine years as an independent non-executive
Director.
Rebecca Wiles was appointed as an independent non-executive
Director in June 2023, bringing deep technical subsurface and
geoscience expertise as well as emerging markets experience in
Africa to the Tullow Board, following a 33-year career at BP
plc.
FINANCE REVIEw
Income Statement (key metrics) 1H 2023 1H 2022 Restated(1)
================================================================================== ======== ====================
Revenue ($m)
================================================================================== ======== ====================
Sales volume (boepd) 56,900 53,500
================================================================================== ======== ====================
Realised oil price ($/bbl) 73.3 86.3
================================================================================== ======== ====================
Total revenue 777 859
================================================================================== ======== ====================
Operating costs ($m)
================================================================================== ======== ====================
Underlying cash operating costs(2) 136 143
================================================================================== ======== ====================
Depreciation, Depletion and Amortisation (DD&A) of oil and gas and leased assets 163 177
================================================================================== ======== ====================
DD&A before impairment charges ($/bbl) 14.8 15.6
================================================================================== ======== ====================
Overlift, (underlift) and oil stock movements 109 (120)
================================================================================== ======== ====================
Administrative expenses 19 23
================================================================================== ======== ====================
Gain on bargain purchase - 197
================================================================================== ======== ====================
Gain on bond buyback 65 -
================================================================================== ======== ====================
Exploration costs written off (10) (87)
================================================================================== ======== ====================
Impairment of property, plant and equipment, net (33) (7)
================================================================================== ======== ====================
Net financing costs (135) (149)
================================================================================== ======== ====================
Profit from continuing activities before tax 217 561
================================================================================== ======== ====================
Income tax expense (147) (297)
================================================================================== ======== ====================
Profit for the year from continuing activities 70 264
================================================================================== ======== ====================
Adjusted EBITDAX (2) 1,171 1,276
================================================================================== ======== ====================
Basic earnings per share (cents) 4.9 18.4
================================================================================== ======== ====================
(1) Refer to note 2 for details on prior year restatement.
(2) Alternative performance measures are reconciled on pages 36
to 39.
Revenue
Sales volumes
During the period, there were 56,900 boepd (1H2022: 53,500
boepd) of liftings. The increase is mainly due to an additional
lifting in 1H 2023 in Gabon compared to 1H 2022 where an incident
at the Cap Lopez terminal had delayed a lifting. The total number
of liftings in Ghana is comparable to the previous period with 6 in
Jubilee (1H 2022: 5) and 2 in TEN (1H 2022: 3).
Realised oil price ($/bbl)
The Group's realised oil price after hedging for the period was
$73.3/bbl (1H 2022: $86.3/bbl) and before hedging $79.7/bbl (1H
2022: $106.9/bbl). Lower oil prices compared to 1H 2022 have
resulted in a lower hedge loss decreasing total revenue by $65.9
million in 1H 2023 (1H 2022: decrease of $189.6 million).
Cost of Sales
Underlying cash operating costs amounted to $136 million;
$12.4/boe (1H 2022: $143 million; $13.0/boe). The cash unit
operating costs have decreased against the comparative period due
to a decrease in total operating costs in Ghana following the
O&M transition in the second half of 2022 and in Gabon due to a
change in the cost allocation for the Perenco-operated fields.
Depreciation, depletion and amortisation (DD&A)
DD&A charges before impairment on production and development
assets amounted to $163 million; $14.8 /boe (1H 2022: $177 million:
$16.1/boe). This decrease in DD&A is mainly attributable to
2022 impairments relating to TEN.
Overlift, underlift and oil stock movements
The Group had an overlift expense compared to an underlift in
the comparative period. The change was due to timing of liftings
specifically in Gabon in 1H 2022 where an incident at the Cap Lopez
terminal delayed a lifting.
Administrative expenses
Administrative expenses of $19 million (1H 2022: $23 million)
have decreased against the comparative period mainly due to
decrease in depreciation of administrative assets. Tullow achieved
in excess of $360 million in net cash savings for the 3-year period
since mid-2020 to date thereby significantly exceeding the target
of $200 million cash savings for 3-year period that had been
set.
Gain on bond buyback - refer to Borrowings section below.
Exploration costs written off
During the first half of 2023, the Group has written off
exploration costs of $10 million (1H 2022: $87 million) which was
predominantly driven by Kenya where withdrawal of the JV Partners
led to a re-assessment of risks associated to reaching FID
resulting in a $9 million impairment.
Impairment of property, plant and equipment (PP&E)
The Group recognised a net impairment charge on PP&E of $33
million in respect of the first half 2023 (1H 2022: $7 million) due
to changes to estimates on the cost of decommissioning for certain
UK and Mauritania assets.
Net financing costs
Net financing costs for the period were $135 million (1H 2022:
$149 million). This decrease is mainly due to lower interest on
obligations under finance leases of $6 million as well as an
increase in interest income of $8 million primarily due to higher
interest rates. A reconciliation of net financing costs is included
in Note 9.
Taxation
The overall net tax expense of $147 million (1H 2022: $297
million) primarily relates to tax charges in respect of the Group's
production activities in West Africa, reduced by tax credits
associated with UK decommissioning, exploration write-offs and
impairments. The tax charge has been calculated by applying the
effective tax rate which is expected to apply to each jurisdiction
for the year ending 31 December 2023.
Based on a profit before tax for the first half of the year of
$217 million (1H 2022: $561 million), the effective tax rate is
67.7% (1H 2022: 52.9%). After adjusting for the non-recurring
amounts related to exploration write-offs, impairments, onerous
lease provisions and their associated tax benefit, the Group's
underlying effective tax rate is 56.2% (1H 2022: 63.0%). The
underlying effective tax rate has decreased primarily due to there
being no UK tax benefit from net interest and hedging expenses,
representing a smaller proportion of the Group's overall profits in
1H 2023 than in 1H 2022. Non-deductible expenditure in Ghana and
Gabon and prior year adjustments are additional contributing
factors.
The Group's future statutory effective tax rate is sensitive to
the geographic mix in which pre-tax profits arise. There is no UK
tax benefit from net interest and hedging expenses, whereas net
interest income and hedging profits would be taxable in the UK.
Consequently, the Group's tax charge will continue to vary
according to the jurisdictions in which pre-tax profits occur.
Analysis of adjusted effective Adjusted profit/(loss) Adjusted tax Adjusted effective
tax rate ($'m) before tax (expense)/credit tax rate
================================= ======================= ================== ===================
Ghana - 1H 2023 266.0 (97.7) 36.7%
================================= ======================= ================== ===================
1H 2022 543.8 (192.8) 35.5%
================================= ======================= ================== ===================
Gabon - 1H 2023 105.0 (49.7) 47.3%
================================= ======================= ================== ===================
1H 2022(1) 199.3 (93.0) 46.6%
================================= ======================= ================== ===================
Corporate - 1H 2023 (114.3) 1.7 1.5%
================================= ======================= ================== ===================
1H 2022 (299.7) 0.2 0.1%
================================= ======================= ================== ===================
Other non-operated & exploration
- 1H 2023 5.2 (1.5) 28.7%
================================= ======================= ================== ===================
1H 2022(1) 17.9 (5.2) 29.2%
================================= ======================= ================== ===================
Total - 1H 2023 261.9 (147.2) 56.2%
================================= ======================= ================== ===================
1H 2022(1) 461.3 (290.8) 63.0%
================================= ======================= ================== ===================
(1) The prior year has been restated to include the notional tax
on the profit oil within current tax expense in accordance with the
terms of the respective Production Sharing Contracts (PSCs). Refer
to note 2.
Adjusted EBITDAX
Adjusted EBITDAX for the year was $1,171 million (1H 2022
restated: $1,276 million). The decrease in the period was mainly
driven by lower revenues as a result of lower oil prices.
Profit for the year from continuing activities and earnings per
share
The profit after tax for the period amounted to $70 million (1H
2022: profit of $264 million). Basic earnings per share was 4.9
cents (1H 2022: 18.4 cents).
Balance Sheet and Liquidity management
Balance Sheet and Liquidity management
(key metrics) 1H 2023 1H 2022
======================================== ======== ========
Capital investment ($m)(1) 187 156
======================================== ======== ========
Derivative financial instruments
($m) (79) (573)
======================================== ======== ========
Borrowings ($m) (2,211) (2,471)
======================================== ======== ========
Underlying operating cash flow
($m) (1) 188 165
======================================== ======== ========
Free cash flow ($m)(1) (142) (205)
======================================== ======== ========
Net debt ($m)(1) 1,938 2,336
======================================== ======== ========
Gearing (times)(1, 2) 1.7 1.8
======================================== ======== ========
(1) Alternative performance measures are reconciled on pages 36
to 39.
(2) Revenue from crude oil sales has been restated following a
revision to the Group's accounting policy. This resulted in an
increase to revenue for the period ended 30 June 2023 of $8.0
million (1H 2022: $12.9 million; FY 2022: $21.4 million), and a
corresponding increase to income tax expense.
The restatement impacted Adjusted EBITDAX and Gearing as at 30
June 2022, increasing Adjusted EBITDAX from $1,262.6 million to
$1,275.5 million, and reducing gearing from 1.9 to 1.8. Refer to
Note 2.
Capital investment
Capital expenditure amounted to $187 million (1H 2022: $156
million) with $177 million invested in production and development
activities and $10 million invested in exploration and appraisal
activities.
Capital investment will continue to be carefully controlled in
the second half of 2023 and total 2023 capital expenditure is
expected to be c.$400 million. The capital investment total is
expected to comprise Ghana capex of c.$300 million, West African
Non-Operated capex of c.$60 million, Kenya capex of c.$10 million
and exploration spend of c.$30 million.
Derivative financial instruments
Tullow has a material hedge portfolio in place to protect
against commodity price volatility and to ensure the availability
of cash flow for re-investment in capital programmes that are
driving business delivery.
Tullow's commodity hedging policy aims to ensure that 60% of the
forecast sales entitlement volumes benefit from downside protection
for the first year ahead, and 30% for the second year ahead. In
addition, through appropriate instrument selection, Tullow is
committed to maintaining full access to upside for no less than 60%
of sales volumes. Tullow has recently started the implementation of
new hedges and now has downside protection in place for c.60% of
forecast sales volumes through to the end of 2023, with legacy
uncapped upside exposure for c.45% for the same period.
At 30 June 202 3 , the Group's derivative instruments had a net
negative fair value of $ 79 million (30 June 202 2 : negative $ 573
million).
All financial instruments that are initially recognised and
subsequently measured at fair value have been classified in
accordance with the hierarchy described in IFRS 13 Fair Value
Measurement. Fair value is the amount for which the asset or
liability could be exchanged in an arm's length transaction at the
relevant date. Where available, fair values are determined using
quoted prices in active markets. To the extent that market prices
are not available, fair values are estimated by reference to
market-based transactions or using standard valuation techniques
for the applicable instruments and commodities involved.
All of the Group's derivatives are Level 2 (1H 2022: Level 2).
There were no transfers between fair value levels during the
year.
Hedge position at 30 June 2023 2H 2023(1) 1H 2024(2) 2H 2024(3)
============================================= =========== =========== ===========
Hedged Volume (kbopd) 34,513 22,734 -
============================================= =========== =========== ===========
Weighted average bought put (floor) ($/bbl) $56/bbl $56/bbl -
============================================= =========== =========== ===========
Weighted average sold call ($/bbl) $75/bbl $76/bbl -
============================================= =========== =========== ===========
From 30 June to date, Tullow has added further hedge volumes in
the following periods:
(1) Aug-Dec 23: 5 kbopd $60/bbl straight puts;
(2) 1H 2024: c.9 kbopd $60/bbl straight puts,
(3) 2H 2024: 3.5 kbopd of collar structures with $60/bbl floors
and weighted average sold upside (ceiling) of $115/bbl.
Borrowings
On 15 May 2023, the Group made a mandatory prepayment of $100
million of the Senior Secured Notes due 2026, which reduced total
drawn debt to $2.4 billion. On 20 June 2023, the Group repurchased
$167 million nominal value of Senior Notes due 2025 for $100
million cash consideration through an Unmodified Dutch Auction.
This further reduced total debt to $2.2 billion. A gain on early
bond redemption of $65 million is recognised as other income in the
income statement. The remaining outstanding Senior Notes due 2025,
amounting to $633 million nominal value, are due in March 2025.
Management regularly reviews options for optimising the Group's
capital structure and may seek to retire or purchase outstanding
debt from time to time through cash purchases or exchanges in the
open market or otherwise. Refer to Note 18 - Borrowings for further
detail.
Credit Ratings
Tullow maintains credit ratings with Standard & Poor's
(S&P) and Moody's Investors Service (Moody's).
On 21 June 2023, S&P's downgraded Tullow's corporate credit
rating to CCC+, stable outlook, from B- with negative outlook, and
the rating of the $1.6 billion Senior Secured Notes due 2026 to
CCC+ from B- and the rating of the $633m Senior Notes due 2025 to
CCC from CCC+. S&P's rating action follows Tullow's repurchase
of $166.5 million of its $800 million Senior Notes due 2025 and
reflects S&P's view that there may be a risk of further bond
buybacks below par, which S&P's may see as distressed, and
Tullow's dependence, in S&P's view on favourable financial
markets to refinance its debt maturities.
On 21 June 2023, Moody's appended a limited default (LD)
designation to Tullow's Caa1-PD Probability of Default rating
following Tullow's repurchase of $166.5 million of its $800 million
Senior Notes due 2025. The LD designation reflects Moody's view
that Tullow's debt repurchase constitutes a 'distressed exchange'
under Moody's definition, which encompasses events whereby issuers
fail to fulfil debt service obligations outlined in their original
debt agreements, including buying back outstanding debt at a
substantial discount to par. As per Moody's methodology, the LD
designation was removed after 3 business days. The LD designation
does not constitute a rating action. Consequently, Tullow's ratings
remain unchanged at Caa1, negative outlook for the corporate credit
rating, Caa1 for the $1.6 billion Senior Secured Notes due 2026,
and Caa2 for the $633 million Senior Notes due 2025.
Underlying Operating Cash Flow and Free Cash Flow
Underlying operating cash flow amounted to $188 million (1H
2022: $165 million.) This increase mainly relates to a payment in
1H 2022 of $77 million relating to a historic dispute that has now
been settled, lower Gabon royalty payments of $18m and lower
operating costs of $11 million offset by a decrease in cash revenue
of $81 million in the current period.
Free cash flow has increased to $(142) million (1H 2022: $(205)
million) primarily due to an increase in underlying operating cash
flow of $23 million as explained above. There has been a decrease
in net cash used in investing activities of $58 million due to the
one- off Ghana pre-emption payment and Uganda FID consideration
receipt in 1H 2022 but this has been offset by an increase in capex
of $15 million and decommissioning spend of $11 million in the
current period.
Net Debt and Gearing
Reconciliation of net debt $m
============================================================================================= ======
FY 2022 net debt 1,864
============================================================================================= ======
Sales revenue (777)
============================================================================================= ======
Operating costs 136
============================================================================================= ======
Other operating and administrative expenses 189
============================================================================================= ======
Operating cash flow before working capital movements (452)
============================================================================================= ======
Movement in working capital 78
============================================================================================= ======
Tax paid 165
============================================================================================= ======
Purchases of intangible exploration and evaluation assets and property, plant and equipment 149
============================================================================================= ======
Other investing activities (13)
============================================================================================= ======
Other financing activities 215
============================================================================================= ======
Gain on bond buyback (65)
============================================================================================= ======
Foreign exchange loss on cash (3)
============================================================================================= ======
1H 2023 net debt 1,938
============================================================================================= ======
Liquidity Risk Management and Going concern
The Directors consider the going concern assessment period to be
up to 30 September 2024. The Group closely monitors and manages its
liquidity headroom. Cash forecasts are regularly produced, and
sensitivities run for different scenarios including, but not
limited to, changes in commodity prices, different production rates
from the Group's producing assets and different outcomes on ongoing
disputes or litigation.
Management has applied the following oil price assumptions for
the going concern assessment:
Base Case: $76/bbl for 2023, $74/bbl for 2024; and
Low Case: $70/bbl for 2023, $70/bbl for 2024.
The Low Case includes, amongst other downside assumptions, a 10%
production decrease and 12% increased operating costs compared to
the Base Case as well as increased outflows associated with ongoing
disputes. It also assumes that the TEN FPSO remains leased and not
purchased during the assessment period as Tullow has control over
the timing of the purchase under the contract.
At 30 June 2023, the Group had $0.7 billion liquidity headroom
consisting of c.$0.2 billion free cash and $0.5 billion available
under the revolving credit facility.
The Group or its affiliates may, at any time and from time to
time, seek to retire or purchase outstanding debt through cash
purchases and/or exchanges, in open-market purchases, privately
negotiated transactions or otherwise. Such repurchases or
exchanges, if any, will be upon such terms and at such prices as
management may determine, and will depend on prevailing market
conditions, liquidity requirements, contractual restrictions, and
other factors. The amounts involved may be material.
The Group's forecasts show that the Group will be able to
operate within its current debt facilities and have sufficient
financial headroom for the going concern assessment period under
its Base Case and Low Case. Based on the analysis above, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Thus, they have adopted the going concern basis of
accounting in preparing the half year results.
2023 principal risks and uncertainties
The Company risk profile has been closely monitored throughout
the year, with consideration given to the risks to delivering the
Business Plan, as well as whether external factors such as
geo-political factors, global pandemics and oil price volatility
have resulted in any new risks or changes to existing risks. The
impact of these factors has been considered and managed across all
principal risks. The directors have reviewed the principal risks
and uncertainties facing the Company and concluded that for the
remaining six months of the financial year are substantially
unchanged from those disclosed in the 2022 Annual Report and are
listed below.
1. Risk of failure to deliver business plan
2. Risk of an asset integrity breach
3. Risk of a major accident event
4. Risk of failure to unlock value
5. Risk of failure to manage geopolitical risks
6. Risk of failure to meet climate change targets
7. Risk of insufficient liquidity and funding capacity to
sustain and grow the business or risk of failure to deliver a
highly cash-generative business
8. Risk of failure to develop, retain and attract capability
9. Risk of a compliance or regulatory breach
10. Risk of major cyber disruption
The detailed descriptions of the principal risks and how they
are being managed can be found on pages 42 to 45 in the 2022 Annual
Report and Accounts.
Events since 30 June 2023
Gabon
Approval of asset swap with Perenco
On 28 April 2023, Tullow announced that through its wholly owned
subsidiary, Tullow Oil Gabon S.A., it had signed an asset swap
agreement (ASA) with Perenco Oil and Gas Gabon S.A. (Perenco).
Under the ASA, Tullow has agreed to assign and transfer certain of
its existing participating interests in Limande, Turnix, M'oba, Oba
and Simba assets to Perenco in return for the assignment and
transfer by Perenco of 15% if its participating interests in Kowe
(Tchatamba) and 20% of its participating interests in DE8 assets to
Tullow.
The exchange of the transferred Interests between the parties
will be deemed for all purposes to be made with effect from the
economic date of 1 February 2023. Due to the agreed neutrality of
the transaction, no additional consideration is payable by either
party in respect thereof. The ASA includes provisions to ensure the
neutrality of the transaction via cash adjustments for the period
between signing and completion.
On completion, all assets and associated liabilities relating to
the existing participating interests held in Limande, Turnix, M'Oba
and Oba assets, together with 17.5% of Tullow's interest in Simba,
will be disposed. All assets impacted by the transaction are
included in the "Non-Operated" business unit applied for segment
performance reporting.
The transaction is expected to complete by the end of 2023,
subject to the fulfilment of certain conditional precedents,
including the written approval of the relevant Governmental
Authority of the Gabonese Republic of the amendment of the Tullow
Protocol. (The "Tullow Protocol" is an investment convention that
applies to certain Tullow licences.)
Management concluded that the assets did not meet the IFRS 5
Held for Sale(HFS) criteria as of 30 June 2023 because the approval
of the Tullow Protocol was considered a substantive condition
without which the transaction would be unlikely to proceed.
Subsequent to the reporting date, the approval has been received
and the HFS criteria was met on 19 July 2023.
Licence extensions
On 9 August 2023, Tullow announced that it had gained approval
from the Government of Gabon for the extension of several of its
Gabon licences operated by Perenco, from 2034 to 2046. In addition
to fulfilling the conditional precedent to the swap transaction,
the licence extension increases the value of Tullow's resource base
through the addition of c.5mmbbls net 2P reserves that are expected
to deliver c.100% 2P reserves replacement in Gabon this year.
Current political situatio n
Production from Tullow's fields in Gabon remains unaffected by
the ongoing political activity in the country and the Group
continues to work closely with the operators of its fields to
ensure the safe continuation of operations.
Guyana
On 10 August 2023 Tullow announced that it had agreed to sell
its total interest in Tullow Guyana B.V., which includes the
Orinduik licence (60% operated equity) in Guyana, to Eco Guyana Oil
and Gas (Barbados) Limited in exchange for an upfront cash
consideration of $0.7 million and contingent consideration linked
to a series of potential future milestones, triggered as
follows:
-- $4 million payment in the event of a commercial discovery;
-- $10 million payment upon the issuance of a production licence
from the Government of Guyana;
-- Royalty payments on future production - 1.75% of the 60%
working interest entitlement revenue net of capital expenditure and
lifting costs.
The transaction is subject to customary government and other
approvals and is expected to complete in the second half of
2023.
There have not been any other events since 30 June 2023 that
have resulted in a material impact on the interim results.
Responsibility statement (DTR 4.2 and the Transparency
(Directive 2004/109/EC) Regulations (as amended))
The Directors confirm that to the best of their knowledge:
a. the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the UK and EU and IAS 34 'Interim Financial Reporting' as
adopted by the EU, the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority (DTR) and the
Transparency (Directive 2004/109/EC) Regulations 2007 as
amended
b. the interim management report includes a fair review of the
information required by DTR 4.2.7R and Regulation 8(2) (indication
of important events during the first six months and description of
principal risks and uncertainties for the remaining six months of
the year); and
c. the interim management report includes a true and fair review
of the information required by DTR 4.2.8R and Regulation 8(3)
(disclosure of related parties' transactions and changes
therein).
A list of the current Directors is maintained on the Tullow Oil
plc website: www.tullowoil.com.
By order of the Board,
Rahul Dhir
Chief Executive Officer
12 September 2023
Richard Miller
Chief Financial Officer
12 September 2023
Disclaimer
This statement contains certain forward-looking statements that
are subject to the usual risk factors and uncertainties associated
with the oil and gas exploration and production business. Whilst
the Group believes the expectations reflected herein to be
reasonable in light of the information available to them at this
time, the actual outcome may be materially different owing to
factors beyond the Group's control or within the Group's control
where, for example, the Group decides on a change of plan or
strategy. Accordingly, no reliance may be placed on the figures
contained in such forward-looking statements.
Independent review report to Tullow Oil plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises Condensed
consolidated income statement, Condensed consolidated statement of
comprehensive income and expense, Condensed consolidated balance
sheet, Condensed statement of changes in equity, Condensed
consolidated cash flow statement and the related notes 1 to 23. We
have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with UK and EU adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it
applies in the European Union. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with UK and EU adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that management have inappropriately adopted
the going concern basis of accounting or that management have
identified material uncertainties relating to going concern that
are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
12 September 2023
Condensed consolidated income statement
Six months ended 30 June 2023
Six months
Six months ended 30.06.22 Year ended
ended 30.06.23 Restated(1) 31.12.22
Unaudited Unaudited Audited
Notes $m $m $m
========================================== ====== ================ ================ ===========
Continuing activities
------------------------------------------ ------ ---------------- ---------------- -----------
6,
Revenue 7 776.9 858.6 1,783.1
------------------------------------------ ------ -----------
Cost of sales 8 (425.6) (225.4) (697.5)
========================================== ====== ================ ================ ===========
Gross profit 351.3 633.2 1,085.6
========================================== ====== ================ ================ ===========
Administrative expenses 8 (19.1) (23.2) (51.0)
------------------------------------------ ------ -----------
Gain on bargain purchase - 196.8 196.8
------------------------------------------ ------ -----------
Other (losses)/ gains (1.3) - 3.1
------------------------------------------ ------ -----------
Exploration costs written off 11 (10.1) (86.6) (105.2)
------------------------------------------ ------ -----------
Impairment of property, plant and
equipment, net 12 (33.2) (6.5) (391.2)
------------------------------------------ ------ -----------
Restructuring costs and other provisions 8 - (4.6) (4.2)
========================================== ====== ================ ================ ===========
Operating profit 287.6 709.1 733.9
========================================== ====== ================ ================ ===========
(Loss)/ gain on hedging instruments (0.3) - 0.8
------------------------------------------ ------ -----------
Gain on bond buyback 18 65.2 - -
------------------------------------------ ------ -----------
Finance income 9 25.0 21.1 42.9
------------------------------------------ ------ -----------
Finance costs 9 (160.3) (169.7) (335.5)
========================================== ====== ================ ================ ===========
Profit from continuing activities
before tax 217.2 560.5 442.1
========================================== ====== ================ ================ ===========
Income tax expense 10 (147.1) (296.6) (393.0)
========================================== ====== ================ ================ ===========
Profit for the year from continuing
activities 70.1 263.9 49.1
========================================== ====== ================ ================ ===========
Attributable to
------------------------------------------ ------ ---------------- ---------------- -----------
Owners of the Company 70.1 263.9 49.1
------------------------------------------ ------ ---------------- ---------------- -----------
Earnings per ordinary share from c c c
continuing activities
========================================== ====== ================ ================ ===========
Basic 3 4.9 18.4 3.4
------------------------------------------ ------ -----------
Diluted 3 4.7 17.8 3.3
========================================== ====== ================ ================ ===========
(1) Refer to Note 2 for details on prior period restatement.
Condensed consolidated statement of comprehensive income and
expense
Six months ended 30 June 2023
Six months ended 30.06.23 Six months ended 30.06.22 Year ended 31.12.22 Audited
Unaudited $m Unaudited $m $m
============================ ============================ ============================ ============================
Profit for the period 70.1 263.9 49.1
============================ ============================ ============================ ============================
Items that may be
reclassified to the income
statement in subsequent
periods
============================ ============================ ============================ ============================
Cash flow hedges
---------------------------- ----------------------------
Gains/ (losses) arising in
the period 68.1 (577.2) (399.5)
---------------------------- ----------------------------
Gains arising in the
period - time value 31.9 4.0 21.7
---------------------------- ----------------------------
Reclassification
adjustments for items
included in loss on
realisation 50.8 174.4 288.5
---------------------------- ----------------------------
Reclassification
adjustments for items
included in loss on
realisation - time value 15.1 12.0 30.8
---------------------------- ----------------------------
Exchange differences on
translation of foreign
operations (4.8) 8.6 10.2
============================ ============================ ============================ ============================
Other comprehensive income/
(expense) 161.1 (378.2) (48.3)
============================ ============================ ============================ ============================
Tax relating to components - - -
of other comprehensive
expense
============================ ============================ ============================ ============================
Net other comprehensive
income/ (expense) for the
period 161.1 (378.2) (48.3)
============================ ============================ ============================ ============================
Total comprehensive income/
(expense) for the period 231.2 (114.3) 0.8
============================ ============================ ============================ ============================
Attributable to
============================ ============================ ============================ ============================
Owners of the Company 231.2 (114.3) 0.8
============================ ============================ ============================ ============================
Condensed consolidated balance sheet
As at 30 June 2023
Six months ended Six months ended Year ended 31.12.22 Audited $m
30.06.23 Unaudited $m 30.06.22
Unaudited
Notes $m
================================= ====== ======================= ================= ===============================
Assets
--------------------------------- ------ ----------------- -------------------------------
Non-current asset
--------------------------------- ------ ----------------- -------------------------------
Intangible exploration and
evaluation assets 11 286.4 288.6 288.6
--------------------------------- ------ -------------------------------
Property, plant and equipment 12 3,008.2 3,413.3 2,981.4
--------------------------------- ------ -------------------------------
Other non-current assets 14 54.1 317.3 327.1
--------------------------------- ------ -------------------------------
Deferred tax assets 13.3 343.5 14.5
================================= ====== ======================= ================= ===============================
3,362.0 4,362.7 3,611.6
================================= ====== ======================= ================= ===============================
Current assets
--------------------------------- ------ -------------------------------
Inventories 16 124.9 333.3 181.6
------ -------------------------------
Trade receivables 13 164.0 290.2 26.8
--------------------------------- ------ -------------------------------
Other current assets 14 822.5 726.6 567.9
--------------------------------- ------ -------------------------------
Current tax assets 15.9 29.9 15.4
--------------------------------- ------ -------------------------------
Cash and cash equivalents 16 294.6 164.1 636.3
--------------------------------- ------ -------------------------------
1,421.9 1,544.1 1,428.0
================================= ====== ======================= ================= ===============================
Total assets 4,783.9 5,906.8 5,039.6
================================= ====== ======================= ================= ===============================
Liabilities
--------------------------------- ------ -------------------------------
Current liabilities
--------------------------------- ------ -------------------------------
Trade and other payables 17 (1,410.0) (828.8) (750.2)
--------------------------------- ------ -------------------------------
Borrowings 18 (100.0) (100.0) (100.0)
Provisions 19 (49.2) (205.2) (98.8)
Current tax liabilities (144.2) (189.5) (186.0)
Derivative financial instruments (78.6) (378.5) (186.3)
(1,782.0) (1,702.0) (1,321.3)
================================= ====== ======================= ================= ===============================
Non-current liabilities
--------------------------------- ------ -------------------------------
Trade and other payables 17 (84.5) (882.3) (780.0)
--------------------------------- ------ -------------------------------
Borrowings 18 (2,110.5) (2,370.7) (2,372.8)
--------------------------------- ------ -------------------------------
Provisions 19 (468.6) (443.7) (415.6)
--------------------------------- ------ -------------------------------
Deferred tax liabilities (565.5) (889.9) (551.5)
--------------------------------- ------ -------------------------------
Derivative financial instruments - (194.2) (57.9)
================================= ====== ======================= ================= ===============================
(3,229.1) (4,780.8) (4,177.8)
================================= ====== ======================= ================= ===============================
Total liabilities (5,011.1) (6,482.8) (5,499.1)
================================= ====== ======================= ================= ===============================
Net liabilities (227.2) (576.0) (459.5)
================================= ====== ======================= ================= ===============================
Equity
--------------------------------- ------ -------------------------------
Called-up share capital 216.2 214.9 215.2
--------------------------------- ------ -------------------------------
Share premium 1,294.7 1,294.7 1,294.7
--------------------------------- ------ -------------------------------
Foreign currency translation
reserve (243.4) (240.2) (238.6)
--------------------------------- ------ -------------------------------
Hedge reserve (31.4) (442.1) (150.3)
--------------------------------- ------ -------------------------------
Hedge reserve - time value (47.4) (130.9) (94.4)
--------------------------------- ------ -------------------------------
Merger reserve 755.2 755.2 755.2
--------------------------------- ------ -------------------------------
Retained earnings (2,171.1) (2,027.6) (2,241.3)
--------------------------------- ------ ======================= ================= -------------------------------
Equity attributable to equity
holders of the Company (227.2) (576.0) (459.5)
================================= ====== ======================= ================= ===============================
Total equity (227.2) (576.0) (459.5)
================================= ====== ======================= ================= ===============================
Condensed statement of changes in equity
As at 30 June 2023
Foreign Hedge
currency reserve
Share Share translation Hedge - Time Merger Retained Total
capital $m premium $m reserve(1) $m reserve(2) $m value $m reserve $m earnings $m equity $m
============= =========== =========== ============== ============== ========= =========== ============ ==========
At 1 January
2022 214.2 1,294.7 (248.8) (39.3) (146.9) 755.2 (2,295.2) (466.1)
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Profit for
the period - - - - - - 263.9 263.9
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Hedges, net
of tax - - - (402.8) 16.0 - - (386.8)
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Currency
translation
adjustments - - 8.6 - - - - 8.6
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Exercise of
employee
share
options 0.7 - - - - - (0.7) -
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Share-based
payment
charges - - - - - - 4.4 4.4
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
At 30 June
2022 214.9 1,294.7 (240.2) (442.1) (130.9) 755.2 (2,027.6) (576.0)
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Loss for the
period - - - - - - (214.8) (214.8)
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Hedges, net
of tax - - - 291.8 36.5 - - 328.2
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Currency
translation
adjustments - - 1.6 - - - - 1.6
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Exercise of
employee
share
options 0.3 - - - - - (0.3) -
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
Share-based
payment
charges - - - - - - 1.4 1.4
------------- ----------- ----------- -------------- -------------- --------- ----------- ------------ ----------
At 1 January
2023 215.2 1,294.7 (238.6) (150.3) (94.4) 755.2 (2,241.3) (459.5)
Profit for
the period - - - - - - 70.1 70.1
Hedges, net
of tax - - - 118.9 47.0 - - 165.9
Currency
translation
adjustments - - (4.8) - - - - (4.8)
Exercise of
employee
share
options 1.0 - - - - - (1.0) -
Share-based
payment
charges - - - - - - 1.1 1.1
============= =========== =========== ============== ============== ========= =========== ============ ==========
At 30 June
2023 216.2 1,294.7 (243.4) (31.4) (47.4) 755.2 (2,171.1) (227.2)
============= =========== =========== ============== ============== ========= =========== ============ ==========
(1) The foreign currency translation reserve represents exchange
gains and losses arising on translation of foreign currency
subsidiaries, monetary items receivable from or payable to a
foreign operation for which settlement is neither planned nor
likely to occur, which form part of the net investment in a foreign
operation.
(2) The hedge reserve represents gains and losses on derivatives
classified as effective cash flow hedges.
Condensed consolidated cash flow statement
Six months ended 30 June 2023
Notes Six months ended 30.06.23 Six months ended 30.06.22 Year ended 31.12.22
Unaudited $m Restated(1) Unaudited $m Audited $m
========================== ====== ========================== ========================== ==========================
Cash flows from operating
activities
-------------------------- ------ -------------------------- --------------------------
Profit from continuing
activities before tax 217.2 560.5 442.1
-------------------------- ------ --------------------------
Adjustments for
-------------------------- ------ --------------------------
Depreciation, depletion
and amortisation 167.1 183.5 425.8
-------------------------- ------ --------------------------
Gain on bargain purchase - (196.8) (196.8)
-------------------------- ------ --------------------------
Other losses/ (gains) 1.3 - (3.1)
-------------------------- ------ --------------------------
Taxes paid in kind (8.0) (12.9) (21.4)
-------------------------- ------ --------------------------
Exploration costs written
off 11 10.1 86.6 105.2
-------------------------- ------ --------------------------
Impairment of property,
plant and equipment, net 12 33.2 6.5 391.2
-------------------------- ------ --------------------------
Restructuring costs and
other provisions 19 - 4.6 4.2
-------------------------- ------ --------------------------
Payments under
restructuring costs and
other provisions 19 (0.6) (77.5) (127.3)
-------------------------- ------ --------------------------
Decommissioning
expenditure (40.0) (28.8) (57.7)
-------------------------- ------ --------------------------
Share-based payment
charge 1.1 4.4 5.8
-------------------------- ------ --------------------------
Loss/ (gain) on hedging
instruments 0.3 - (0.8)
-------------------------- ------ --------------------------
Gain on bond buyback 18 (65.2) - -
-------------------------- ------ --------------------------
Finance income 9 (25.0) (21.1) (42.9)
-------------------------- ------ --------------------------
Finance costs 9 160.3 169.7 335.5
-------------------------- ------ ========================== ========================== --------------------------
Operating cash flow
before working capital
movements 451.8 678.7 1,259.8
-------------------------- ------ --------------------------
(Increase)/ decrease in
trade and other
receivables (184.8) (118.0) 288.4
------ --------------------------
Decrease/ (increase) in
inventories 49.0 (198.6) (48.0)
-------------------------- ------ --------------------------
Increase/ (decrease) in
trade payables 61.3 (9.8) (193.1)
========================== ====== ========================== ========================== ==========================
Cash flows from operating
activities 377.3 352.3 1,307.1
-------------------------- ------ --------------------------
Income taxes paid (165.3) (143.7) (229.3)
-------------------------- ------ ========================== ========================== --------------------------
Net cash from operating
activities 212.0 208.6 1,077.8
========================== ====== ========================== ========================== ==========================
Cash flows from investing
activities
-------------------------- ------ --------------------------
Proceeds from disposals - 68.6 68.1
-------------------------- ------ --------------------------
Purchase of additional
interest in joint
operation - (126.8) (126.8)
-------------------------- ------ --------------------------
Purchase of intangible
exploration and
evaluation assets (14.4) (17.5) (42.6)
-------------------------- ------ --------------------------
Purchase of property,
plant and equipment (134.9) (117.3) (263.8)
-------------------------- ------ --------------------------
Interest received 13.2 1.1 8.9
========================== ====== ========================== ========================== ==========================
Net cash (used in)/ from
in investing activities (136.1) (191.9) (356.2)
========================== ====== ========================== ========================== ==========================
Cash flows from financing
activities
-------------------------- ------ --------------------------
Repayment of borrowings 23 (200.0) (100.0) (100.0)
-------------------------- ------ --------------------------
Repayment of obligations
under leases (90.1) (91.9) (203.8)
-------------------------- ------ --------------------------
Finance costs paid (125.0) (126.2) (249.0)
========================== ====== ========================== ========================== ==========================
Net cash used in
financing activities (415.1) (318.1) (552.8)
========================== ====== ========================== ========================== ==========================
Net decrease in cash and
cash equivalents (339.2) (301.4) 168.8
-------------------------- ------ --------------------------
Cash and cash equivalents
at beginning of period 636.3 469.1 469.1
-------------------------- ------ --------------------------
Foreign exchange loss (2.5) (3.6) (1.6)
========================== ====== ========================== ========================== ==========================
Cash and cash equivalents
at end of period 16 294.6 164.1 636.3
========================== ====== ========================== ========================== ==========================
(1) Refer to Note 2 for details on prior period restatement.
Notes to the condensed financial statements
Six months ended 30 June 2023
1. General information
The condensed financial statements for the six-month period
ended 30 June 2023 have been prepared in accordance with
International Accounting Standard (IAS) 34 Interim Financial
Reporting as adopted by UK and EU and the requirements of the
Disclosure and Transparency Rules (DTR) of the Financial Conduct
Authority (FCA) in the United Kingdom as applicable to interim
financial reporting.
The Condensed financial statements represent a 'condensed set of
financial statements' as referred to in the DTR issued by the FCA.
Accordingly, they do not include all the information required for a
full annual financial report and are to be read in conjunction with
the Group's financial statements for the year ended 31 December
2022, which were prepared in accordance with UK-adopted
international accounting standards (IFRSs) and International
Financial Reporting Standards (IFRSs) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
(EU). The Condensed financial statements are unaudited and do not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The financial information for the year ended 31
December 2022 does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. This information was derived
from the statutory accounts for the year ended 31 December 2022, a
copy of which has been delivered to the Registrar of Companies. The
auditor's report on these accounts was unqualified, did not include
a reference to any matters to which the auditor drew attention by
way of an emphasis of matter and did not contain a statement under
sections 498 (2) or (3) of the Companies Act 2006.
2. Accounting policies
The annual financial statements of Tullow Oil plc will be
prepared in accordance with United Kingdom adopted international
accounting standards ("UK adopted IFRSs") and International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No. 1606/2002 as it applies in the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard (IAS) 34 Interim Financial Reporting as adopted
by UK and EU, the Disclosure and Transparency Rules of the
Financial Conduct Authority and the Transparency (Directive
2004/109/EC) Regulations 2007 as amended.
The accounting policies adopted in the 2023 half-yearly
financial report are the same as those adopted in the Group's
Annual Report and Accounts as at 31 December 2022. This includes a
revised accounting policy in relation to the presentation of
corporate income taxes in Gabon and Côte d'Ivoire Production
Sharing Contracts (PSCs).
Under the terms of the PSCs the share of the profit oil which
the government is entitled to is deemed to include the notional
corporate income tax which is paid by the government on behalf of
Tullow. From 1 January 2022 the notional corporate income tax is
classified as an income tax in accordance with IAS 12 Income taxes
which has resulted in a gross up of revenue with a corresponding
increase in income tax expense. In the previous years, the Revenues
and Taxes from Gabon and Côte d'Ivoire were presented on a net
basis. This change has been implemented to more accurately
represent the Group's income tax obligations in Gabon and Côte
d'Ivoire and to be more comparable with other entities in the
sector.
Prior period balances as at 30 June 2022 have been adjusted only
to conform with the same presentation. As a result of the change,
revenue for the period ended 30 June 2022 increased from $845.7
million to $858.6 million, whilst income tax expense increased from
$283.7 million to $296.6 million. There is no impact on
profit/(loss) for the year from continuing activities nor on basic
and diluted earnings per share. In addition, the restatement had no
impact on reported net assets, cash flows or total equity.
The amendments on International Tax Reform - Pillar Two Model
Rules introduce a mandatory exception in IAS 12 'Income Taxes' to
recognizing and disclosing information about deferred tax assets
and liabilities related to Pillar Two income taxes. The amendments
have been adopted by the UK Endorsement Board but have yet to be
endorsed in the EU. Pillar Two introduces a minimum effective tax
rate of 15%, however the operation of the Pillar Two Model Rules is
complex, and it is unclear whether the Pillar Two Model Rules
create additional temporary differences, whether to remeasure
deferred taxes for the Pillar Two model rules and how to determine
the tax rate for measuring deferred taxes. Accordingly, the Group
has concluded that not accounting for deferred taxes related to
Pillar Two income taxes would result in the most appropriate
accounting policy pending the completion of the EU endorsement
process. The Group is not expecting profits in jurisdictions which
are taxed at below 15% and is therefore not anticipating any
current tax expense related to Pillar Two income taxes.
Going Concern
The Directors consider the going concern assessment period to be
up to 30 September 2024. The Group closely monitors and manages its
liquidity headroom. Cash forecasts are regularly produced, and
sensitivities run for different scenarios including, but not
limited to, changes in commodity prices, different production rates
from the Group's producing assets and different outcomes on ongoing
disputes or litigation.
Management has applied the following oil price assumptions for
the going concern assessment:
Base Case: $76/bbl for 2023, $74/bbl for 2024; and
Low Case: $70/bbl for 2023, $70/bbl for 2024.
2. Accounting policies continued
Going Concern continued
The Low Case includes, amongst other downside assumptions, a 10%
production decrease and 12% increased operating costs compared to
the Base Case as well as increased outflows associated with ongoing
disputes. It also assumes that the TEN FPSO remains leased and not
purchased during the assessment period as Tullow has control over
the timing of the purchase under the contract.
At 30 June 2023, the Group had $0.7 billion liquidity headroom
consisting of c.$0.2 billion free cash and $0.5 billion available
under the revolving credit facility.
The Group or its affiliates may, at any time and from time to
time, seek to retire or purchase outstanding debt through cash
purchases and/or exchanges, in open-market purchases, privately
negotiated transactions or otherwise. Such repurchases or
exchanges, if any, will be upon such terms and at such prices as
management may determine, and will depend on prevailing market
conditions, liquidity requirements, contractual restrictions, and
other factors. The amounts involved may be material.
The Group's forecasts show that the Group will be able to
operate within its current debt facilities and have sufficient
financial headroom for the going concern assessment period under
its Base Case and Low Case. Based on the analysis above, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Thus, they have adopted the going concern basis of
accounting in preparing the half year results.
3. Earnings per ordinary share
The calculation of basic earnings per share is based on the
profit for the period after taxation attributable to equity holders
of the parent of $70.1 million (1H 2022: profit of $263.9 million)
and a weighted average number of shares in issue of 1,444.0 million
(1H 2022: 1,435.3 million).
The calculation of diluted earnings per share is based on the
profit for the period after taxation as for basic earnings per
share. The number of shares outstanding, however, is adjusted to
show the potential dilution if employee share options are converted
into ordinary shares. The weighted average number of ordinary
shares is increased by 48.4 million resulting in a diluted weighted
average number of shares of 1,492.4 million (1H 2022: 1,481.0
million).
4. Dividends
The Directors intend to recommend that no 2023 interim dividend
be paid.
5. Approval of accounts
These unaudited half year results were approved by the Board of
Directors on 12 September 2023.
6. Segmental reporting
The information reported to the Group's Chief Executive Officer
for the purposes of resource allocation and assessment of segment
performance is focused on four Business Units - Ghana, Non-operated
producing assets including Uganda and decommissioning assets, Kenya
and Exploration. Therefore, the Group's reportable segments under
IFRS 8 are Ghana, Non-Operated, Kenya and Exploration.
The following tables present revenue, profit and certain asset
and liability information regarding the Group's reportable business
segments for the period ended 30 June 2023, 30 June 2022 and 31
December 2022.
Ghana $m Non-Operated $m Kenya $m Exploration $m Corporate $m Total $m
================================= ========== ================ ========= =============== ============= ==========
Six months ended 30 June 2023
---------------------------------
Sales revenue by origin 579.4 263.4 - - (65.9) 776.9
================================= ========== ================ ========= =============== ============= ==========
Segment result(1) 318.7 77.2 (9.1) (5.6) (73.2) 308.0
================================= ========== ================ ========= =============== ============= ==========
Other losses (1.3)
Unallocated corporate
expenses(2) (19.1)
================================= ========== ================ ========= =============== ============= ==========
Operating profit 287.6
---------------------------------
Loss on hedging instruments (0.3)
---------------------------------
Gain on bond buyback 65.2
---------------------------------
Finance income 25.0
---------------------------------
Finance costs (160.3)
================================= ========== ================ ========= =============== ============= ==========
Profit before tax 217.2
---------------------------------
Income tax expense (147.1)
================================= ========== ================ ========= =============== ============= ==========
Profit after tax 70.1
================================= ========== ================ ========= =============== ============= ==========
Total assets 3,857.5 364.1 258.9 47.7 255.7 4,783.9
================================= ========== ================ ========= =============== ============= ==========
Total liabilities(3) (2,250.8) (345.9) (10.2) (3.9) (2,400.3) (5,011.1)
--------------------------------- ========== ================ ========= =============== ============= ==========
Other segment information
---------------------------------
Capital expenditure:
Property, plant and equipment 201.3 48.8 - - 0.4 250.5
---------------------------------
Intangible exploration and
evaluation assets 0.3 (4.9) 3.1 9.4 - 7.9
---------------------------------
Depletion, depreciation and
amortisation (140.7) (22.9) (0.6) - (2.9) (167.1)
Impairment of property, plant
and equipment, net - (33.2) - - - (33.2)
Exploration costs written off (0.3) 4.9 (9.1) (5.6) - (10.1)
================================= ========== ================ ========= =============== ============= ==========
(1) Segment result is a non-IFRS measure which includes gross
profit, exploration costs written off and impairment of property,
plant and equipment. See reconciliation below.
(2) Unallocated expenditure and net liabilities include amounts
of a corporate nature and not specifically attributable to a
geographic area.
(3) Total liabilities - Corporate comprise of the Group's
external debt, derivative financial instruments and other
non-attributable liabilities.
6. Segmental reporting continued
Reconciliation of segment result
Six months ended 30.06.23 Six months ended 30.06.22 Year ended 31.12.22 Audited
Unaudited $m Restated(1) Unaudited $m $m
============================= ============================ =========================== ============================
Segment result 308.0 540.1 589.2
----------------------------- --------------------------- ----------------------------
Add back
----------------------------- --------------------------- ----------------------------
Exploration costs written
off 10.1 86.6 105.2
----------------------------- --------------------------- ----------------------------
Impairment of Property,
Plant and Equipment 33.2 6.5 391.2
----------------------------- --------------------------- ----------------------------
Gross profit 351.3 633.2 1,085.6
----------------------------- --------------------------- ----------------------------
(1) Revenue from crude oil sales has been restated following a
revision to the Group's accounting policy.
Ghana $m Non-Operated $m Kenya $m Exploration $m Corporate $m Total $m
=============================== ========== ================ ========= =============== ============= ==========
Six months ended 30 June 2022
-------------------------------
Sales revenue by origin -
restated(1) 781.0 267.3 - - (189.7) 858.6
-------------------------------
Segment result - restated(1,3) 609.1 215.7 - (86.9) (197.8) 540.1
=============================== ========== ================ ========= =============== ============= ==========
Other provisions(2) (4.1)
Gain on bargain purchase 196.8
Unallocated corporate
expenses(4) (23.7)
=============================== ========== ================ ========= =============== ============= ==========
Operating profit 709.1
-------------------------------
Finance income 21.1
-------------------------------
Finance costs (169.7)
-------------------------------
Profit before tax 560.5
=============================== ========== ================ ========= =============== ============= ==========
Income tax expense -
restated(1) (296.6)
-------------------------------
Profit after tax 263.9
=============================== ========== ================ ========= =============== ============= ==========
Total assets 4,923.2 521.9 270.8 44.8 146.1 5,906.8
=============================== ========== ================ ========= =============== ============= ==========
Total liabilities(5) (2,742.0) (494.4) (16.9) (11.6) (3,217.9) (6,482.8)
=============================== ========== ================ ========= =============== ============= ==========
Other segment information
=============================== ========== ================ ========= =============== ============= ==========
Capital expenditure:
-------------------------------
Property, plant and
equipment 135.5 20.5 - - 0.5 156.5
-------------------------------
Intangible exploration and
evaluation assets 0.3 (1.5) 2.6 19.2 - 20.6
-------------------------------
Depletion, depreciation and
amortisation (158.7) (18.6) (0.7) - (5.5) (183.5)
-------------------------------
Impairment of property, plant
and equipment, net - (6.5) - - - (6.5)
Exploration costs written off (0.3) 1.5 - (87.8) - (86.6)
=============================== ========== ================ ========= =============== ============= ==========
(1) Revenue from crude oil sales has been restated following a
revision to the Group's accounting policy. This resulted in an
increase to revenue for the period ended 30 June 2022 of $12.9
million (FY 2022: $21.4 million), and a corresponding increase to
income tax expense. Refer to Note 2.
(2) This is included within the Restructuring costs and other
provisions in the Group Income Statement.
(3) Segment result is a non-IFRS measure which includes gross
profit, exploration costs written off and impairment of property,
plant and equipment. See reconciliation below.
(4) Unallocated expenditure and net liabilities include amounts
of a corporate nature and not specifically attributable to a
geographic area.
(5) Total liabilities - Corporate comprise of the Group's
external debt, derivative financial instruments and other
non-attributable liabilities.
6. Segmental reporting continued
Ghana $m Non-Operated $m Kenya $m Exploration $m Corporate $m Total $m
------------------------------- ---------- ---------------- --------- --------------- ------------- ----------
Year ended 31 December 2022
-------------------------------
Sales revenue by origin 1,578.5 524.0 - - (319.4) 1,783.1
-------------------------------
Segment result(1) 692.5 337.3 (0.5) (102.6) (337.5) 589.2
=============================== ========== ================ ========= =============== ============= ==========
Other provisions(2) (4.1)
Gain on bargain purchase 196.8
Other gains 3.1
Unallocated corporate
expenses(3) (51.1)
=============================== ========== ================ ========= =============== ============= ==========
Operating profit 733.9
-------------------------------
Gain on hedging instruments 0.8
-------------------------------
Finance income 42.9
-------------------------------
Finance costs (335.5)
=============================== ========== ================ ========= =============== ============= ==========
Profit before tax 442.1
-------------------------------
Income tax expense (393.0)
=============================== ========== ================ ========= =============== ============= ==========
Profit after tax 49.1
=============================== ========== ================ ========= =============== ============= ==========
Total assets 3,827.7 380.6 265.6 46.0 519.7 5,039.6
=============================== ========== ================ ========= =============== ============= ==========
Total liabilities(4) (2,220.5) (401.6) (14.1) (4.6) (2,858.3) (5,499.1)
=============================== ========== ================ ========= =============== ============= ==========
Other segment information
-------------------------------
Capital expenditure:
-------------------------------
Property, plant and
equipment 342.9 26.9 - - 0.9 370.7
-------------------------------
Intangible exploration and
evaluation assets 0.9 (1.7) (2.1) 42.1 - 39.2
-------------------------------
Depletion, depreciation and
amortisation (362.1) (52.7) (1.3) - (9.7) (425.8)
-------------------------------
Impairment of property, plant
and equipment, net (380.6) (10.6) - - - (391.2)
-------------------------------
Exploration costs written off (0.9) 1.8 (0.5) (105.6) - (105.2)
=============================== ========== ================ ========= =============== ============= ==========
(1) Segment result is a non-IFRS measure which includes gross
profit, exploration costs written off and impairment of property,
plant and equipment. See reconciliation below.
(2) This is included within the Restructuring costs and other
provisions in the Group Income Statement.
(3) Unallocated expenditure and net liabilities include amounts
of a corporate nature and not specifically attributable to a
geographic area.
(4) Total liabilities - Corporate comprise of the Group's
external debt, derivative financial instruments and other
non-attributable liabilities.
6. Segmental reporting continued
Sales revenue Sales revenue
six months six months Sales revenue Non-current Non-current Non-current
ended 30.06.23 ended 30.06.22 Year ended assets assets assets
$m Restated(1) $m 31.12.22 $m 30.06.23(2) $m 30.06.22(2) $m 31.12.22(2) $m
================ =============== =============== =============== =============== =============== ===============
Ghana 579.4 781.0 1,578.5 2,848.5 3,473.9 3,087.4
---------------- --------------- --------------- --------------- ---------------
Total Ghana 579.4 781.0 1,578.5 2,848.5 3,473.9 3,087.4
================ =============== =============== =============== =============== =============== ===============
Kenya - - - 253.8 262.5 258.5
Total Kenya - - - 253.8 262.5 258.5
================ =============== =============== =============== =============== =============== ===============
Argentina - - - 35.1 31.8 33.6
Côte
d'Ivoire - - - 4.7 - 2.4
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total
Exploration - - - 39.8 31.8 36.0
---------------- --------------- --------------- --------------- ---------------
Gabon 242.1 234.4 477.0 126.9 137.0 132.6
---------------- --------------- --------------- --------------- ---------------
Côte
d'Ivoire 21.3 32.9 47.0 57.7 86.6 59.2
---------------- --------------- --------------- --------------- ---------------
Total
Non-Operated 263.4 267.3 524.0 184.6 223.6 191.8
================ =============== =============== =============== =============== =============== ===============
Corporate (65.9) (189.7) (319.4) 22.0 27.4 23.4
================ =============== =============== =============== =============== =============== ===============
Total 776.9 858.6 1,783.1 3,348.7 4,019.2 3,597.1
================ =============== =============== =============== =============== =============== ===============
(1) Revenue from crude oil sales has been restated following a
revision to the Group's accounting policy. This resulted in an
increase to revenue for the period ended 30 June 2023 of $8.0
million (1H 2022: $12.9 million; FY 2022: $21.4 million), and a
corresponding increase to income tax expense. Refer to Note 2.
(2) Excludes derivative financial instruments and deferred tax
assets.
7. Total revenue
Six months ended 30.06.23 Six months ended 30.06.22 Year ended 31.12.22 Audited
Unaudited $m Restated(1) Unaudited $m $m
============================= ============================ =========================== ============================
Revenue from contracts with
customers
Revenue from crude oil sales 837.9 1,048.3 2,102.5
Revenue from gas sales 4.9 - -
Total revenue from contracts
with customers 842.8 1,048.3 2,102.5
Loss on realisation of cash
flow hedges (65.9) (189.7) (319.4)
----------------------------- ----------------------------
Total revenue 776.9 858.6 1,783.1
============================= ============================ =========================== ============================
(1) Revenue from crude oil sales has been restated following a
revision to the Group's accounting policy. This resulted in an
increase to revenue for the period ended 30 June 2023 of $8.0
million (1H 2022: $12.9 million; FY 2022: $21.4 million), and a
corresponding increase to income tax expense. Refer to Note 2.
Finance income has been presented as part of net financing costs
(refer to note 9).
8. Operating profit
Six months ended 30.06.23 Six months ended 30.06.22 Year ended 31.12.22 Audited
Unaudited $m Unaudited $m $m
============================ ============================ ============================ ============================
Operating profit is stated
after charging/
(deducting):
---------------------------- ---------------------------- ----------------------------
Operating costs 136.4 142.7 266.5
---------------------------- ----------------------------
Depletion and amortisation
of oil and gas and leased
assets(1) 163.2 176.9 410.7
---------------------------- ----------------------------
Underlift, overlift and oil
stock movements(2) 108.9 (119.9) (46.3)
---------------------------- ----------------------------
Royalties 16.3 33.3 61.7
---------------------------- ----------------------------
Share-based payment charge
included in cost of sales - 0.2 0.4
---------------------------- ----------------------------
Other cost of sales 0.8 (7.8) 4.5
============================ ============================ ============================ ============================
Total cost of sales 425.6 225.4 697.5
---------------------------- ============================ ============================ ----------------------------
Administrative expenses
---------------------------- ----------------------------
Share-based payment charge
included in administrative
expenses 1.1 4.2 5.4
---------------------------- ----------------------------
Depreciation of other fixed
assets(1) 3.9 6.6 15.1
---------------------------- ----------------------------
Other administrative costs 14.1 12.4 30.5
============================ ============================ ============================ ============================
Total administrative
expenses 19.1 23.2 51.0
============================ ============================ ============================ ============================
Total restructuring costs
and other provisions - 4.6 4.2
============================ ============================ ============================ ============================
(1) Depreciation expense on leased assets of $30.0 million as
per note 12 includes a charge of $2.0 million on leased
administrative assets, which is presented within administrative
expenses in the income statement. The remaining balance of $28.0
million relates to other leased assets and is included within cost
of sales.
(2) Refer to page 4 of Finance Review and Note 17 for detailed
explanations.
9. Net financing costs
Six months ended 30.06.23 Six months ended 30.06.22 Year ended 31.12.22 Audited
Unaudited $m Unaudited $m $m
============================ ============================ ============================ ============================
Interest on bank overdrafts
and borrowings 122.7 127.1 250.4
---------------------------- ----------------------------
Interest on obligations for
leases 32.1 37.8 76.4
============================ ============================ ============================ ============================
Total borrowing costs 154.8 164.9 326.8
---------------------------- ----------------------------
Finance and arrangement
fees 0.1 0.1 0.3
---------------------------- ----------------------------
Other interest expense 0.4 1.5 2.4
---------------------------- ----------------------------
Unwinding of discount on
decommissioning provisions 5.0 3.2 6.0
============================ ============================ ============================ ============================
Total finance costs 160.3 169.7 335.5
============================ ============================ ============================ ============================
Interest income on amounts
due from Joint Venture
partners for leases (12.0) (15.7) (29.6)
============================ ============================ ============================ ============================
Other finance income (13.0) (5.4) (13.3)
============================ ============================ ============================ ============================
Total finance income (25.0) (21.1) (42.9)
============================ ============================ ============================ ============================
Net financing costs 135.3 148.6 292.6
============================ ============================ ============================ ============================
Other finance income mainly relates to interest on investments
in Money Market Funds of $8.3 million (1H 2022: $0.2 million, FY
2022: $3.7 million) and interest on a Ghana National Petroleum
Corporation (GNPC) loan in Ghana of $2.7 million (1H 2022: $0.6
million, FY 2022: $2.7 million).
10. Taxation on profit on ordinary activities
The overall net tax expense of $147.1 million (1H 2022: $296.6
million) primarily relates to tax charges in respect of the Group's
production activities in West Africa, reduced by tax credits
associated with UK decommissioning, exploration write-offs and
impairments. The tax charge has been calculated by applying the
effective tax rate which is expected to apply to each jurisdiction
for the year ending 31 December 2023.
Based on a profit before tax for the first half of the year of
$217.2 million (1H 2022: $560.5 million), the effective tax rate is
67.7% (1H 2022: 52.9%). After adjusting for the non-recurring
amounts related to exploration write-offs, impairments, onerous
lease provisions and their associated tax benefit, the Group's
underlying effective tax rate is 56.2% (1H 2022: 63.0%). The
underlying effective tax rate has decreased primarily due to there
being no UK tax benefit from net interest and hedging expenses,
representing a smaller proportion of the Group's overall profits in
1H 2023 than in 1H 2022. Non-deductible expenditure in Ghana and
Gabon and prior year adjustments are additional contributing
factors.
Uncertain tax treatments
The Group is subject to various material claims which arise in
the ordinary course of its business in various jurisdictions,
including cost recovery claims, claims from other regulatory bodies
and both corporate income tax and indirect tax claims. The Group is
in formal dispute proceedings regarding a number of these tax
claims with significant updates described in more detail below. The
resolution of tax positions, through negotiation with the relevant
tax authorities or litigation, can take several years to complete.
In assessing whether these claims should be provided for in the
Financial Statements, management has considered them in the context
of the applicable laws and relevant contracts for the countries
concerned. Management has applied judgement in assessing the likely
outcome of the claims and has estimated the financial impact based
on external tax and legal advice and prior experience of such
claims.
Due to the uncertainty of such tax items, it is possible that on
conclusion of an open tax matter at a future date the outcome may
differ significantly from management's estimate. If the Group was
unsuccessful in defending itself from all of these claims, the
result would be additional unprovided liabilities of $989.4 million
(1H 2022: $991.9 million; FY 2022: $1,024.0 million) which includes
$11.5 million of interest and penalties (1H 2022: $33.0 million; FY
2022: $32.4million).
Provisions of $99.4 million (1H 2022: $106.5 million; FY 2022:
$106.4 million) are included in income tax payable ($71.0 million
(1H 2022: $70.4 million; FY 2022: $70.6million)) and provisions
($28.4 million (1H 2022: $36.2 million; FY 2022: $35.8million)).
Where these matters relate to expenditure which is capitalised
within Intangible Exploration and Evaluation Assets and Property,
Plant and Equipment, any difference between the amounts accrued and
the amounts settled is capitalised within the relevant asset
balance, subject to applicable impairment indicators. Where these
matters relate to producing activities or historical issues, any
differences between the accrued and settled amounts are taken to
the group income statement.
The provisions and contingent liabilities relating to these
disputes have decreased following the conclusion of tax authority
challenges and matters lapsing under statutes of limitation, but
have increased, following new claims being initiated and
extrapolation of exposures through to 30 June 2023, giving rise to
an overall decrease in provision of $7.0 million and decrease in
contingent liability of $34.6 million from 31 December 2022.
Ghana tax assessments
In October 2021, Tullow Ghana Limited (TGL) filed a Request for
Arbitration with the International Chamber of Commerce (ICC)
disputing the US$320 million branch profits remittance tax (BPRT)
assessment issued as part of the direct tax audit for the financial
years 2014 to 2016. The Ghana Revenue Authority (GRA) is seeking to
apply BPRT under a law which the Group considers is not applicable
to TGL, since it falls outside the tax regime provided for in the
Petroleum Agreements and relevant double tax treaties. The parties
have agreed a procedural timetable for the arbitration under which
the first Tribunal hearing will be held in October 2023.
In December 2022, TGL received a $190.5m corporate income tax
assessment and payment demand from the GRA relating to the
disallowance of loan interest for the financial years 2010 to 2020.
The Group has previously disclosed assessments by the GRA relating
to the same issue; this revised assessment supersedes all previous
claims. The Group considers the assessment to breach TGL's rights
under its Petroleum Agreements. In February 2023, TGL filed a
Request for Arbitration to the ICC, disputing the assessment with
the suspension of TGL's obligation to pay any amount in relation to
the assessment until the dispute is formally resolved.
In December 2022, TGL received a $196.5m corporate income tax
assessment and payment demand from the GRA relating to proceeds
received by Tullow during the financial years 2016 to 2019 under
Tullow's corporate Business Interruption Insurance policy. The
Group considers the assessment to breach TGL's rights under its
Petroleum Agreements. In February 2023, TGL filed a Request for
Arbitration to the ICC, disputing the assessment with the
suspension of TGL's obligation to pay any amount in relation to the
assessment until the dispute is formally resolved.
The Group continues to engage with the Government of Ghana with
the aim of resolving all tax disputes on a mutually acceptable
basis.
10. Taxation on profit on ordinary activities continued
Bangladesh litigation
The National Board of Revenue (NBR) is seeking to disallow $118
million of tax relief in respect of development costs incurred by
Tullow Bangladesh Limited (TBL). The NBR subsequently issued a
payment demand to TBL in February 2020 for Taka 3,094m (c$37
million) requesting payment by 15 March 2020. However, under the
Production Sharing Contract (PSC), the Government is required to
indemnify TBL against all taxes levied by any public authority, and
the share of production paid to Petrobangla (PB), Bangladesh's
national oil company, is deemed to include all taxes due which PB
is then obliged to pay to the NBR. TBL sent the payment demand to
PB and the Government requesting the payment or discharge of the
payment demand under their respective PSC indemnities. On 14 June
2021 TBL issued a formal notice of dispute under the PSC to the
Government and PB. A further request for payment was received from
NBR on 28 October 2021 demanding settlement by 15 November 2021.
Arbitration proceedings were initiated under the PSC on 29 December
2021. A procedural hearing was held on 28 June 2022 which set the
timetable for the process going forward. The first submissions were
made in October 2022 and the second submissions were made in June
2023; with the first Tribunal hearing scheduled for May 2024.
Timing of cash-flows
While it is not possible to estimate the timing of tax cash
flows in relation to possible outcomes with certainty. Management
anticipates that there will not be material cash taxes paid in
excess of the amounts provided for uncertain tax treatments.
11 . Intangible exploration and evaluation assets
Six months ended 30.06.23 Six months ended 30.06.22 Year ended 31.12.22 Audited
Unaudited $m Unaudited $m $m
============================= =========================== ============================ ============================
At 1 January 288.6 354.6 354.6
----------------------------- ----------------------------
Additions 7.9 20.6 39.2
----------------------------- ----------------------------
Exploration costs written
off (10.1) (86.6) (105.2)
----------------------------- ----------------------------
At 30 June/31 December 286.4 288.6 288.6
============================= =========================== ============================ ============================
The below table provides a summary of the exploration costs
written off on a pre-tax basis by country.
Rationale for Remaining recoverable
Exploration costs written write-off/(back) six months Write-off/(back) 30.06.23 amount 30.06.23 Unaudited
off ended 30.06.23 Unaudited $m $m
============================= ============================ ============================ ===========================
Guyana a, b 1.6 -
----------------------------- ----------------------------
Côte d'Ivoire b 2.0 -
----------------------------- ----------------------------
Kenya c 9.1 246.7
----------------------------- ----------------------------
New Ventures d 2.1 -
----------------------------- ----------------------------
Uganda e (4.9) -
----------------------------- ----------------------------
Other a, b 0.2 -
----------------------------- ----------------------------
Exploration costs written off 10.1 -
=========================================================== ============================ ===========================
a. Licence relinquishments, expiry, planned exit or reduced
activity
b. Current year expenditure on assets previously written off
c. Following VIU assessment subsequent to withdrawal of JV
partners
d. New Ventures expenditure is written off as incurred
e. Release of indirect tax provision
11. Intangible exploration and evaluation assets continued
Since 1 January 2022, there have been ongoing discussions with
the Government of Kenya (GoK) on approval of the Field Development
Plan (FDP) submitted on 10 December 2021 and securing government
deliverables. An updated FDP was submitted on 3 March 2023 and is
being reviewed by the GoK before ratification by the Kenyan
Parliament. Energy and Petroleum Regulatory Authority (EPRA), the
regulator, has recently engaged third party consultants to review
the revised FDP and extended the review period to Q1 2024. The
Group expects a production licence to be granted once Government
due process has been completed.
On 22 May 2023, Africa Oil Corporation (AOC) and Total Energies
(TE) gave notice of their respective withdrawal from the Blocks
10BA, 10BB and 13T Production Sharing Contracts (PSCs) and the
Joint Operating Agreements (JOAs), effective 30 June 2023, quoting
differing internal strategic objectives as reasons. The withdrawal
is ultimately subject to the GoK's consent, at which stage the
transaction will be considered completed and Tullow will have full
rights and liabilities under the JOA. Per the terms of the
agreement, until such approval, the participating interest will
remain in trust for the sole and exclusive benefit of Tullow, who
is the only remaining joint venture partner.
In Management's view, in light of public statements and
announcements made by AOC and TE to this effect, and in accordance
with the terms of the Joint Operating Agreement, it is considered
that the ownership of the 50% held by AOC and TE was passed on 30
June 2023, resulting in Tullow holding 100%. From that date, Tullow
has the right to benefit from the participating interest and is
liable for all costs incurred going forward. As the sole party,
Tullow can control and direct the use of the asset from 30 June
2023. Tullow accounted for this as asset acquisition at nil
cost.
The withdrawal of the partners is considered to be an impairment
trigger, and in line with its accounting policy the Group has
performed a VIU assessment. The cash flows were discounted using a
pre-tax nominal discount rate of 20%. Oil price assumptions are
detailed in Note 12. This resulted in an NPV significantly in
excess of the book value of $255.8 million. However, the Group has
identified the following uncertainties in respect to the Group's
ability to realise the estimated VIU; receiving and subsequently
finalising an acceptable offer from a strategic partner and
securing governmental approvals relating thereto, obtaining
financing for the project and government deliverables. These items
require satisfactory resolution before the Group can take a Final
Investment Decision (FID). The Group continues to progress with the
farm down process.
Due to the binary nature of these uncertainties the Group was
unable to either adjust the cash flows or discount rate
appropriately. It has therefore used its judgement and assessed a
probability of achieving FID and therefore the recognition of
commercial reserves. This probability was applied to the VIU to
determine a risk adjusted VIU and compared against the net book
value of the asset. Certain risks have increased since 31 December
2022, predominantly around farm down and project financing. This
has been partially offset by an increased equity interest in the
project.
Based on this, the NPV has been revised to $246.7 million and an
impairment of $9.1 million has been recognized as at 30 June
2023.
Should the uncertainties around the project be resolved, there
will be a reversal of a previously recorded impairment. However, if
the uncertainties are not resolved there will be an additional
impairment of $246.7 million. A reduction or increase in the
two-year forward curve of $5/bbl, based on the approximate range of
annualized average oil price over recent history, and a reduction
or increase in the medium and long-term price assumptions of
$5/bbl, based on the range of annualized average historical prices,
are considered to be reasonably possible changes for the purposes
of sensitivity analysis. Decreases to oil prices specified above
would increase the impairment charge by $31.6 million, whilst
increases to oil prices specified above would result in a credit to
the impairment charge of $37.0 million. A 1% change in the pre-tax
discount rate would result in an additional impairment charge of
$34.7 million. The Group believes a 1% change in the pre-tax
discount rate to be a reasonable possibility based on historical
analysis of the Group's and a peer group of companies'
impairments.
Remaining recoverable
Exploration costs written Rationale for write-off six Write-off 30.06.22 amount 30.06.22 Unaudited
off months ended 30.06.22 Unaudited $m $m
============================ ============================ ============================ ============================
Guyana a,d 84.2 -
---------------------------- ----------------------------
Côte d'Ivoire b 2.0 -
---------------------------- ----------------------------
Other a, b, c 0.4 -
---------------------------- ----------------------------
Exploration costs written 86.6 -
off
============================ ============================ ============================ ============================
a. Licence relinquishments, expiry, planned exit or reduced
activity
b. Current year expenditure on assets previously written off
c. New Ventures expenditure is written off as incurred
d. Unsuccessful well costs written off
11. Intangible exploration and evaluation assets continued
Remaining
recoverable
Rationale Write-off amount
for write- 31.12.22 31.12.22
off year Audited Audited
Exploration costs written off ended 31.12.22 $m $m
============================== ================ ========== =============
Guyana a, b 97.7 -
------------------------------ ----------------
Côte d'Ivoire c 3.1 -
------------------------------ ----------------
New Ventures d 3.0 -
------------------------------ ----------------
Other 1.4 -
------------------------------ ----------------
Total write-off 105.2 -
============================== ================ ========== =============
a. Unsuccessful well costs written off.
b. Licence relinquishments, expiry, planned exit or reduced
activity.
c. Current year expenditure on assets previously written
off.
d. New Ventures expenditure is written off as incurred.
12. Property, plant and equipment
Oil and Right of Other Oil and Right of Other Right of Other
gas use fixed gas use fixed Oil and use fixed
assets assets assets Total six assets assets assets Total gas assets assets
six six six months six six six six assets Year six Total
months months months ended months months months months Year ended months Year
ended ended ended 30.06.23 ended ended ended ended ended ended ended ended
30.06.23 30.06.23 30.06.23 Unaudited 30.06.22 30.06.22 30.06.22 30.06.22 31.12.22 31.12.22 31.12.22 31.12.22
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited Audited Audited
$m $m $m $m $m $m $m $m $m $m $m $m
=============== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========= ========= ==========
Cost
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
At 1 January 11,182.6 1,196.8 30.0 12,409.4 10,521.7 1,091.7 69.5 11,682.9 10,521.7 1,091.7 69.5 11,682.9
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Additions 249.9 - 0.6 250.5 142.8 12.9 0.8 156.5 305.2 63.5 2.0 370.7
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Acquisitions - - - - 473.2 - - 473.2 473.2 - - 473.2
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Transfer - - - - - 86.6 - 86.6 - 86.6 - 86.6
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Asset
retirement - - - - - - - - - (41.7) (38.1) (79.8)
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Currency
translation
adjustments 47.2 1.3 0.6 49.1 (113.5) (3.2) (3.7) (120.4) (117.5) (3.3) (3.4) (124.2)
=============== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========= ========= ==========
At 30 June/31
December 11,479.7 1,198.1 31.2 12,709.0 11,024.2 1,188.0 66.6 12,278.8 11,182.6 1,196.8 30.0 12,409.4
=============== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========= ========= ==========
Depreciation,
depletion and
amortization
and impairment
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
At 1 January (8,888.4) (515.2) (24.4) (9,428.0) (8,263.7) (450.8) (53.8) (8,768.3) (8,263.7) (450.8) (53.8) (8,768.3)
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Charge for the
year (135.2) (30.0) (1.9) (167.1) (155.7) (23.2) (4.6) (183.5) (353.7) (60.9) (11.2) (425.8)
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Impairment
loss (33.2) - - (33.2) (6.5) - - (6.5) (391.2) - - (391.2)
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Capitalised
depreciation - (24.5) - (24.5) - (23.4) - (23.4) - (46.1) - (46.1)
--------------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Asset
retirement - - - - - - - - - 41.7 38.1 79.8
Currency
translation
adjustments (47.2) (0.4) (0.4) (48.0) 112.5 0.8 2.9 116.2 120.2 0.9 2.5 123.6
=============== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========= ========= ==========
At 30 June/31
December (9,104.0) (570.1) (26.7) (9,700.8) (8,313.4) (496.6) (55.5) (8,865.5) (8,888.4) (515.2) (24.4) (9,428.0)
--------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Net book value
at 30 June/31
December 2,375.7 628.0 4.5 3,008.2 2,710.8 691.4 11.1 3,413.3 2,294.2 681.6 5.6 2,981.4
=============== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========= ========= ==========
The currency translation adjustments arose due to the movement
against the Group's presentation currency, USD, of the Group's UK
assets which have functional currencies of GBP.
12. Property, plant and equipment continued
Impairment
30.06.23 30.06.23 Remaining recoverable amount
Trigger for impairment Unaudited Unaudited
six months ended 30.06.23 $m $m
============ =========================== =========== ======================================
Mauritania a 27.6 -
------------ ---------------------------
UK 'CGU'(1) a 5.6 -
------------ ---------------------------
Impairment 33.2 -
============ =========================== =========== ======================================
(1) The fields in the UK are grouped into one CGU as all fields
share critical gas infrastructure.
a. Change to decommissioning estimate.
Impairment
30.06.22 30.06.22 Remaining recoverable amount
Unaudited Unaudited
Trigger for impairment six months ended 30.06.22 $m $m
============ ================================================= =========== ======================================
Mauritania a 4.9 -
------------ -------------------------------------------------
UK 'CGU'(1) a 1.6 -
------------ ------------------------------------------------- =========== ======================================
Impairment 6.5 -
============ ================================================= =========== ======================================
(1) The fields in the UK are grouped into one CGU as all fields
share critical gas infrastructure.
a. Change to decommissioning estimate.
Impairment/ (reversal)
31.12.22 31.12.22 Remaining recoverable amount(2)
Audited) Audited
Trigger for impairment/ (reversal) year ended 31.12.22 $m Pre-tax discount rate assumption $m
============ ======================================================== ======================= ================================== =========================================
Limande and
Turnix CGU
(Gabon) a (1.6) 15% 44.6
------------ --------------------------------------------------------
Tchatamba
(Gabon) a (1.3) 15% 38.0
------------ --------------------------------------------------------
Oba and
Middle Oba
CGU
(Gabon) a (0.4) 17% 11.8
------------ --------------------------------------------------------
Echira,
Niungo and
Igongo
(Gabon) a (1.4) 17% 8.6
------------ --------------------------------------------------------
TEN (Ghana) b 380.6 13% 926.9
------------ --------------------------------------------------------
Mauritania a 12.8 n/a -
------------ --------------------------------------------------------
UK 'CGU'(1) a 2.5 n/a -
------------ --------------------------------------------------------
Impairment 391.2
====================================================================== ======================= ================================== =========================================
(1) The fields in the UK are grouped into one CGU as all fields
within those countries share critical gas infrastructure.
(2) The remaining recoverable amount of the asset is its value
in use.
a. Change to decommissioning estimate.
b. Revision of value based on revisions to reserves.
The Group applied the following nominal oil price assumption for
impairment assessments:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 onwards
======== ================= ======== ======== ======== ======== =======================
1H 2023 $76/bbl $74/bbl $70/bbl $70/bbl $70/bbl $70/bbl inflated at 2%
======== ================= ======== ======== ======== ======== =======================
FY 2022 $84/bbl $79/bbl $70/bbl $70/bbl $70/bbl $70/bbl inflated at 2%
======== ================= ======== ======== ======== ======== =======================
*At 1H 2022 there were no impairment assessments carried
out.
13. Trade receivables
Trade receivables comprise amounts due for the sale of oil and
gas. They are generally due for settlement within 30-60 days and
are therefore all classified as current. The Group holds the trade
receivable with the objective of collecting the contractual cash
flows and therefore measures them subsequently at amortised cost
using the effective interest method.
The balance of trade receivables as of 30 June 2023 of $164.0
million (1H 2022: $290.2 million; FY 2022: $26.8 million) mainly
relates to June 2023 oil liftings in Ghana ($65.4 million), Gabon
($67.8 million) and Côte d'Ivoire ($9.9 million) which were
collected in July 2023.
14. Other assets
30.06.23 Unaudited $m 30.06.22 Unaudited $m 31.12.22 Audited $m
========================================= ====================== ====================== ====================
Non-current
----------------------------------------- ---------------------- --------------------
Amounts due from joint venture partners 50.6 314.4 323.3
----------------------------------------- --------------------
VAT recoverable 3.5 2.9 3.8
========================================= ====================== ====================== ====================
54.1 317.3 327.1
========================================= ====================== ====================== ====================
Current
----------------------------------------- --------------------
Amounts due from joint venture partners 769.4 584.0 452.3
----------------------------------------- --------------------
Underlifts 20.7 76.0 76.2
----------------------------------------- --------------------
Prepayments 27.1 59.8 31.3
----------------------------------------- --------------------
Other current assets 5.3 6.8 8.1
========================================= ====================== ====================== ====================
822.5 726.6 567.9
========================================= ====================== ====================== ====================
876.6 1,043.9 895.0
========================================= ====================== ====================== ====================
The movement between current and non-current amounts due from
joint venture partners is driven by the receivables relating to the
TEN FPSO lease. This is based on the assumption that the lease term
will end in April 2024 when the purchase option is assumed to be
exercised.
Underlifts of $20.7 million as at 30 June 2023 are due to the
timing of liftings and are mainly attributable to the Jubilee field
in Ghana.
15. Inventories
30.06.23 Unaudited $m 30.06.22 Unaudited $m 31.12.22 Audited $m
=============================== ====================== ====================== ====================
Warehouse stock and materials 65.5 53.7 69.1
------------------------------- --------------------
Oil stock 59.4 279.6 112.5
=============================== ====================== ====================== ====================
124.9 333.3 181.6
=============================== ====================== ====================== ====================
The decrease in oil stock from 30 June 2022 was mainly driven by
the Cap Lopez incident in Gabon which delayed lifting by a month in
1H 2022.
The decrease in oil stock from 31 December 2022 is driven by a
decrease in Gabon of $72.9 million due to an additional lifting in
June 2023, partially offset by a stock increase in Ghana.
16. Cash and cash equivalents
30.06.23 Unaudited $m 30.06.22 Unaudited $m 31.12.22 Audited $m
================================================ ====================== ====================== ====================
Cash at bank 96.4 90.4 305.3
------------------------------------------------ --------------------
Short- term deposits and other cash equivalents 198.2 73.7 331.0
================================================ ====================== ====================== ====================
294.6 164.1 636.3
================================================ ====================== ====================== ====================
Short- term deposits and other cash equivalents include an
amount of $53.1 million (1H 2022: $51.8 million; FY 2022: $74.7
million) which the Group holds as operator in joint venture bank
accounts. Included within cash at bank is $4.5 million (1H 2022:
$3.8 million; FY 2022: $7.0 million) of restricted cash held as
collateral for performance bonds issued in relation to exploration
activities.
17. Trade and other payables
30.06.23 Unaudited $m 30.06.22 Unaudited $m 31.12.22 Audited $m
=============================== ====================== ====================== ====================
Current
Trade payables 65.1 54.8 68.4
Other payables 56.8 62.0 51.3
Overlifts - 93.9 -
Accruals 461.9 403.2 379.3
Current portion of leases 826.2 214.9 251.2
=============================== ====================== ====================== ====================
1,410.0 828.8 750.2
=============================== ====================== ====================== ====================
Non-current
Other non-current liabilities 46.2 45.1 47.1
------------------------------- --------------------
Non-current portion of leases 38.3 837.2 732.9
=============================== ====================== ====================== ====================
84.5 882.3 780.0
=============================== ====================== ====================== ====================
Accruals mainly relate to capital expenditure, interest expense
on bonds and loans and staff related expenses.
Other non-current liabilities include balances related to JV
Partners.
Trade and other payables are non-interest bearing except for
leases.
The movement between current and non-current portion of leases
is driven by TEN FPSO (Ghana). This is based on the assumption that
the lease term will end in April 2024 when the purchase option is
assumed to be exercised.
Payables related to operated joint ventures (primarily related
to Ghana and Kenya) are recorded gross with the debit representing
the partners' share recognised in amounts due from joint venture
partners (note 14). The change in trade payables and in other
payables predominantly represents timing differences and levels of
work activity.
Included in the lease liabilities as at 30 June 2022 and 31
December 2022 is $19.0 million and $6.6 million, respectively,
related to Espoir FPSO (Côte d'Ivoire). The JV partnership
exercised the option to purchase the FPSO, and the transaction
completed on 12 June 2023 for a gross consideration of $20.0
million ($4.7 million net to Tullow).
18. Borrowings
30.06.23 Unaudited $m 30.06.22 Unaudited $m 31.12.22 Audited $m
================================================ ====================== ====================== ====================
Current
------------------------------------------------ ---------------------- --------------------
Borrowings - within one year
------------------------------------------------ --------------------
10.25% Senior Notes due 2026 100.0 100.0 100.0
------------------------------------------------ --------------------
Carrying value of total current borrowings 100.0 100.0 100.0
================================================ ====================== ====================== ====================
Non-current
------------------------------------------------ --------------------
Borrowings - after one year but within five
years
------------------------------------------------ --------------------
7.00% Senior Notes due 2025 628.3 792.5 792.8
------------------------------------------------ --------------------
10.25% Senior Notes due 2026 1,482.2 1,578.2 1,580.0
------------------------------------------------ --------------------
Carrying value of total non-current borrowings 2,110.5 2,370.7 2,372.8
================================================ ====================== ====================== ====================
Carrying value of total borrowings 2,210.5 2,470.7 2,472.8
================================================ ====================== ====================== ====================
The Group's capital structure includes $1.6bn senior secured
notes (2026 Notes), $0.6bn senior notes due 2025 (2025 Notes) and
an undrawn $500 million Super Senior Revolving Credit Facility
(SSRCF) which will primarily be used for working capital purposes.
The 2026 Notes, maturing in May 2026, require an annual prepayment
of $100 million, in May, of the outstanding principal amount plus
accrued and unpaid interest, with the balance due on maturity.
On 15 May 2023, the Group made the annual prepayment of $100
million of the 2026 Notes, which reduced total debt to $2.4
billion. On 20 June 2023, the Group repurchased $167 million
nominal value of 2025 Notes for $100 million through an Unmodified
Dutch Auction. This further reduced total debt to $2.2 billion. A
gain on early bond buyback of $65 million is recognised as other
income in the income statement. The outstanding 2025 Notes,
amounting to $633 million nominal value, are due in March 2025.
18. Borrowings continued
The SSRCF, maturing in December 2024, comprises of (i) a $500
million revolving credit facility and (ii) a $100 million letter of
credit facility. The revolving credit facility remains undrawn as
at 30 June 2023. Letters of credit amounting to $23 million (FY
2022: $44 million) have been issued under the facility.
Unamortised debt arrangement fees for the 2026 Notes, 2025 Notes
and the SSRCF are $17.9 million, $5.0 million and $3.6 million
respectively.
The 2026 Notes and the SSRCF are senior secured obligations of
Tullow Oil Plc and are guaranteed by certain subsidiaries of the
Group.
Capital management
The Group defines capital as the total equity and net debt of
the Group. Capital is managed in order to provide returns for
shareholders and benefits to stakeholders and to safeguard the
Group's ability to continue as a going concern. Tullow is not
subject to any externally imposed capital requirements. To maintain
or adjust the capital structure, the Group may put in place new
debt facilities, issue new shares for cash, repay debt, engage in
active portfolio management, or undertake other such restructuring
activities as appropriate. No significant changes were made to the
capital management objectives, policies or processes during the
half year ended 30 June 2023. The Group monitors capital on the
basis of the gearing, being net debt divided by adjusted EBITDAX,
and maintains a policy target of less than 1x.
SSRCF covenants
The SSRCF does not have any financial maintenance covenants.
Availability under the $500 million cash tranche of the facility is
determined on an annual basis with reference to the Net Present
Value of the 2P reserves of the Group (2P NPV) at the end of the
preceding calendar year. SSRCF debt capacity is calculated as 2P
NPV divided by 1.1x less senior secured debt outstanding.
2025 Notes and 2026 Notes covenants
The 2025 Notes and the 2026 Notes are subject to customary high
yield covenants including limitations on debt incurrence, asset
sales and restricted payments such as prepayments of junior debt
and dividends.
Key covenants in the current business cycle are considered to be
those related to debt incurrence and restricted payments. For
definitions of the capitalised terms used in the following
paragraphs please refer to the offering memorandum of the 2025
Notes and/or the 2026 Notes.
Tullow is permitted to in cur additional debt if the ratio of
Consolidated Cash Flow to Fixed Charges for the previous 12 months
is at least 2.25 times on a pro forma basis.
Tullow is permitted to incur secured debt if the 2P Reserves
Coverage Ratio is at least 2.0 times on a pro forma basis.
Tullow is permitted to incur debt to refinance the 2025 Notes on
a like for like basis, i.e. subordinated to the 2026 Notes.
Tullow is permitted to make payments towards the 2025 Notes
amounting to the greater of $100 million per year and 50% of the
Consolidated Net Income of the Group for the period from 1 January
2021 to the end of the most recently completed fiscal half-year for
which internal financial statements are available if, after giving
pro forma effect to the payment(s), the 2P Reserves Coverage Ratio
is equal to or greater than 1.5 times.
Tullow is permitted to make payments towards the 2025 Notes
amounting to the greater of $100 million per year, 50% of the
Consolidated Net Income of the Group for the period from 1 January
2021 to the end of the most recently completed fiscal half-year for
which internal financial statements are available and 100% of
Consolidated Cash Flow per year if, after giving pro forma effect
to the payment(s), the 2P Reserves Coverage Ratio is equal to or
greater than 2.0 times and the Consolidated Leverage Ratio is less
than 1.5 times.
19. Provisions
Other Other Other
Decommissioning provisions Total Decommissioning provisions Total Decommissioning provisions Total
30.06.23 30.06.23 30.06.23 30.06.22 30.06.22 30.06.22 31.12.22 31.12.22 31.12.22
Unaudited $m Unaudited $m Unaudited $m Unaudited $m Unaudited $m Unaudited $m Audited $m Audited $m Audited $m
=================== ---------------- ------------- ------------- ================ ============= ============= ================ =========== ===========
At 1 January 398.1 116.3 514.4 498.7 228.8 727.5 498.7 228.8 727.5
------------------- ---------------- ------------- ------------- ---------------- ----------- -----------
New provisions,
changes in
estimates and
reclassifications 42.0 (1.4) 40.6 (2.4) (18.8) (21.2) (47.6) (19.7) (67.3)
------------------- ---------------- ------------- ------------- ---------------- ----------- -----------
Acquisitions - - - 24.8 36.8 61.6 24.8 36.8 61.6
------------------- ---------------- ------------- ------------- ---------------- ----------- -----------
Payments (43.8) (0.6) (44.4) (32.5) (77.5) (110.0) (72.1) (127.3) (199.4)
------------------- ---------------- ------------- ------------- ---------------- ----------- -----------
Unwinding of
discount 5.0 - 5.0 3.2 - 3.2 6.0 - 6.0
------------------- ---------------- ------------- ------------- ---------------- ----------- -----------
Currency
translation
adjustment 2.4 (0.2) 2.2 (10.5) (1.7) (12.2) (11.6) (2.3) (13.9)
=================== ================ ============= ============= ================ ============= ============= ================ =========== ===========
At 30 June/31
December 403.7 114.1 517.8 481.3 167.6 648.9 398.1 116.3 514.4
=================== ================ ============= ============= ================ ============= ============= ================ =========== ===========
Current provisions 36.2 13.0 49.2 106.1 99.1 205.2 87.7 11.1 98.8
=================== ================ ============= ============= ================ ============= ============= ================ =========== ===========
Non-current
provisions 367.5 101.1 468.6 375.2 68.5 443.7 310.4 105.2 415.6
=================== ================ ============= ============= ================ ============= ============= ================ =========== ===========
Other provisions include non-income tax provision and disputed
cases and claims. Management estimates non-current other provisions
would fall due between two and five years.
Non-current other provisions mainly relate to the Bangladesh
litigation. Refer to Note 10. Taxation on profit on continuing
activities. This also includes a provision relating to a potential
claim arising out of historical contractual agreement. Further
information is not provided as it will be seriously prejudicial to
the Company's interest.
The decommissioning provision represents the present value of
decommissioning costs relating to the European and African oil and
gas interests. The increase in the provision in 2023 relates to
changes in cost estimates in UK and Mauritania, as well as new
wells drilled in the Jubilee field in Ghana.
The Group has assumed cessation of production as the estimated
timing for outflow of expenditure. However, expenditure could be
incurred prior to cessation of production or after and actual
timing will depend on a number of factors including, underlying
cost environment, availability of equipment and services and
allocation of capital.
20. Called up share capital and share premium
As at 30 June 2023, the Group had in issue 1,448.3 million
allotted and fully paid ordinary shares of GBP 10 pence each (1H
21: 1,438.3 million, FY 2022: 1,439.6million).
In the six months ended 30 June 2023, the Group issued 8.7
million shares in respect of employee share options (1H 22: 6.2
million; FY 2022: 7.5 million new shares in respect of employee
share options).
21. Contingent Liabilities
30.06.23 Unaudited $m 30.06.22 Unaudited $m 31.12.22 Audited $m
============================== ====================== ====================== ====================
Contingent liabilities
------------------------------ ---------------------- --------------------
Performance guarantees 63.3 89.6 84.1
------------------------------ --------------------
Other contingent liabilities 55.8 60.2 55.8
============================== ====================== ====================== ====================
119.1 149.8 139.9
============================== ====================== ====================== ====================
Performance guarantees are in respect of abandonment
obligations, committed work programmes and certain financial
obligations.
Other contingent liabilities
This includes amounts for ongoing legal disputes with third
parties where we consider the likelihood of cash outflow to be
higher than remote but not probable. The timing of any economic
outflow if it were to occur would likely range between one and five
years.
22. Events since 30 June 2023
Gabon
Approval of asset swap with Perenco
On 28 April 2023, Tullow announced that through its wholly owned
subsidiary, Tullow Oil Gabon S.A., it had signed an asset swap
agreement (ASA) with Perenco Oil and Gas Gabon S.A. (Perenco).
Under the ASA, Tullow has agreed to assign and transfer certain of
its existing participating interests in Limande, Turnix, M'oba, Oba
and Simba assets to Perenco in return for the assignment and
transfer by Perenco of 15% if its participating interests in Kowe
(Tchatamba) and 20% of its participating interests in DE8 assets to
Tullow.
The exchange of the transferred Interests between the parties
will be deemed for all purposes to be made with effect from the
economic date of 1 February 2023. Due to the agreed neutrality of
the transaction, no additional consideration is payable by either
party in respect thereof. The ASA includes provisions to ensure the
neutrality of the transaction via cash adjustments for the period
between signing and completion.
On completion, all assets and associated liabilities relating to
the existing participating interests held in Limande, Turnix, M'Oba
and Oba assets, together with 17.5% of Tullow's interest in Simba,
will be disposed. All assets impacted by the transaction are
included in the "Non-Operated" business unit applied for segment
performance reporting.
The transaction is expected to complete by the end of 2023,
subject to the fulfilment of certain conditional precedents,
including the written approval of the relevant Governmental
Authority of the Gabonese Republic of the amendment of the Tullow
Protocol. (The "Tullow Protocol" is an investment convention that
applies to certain Tullow licences.)
Management concluded that the assets did not meet the IFRS 5
Held for Sale(HFS) criteria as of 30 June 2023 because the approval
of the Tullow Protocol was considered a substantive condition
without which the transaction would be unlikely to proceed.
Subsequent to the reporting date, the approval has been received
and the HFS criteria was met on 19 July 2023.
Licence extensions
On 9 August 2023, Tullow announced that it had gained approval
from the Government of Gabon for the extension of several of its
Gabon licences operated by Perenco, from 2034 to 2046. In addition
to fulfilling the conditional precedent to the swap transaction,
the licence extension increases the value of Tullow's resource base
through the addition of c.5mmbbls net 2P reserves that are expected
to deliver c.100% 2P reserves replacement in Gabon this year.
Guyana
On 10 August 2023, Tullow announced that it had agreed to sell
its total interest in Tullow Guyana B.V., which includes the
Orinduik licence (60% operated equity) in Guyana, to Eco Guyana Oil
and Gas (Barbados) Limited in exchange for an upfront cash
consideration of $0.7 million and contingent consideration linked
to a series of potential future milestones, triggered as
follows:
-- $4 million payment in the event of a commercial discovery
-- $10 million payment upon the issuance of a production licence from the Government of Guyana
-- Royalty payments on future production - 1.75% of the 60%
working interest entitlement revenue net of capital expenditure and
lifting costs.
The transaction is subject to customary government and other
approvals and is expected to complete in the second half of
2023.
There have not been any other events since 30 June 2023 that
have resulted in a material impact on the interim results.
23. Cash flow statement reconciliations
Movement in borrowings 1H23 $m FY22 $m 1H22 $m FY21 $m 1H23 Movement 1H22 Movement 2022 Movement
============================== -------- -------- -------- -------- ============== ============== ==============
Borrowings 2,210.5 2,472.8 2,470.7 2,568.7 (262.3) (98.0) (95.9)
------------------------------ -------- -------- -------- -------- --------------
Associated cash flows
Repayment of borrowings(1) (200.0) (100.0) (100.0)
Non-cash movements/presented
in other cash flow lines
Gain on bond buyback(1) (65.2) - -
Amortisation of arrangement
fees and accrued interest 2.9 2.0 4.1
------------------------------ -------- -------- ======== ======== -------------- -------------- --------------
(1) Refer to Note 18 for the detailed explanation of the
movement in borrowings.
Commercial Reserves and Contingent Resources summary working
interest basis
Ghana Non-Operated Kenya Exploration Total
--------------- --------------- -------------- -------------- ------------------------
Oil Gas Oil Gas Oil Gas Oil Gas Oil Gas Total
mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf mmboe
(3)
================ ======= ====== ======= ====== ======= ===== ======= ===== ======= ====== =======
COMMERCIAL
RESERVES(1)
================ ======= ====== ======= ====== ======= ===== ======= ===== ======= ====== =======
1 January 2023 164.3 157.3 37.8 5.1 - - - - 202.1 162.4 229.1
----------------
Production(2) (7.1) (6.7) (2.5) (0.5) - - - - (9.6) (7.3) (10.8)
================ ======= ====== ======= ====== ======= ===== ======= ===== ======= ====== =======
30 June 2023 157.2 150.6 35.3 4.6 - - - - 192.5 155.1 218.3
================ ======= ====== ======= ====== ======= ===== ======= ===== ======= ====== =======
CONTINGENT
RESOURCES(1)
================ ======= ====== ======= ====== ============== ======= ===== ======= ====== =======
1 January 2023 185.0 577.8 36.0 8.6 231.4 - 54.5 - 506.8 586.3 604.6
----------------
30 June 2023 185.0 577.8 36.0 8.6 231.4 - 54.5 - 506.8 586.3 604.6
================ ======= ====== ======= ====== ======= ===== ======= ===== ======= ====== =======
TOTAL
----------------
30 June 2023 342.2 728.4 71.3 13.2 231.4 54.5 - 699.3 741.4 822.9
================ ======= ====== ======= ====== ======= ===== ======= ===== ======= ====== =======
(1) Proven and Probable Reserves & Contingent Resources
above are as audited and reported by independent third-party
reserve auditors as of 31 December 2022 and production to 30 June
2023.
(2) Production accounted for all assets from January to June
2023.
(3) A gas conversion factor of 6 mscf/boe is used to calculate
the total petroleum mmboe.
The Group provides for depletion and amortisation of tangible
fixed assets on a net entitlement basis, which reflects the terms
of the Production Sharing Contracts related to each field. Total
net entitlement reserves were 209.3 mmboe as at 30 June 2023 (31
December 2022: 219.6 mmboe).
Contingent Resources relate to resources in respect of which
development plans are in the course of preparation or further
evaluation is under way with a view to future development.
Alternative performance measures
The Group uses certain measures of performance which are not
specifically defined under IFRS or other generally accepted
accounting principles. These non-IFRS measures include capital
investment, net debt, gearing, adjusted EBITDAX, underlying cash
operating costs, free cash flow, underlying operating cash flow and
pre-financing free cash flow.
Capital investment
Capital investment is defined as additions to property, plant
and equipment and intangible exploration and evaluation assets less
decommissioning asset additions, right-of-use asset additions,
additions to administrative assets and certain other adjustments.
The Directors believe that capital investment is a useful indicator
of the Group's organic expenditure on exploration and appraisal
assets and oil and gas assets incurred during a period because it
eliminates certain accounting adjustments such as decommissioning
asset adjustments.
1H 2023 1H 2022
=========================================================== ======== ========
Additions to property, plant and equipment 249.9 156.5
=========================================================== ======== ========
Additions to intangible exploration and evaluation assets 7.9 20.6
=========================================================== ======== ========
Less
=========================================================== ======== ========
Decommissioning asset adjustments 42.0 22.4
=========================================================== ======== ========
Right-of-use asset additions - 12.9
=========================================================== ======== ========
Lease payments related to capital activities (26.3) (19.5)
=========================================================== ======== ========
Additions to administrative assets 0.6 0.8
=========================================================== ======== ========
Other non-cash capital expenditure 54.6 4.5
=========================================================== ======== ========
Capital investment 186.9 156.0
=========================================================== ======== ========
Movement in working capital (38.2) (22.0)
=========================================================== ======== ========
Additions to administrative assets 0.6 0.8
=========================================================== ======== ========
Cash capital expenditure per the cash flow statement 149.3 134.8
=========================================================== ======== ========
Net debt
Net debt is a useful indicator of the Group's indebtedness,
financial flexibility and capital structure because it indicates
the level of cash borrowings after taking account of cash and cash
equivalents within the Group's business that could be utilised to
pay down the outstanding cash borrowings. Net debt is defined as
current and non-current borrowings plus non-cash adjustments, less
payments to convertible bond trustees and cash and cash
equivalents. Non-cash adjustments include unamortised arrangement
fees, adjustment to convertible bonds, and other adjustments. The
Group's definition of net debt does not include the Group's leases
as the Group's focus is the management of cash borrowings and a
lease is viewed as deferred capital investment. The value of the
Group's lease liabilities as at 30 June 2023 was $826.2 million
current and $38.3 million non-current; it should be noted that
these balances are recorded gross for operated assets and are
therefore not representative of the Group's net exposure under
these contracts.
1H 2023 1H 2022
=================================== ======== ========
Current borrowings 100.0 100.0
=================================== ======== ========
Non-current borrowings 2,110.5 2,370.7
=================================== ======== ========
Non-cash adjustments(1) 22.1 29.4
=================================== ======== ========
Less cash and cash equivalents(2) (294.6) (164.1)
=================================== ======== ========
Net debt 1,938.0 2,336.0
=================================== ======== ========
(1) Non-cash adjustments include unamortised arrangement fees
which are incurred on creation or amendment of borrowing
facilities.
(2) Cash and cash equivalents include an amount of $53.1 million
(1H 2022: $51.8 million) which the Group holds as operator in joint
venture bank accounts. Included within cash at bank is $4.5 million
(1H 2022: $3.8 million) of restricted cash held as collateral for
performance bonds issued in relation to exploration activity.
Gearing and Adjusted EBITDAX
Gearing is a useful indicator of the Group's indebtedness,
financial flexibility and capital structure and can assist
securities analysts, investors and other parties to evaluate the
Group. Gearing is defined as net debt divided by adjusted EBITDAX.
This definition of gearing differs from the one included in the RBL
facility agreements. Adjusted EBITDAX is defined as profit/(loss)
from continuing activities adjusted for income tax
(expense)/credit, finance costs, finance revenue, gain on hedging
instruments, depreciation, depletion and amortisation, share-based
payment charge, restructuring costs, gain/(loss) on disposal, gain
on bargain purchase, other gains and losses, gain on bond buyback,
exploration cost written off, impairment of property, plant and
equipment net, and provision for onerous service contracts.
1H 2023 1H 2022
Restated(2)
===================== ======== =============
Adjusted EBITDAX(1) 1,171.4 1,275.5
===================== ======== =============
Net debt 1,938.0 2,336.0
===================== ======== =============
Gearing (times) 1.7 1.8
===================== ======== =============
(1) Last 12 months (LTM). Refer to the 2022 Annual Report and
Accounts and 2022 Half year results for a full reconciliation of
2022 and 1H 2022 Adjusted EBITDAX.
(2) Revenue from crude oil sales has been restated following a
revision to the Group's accounting policy. This resulted in an
increase to revenue for the period ended 30 June 2023 of $8.0
million (1H 2022: $12.9 million; FY 2022: $21.4 million), and a
corresponding increase to income tax expense.
The restatement impacted Adjusted EBITDAX and Gearing as at 30
June 2022, increasing Adjusted EBITDAX from $1,262.6 million to
$1,275.5 million, and reducing gearing from 1.9 to 1.8. Refer to
Note 2.
Underlying cash operating costs
Underlying cash operating costs is a useful indicator of the
Group's costs incurred to produce oil and gas. Underlying cash
operating costs eliminates certain non-cash accounting adjustments
to the Group's cost of sales to produce oil and gas. Underlying
cash operating costs is defined as cost of sales, depletion and
amortisation of oil and gas assets, underlift, overlift and oil
stock movements, share-based payment charge included in cost of
sales, and certain other cost of sales. Underlying cash operating
costs are divided by production to determine underlying cash
operating costs per boe.
In 2023 and 2022, Tullow incurred abnormal non-recurring costs
which are presented separately below. The adjusted normalised cash
operating costs are a helpful indicator to the forward underlying
costs of the business.
1H 2023 1H 2022
================================================================ ======== ========
Cost of sales 425.6 225.4
================================================================ ======== ========
Add
================================================================ ======== ========
Lease payments related to operating activity 7.2 7.9
================================================================ ======== ========
Less
================================================================ ======== ========
Depletion and amortisation of oil and gas and leased assets(1) 163.2 176.9
================================================================ ======== ========
Underlift, overlift and oil stock movements(2) 108.9 (119.9)
================================================================ ======== ========
Royalties 16.3 33.3
================================================================ ======== ========
Share-based payment charge included in cost of sales(3) - 0.2
================================================================ ======== ========
Other cost of sales(4) 8.0 0.1
================================================================ ======== ========
Underlying cash operating costs 136.4 142.7
================================================================ ======== ========
Non-recurring costs(5) (15.6) (14.4)
================================================================ ======== ========
Total normalised operating costs 120.8 128.3
================================================================ ======== ========
Production (MMboe) 11.0 11.0
================================================================ ======== ========
Underlying cash operating costs per boe ($/boe) 12.4 13.0
================================================================ ======== ========
Normalised cash operating costs per boe ($/boe) 11.0 11.6
================================================================ ======== ========
(1) Depletion and amortisation of oil and gas assets is the
depreciation and amortisation of the Group's oil and gas assets
over the life of an asset on a unit of production basis.
(2) Under lifting or offtake arrangements for oil and gas
produced in certain operations in which the Group has interests
with other commercial partners, each participant may not receive
and sell its precise share of the overall production in each
period. The resulting imbalance between cumulative entitlement and
cumulative production less stock constitutes "underlift" or
"overlift". Underlift and overlift are valued at market value and
included within other current assets and other current payables on
the Group's balance sheet, respectively. Movements during an
accounting period are charged to cost of sales rather than charged
through revenue, and as a result gross profit is recognised on an
entitlements basis.
(3) Share-based payment charge included in cost of sales relates
to the portion of the non-cash share-based payment charge that
relates to employees who work on operational projects.
(4) Other cost of sales includes purchases of gas from third
parties to fulfil gas sales contracts and royalties paid in
cash.
(5) Non-recurring costs include O&M (Operations &
Maintenance) costs, riser remediation costs, facility projects
costs, OOSYS (Oil offloading system) costs, CSV (Construction
Support Vessel) campaign costs and shutdown costs.
Free cash flow
Free cash flow is a useful indicator of the Group's ability to
generate cash flow to fund the business and strategic acquisitions,
reduce borrowings and provide returns to shareholders through
dividends. Free cash flow is defined as net cash from operating
activities, and net cash used in investing activities, less debt
arrangement fees, repayment of obligations under leases, finance
costs paid and foreign exchange gain/ (loss).
1H 2023 1H 2022
======================================= ======== ========
Net cash from operating activities 212.0 208.6
======================================= ======== ========
Net cash used in investing activities (136.1) (191.9)
======================================= ======== ========
Repayment of obligations under leases (90.1) (91.9)
======================================= ======== ========
Finance costs paid (125.0) (126.2)
======================================= ======== ========
Foreign exchange loss (2.5) (3.6)
======================================= ======== ========
Free cash flow (141.7) (205.0)
======================================= ======== ========
Underlying operating cash flow
This is a useful indicator of the Group's assets' ability to
generate cash flow to fund further investment in the business,
reduce borrowings and provide returns to shareholders. Underlying
operating cash flow is defined as net cash from operating
activities less repayments of obligations under leases plus
decommissioning expenditure.
Pre-financing free cash flow
This is a useful indicator of the Group's assets' ability to
generate cash flow to reduce borrowings and provide returns to
shareholders through dividends. Pre-financing free cash flow is
defined as net cash from operating activities, and net cash used in
investing activities, less repayment of obligations under leases
and foreign exchange gain.
1H 2023 1H 2022
============================================== ======== ========
Net cash from operating activities 212.0 208.6
============================================== ======== ========
Less
============================================== ======== ========
Decommissioning expenditure 40.0 28.8
============================================== ======== ========
Lease payments related to capital activities 26.3 19.5
============================================== ======== ========
Add
============================================== ======== ========
Repayment of obligations under leases (90.1) (91.9)
============================================== ======== ========
Underlying operating cash flow 188.2 165.0
============================================== ======== ========
Net cash used in investing activities (136.1) (191.9)
============================================== ======== ========
Decommissioning expenditure (40.0) (28.8)
============================================== ======== ========
Lease payments related to capital activities (26.3) (19.5)
============================================== ======== ========
Pre-financing free cash flow (14.2) (75.2)
============================================== ======== ========
WEBCAST - 9:00 BST
To access the webcast please use the following link and follow
the instructions provided:
https://web.lumiconnect.com/156469303
A replay will be available on the website from midday on 13
September 2023:
https://www.tullowoil.com/investors/results-reports-and-presentations/
Contacts
Tullow Oil plc (Investors) Camarco (Media)
(London) (London)
(+44 20 3249 9000) (+44 20 3781 9244)
Nicola Rogers Billy Clegg
Matthew Evans Andrew Turner
Rebecca Waterworth
=========================== ====================
Notes to editors
Tullow is an independent oil & gas, exploration and
production group which is quoted on the London, Irish and Ghanaian
stock exchanges (symbol: TLW). The Group has interests in over 30
licences across eight countries. In March 2021, Tullow committed to
becoming Net Zero on its Scope 1 and 2 emissions by 2030.
For further information, please refer to our website at
www.tullowoil.com .
Follow Tullow on:
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