Tullow looks to increase stake in key Ghanaian assets

Tullow Oil is poised to increase its stake at the Jubilee and TEN fields offshore Ghana as the Africa-focused independent looks to double down on its existing production assets.

On Nov. 11, Tullow said it has exercised its right of pre-emption related to the sale of Occidental Petroleum's interests in the Jubilee and TEN fields in Ghana to Kosmos Energy.

This deal will add around 10% to Tullow's daily production and help it accelerate its debt reduction by generating over $250 million of cash flow at $65/b over 2022-2026, it said.

The 7.7% additional equity would also increase Tullow's net 2P reserves by approximately 21 million barrels of oil equivalent.

"This opportunity fits well with our strategy to focus on maximizing value from our producing assets," Tullow CEO Rahul Dhir said. "We look forward to constructive conversations with our joint venture partners and the Government of Ghana as we finalized the transaction."

Tullow recently upwardly revised its 2021 production guidance to 58,000-61,000 b/d from its previous forecast of 55,000-61,000 b/d. This is a fall of around 20% from 2020 when it pumped 74,900 b/d.

The decline has been attributed to a lack of drilling activity last year and a planned shutdown at the Jubilee field.

Tullow's equity interests will increase to 38.9% in the Jubilee field and to 54.8% in the TEN fields once the deal, which is expected to cost around $150 million, is complete.

This comes almost a month after Kosmos Energy said it planned to buy part of the Jubilee and TEN field interests sold by Occidental, as it looked to revive Ghanaian production.

The transaction, which Tullow will fund through existing resources, remains subject to finalizing definitive agreements with Kosmos Energy/Anadarko WCTP Company and approval by the government of Ghana.

New strategy

Tullow and its partners have been looking to improve operational performance at the fields after a series of setbacks in recent years hit the productive capacity of the assets, including a major fault with Jubilee's FPSO and water injection problems at TEN.

In April, the field partners began a critical multi-year, multi-well drilling campaign at Jubilee in a bid to stem production declines.

The cash-strapped company recently adopted a new strategy, which involves focusing almost solely on growing its Ghanaian assets and scaling down exploration at other frontier basins.

Tullow is hoping to generate $7 billion of operating cash flow over the next 10 years by focusing over 90% of its investment in its West African assets, the bulk of those in Ghana.

The flagship Jubilee field still has around 2 billion barrels of oil initially in place and to date Tullow has produced less than half of the expected ultimate recovery.

This is why Tullow is focused on growing this development through a combination of infill drilling, facilities expansion and two sanctioned projects in the eastern part of the field -- Jubilee North East and Jubilee South East.

It will also be focusing on the Greater Ntomme and Tweneboa area, which contains 80% of TEN's total resource.

The TEN fields have over 1 billion barrels of oil initially in place and to date Tullow has produced less than a third of the expected ultimate recovery through the Enyenra and Ntomme fields.

Ghana produces about 150,000 b/d of crude oil, mainly from the Jubilee, TEN and Sankofa fields.