Tullow Oil - comment

Tullow’s endgame may be approaching, or perhaps not. As we stated previously, a delisting, debt for equity and/or Amend and Extend are the only possibilities. The Company states it is in talks with everyone, but is now progressing alternative options. These include an amend and extend exercise and other liability management transactions. Senior bondholders appear to be left carrying the risk, and with little appetite in the market to own Tullow, it seems increasingly likely that maturities will simply be pushed out once again.

The guidance issued in the Trading Update is broadly in line with our projections, and at this stage we see no reason to adjust our forecasts. Group production is guided at 34–42kboepd, compared with our estimate of 38kboepd. The breadth of the range is somewhat surprising and suggests a higher level of operational uncertainty than we had anticipated. CAPEX and decommissioning expense guidance is slightly above our expectations, although Tullow is guiding to a higher pre-financing cashflow of $70–100m versus our $60m, likely reflecting lower production costs.