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Tullow free cash of $340m in 2021 if OP remains at $65

 Based on the average OP in Jan of $54.77 and Feb of $62.28 and what looks like it might be as high as $67 for the average in Mar, I've taken a look at the forecast and potentially booked free cash flow for Tullow oil prior to financing. Tullow has reduced its risk significantly with a $48 bbl hedged floor for 60% of their revenues in '21. At an OP of $50 they expect to make $200m of pre-financing free cash flow.

Based on a potential average OP of $61.35 for the whole of Q1, it looks like Tullow will book $77.59m of free cash towards their financing obligations. They already have liquidity headroom of $900m based on their reserves based lending agreed.

Back when the OP was $40 Tullow engaged with bond holders for discussions. At an OP of $50 there is no need for such discussions. For an additional $10 / bbl to $60 there is an extra $100m of FCF pre-financing expected in '21. This works out to $1 bbl = $10m FCF for the workings below.

If the OP were to average $65 in Q2-Q4 then the expected FCF pre-financing would be $340.09m (counting every $ that is)

As Tullow are also counting every barrel going forward with a laser focus on costs and margins there will probably be some additional production towards the end of the year as Tullow trends towards 77.7 k bopd.

Production is expected to be 63k bopd. 6.3k of this has been sold and approved today for up to $180m with the majority of funds receivable in H1 '21.

  • Jubilee producers are expected to bring in an additional 8k production
  • Jubilee water injection is expected to bring in an additional 8k production
  • TEN gas injection is expected to bring in an additional 5k production

Adding this 21k additional production to the 63k expected less 6.3k for EG & Dussafu sold this means that we might expect full year production guidance of 77.7 k bopd in '22. Some of this additional production should enhance the numbers in the back half of '21.

The table below doesn't include the additional upside from this years drilling programme, but looks to represent FCF prior to financing costs generated each quarter.


I own shares in Tullow oil. This is not investment advice. Please do your own research.

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