2018 FULL YEAR RESULTS
2018 FULL YEAR RESULTS DISCLAIMER This presentation contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst Tullow believes the expectations reflected herein to be reasonable in light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Group’s control or within the Group’s control where, for example, the Group decides on a change of plan or strategy. The Group undertakes no obligation to revise any such forward-looking statements to reflect any changes in the Group’s expectations or any change in circumstances, events or the Group’s plans and strategy. Accordingly no reliance may be placed on the figures contained in such forward looking statements. Slide 2
2018 FULL YEAR RESULTS DRIVING FORWARD TO ACHIEVE OUR GROWTH AMBITIONS Investing in >150kbopd Investing to grow production, develop our assets discoveries and find new oil production potential Low cost <$10/bbl Significant savings realized; cost- base discipline embedded across the business targeted operating costs $40/bbl Business delivers substantial and Cash growing underlying free cash flow generation free cash flow breakeven 1x-2x Robust balance Continued disciplined management of our balance sheet sheet targeted gearing range Shareholder $100m Sustainable capital returns policy emphasises strong financial discipline returns minimum annual dividend Slide 3
2018 FULL YEAR RESULTS
2018 FULL YEAR RESULTS 2018 FULL YEAR RESULTS SUMMARY Underlying cash Revenue 1 Adjusted EBITDAX Profit after tax 2 operating costs $10.0 /boe $1,600 million $1,859 million $85 million FY 2017: $1,723 million FY 2017: $11.1/boe FY 2017: $1,346 million FY 2017: $(189) million Capital investment 3 Free cash flow 4 Net debt Gearing $423 million $411 million $3.1 billion 1.9 times FY 2017: $225 million FY 2017: $543 million YE 2017: $3.5 billion YE 2017: 2.6 times 1. Revenue excludes $188 million additional revenue from Corporate Business Interruption insurance (2017: $162 million) 2. Profit/(loss) includes non-cash exploration write-offs of $295 million (pre-tax) 3. Capital investment excludes Uganda capex expected to be recovered on completion of the farm down 4. Free cash flow impacted by one-off litigation payment of $208 million Strong financial performance despite oil price volatility Slide 5
2018 FULL YEAR RESULTS RELENTLESS FOCUS ON RETAINING COST DISCIPLINE $m $/bbl Unit Opex Net G&A 250 20 200 15 150 10 100 5 50 0 0 2015 2016 2017 2018 2019f 2015 2016 2017 2018 2019f Financing costs $m 400 Competitive industry cost base 300 • Targeting further operational efficiencies 200 • Cost conscious culture embedded • Optimising capital structure 100 • Sustaining low cost base through the cycle 0 2015 2016 2017 2018 2019f Underlying free cash flow breakeven in 2019 of $40/bbl % sales volume Slide 6
2018 FULL YEAR RESULTS DISCIPLINED CAPITAL INVESTMENT IN OUR BUSINESS MAXIMISING GROWTH FROM FINDING PRODUCTION DISCOVERED RESOURCES NEW OIL $62m $204m $92m $65m $50m $423m FY 2018 Uganda * Exploration Ghana Non-op Kenya $250m $100m $70m $180m $140m $570m FY 2019 Ghana Non-op Uganda * Exploration Kenya Annual Up to • Invest up to $600m in high value assets $600m • Flexibility to lower capex if required with a sustained low oil price outlook * Excluded from totals as expected to be recovered on completion of the farm-down with the exception of $10m in 2019 representing Tullow own costs. Attractive opportunities for capital investment across the portfolio Slide 7
2018 FULL YEAR RESULTS A BUSINESS DELIVERING SIGNIFICANT FREE CASH FLOW Free cash flow 1 $m Factors impacting 2018 free cash flow: 1000 Strong underlying operating cash flow $70 One-off cash outflow from Seadrill litigation 800 $65 Year-end working capital movements $60 $70 $68 600 Litigation $58 $65 $543m Factors impacting 2019 free cash flow: Uganda $60 400 $411m One-off cash inflow expected from Uganda farm-down & FID 200 Oil price sensitivity ($5/bbl = +/- $125m) Working capital movements (+/- $100m) 0 2017 2018 2019f 2019f inc. underlying Uganda 1 Free cash flow : Cash after all costs, capex and financing but before dividends and debt paydown A self-funding E&P Company Slide 8
2018 FULL YEAR RESULTS CAPITAL ALLOCATION FRAMEWORK DEBT AND LIQUIDITY INVESTING IN OUR BUSINESS SHAREHOLDER RETURNS Apply strict criteria to allocate Balance sheet robust to Demonstrating financial capital across the portfolio: future oil price volatility discipline and business progress Maximising production: Driving net debt below Immediate cashflow $2 billion in near term Capital Returns High returns, short payback Policy established Retain flexibility Growth from with longer term Sustainable annual discovered resources: gearing of 1x-2x ordinary dividend Future cash flow Medium-term payback Additional returns Ensuring headroom for in periods of strong FCF future opportunities Finding new oil: Significant value 2018 final dividend New resources, capital growth ¢4.8/share ( $67m) Other opportunities Balanced capital allocation focused on maximising shareholder returns Slide 9
2018 FULL YEAR RESULTS
2018 FULL YEAR RESULTS ORGANIC INVESTMENT OPPORTUNITIES TO GROW OUR BUSINESS MAXIMISING GROWTH FROM FINDING PRODUCTION DISCOVERED RESOURCES NEW OIL East Africa development Exploration in emerging Jubilee and TEN infill wells projects basins Non-op investment West Africa Infrastructure-led exploration opportunities near-field tie-backs High value oil plays Increase and sustain Growing medium term production revenues Material low cost campaigns production and revenue High returns from known Potential to transform Converting resources to reservoirs resource base reserves Slide 11
2018 FULL YEAR RESULTS MAXIMISING PRODUCTION IN WEST AFRICA Growing & sustaining our production business • Ramping up production to 100,000 bopd net in 2019 • Infill, near-field & exploration opportunities to sustain & grow production • Low-cost production $10 opex/bbl • Significant scope for ‘just -in- time’ reserves & resources growth 120,000 No additional Upside capex 100,000 Annual capital investment $50-$100m Non-operated 80,000 bopd 60,000 40,000 Ghana $200-$300m 20,000 0 2017 2018 2019 2020 2021 2022 Slide 12
2018 FULL YEAR RESULTS PRODUCTION OPERATIONS ACROSS WEST AFRICA Ghana infill programme delivering results • New wells meeting/exceeding expectations • Seven new wells planned in 2019 • 180,000 bopd gross production forecast 2019 Significant Ghana reserves & resource base • Fields in early life; only 25% of R&R produced • Progressively maturing 2C into 2P, with further nearfield opportunities being pursued Revival of West Africa non-op portfolio • 70% 2P & 2C resource increase across portfolio in 2018 • 160% 2P reserves replacement in 2018 • New Simba field on stream, exceeding expectations • Small transactions in 2018 grow 2019 production Slide 13
2018 FULL YEAR RESULTS DEVELOPING OUR DISCOVERIES: EAST AFRICA PRODUCTION HUB Group net oil production growth 150 KENYA UGANDA 560mmbo 1.7bbo 125 MATERIAL OIL DISCOVERIES Gross 2C resource Gross 2C resource 100 60 100,000 230,000 PRODUCTION SCALE kbopd bopd gross production bopd gross production 75 Ghana Targeting FID end 2019 Targeting FID mid-2019 50 • FEED & Upstream ESIA complete • EOPS transporting 600 bopd • Ready to award major contracts • Foundation stage well defined DEVELOPMENT • FEED & ESIAs ongoing • Finalisation of commercial, UPDATE 25 technical & land agreements • Awaiting finalisation of key ongoing commercial agreements • Infrastructure improvements • Land & water agreements under way progressing 0 2018 2019f Future growth Inc. East Africa JV Partners & Governments targeting 2019 FID in Uganda and Kenya Slide 14
2018 FULL YEAR RESULTS FINDING NEW OIL – EXECUTING OUR EXPLORATION PROGRAMME 2019 2020 2021 GUYANA #1 priority SURINAME Ranked highly CÔTE D’IVOIRE COMOROS Material entries PERU Prospect MAURITANIA/ NAMIBIA/ JAMAICA evaluation WEST & EAST Near Field AFRICA Firm Seismic Airborne Survey Drilling options Firm Drilling Drilling 3-5 high-impact wildcats per year, within $150m exploration budget Peru & Comoros licences remain subject to final Government approval Slide 15
2018 FULL YEAR RESULTS 2019 DRILLING FOCUS ON GUYANA >4BBO Gross mean un-risked resources ORINDUIK KANUKU Shelf-edge acreage in JETHRO CARAPA industry hot-spot prospect selected for 2Q 2019 drilling prospect selected for 3Q 2019 drilling Multiple prospects up-dip >100 mmbo 1,350m >200 mmbo 70m of giant oil discoveries Tertiary target water depth Cretaceous target water depth Jack-up High-quality 3D Drillship ~$30m ~$20m rig to be rig being seismic processed net well cost net well cost contracted contracted Slide 16
2018 FULL YEAR RESULTS
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