The main deck of Tullow Oil's gloating production, storage and offloading vessel. Picture: REUTERS
The main deck of Tullow Oil's gloating production, storage and offloading vessel. Picture: REUTERS

London — Tullow Oil is exploring ways to fend off a potential cash crunch as the London-listed group reported a $1.3bn loss after it was forced to write down $1.4bn due to collapsing demand for oil.

Tullow, with a market cap of $361m as of Tuesday and $3bn in debt, said it is looking at “various refinancing alternatives” and plans to hold a capital markets day later this year.

It warned that the process carries uncertainties that could risk its going-concern status.

“Cash flow projections forecast a potential liquidity shortfall during the 18-month period relevant to the liquidity forecast test in respect of the January 2021 reserve-based lending (RBL)  redetermination due to the maturity of the $650m senior notes due in April 2022,” it said.

Tullow, which is slashing jobs and selling assets, said it is looking to refinance convertible bonds due in 2021 or the senior notes due in 2022, amend its RBL facility, or raise cash from banks or other investors by January.

Like other oil producers, Tullow has already received debt covenant waivers this year, but CFO Les Wood said Tullow does not take continued waivers for granted.

Tullow reported a half-year loss of $1.3bn on Wednesday, compared with a $103m profit last year, as it took an expected $1.4bn writedown after it lowered its oil price outlook. Tullow has untapped liquidity and about $500m in available cash.

It plans to spend about $365m on investments and decommissioning this year. Tullow said it expects its 2020 cash flow to break even at current oil futures prices. It has hedged 60% of its sales this year at a floor price of $57 a barrel and 48% of next year’s at a floor of $51 a barrel.

Tullow said it halted the sale of a portion of its Kenyan onshore oilfields pending a review, but is confident it will close the sale of its Ugandan assets for about $500m to France’s Total this year.

Its shares were down about 8% at 18p at 8.18am GMT.

Tullow, founded in the 1980s to tap into African oil and gas, suffered a series of technical difficulties and missed production targets, leading its CEO to step down late last year.

Reuters

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