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Tullow Oil targets capital expenditure of $300m for 2020

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Exploration: Workers aboard a Tullow Oil platform

Exploration: Workers aboard a Tullow Oil platform

Exploration: Workers aboard a Tullow Oil platform

Oil and gas explorer Tullow Oil is targeting capital expenditure of $300m for the year.

This is down from a previous estimate of $350m, according to a trading update from the group.

Savings are being made through the deferral of activities across the portfolio and through savings that can be realised by ongoing farm-down activities, the company said.

Elsewhere, it has completed a bi-annual review of its Reserves Based Lending facility. The group has around $700m liquidity headroom of undrawn facilities and free cash at the start of the second quarter of the year.

The group's underlying operating costs remain at less than $12 a barrel.

Tullow said that with the benefit of its hedging policy and production remaining on track within the its 70,000-80,000 barrels of oil per day guidance range, this results in a free cash flow breakeven oil price of around $35 a barrel for the rest of the year.

Job Langbroek, analyst at Davy Stockbrokers, said: “The background remains brutal for leveraged E&P stocks, but Tullow has found a breathing space and continues to undertake whatever self-help it can.”

Tullow has 60pc of its 2020 sales revenue hedged with a floor of circa $57 a barrel, and 40pc of sales revenue for next year hedged with a floor of around $53 a barrel.

The company’s oil price in January and February was circa $62 a barrel, and is due to receive hedging receipts of $30m in respect of last month.

Oil prices have now fallen to less than $30 a barrel, meaning “hedging becomes a lifeline, allowing the group to continue investment and generate cashflow,” according to Mr Langbroek.  

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