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INTERVIEW: CEO says Tullow on track to deliver new E&P strategy after debt refinancing

Highlights

Production will recover 'quite significantly' in 2022 after sharp fall this year

Drilling campaign in Ghana progressing well

Confident Kenyan project will be economically viable, getting capital will be challenging

Tullow Oil is looking to double-down its efforts on exploration and production in West Africa, as the oil explorer finds itself on a more stable financial footing more than a year after its leadership was overhauled, CEO Rahul Dhir said July 14.

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In an interview with S&P Global Platts, Dhir also said he was confident that Tullow's crude production would recover significantly in 2022 due to an increase in drilling activity offshore Ghana, despite a sharp fall in its output expected this year.

"We are in what I call delivery mode," Dhir said. "Every day [we] are looking at operational performance, looking at costs, looking at ways to maximize recovery from our assets. We have recognized that we have a unique geoscience capability. We have a very unique understanding of the resource base of where we are and there is a potential to add value."

Tullow has had to reinvent itself in the past year and a half after a series of operational and financial setbacks. Its recent move to refinance its debt with a major bond placement has helped it recover financially, and it is nowconcentrating on its assets in Ghana and in the surrounding West Africa.

"We have a refocused exploration strategy which is aligned with our core producing assets," Dhir said.

Besides focusing on the Jubilee and TEN fields in Ghana, Dhir said it was optimistic that its Simba project there and Block CI-524 in Cote D'Ivoire will yield positive results in the coming years. Both of these are short-cycle projects, which are very close to already existing oil infrastructure, which could be easily fast-tracked to production.

Fluctuating production fortunes

In its latest trading statement, released earlier July 14, Tullow downgraded its 2021 production guidance to 55,000-61,000 b/d from its previous forecast of 60,000-66,000 b/d, reflecting the sale of its assets in Equatorial Guinea and Gabon to Panoro Energy. Tullow's working interest production averaged 61,200 b/d in the first half of the year.

But Dhir said there will be a reversal of this trend in 2022 as the "real effect" of its recent drilling work in Ghana will bear fruit. Production will recover quite significantly next year, close to 2020 levels, when it pumped 74,900 b/d, he added.

Tullow is in the midst of a multiyear, multi-well drilling campaign at its flagship offshore Ghana fields started in April. Four wells are being drilled this year and the company has plans to add more wells in 2022, the company has said.

The first Jubilee producer well (J-56) is already onstream with encouraging initial flow rates, adding around 10,000 b/d to the Jubilee field rate, slightly ahead of pre-drill expectations, Tullow said in its statement.

"In Ghana, production [business] is very much on track. Jubilee has done better than expected and TEN is slightly behind but within the range," Dhir said. "Importantly, the uptime on both of the assets is been about 98% compared to 85% in 2020. We have come a long way in terms of embedding good operating performance."

Jubilee gross production averaged 70,600 b/d in H1 2021 while TEN gross output was at 37,000 b/d, according to Tullow's statement.

Viability of Kenyan project

On Kenya, Dhir said he remained optimistic about the prospects of the Turkana oil project and it is hoping to talk to the government in the coming weeks.

"What we wanted to do was make the project more viable from an economic perspective. I think we have successfully done that," said Dhir. "We are pretty comfortable that the project is looking quite good and then the challenges will be getting the capital for that."

The company recently carried out a reassessment to ensure that this project, located in in the South Lokichar Basin in northwest Kenya, would be competitive in a low oil price environment.

A final investment decision on Turkana was recently pushed back to the end of 2022.

Turkana is expected to produce some 80,000 b/d via a planned export pipeline to the Indian Ocean port of Lamu. The project is estimated to cost $3 billion, comprising $1.8 billion for the upstream portion and $1.2 billion for the pipeline.