LONDON, July 9 Tullow-Oil-Ops-Update
LONDON, July 9 /PRNewswire/ -- Tullow Oil plc ("Tullow") issues this
Trading Statement in respect of the first half of the 2008 financial year and
this Operational Update in respect of recent Production, Development and
Exploration activities.
The Trading Statement is in advance of the Group's Interim Results, which
are scheduled for release on Wednesday, 27 August 2008. The information
contained herein has not been audited and is subject to further review.
HIGHLIGHTS
Exploration
-- Mahogany-2 appraisal well on the Jubilee field in Ghana extends upside
potential to 1.8 billion barrels.
-- Jubilee and Odum have proved two new plays and de-risked substantial
follow-up prospects scheduled for drilling in Ghana and Cote d'Ivoire within
the next 12 months.
-- Kingfisher-2 well in Uganda intersects zones encountered in
Kingfisher-1, deep target results expected in August.
-- Ugandan Butiaba campaign yields three more discoveries and opens up a
new geological fairway.
-- Four-well drilling campaign in India commenced in Block CB-ON/1 in late
June.
Production and Development
-- Group working interest production averaged 70,550 boepd for the first
half of 2008 and is expected to average between 70,000 and 72,000 boepd for
the full year.
-- Jubilee production facilities tender under way and on track to achieve
first oil target of 2010.
-- Three deepwater rigs contracted for Ghana, next phase of drilling to
commence in September.
-- Early Production System in Uganda is expected to be sanctioned in the
third quarter 2008.
Finance and Portfolio Management
-- Successful portfolio rationalisation in the first half of 2008 will
raise approximately US$1 billion and a total anticipated profit on disposal
after tax of approximately 400 million pounds on completion.
-- Capital expenditure in first half was 170 million pounds Sterling,
planned expenditure for 2008 is forecast to be 480 million pounds.
-- Net debt at 30 June 2008 was 420 million pounds.
Commenting today, Aidan Heavey, Chief Executive, said:
"Tullow has performed exceptionally well over the first half of 2008. We
have had solid production performance, outstanding appraisal results in Ghana,
continued exploration success in Uganda and announced almost $1 billion worth
of non-core disposals to enhance our financial and operational flexibility.
These factors, combined with the unprecedented strength in oil and gas pricing
and our ongoing exploration programmes mean that Tullow has never been in a
better position to enhance shareholder value."
Presentation, Webcast and Conference Calls: In conjunction with this
announcement Tullow has scheduled two conference calls. Details are included
at the end of the release.
Trading Statement
Production
Group working interest production for the first half of 2008 averaged
70,550 boepd, 1% higher than the 2007 average. Sales volumes for the first
half of 2008 averaged 60,000 boepd. A further breakdown of these figures is
provided in the Operational Update for each core area.
Production figures remain subject to final reconciliation and do not
equate to sales volumes. This is due to variations in lifting schedules and
because a portion of the production is delivered to host governments under the
terms of Production Sharing Contracts.
Average working interest production for 2008 is expected to be between
70,000 and 72,000 boepd, before any adjustment in respect of disposals.
Realised Prices and Oil Discount
Average prices realised during the first half of 2008 continued to be
exceptionally strong. Realised oil price was approximately US$106/bbl (pre
hedges) and US$80/bbl (post hedges) and realised UK gas price was
approximately 56p/therm (pre hedges) and 52p/therm (post hedges).
The Group's oil production sold at an average discount of approximately 3%
to Brent during the first half of 2008, and this level of discount is expected
to continue for the remainder of 2008.
Overlift
At 30 June 2008, Tullow was in a net overlift position amounting to an
estimated 7,000 barrels. Movements in overlift positions are recorded at
market value and, combined with stock movements during the period, give rise
to a credit of approximately 3 million pounds to Cost of Sales.
Exploration Write-Off
Tullow's exploration write-off for the first half of 2008 is expected to
be of the order of 25 million pounds. This write-off is principally associated
with unsuccessful exploration activities in the UK and Mauritania, new
ventures activity and licence relinquishments.
Capital Expenditure
Capital expenditure for the first half of 2008 amounted to 170 million
pounds and anticipated capital expenditure for 2008 is now forecast to be 480
million pounds. The increase in full year planned expenditure is principally
due to the acceleration of development activities on the Jubilee field in
Ghana. Investment will be split 45% on production and development and the
remainder on exploration and appraisal. Tullow's activities in Africa will
comprise 75% of the anticipated 2008 capital outlay, with the principal
expenditures being in Ghana and Uganda.
Portfolio Management
During the first half of 2008 Tullow announced the disposal of a number of
non-core assets for a combined consideration of approximately $1 billion.
In Africa, Tullow announced the sale of its 11% interest in the M'Boundi
field to the Korea National Oil Company (KNOC) for a total cash consideration
of $435 million. The sale is subject to government approval and is expected to
complete in the third quarter of 2008. On 2 July 2008 Tullow completed the
sale of its 40% interest in the Ngosso licence, offshore Cameroon, to MOL.
In Europe, the sale of certain CMS assets to Venture Production for a
consideration of 35 million pounds completed on 23 June 2008. Also in June,
Tullow announced the proposed sale of its 51.68% interest in the Hewett-Bacton
complex to Eni for a cash consideration of 210 million pounds. This
transaction, which is expected to complete in late 2008, will also involve the
assumption by Eni of approximately 45 million pounds of abandonment
liabilities and will give rise to an anticipated profit on disposal after tax
of approximately 225 million pounds.
The combined impact of these transactions will give rise to an overall
profit on disposal after tax of approximately 400 million pounds in 2008, of
which approximately 15 million pounds will be reflected in the first half
results.
Net Debt
Net debt at 30 June 2008 was approximately 420 million pounds while
unutilised debt capacity was in excess of $400 million. The reduction in the
period reflects a greater weighting of capital programmes towards the second
half of the year and the positive impact of portfolio management receipts
which totalled 35 million pounds during the period.
Derivative Instruments
At 30 June 2008 the Group's derivative instruments had a net negative mark
to market value of approximately 435 million pounds. Approximately 120 million
pounds of this valuation relates to hedges acquired as part of the Energy
Africa acquisition in 2004. The increase in the mark to market position
principally reflects the unprecedented rate of increase in commodity prices
during the first half of 2008.
Hedging - IAS 39
While all of the Group's commodity derivative instruments currently
qualify for hedge accounting, a credit of approximately 7 million pounds (4
million pounds after taxation charges) will be recognised in the income
statement for the first half of 2008. The IAS 39 credit comprises
approximately 10 million pounds relating to the movement in the non-intrinsic
(or time value) component of both oil and gas hedges, partially offset by a
charge of approximately 3 million pounds relating to the ineffectiveness of
both oil and gas hedges. The favourable movement in the time value element is
largely due to the movements in the oil and gas forward curves since the
beginning of the year. Brent forward oil prices and natural gas prices in the
UK have risen considerably and with prices now trading significantly above the
strike prices less time value is associated with the mark to market value.
Commodity Hedging Summary
At 30 June 2008 the Group's hedge position to the end of 2011 was as
follows:
Hedge Position 2H 2008 2009 2010 2011
Oil Hedges *
Volume - bopd 18,000 11,0004,000-
Current Price Hedge -
US$/bbl 70.8563.56 116.93-
Gas Hedges
Volume - mmscfd 65.2 44.9 16.6 3.1
Current Price Hedge -
p/therm 54.2 56.1 60.3 71.0
*Oil hedges include an Energy Africa legacy position of 4,000 bopd at
$29.30 until end 2009.
Operational Update
AFRICA CORE AREA
Tullow's African interests are in Uganda, Ghana, Gabon, Cote d'Ivoire,
Congo (Brazzaville), Equatorial Guinea, Mauritania, Namibia, Senegal, Angola,
Tanzania, Madagascar and Congo (DRC).
In the first half of 2008 Tullow continued to invest in its African
producing and development assets, with production averaging 41,580 boepd, a 6%
increase from the same period in 2007. Significant progress is being made
across the African portfolio, specifically on the Jubilee development project
and the Ugandan Early Production System. Exploration and appraisal programmes
have continued to be successful with a significant upgrade in Jubilee field
resources in Ghana, three further discoveries in the Butiaba region of Block 2
in Uganda and successful appraisal of the Banda gas discovery in Mauritania.
1H 2008Current
Average Production
Working interest production (boepd)(boepd)
Congo (Brazzaville)4,590 4,600
Cote d'Ivoire 6,540 6,200
Equatorial Guinea 15,450 15,700
Mauritania 1,900 1,700
Gabon
Tchatamba4,420 4,900
Niungo 4,270 3,900
Other Gabon 4,410 4,800
Africa Total 41,580 41,800
Ghana
Significant progress has been made on our exploration, appraisal and
development programmes in Ghana in the first half of 2008. In particular, the
successful Mahogany-2 exploratory-appraisal well has led to a material upgrade
in the resource potential of the Jubilee field while the Phase One development
programme remains on track to deliver first oil in 2010. The next drilling
phase is planned for September 2008 with the arrival of the Blackford Dolphin.
The Eirik Raude rig is expected in October and the recently contracted Attwood
Hunter is scheduled to start work in the second quarter of 2009. These rigs
will focus on additional appraisal of the Jubilee field, development drilling
and a further phase of exploration. The overall programme has the potential to
deliver significant upside over the next 12 months across Tullow's acreage in
both Ghana and Cote d'Ivoire.
Jubilee Field Appraisal Programme
The drilling of the Mahogany-2 exploratory-appraisal well completed in May
indicates that the Jubilee field is a continuous stratigraphic trap extending
at least 11 km to the Hyedua-1 discovery well in the adjacent Deepwater Tano
licence. Combined hydrocarbon columns in excess of 600 metres have been
identified and the recoverable resources of the field are now estimated to
range from 500 million barrels up to 1.8 billion barrels.
The lower sands of Mahogany-2 were production tested in June and flowed 36
degree API crude at a rate of 5,200 bopd and approximately 5.3 mmscfd of
associated natural gas. This test confirmed that each of these highly
productive wells will have the potential to produce at rates in excess of
20,000 bopd when completed for production. A second test is close to
completion on the upper sands after which the Songa Saturn rig goes off
contract.
No gas cap was encountered in this well indicating the oil bearing
reservoirs extend further north from this location, with positive implications
for ultimate Jubilee field reserves. A further appraisal campaign will begin
in September 2008, with plans for a minimum of three wells planned to help
determine the further upside potential of the Jubilee field, prior to
initiating development drilling.
Jubilee Field Development and Well Planning
Development planning for the Jubilee field is progressing rapidly towards
sanction with a target of producing first oil in 2010. The Jubilee
partnership, with the support of the Ghanaian Government, has agreed on a
first phase of development focusing on the core area of the field. Phase One
will consist of approximately 15 production and injection wells tied back to a
Floating Production Storage and Offtake vessel (FPSO) with a minimum
production capacity of 120,000 bopd.
Tenders have been received and are being evaluated for production
facilities (FPSO and sub-sea equipment), and the preferred contractors will be
selected in the next few months. The project is expected to be sanctioned in
the fourth quarter of 2008, with tender results to date supporting the
objective of achieving first oil production in 2010. The facilities will
include the capability to re-inject produced gas, thereby avoiding gas
flaring. The Jubilee field has a potentially material associated gas resource
and the partnership is currently developing plans for early export of gas to
the Ghanaian market where significant energy demand exists.
Based on the exceptionally positive drilling and test results to date it
is now likely that multiple phases of development will be required to fully
develop the Jubilee field. The data from the upcoming appraisal drilling
campaign will be incorporated into our overall view of the field prior to
development work commencing in 2009.
Exploration Activity
The Odum-1 exploration well, drilled in February 2008 in the West Cape
Three Points block, encountered a significant oil column with resource
potential of over 100 million barrels in good permeable reservoirs. This field
will be appraised by a 500 sq km extension of the 2007 Jubilee 3D/4D seismic
survey and potentially by further drilling during 2009. Development options
for this field will be considered following appraisal and in context of the
overall Ghana development programme.
The Jubilee and Odum discoveries have established the Turonian and
Campanian intervals as working geological plays in the region. These plays
offer considerable upside potential across the West Transform Margin and have
been de-risked by these recent discoveries. In particular, the Teak prospect
in the West Cape Three Points licence and the Tweneboa prospect in the
Deepwater Tano licence have a combined gross upside potential of over a
billion barrels and Tullow expects both of these prospects to be drilled in
early 2009. Further exploration prospects are under review in both Ghana and
Cote d'Ivoire and are likely to be drilled as part of the 2009 campaign.
The Ebony prospect in the Shallow Water Tano block (Tullow 31.5%) is
expected to be drilled by the West Ceres jack-up rig in the third quarter of
2008.
Uganda and Congo (DRC)
Tullow has continued its 100% success rate in the Lake Albert Rift Basin
having encountered hydrocarbons in all 13 wells drilled. The most recent
drilling activity in the Butiaba region has resulted in three discoveries and
has de-risked a number of further prospects by opening up a new deltaic play
in the north of the basin. The near-shore campaign has continued with the
Kingfisher-2 well which has encountered oil shows in zones interpreted as
analogous to those seen in the Kingfisher-1 discovery. In addition, good
progress is being made towards the sanction of an Early Production System in
the third quarter this year and offshore drilling is on track to commence in
mid 2009. Overall, excellent progress is being made with the exploration,
appraisal and early development programmes in the basin.
Butiaba Campaign - Blocks 1 & 2 (Tullow 50% and 100%)
Onshore drilling activity is currently focused on the Butiaba drilling
campaign where over 20 leads and prospects have been identified with upside
potential of up to billion barrels in aggregate. To date, three wells have
been drilled in a nine-well campaign, Taitai-1, Ngege-1 and Karuka-1, and all
have encountered hydrocarbons at the objective levels. One well is expected to
be drilled per month and an integrated campaign of appraisal and flow testing
for the Butiaba area will be undertaken later in the programme.
The Taitai-1 well, testing an escarpment fan play equivalent to those
drilled in the Kaiso-Tonya region, reached a total depth of 1,006 metres in
May and encountered five metres of net gas pay and at least eight metres of
net oil pay. A thick section of oil-stained basement was also encountered and
provides upside potential both at Taitai-1 and elsewhere in the basin.
Pressure testing and sampling confirmed the presence of moveable 30 degree API
oil.
The Ngege-1 well, to evaluate the Victoria Nile delta play in the north of
Block 2, was drilled in June to a depth of 640 metres. The well was located
three kilometres from the crest of the Ngege structure and encountered over
five metres of net oil pay and nine metres of net gas pay. Seismic
interpretation indicates significant further potential within the Ngege
structure. This discovery has confirmed the presence of a working hydrocarbon
system in a new play fairway, thereby upgrading several other prospects in
both Block 2 and Block 1.
The third exploration well in the Butiaba Campaign, Karuka-1, commenced
drilling on 28 June. The well, which is testing an escarpment fan prospect 20
km north of Taitai-1 reached a total depth of 853 metres on 6 July. The well
has encountered oil in basal sands and logging operations are ongoing. The
next well in the Butiaba schedule is expected to be Kasamene-1, 20 km west of
Ngege-1 in the Victoria Nile delta play area.
In the Butiaba area all planned onshore 2D seismic data has now been
acquired and the current programme, which is focusing on the nearshore and
shallow water area of Block 2, is approximately 70% complete. This programme
has already validated many of the current prospects and assisted in the
identification of numerous additional leads, some of which exhibit amplitude
effects characteristic of hydrocarbons.
Near-shore Campaign - Blocks 2 & 3A (Tullow 100% and 50%)
Following the suspension of the Ngassa-1 well in February, the Nabors 221
rig moved to Block 3A to drill the Kingfisher-2 well. This well is designed to
appraise reservoir zones discovered by the Kingfisher-1 well and to explore a
deeper potential objective. As announced on 30 June, the well has been drilled
to a depth of 2,992 metres and excellent oil shows have already been
encountered and interpreted as being potentially equivalent to a number of
zones intersected by the Kingfisher-1 well. The rig is now drilling ahead to
the basal sands target which is expected to be encountered during August at a
depth of approximately 4,000 metres.
Following the Kingfisher programme, the rig is likely to move back to
Block 2 to drill the Ngassa prospect. A new onshore location has been
identified which reduces the operational complexity following significant
difficulties with earlier drilling. The environmental impact study for this
new location has been initiated and drilling is expected to commence towards
the end of the year.
Offshore Drilling
Preparations for offshore drilling during 2009 are continuing and Tullow
is currently in the process of awarding a Front End Engineering and Design
(FEED) contract. This work and the subsequent construction and mobilisation
phases are expected to deliver a drilling campaign covering Blocks 2 and 3A in
2009.
Offshore prospect evaluation has to date focused on the interpretation of
the 3D seismic dataset over the greater Kingfisher/Pelican complex, with
encouraging results. The interpretation of the Pelican prospect area is
particularly encouraging as seismic amplitude anomalies at numerous
stratigraphic levels have been identified which are potentially indicative of
hydrocarbons. A number of new offshore prospects have also been identified and
are expected to form part of the offshore drilling campaign.
Early Production System
The sanction of an Early Production System, utilising the discoveries in
the Kaiso-Tonya region, is at an advanced stage, with government approvals
expected in the third quarter 2008. The target for first oil from this
development remains 2009.
The project has been designed to produce around 4,000 bopd of heavy fuel
oil and petroleum products. A proportion of the heavy fuel oil will be
utilised in a local power generation plant with the balance and the petroleum
products being exported by truck into the local market. The FEED contract has
been awarded to Wood Group with the expectation that the full contract award
will be made following project sanction and full Government approval. The
construction of the local power generation and transmission lines will be
delivered by Jacobsen Elektro with whom Tullow recently signed a Memorandum of
Understanding.
The results of the appraisal drilling and 3D seismic survey, acquired in
2007 are being incorporated into the reservoir model to finalise the location
of the development wells.
Congo (DRC)
Tullow also has interests in two prospective blocks on the Congo (DRC)
side of the Lake Albert Rift Basin, adjacent to the Group's Ugandan acreage.
While the validity of the award of these licences is currently being disputed,
Tullow has confidence in the integrity of the original award process and its
title to the licence and will continue to pursue all legal and governmental
avenues to finalise the award.
Congo (Brazzaville)
Gross production from the M'Boundi field (Tullow 11%) in the first half of
2008 averaged 41,000 bopd from 59 production wells. The focus on drilling
water injection wells and upgrading the water injection facilities continues
to have a positive impact on overall reservoir and production performance.
In January 2008, Tullow announced the sale of its interest in the field to
the Korea National Oil Company (KNOC) for a total cash consideration of $435
million. The deal is subject to government approval and is expected to
complete later in 2008.
Equatorial Guinea
Performance from the Ceiba field (Tullow 14.25%) has continued to exceed
expectations during the first half of 2008 with gross production averaging
over 40,000 bopd. An infill drilling campaign is now complete and the
installation of flowline gas lift is underway to assist production as water
production from the wells increases.
Gross production from the Okume Complex (Tullow 14.25%) for the first half
of 2008 averaged over 66,000 bopd as the field increased to a facility
constrained plateau rate of 75,000 bopd. The first phase of development of the
Elon field in the Okume Complex has now been completed. Drilling continues on
the Okume field, bringing the total well count for the complex to 25.
Average gross production from these fields in 2008 is expected to average
over 100,000 bopd.
Cote d'Ivoire
The success of the recent Espoir development programme has resulted in
field production being constrained by the capacity of the FPSO. An upgrade of
the FPSO processing facilities is under way and is on schedule for completion
in 2009.
Gross production from the Espoir fields (Tullow 21.30%) averaged over
30,000 boepd during the first half of 2008 and is expected to remain at
approximately this level for the remainder of the year although this may be
impacted by the ongoing facility upgrade.
Exploration efforts continue to pursue both the Upper Cretaceous turbidite
sandstone play, analogous to the Jubilee discovery in Ghana, and tilted Albian
fault blocks similar to the Espoir field, along the West Africa Transform
Margin. Tullow holds equity in three exploration blocks in Cote d'Ivoire where
significant prospectivity remains to be tested as part of the 2009 drilling
programme.
Blocks CI-107 and CI-108 were relinquished in May 2008.
Mauritania
Gross production from the Chinguetti field (Tullow 19.01%) is
approximately 10,500 bopd, in line with expectations. In May, a programme of
three well interventions was conducted to improve gas lift and reduce water
production. The full impact of this programme on field production will be
determined as the field is brought back on line after the recent annual
shutdown on the FPSO. The rig then spudded the first of two infill wells,
aimed at accessing additional reserves and production. The first well, C19 has
been successfully drilled and encountered oil in the reservoir section;
completion of the well is underway with first production expected in
early-September.
In April, an appraisal well was drilled on the Banda discovery (Tullow
21.6%), which successfully encountered gas pay. The analysis of this well
resulted in the well being sidetracked to a more optimum location where 30
metres of net gas and 11 metres of net oil were intersected. The pressure
testing and sampling indicated that the well is in communication with the
original discovery well some two kilometres away. Results from both wells are
now being evaluated to determine the gas volumes in place and the extent of
the underlying oil rim. Further development options and appraisal options for
the field are currently being considered.
In Block 6, the Khop-1 exploration well was spudded in February and whilst
only minor oil shows were encountered, the well provided important
stratigraphic data on the prospective Cretaceous intervals, which will prove
invaluable as we progress our exploration of the area. Evaluation of
exploration opportunities across the entire area indicates the potential for
significant resources within the under-explored Cretaceous section, where a
series of prospects with total gross upside resources of up to one billion
barrels have been recognised along previously unexplored play fairways.
Gabon
Production from Gabon averaged 13,100 bopd net to Tullow in the first half
of 2008 and is currently approximately 13,750 bopd. The two main assets,
Tchatamba (Tullow 25%) and Niungo (Tullow 40%) have continued to perform
strongly. Production performance continues to improve on the Echira field
(Tullow 40%) where appraisal drilling with potential to add significant
reserve upside is planned for late 2008. Over the remainder of 2008,
production will be maintained at approximately 13,750 bopd through the
addition of first oil from Ebouri (Tullow 7.5%), commencement of production
from Onal (Tullow 7.5% back-in) and a further 35 development wells to be
drilled on Tsiengui, Obangue, Oba and Onal fields
Namibia
The development of the Kudu main field area remains a key area of focus
for Tullow. The Group is also committed to proving and commercialising the
potentially significant reserves upside within the greater Kudu Licence area.
The Kudu-8 well, drilled in 2007, although sub-commercial proved that the Kudu
reservoir sequence is contained within a large stratigraphic trap, indicating
that gas is likely to be present in any porous connected sands in the area.
Current exploratory appraisal efforts are therefore now focused on locating
extensions of the highly productive Kudu main field reservoir.
Whilst development concepts for Kudu continue to be primarily based on
supplying gas to an 800 MW load power station in Namibia with excess
electricity being exported to the South African, the delays in commercial
closure have also resulted in alternative options being actively considered.
The changing global and regional energy environment has resulted in a
combination of local power options combined with direct gas export having the
potential to be commercially viable. The fast maturing marine CNG technology
is being actively pursued as it potentially offers the means for managing both
the local and export markets. Technical and commercial studies are currently
being conducted to confirm the viability of this development option.
Cameroon
Tullow completed the sale of its 40% interest in the Ngosso concession to
MOL on 2 July 2008.
EUROPE CORE AREA
Tullow's producing interests in Europe lie in the Southern Gas Basin of
the UK North Sea. In addition Tullow also has offshore exploration interests
in the Netherlands and Portugal.
1H 2008Current
Average Production
Working interest production(1) (boepd)(boepd)
CMS Area 15,220 13,000
Thames-Hewett Area 8,360 8,200
UK Total 23,580 21,200
(1) Includes condensate
UK
During the first half of 2008 Tullow has benefited from a significant rise
in UK gas pricing. The gas price outlook for the remainder of 2008 and beyond
is also very strong and against this backdrop incremental investment
opportunities in the UK are now being actively progressed. The Group has also
agreed the sale of non-core assets that will raise 245 million pounds, these
include non-core exploration/development assets in the CMS area and an
operated interest in the Hewett-Bacton producing assets and terminal.
Tullow's net UK production averaged 23,580 boepd in the first half of
2008, 13% lower than the same period in 2007. This reduction was primarily a
result of natural decline in mature fields exacerbated by poor weather in the
first quarter which hampered intervention visits. However, the current
reservoir performance of the fields in both the Thames-Hewett Area and the CMS
assets are generally in line with expectations. Average production from the UK
in 2008 is expected to be in the range 22,000 to 24,000 boepd.
In the Thames-Hewett area, the development of the Tullow-operated Wissey
discovery (Tullow 62.5%) in Block 53/4d is ongoing. The well has been drilled
and completed and the facilities tie-in is underway with first gas forecast
for August at an initial rate of 75 mmscfd. The Thames co-venturers have also
approved the drilling of a development well in the Bure field to accelerate
production and are currently sourcing a rig for early 2009.
The Hewett Complex has now been fully de-manned yielding considerable cost
savings. The appraisal-development well targeting a deep Rotliegendes
reservoir in the Hewett main field is scheduled for August 2008. However, as
part of Tullow's ongoing portfolio rationalisation, the Group announced the
proposed sale of its entire 51.68% interest in the Hewett-Bacton development
to Eni for a consideration of 210 million pounds. The sale is expected to be
completed by the end of the year.
In the CMS Area the operated Schooner (Tullow 90.35%) and Ketch (Tullow
100%) fields continue to produce strongly and following a review of infill
opportunities further drilling is now planned for 2009. The Ketch-10 well is
expected to be spudded in early 2009 and we are evaluating a second well to be
drilled as part of the same programme with the overall objective of accessing
currently undepleted compartments within the greater Ketch field area. In
addition the non-operated fields are also performing strongly and further
drilling is planned, including the Murdoch MD11 infill well and two infill
wells on the highly productive Boulton B reservoir. The operator expects to
spud the first of these wells in the fourth quarter of 2008. With our partners
we have also made good progress on the development plan for the Harrison
project and sanction is expected by the end of the year.
In April 2008 Tullow sold peripheral exploration and development interests
in its CMS assets to Venture Production for a consideration of 35 million
pounds. This transaction completed on 24 June 2008 and a profit of 15 million
pounds will be recognized in the first half results.
Netherlands
Tullow has rapidly grown its acreage position in the Netherlands and now
holds nine operated blocks and one non-operated block now held. The majority
of this acreage falls in Quadrant E, adjacent to the Group's UK CMS acreage
where the Carboniferous play has been successfully exploited over the last few
years. The same Carboniferous play extends into Quadrant E and has been
identified as being highly prospective and under-explored. Current work is
focused on seismic data reprocessing and geological study work ahead of
potential drilling campaigns in 2009 and 2010.
SOUTH ASIA CORE AREA
In South Asia, Tullow has exploration, development and production
interests in Pakistan and Bangladesh and exploration interests in India.
1H 2008Current
Average Production
Working interest production (boepd)(boepd)
Pakistan 1,890 2,000
Bangladesh 3,500 3,500
South Asia Total 5,390 5,500
India
Drilling operations on Block CB-ON/1 (Tullow 50%) have commenced. A firm
programme of four wells has been approved, along with two contingent wells.
The wells will target a range of different play types within the rift basin.
The C1 well in the east of the block commenced on 27 June and is expected
to take 30 days to reach total depth. Reservoirs targeted include prospective
Middle Eocene and Early Eocene sands between approximately 650 metres and 750
metres and Early Palaeocene sands below 1,100 metres. The well is currently at
642 metres preparing for logging prior to running casing above the first
target sequence.
The next well will target prospect G1 in the north of the block.
Bangladesh
Gross production from the Bangora field (Tullow 30%) remains steady at 70
mmscfd. The second phase of development is well under way and is scheduled to
be completed in the third quarter this year: this involves the upgrade in
capacity of the plant and the tie-back of the Bangora-3 well. When completed,
the plant capacity will increase to 120 mmscfd and field production is
expected to increase to in excess of 100 mmscfd. In addition, Tullow has
applied for a shallow water block in the Bangladesh third licensing round and
is awaiting notification from Petrobangla.
Pakistan
Gas production from the Chachar field (Tullow 75%) continues at a rate of
14 mmscfd, whilst production from Sara/Suri continues at a low level.
Tenders have been issued for a rig to drill an exploration well on the
Kohat Block (Tullow 40%) in Q4 2008. Geological fieldwork has been completed
on the Kalchas Block (Tullow 30%) and plans are being finalised to commence
seismic operations.
SOUTH AMERICA CORE AREA
In South America, Tullow has exploration interests in Suriname and French
Guiana and continues to negotiate Production Sharing Contracts for two key
blocks offered in Trinidad's 6th exploration licensing round.
Trinidad
The Production Sharing Contract for Block 2ab (Tullow 32.5%) was
initialled on 15 May and it is anticipated that the agreement will be signed
in Q3 2008. The work programme for the licence includes the acquisition of 864
square kilometres of 3D seismic and the drilling of four wells over the next
three years. Negotiations are continuing on the Guayaguayare Block (Tullow 65-
80%).
Suriname
The second phase of exploration drilling on Uitkijk (Tullow 40%),
involving five exploration wells, is scheduled to commence in Q3 2008. This
will be followed by a 5 well exploration well programme on the Coronie Block
(Tullow 40%) later in 2008.
French Guiana
Block 2 in French Guiana (Tullow 97.5%) contains the high impact but high
risk Matamata prospect, a very large dome shaped structure in the north
western part of the block. Gaz de France recently elected not to participate
any further in the licence and Tullow is now focused on bringing in a partner
to dilute its interest whilst securing a rig to allow drilling to commence on
the block.
Summary of Planned Second Half 2008 Exploration and Appraisal Activity
Country Block Prospect Interest Spud Date
Uganda Blocks 1&2 Butiaba campaign50%/100% In progress
UgandaBlock 3AKingfisher-2 50% In progress
India CB-ON/1 4-well campaign 50% In progress
Ghana Deepwater Tano Hyedua-249.95% (op) Q3 2008
GhanaShallow TanoEbony 31.5% (op) Q3 2008
Ghana WCTP Mahogany-3 22.9%Q4 2008
Ghana WCTP Mahogany-4 22.9%Q4 2008
Uganda Block 2 Ngassa-2100% (op)Q4 2008
Suriname Uitkijk &10 Shallow 40% Q4 2008
Coronie wells
PakistanKohat Kohat East 40% (op) Q4 2008
Mauritania PSC A Banda E 24.3%Q4 2008
CONFERENCE CALLS
Conference calls hosted by Aidan Heavey (Chief Executive), Paul McDade
(Chief Operating Officer), Angus McCoss (Exploration Director) and Tom Hickey
(Chief Financial Officer) will be held today at 09:30 (BST) and at 15:00
(BST).
To access the calls please dial the appropriate number below shortly
before the call and ask for the Tullow Oil plc conference call. A replay
facility will be available three hours after the conference call until 16
July. The telephone numbers and access codes are:
European Conference Call Replay Facility
UK Participants 020 7806 1956 UK Participants 020 7806 1970
Irish Participants 01 655 8886 Irish Participants 01 659 8321
Access Code 9312438#
U.S. Conference Call Replay Facility
Domestic Toll Free +1 800 762 8795 Domestic Toll Free +1 800 406 7325
Toll+1 480 629 9041 Toll+1 303 590 3030
Access Code 3898555#
Disclaimer
This announcement contains certain operational and financial information
in relation to the first half of 2008 that is subject to final review and has
not been audited. Furthermore it contains certain forward-looking statements
that are subject to the usual risk factors and uncertainties associated with
the oil & gas exploration and production business. Whilst the Group believes
the expectations reflected herein to be reasonable, the actual outcome may be
materially different owing to factors either within or beyond the Group's
control, and accordingly no reliance may be placed on the figures contained in
such forward looking statements.
For further information please refer to our website at www.tullowoil.com.
Contact: Aidan Heavey
Tom Hickey
Chris Perry
Tullow Oil plc
+ 44-20-8996-1000
- or -
Brian J. Rafferty
Taylor Rafferty
212-889-4350
SOURCE Tullow Oil plc
