Tullow credits advance planning for limited virus impact on operations

Tullow Ghana is crediting its ability to maintain stable operations during the coronavirus outbreak to its advance planning and preparation to manage the impact of the virus.

According to Operations Director of the oil company, Anthony Pearce, the early adoption of a COVID Response Committee contributed to the firm increasing its production even as the pandemic raged.

Mr. Pearce was speaking during a webinar on “COVID-19 Response Strategies in Africa’s Oil and and Gas Industry” organised by the think tank Africa Centre for Energy Policy (ACEP).

“Through all this, both of our production facilities have probably had the best production records for the past two years. In the last month we have not seen a production trip on our facility,” he said. “What is making that happen is that we have reduced activity to a sensible level—everyone’s awareness is heightened, everyone gets the gravity of the situation.”

He said the company is learning from the pandemic and is convinced that by the next six months, a lot of lessons will have been learnt to make things better.

“It is interesting how Tullow Ghana has achieved the best oil production so far in this dire Covid-19 era. Maybe the pandemic has helped companies like Tullow to focus on what is really important.”

Hedge cushion

Another critical factor that has helped the company overcome operational challenges, according to Mr. Pearce, is its hedging philosophy, which has proved helpful given the extremely low crude oil prices, particularly during March and April.

Tullow has previously said the impact of reduced crude oil prices is mitigated by a robust hedging strategy, whereby 60 percent of its 2020 sales revenue is hedged at a floor price of US$57 per barrel (/bbl) and 40 percent of 2021 sales revenue is hedged at a minimum price of US$53/bbl.

For January and February, the company’s realised oil price was US$62/bbl, and following the price drop, hedging receipts of US$30m were forecast for March alone.

According to the company, underlying operating costs remain less than US$12/bbl, with operating costs in Ghana at US$9/bbl. It said its hedging policy together with the expected output of 70,000-80,000 barrels per day results in a free cash flow breakeven oil price of US$35/bbl for the rest of the year.