Mar 10, 2021

Tullow Oil reports after tax loss of $1.22 billion

Oil
WestAfrica
Results
Dominic Ellis
2 min
Tullow Oil is pivoting to a more sustainable business model and aims to be net zero by 2030
Tullow Oil is pivoting to a more sustainable business model and aims to be net zero by 2030...

Last year was one of "significant change" for Tullow Oil as it posted an after tax loss of $1,222 million for the year ending December 31 2020.

In line with many of competitors, the independent oil and gas company focused on Africa and South America is now pivoting to a more sustainable business model and aims to be net zero by 2030.

CEO Rahul Dhir, who took up his position last July, said: "We will start a multi-year, multi-well drilling programme in Ghana next month to deliver sustainable and profitable production growth."

Losses were attributed to non-cash exploration write-offs and impairments, as total revenue and gross profit dropped to $1,396 million and $403 million respectively. Sale of interests in Equatorial Guinea and Dussafu in Gabon for up to $180 million are expected to complete in the first half of this year.

Tullow’s West Africa oil assets performed in line with expectations delivering average working interest oil production of 74,900bpd and this year working interest oil production is expected to average between 60,000-66,000bpd. 

undefined

Jack Winchester, Analyst at Third Bridge, said Tullow’s full year production came in "pretty much bang in the middle of guidance" and the drop from previous years' production levels was partly due to OPEC+ enforced shut-ins in Gabon.

"Tullow has survived a tempestuous 2020 by bringing in a new CEO, refocusing on its productive assets, and rationalising its portfolio," he said. "A recovering oil price alleviates some of the pressure on Tullow, but significant debt levels mean they’ll still be anxious for commodity prices to grow further to continue the deleveraging we saw in 2020.”

Dhir recently signed off the sale of Tullow’s Ugandan assets to Panoro Energy, has come in with a reputation for being strong on capital discipline, and led a strategy of rationalisation as the company seeks to repair its balance sheet, he added.

"Our experts are positive about the company’s Jubilee and TEN fields in Ghana which will receive a large chunk of the company’s CAPEX over the coming years. The Jubilee field is a relatively low cost asset and our experts say the TEN field could yield large volumes increases from further drilling at fairly low risk," he said.

"Meanwhile, the rest of Tullow’s portfolio outside of West Africa is likely to take a backseat. The license extension, granted to Tullow’s Kenyan operation will give the company time to decide what to do with this asset."

Share article

Jun 21, 2021

Magellan, Enterprise and ICE unveil new futures contract

futures
Oil
trading
USA
Dominic Ellis
4 min
The Midland WTI American Gulf Coast contract is being launched in response to market interest for a Houston-based index

Magellan Midstream Partners, Enterprise Products Partners and Intercontinental Exchange (ICE) are establishing a new futures contract for the physical delivery of crude oil in the Houston area.

The Midland WTI American Gulf Coast contract is being launched in response to market interest for a Houston-based index with greater scale, flow assurance and price transparency. It will use the capabilities and global reach of ICE’s trading platform and is due to be launched by ICE by early 2022, subject to regulatory approval. 

The quality specifications of the new futures contract will be consistent with a West Texas Intermediate crude oil originating from the Permian Basin with common delivery options at either the Magellan East Houston terminal or the Enterprise Crude Houston terminal. In support of this new futures contract, Magellan and Enterprise anticipate discontinuing their existing provisions for delivery services under the current futures contracts deliverable at each terminal once the new contract receives regulatory approval and is finalised. 

“Magellan is pleased to join forces with Enterprise and ICE to offer this leading-edge joint futures contract,” said Aaron Milford, Magellan’s chief operating officer. “The new contract improves the transparency, flexibility and marketability of Midland WTI crude oil for Gulf Coast and export customers while maintaining industry-recognized quality and consistency.”

Harold Hamm, Chairman of the Board of Continental Resources and Founding Member of the American Gulf Coast Select Best Practices Task Force Association said on April 20 last year, when the Cushing, Oklahoma WTI contract traded down to -$38, it was a wake-up call to the oil industry that the storage constraints and landlocked location of the Cushing contract could no longer be ignored.

"I started the American Gulf Coast Select Best Practices Task Force to develop specifications for a new US light sweet crude oil price benchmark in the American Gulf Coast, and to advocate for its implementation and adoption as the main pricing point for the US oil markets," he said.

"We think a futures contract in the most interconnected market center in the country, with a widely accepted quality spec, which settles with guaranteed delivery of crude oil is an important new alternative for the industry. The task force has worked tirelessly to create a marker with transparency and liquidity that is waterborne for this modern era. The Midland WTI American Gulf Coast futures contract ... is a huge step forward for the industry and goes a long way to accomplishing the mission on which the task force has been working.”

Brent Secrest, Executive Vice President and Chief Commercial Officer of Enterprise’s general partner, said: “We are excited about this new crude oil futures contract, which features the combined strength of two extensive and complementary networks of midstream assets with a world-class trading platform to provide customers with greater supply reliability, flexibility and price transparency. 

As the market hub for Permian Basin production, Houston represents the most logical choice for a new futures contract. Between Magellan and Enterprise, we offer access to virtually all of the export capacity in the Houston region, redundant connectivity to all area refineries, a robust Gulf Coast storage position and interconnects to all of the relevant supply pipelines, including those owned by third parties.”

Jeff Barbuto, Global Head of Oil Markets at ICE, said combining efforts with Magellan and Enterprise to establish a benchmark for pricing Midland quality WTI on the Gulf Coast allows it to offer the industry a futures contract with over four million bpd of supply capacity from Midland into Houston, access to both domestic and foreign demand, and nearly 60 million barrels of storage capacity in the Magellan and Enterprise systems. 

"Traded on the same global platform as ICE Brent, Murban and Platts Dubai Crude Oil futures contracts, the new Midland WTI American Gulf Coast contract can also offer significant capital efficiencies to the industry and provide industry-leading quality that buyers have grown accustomed to in the Houston market," he said.

According to EIA forecastsglobal consumption of petroleum and liquid fuels will average 97.7 million bpd for all of 2021, a 5.4 million bpd increase from 2020. US crude oil production averaged 11.2 million bpd in March, up 1.4 million on February. 

Share article