Tullow Oil says it is optimistic of weathering a collapse in oil prices and expects the start-up of its TEN Project in the middle of this year to help shore up its coffers.

The Africa-focused oil company entered 2016 with US$1.9billion in undrawn bank facilities, giving it the option to tap more money if needed -- and it was able to shave another US$200million off its US$1.1billion capital investment budget.

Aidan Heavey, Chief Executive, said in an advance statement expected to be released on February 10, which summarises recent operational activities and to provide trading guidance in respect of the financial year to 31 December 2015, that: “In 2015, Tullow not only reset its business to deal with very difficult market conditions but also deliver on its key operational goals”.

Despite current low oil prices, Tullow expects to maintain sufficient liquidity throughout 2016. The Group starts the year with a financial headroom of US$1.9billion, is benefitting from a significant hedge position, will see West Africa oil production increase with TEN’s first oil and will continue to focus on reducing costs and capex across its portfolio. The primary focus of the Group in 2016 remains to de-leverage the balance sheet.

Strong West African oil production supported by a significant hedge programme delivered pre-tax operating cash flow of US$1billion.

“We also made excellent progress on development of the TEN Project, which is on track to begin production in the middle of 2016, and we expect the Group to be producing around 100,000 bopd in West Africa in 2017.

“In East Africa, steady progress has been made toward a potential development sanction in 2017. Our appraisal programme in Kenya has proved up commercial resources with further significant upside identified. We continue to focus on driving down our costs and capital expenditure and, at the beginning of 2016, Tullow has a mark-to-market hedge value of over US$600million and financial headroom of US$1.9billion. Accordingly, we have a diversified balance sheet that supports our planned activities for the year ahead.”

In 2015, West Africa working interest oil production was within guidance averaging 66,600 bopd. In 2016, West Africa average working interest oil production guidance is expected to be in the range of 73,000 to 80,000 bopd. This includes production from the TEN development, which remains on track for first oil between July and August 2016.

In Europe, working interest gas production in 2015 was within guidance averaging 6,800 boepd. In 2016, Europe average working interest gas production guidance is expected to be in the range of 5,000 to 7,000 bopd.

Jubilee production performance for 2015 exceeded the 100,000 bopd target, averaging 102,600 bopd gross (net: 36,400 bopd). Good performance from the onshore gas processing facility has allowed significant gas export from the Jubilee Field with an average rate of gas export of around 85 mmscfd in the last quarter of 2015. Tullow is forecasting Jubilee 2016 average production to be around 101,000 bopd gross (net: 36,000 bopd). This reflects the impact of a planned two-week FPSO maintenance shutdown in the first quarter 2016 and a period of reduced water injection capacity, which is currently being addressed.

The Greater Jubilee Full Field Development Plan (GJFFD), which includes the Mahogany and Teak fields, was submitted to the Government of Ghana in December 2015, and approval is targetted for the first half of 2016. This project -- to extend field production and increase commercial reserves -- has been redesigned, given the current environment, to reduce the overall capital requirement and allow flexibility in the timing of capital investment.

The TEN Project continues to make excellent progress, is over 80% complete, and remains within budget and on schedule for first oil between July and August 2016. To date, all the key milestones of the project have been met, with the next important event being departure of the TEN FPSO from Singapore to Ghana. The vessel is expected to depart late January 2016 and arrive in Ghana early March when the vessel will begin to be connected to the risers and subsea infrastructure.

A gradual ramp-up in production toward plateau is anticipated during the second-half of 2016 as the facilities go through the final commissioning stage and wells are tied into the FPSO. Tullow estimates that TEN average working interest production in 2016 will be around 23,000 bopd gross (net: 11,000 bopd).

Fact File

2015 revenue of US$1.6 billion and pre-tax operating cash flow of US$1.0billion

TEN project over 80% complete and on schedule for first oil between July and August 2016

Successful Kenya appraisal programme underpins strong resource base for development

Financial headroom of US$1.9billion at year end, mark-to-market hedge value of over US$600million