Tullow Oil plc (Tullow), the independent oil and gas exploration and production group, announces its results for the year ended 31 December 2012.
Commenting, Aidan Heavey, Chief Executive, said:
“2012 was a year of major progress for Tullow. We materially enhanced the business with a basin-opening oil discovery in Kenya, by adding highly prospective new licences in Africa and the Atlantic Margins, refinancing our debt and partially monetising our Ugandan assets. The Jubilee Field in Ghana is now approaching its full potential and provides the base for our production profile and operational cash flow. Our financial position underpins our highly ambitious 2013 exploration programme which has high-impact wells planned in Kenya, Ethiopia, Norway, Mauritania, Mozambique, Côte d’Ivoire and French Guiana. This focus on exploration-led growth, together with active portfolio management and Tullow’s strong balance sheet, provides an excellent platform for growth in 2013 and beyond.”
Tullow has interests in two licences offshore Ghana, Deepwater Tano and West Cape Three Points, with the Jubilee Field straddling both licence areas. In 2012, Tullow conducted a highly successful and cost-effective remediation programme on a number of wells in the Jubilee field. Towards the end of 2012, the first Jubilee Phase 1A well was brought on-stream with the second coming on-stream in early January 2013. The FPSO Kwame Nkrumah, which serves the Jubilee field, continues to perform well with a very low rate of unplanned shut-downs and an excellent safety and environmental record.
During the year, the Group also successfully appraised the Tweneboa-Enyenra-Ntomme (TEN) Cluster Development and submitted a Plan of Development (PoD) for the TEN project in November 2012. Approval of the PoD is expected in the near future. Exploration drilling activity in the Deepwater Tano licence continued throughout 2012.
Jubilee field Phase 1 and Phase 1A Developments
Since the start-up of production at the end of 2010 to the end of January 2013, the Jubilee field had produced 55 million barrels of oil. Gross field production during 2012 averaged 72,000 bopd. This was slightly lower than envisaged at the start of the year due to productivity issues with some of the wells. Acid stimulations proved to be the best and most cost-effective solution to these issues and well productivity has been restored at a cost of $160 million gross, significantly below the amount originally budgeted at the start of 2012.
The Jubilee Phase 1A development project, designed to increase production and recover additional reserves, was approved by the Government of Ghana in January 2012. Phase 1A consists of eight new wells of which five are producers and three are additional water injectors. The project has progressed well with two wells currently producing and three more expected on stream by the end of the third quarter of 2013.
As a result of the Phase 1 remediation programme and Phase 1A production coming on stream at the end of 2012, gross production increased during the year, exiting 2012 at around 110,000 bopd. 2013 average gross production is expected to be within the range of 100,000-110,000 bopd with a year end exit rate in excess of 120,000 bopd. The increase from current production levels will follow work scheduled to take place in the third quarter of the year to remove gas compression constraints on the FPSO. A full field development plan that sets out future investment opportunities has been prepared and is being discussed with the Government of Ghana. This work demonstrates the potential to significantly extend the Jubilee production plateau.
TEN Appraisal and Development
During 2012 the Group made good progress on the Development Plan for the TEN Project which culminated in the Declaration of Commerciality and the Plan of Development (PoD) being submitted to the Minister of Energy in November 2012. The current estimated capex cost for the base development plan, which includes around 23 injection and production wells, and excludes FPSO lease costs, is around $4.5 billion. As at 31 December 2012 Tullow has transferred 112 mmboe from contingent resources to commercial reserves in respect of the TEN development.
The TEN appraisal programme, which started in January 2011, continued in 2012 with the drilling of three wells. The Owo-1RA well was drilled and successfully tested in January 2012 at combined rates in excess of 20,000 bopd. Enyenra-4A was drilled in March 2012, intersecting 32 metres of oil pay. Water injection tests on this down-dip well were carried out in April 2012, with results proving that the Enyenra channel sands are suitable for water injection to support oil production.
The Ntomme-2A well was drilled in January 2012 and found oil (the Ntomme discovery well) down dip of the Tweneboa-3ST non-associated gas discovery. The well was production tested in May 2012 at combined flow rates in excess of 20,000 bopd, confirming excellent quality reservoir. The top-hole of the final appraisal well, Enyenra-6A, has been drilled and will be completed in Q1 2013 after the drilling of Sapele-1. Pressure gauges were installed in a number of the exploration and appraisal wells and readings have confirmed reservoir continuity within the core parts of the Enyenra and Ntomme fields.
The FPSO design competition was completed and bids have now been received from the two contractors and these are being evaluated. A contract award will take place in early 2013, subject to PoD approval. The subsea FEED is now complete and the tender evaluation process ongoing. The TEN FPSO production capacity has been optimised at around 80,000 bopd with a flexible design allowing for potential future expansion to allow near field resource potential to be tied in. As previously guided, first production from the TEN Project is anticipated to be between 32 and 36 months after Government of Ghana approval of the PoD.
Exploration and Appraisal activity
Exploration drilling activity in the Deepwater Tano licence continued in 2012. The first of three wells, Wawa-1, was completed drilling in July 2012. The results of drilling, wireline logging and sampling showed that Wawa-1 had intersected separate oil and gas condensate accumulations up dip of the Enyenra field which the Deepwater Tano partners have elected to appraise.
The Okure-1 exploration well reached its planned total depth of 4,511 metres in December 2012. The well was then plugged and abandoned after encountering light oil within a gross 17 metre interval of low net to gross Turonian age sandstone reservoirs. Integration of wireline logs and pressure data indicated that this oil accumulation was not connected to other hydrocarbon discoveries in the licence area. The Sapele-1 well is the last exploration well to be drilled on the Deepwater Tano block prior to the end of the Exploration Period in the first quarter of 2013. The well spudded in December 2012 and has been drilled to a depth of 3,900 metres. The primary target encountered a high-quality water-bearing reservoir and drilling operations are now continuing to a deeper target.
In the West Cape Three Points licence, the Teak-4 appraisal well encountered thin non-commercial reservoirs and the well was plugged and abandoned. Appraisal activities were also performed including installing downhole pressure gauges in Teak 2 and a DST at Akasa-1 with rates exceeding 7,500 bopd. Discussions are on-going in relation to further appraisal and development plans for the Mahogany, Teak and Akasa discoveries. In January 2013, the discovery area associated with the Banda discovery on the West Cape Three Points licence was relinquished.
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