Tullow Oil trims output forecast, but raises cash flow outlook

By Eva Mathews and Shadia Nasralla

(Reuters) -West Africa-focused Tullow Oil on Wednesday trimmed its 2023 production forecast, but raised its annual cash flow outlook and moved to ease concerns about its debts by tendering to buy back some of its bonds.

The company raised its full-year free cash flow estimate to $150 million from $100 million, citing increased sales in Gabon and deferral of some capital expenditure in the country.

On Monday, Tullow signed a $400 million five-year debt deal with Glencore to help manage its senior notes maturing through 2026 and will also see the trading house take over marketing the crude from its flagship Ghana and Gabon oilfields.

On Wednesday, Tullow also launched tender offers to buy back $300 million of its 2025 bonds which amount to $633 million – using the Glencore facility – and $100 million of its 2026 bonds – using company cash – which stand at $1.6 billion.

“This is a key part of its upcoming refinancing strategy, and the company is on track to being a ‘low debt company’ by 2025 and is well positioned for a successful refinancing of the 2026 Notes in the near term,” Investec analysts said.

Tullow forecast its net debt would fall to $1.6 billion at the end of this year from $1.9 billion at end-June, which compares with its market capitalisation of around $607 million.

Its shares rose around 4% in early trading to their highest in about two weeks, outperforming a broader index of European energy companies up 0.1%.

In September, the London-listed company lowered the upper end of its estimated production range for the year to 58,000-60,000 barrels per day (bpd) from 58,000-64,000 bpd.

It now expects this year’s output to be marginally below these forecasts, also citing “reduced water injection” at its flagship Jubilee field in Ghana.

Tullow reiterated its outlook to make $800 million in free cash flow between this year and 2025 at oil prices of $80 a barrel.

(Reporting by Eva Mathews in Bengaluru and Shadia Nasralla in London; Editing by Bernadette Baum and Mark Potter)