- West Africa output seen lower at 62,000-68,000 barrels a day
- Operations update ‘gives welcome clarity,’ Barclays says
Tullow Oil Plc detailed plans to fix a faulty turret at a production vessel at its flagship field off Ghana and revised its estimates of West African output. The shares rose.
Tullow and its partners will install a spread mooring on the Jubilee vessel next year, followed by a deepwater offloading buoy in 2018, according to a statement Thursday. The field will be able to produce “flat out” by the end of this year once a temporary mooring system has been installed, Chief Executive Officer Aidan Heavey said by phone.
“The fact that the company now has a long-term solution for Jubilee is a positive,” Exane BNP Paribas said in a note today. Tullow erased early losses to advance 5.4 percent to 266.50 pence at 10:53 a.m. in London. It was the biggest gainer on the STOXX Europe 600 Oil & Gas Index.
Production at Jubilee was interrupted from March 20 to May 3 after the field’s floating production, storage and offloading vessel was found to have a fault in a bearing on the turret, which is moored to the seabed and allows the ship to rotate. Tullow’s West African operations will probably pump 62,000 to 68,000 barrels of oil a day this year, down from the 73,000 to 80,000 barrels the London-based explorer forecast in February, according to the statement.
Jubilee will need to halt again for eight to 12 weeks during the first half of 2017 for work to install the new mooring system at a total cost of $100 million to $150 million, according to the statement. Insurance will cover the relevant operating and capital costs, loss of production and revenue associated with the fault on the Jubilee vessel.
“We expect limited cashflow impact with insurance covering both costs,” related to the damaged turret and revenue loss during the extended shut-in periods, Oswald Clint, an analyst at Sanford C. Bernstein Ltd, said in a note today. The broker rates Tullow outperform.
Tullow’s Heavey said he expects payments for the hull and machinery claims to come this year but said he was unsure when it would receive payments for the interruption of production. He said he expects necessary approval for works from Ghana’s government within weeks.
Tullow’s Tweneboa-Enyenra-Ntomme -- or TEN -- project off Ghana is on schedule to deliver its first oil in the next three to six weeks, the company said in the statement.
The trading update from Tullow “gives welcome clarity,” James Hosie, an analyst at Barclays Plc, said in a note.