- Field offshore Ghana halted after damage to production vessel
- Company secures extension of bank lending facilities
Tullow Oil Plc said production at its flagship field offshore Ghana will resume in the next few days, while another project under development in the nation’s waters remains on track.
Production at the Jubilee field, which has been halted since March 20 because of a technical issue, will restart once new measures are in place to offload oil from the production vessel, Tullow said in a statement Thursday. The company also secured an extension of lending facilities following a review by its banks.
“A highly experienced project team are dealing with the turret issues,” on the Jubilee production vessel, Aidan Heavey, Tullow’s chief executive officer, said in a statement. “We have made excellent progress with the TEN Project” offshore Ghana, which remains on track to start in July or August, he said.
Shares of the company rose as much as 9.9 percent to 276.1 pence in London, the biggest gain in two weeks. Tullow is the best performer so far this year on the Stoxx Europe 600 Oil & Gas index, with shares advancing 66 percent.
Tullow halted Jubilee after discovering the fault in a bearing on the turret, which is moored to the seabed and allows the floating production, storage and offloading vessel to rotate. Output from the field fell to an average of 80,300 barrels a day in the first quarter, down from 102,600 last year. The issue won’t have a “material impact on future cash flow, due to the imminent resumption of production and appropriate insurance policies in place,” according to the statement.
The company’s overall production, including its share of Jubilee, was 65,700 barrels a day in the first quarter, “ahead of our cautious expectations,” Stephane Foucaud, an analyst at FirstEnergy LLP, said by e-mail. Despite a likely downward revision to full-year production guidance, Foucaud sees a “limited impact” on cash flow because of the insurance Tullow has in place.
“The insurance was set at a time of much higher oil prices” and it covers production losses reflecting a Brent price of $60 a barrel, Foucaud said. Brent traded at $47.16 a barrel at 11:53 a.m. in London.
It will be “some time” before claims can be completed, but the company is confident its insurance will cover the cost of the repairs to the FPSO, Tullow’s Chief Financial Officer Ian Springett said in a phone interview.
Tullow said it had secured a $3.5 billion loan facility based on its hydrocarbons reserves following a bi-annual review by banks. The previous facility agreed in October was for $3.7 billion. “Liquidity remains comfortable,” Oswald Clint, an analyst at Sanford C. Bernstein, said in a note.
Uganda’s decision this week to route its oil-export pipeline through Tanzania rather than Kenya will allow Tullow to move forward on its East African plans, said Chief Operating Officer Paul McDade.
Tullow began drilling wells in Kenya in 2012, but oil there remained undeveloped amid discussions regarding the pipeline route. “Until the route was decided, we couldn’t move to the next step,” McDade said by phone. Building a standalone pipeline in Kenya remains the “optimum option,” he said.