Tullow Oil said it is proceeding with plans to farm down interest in assets, including those offshore the new oil producing South American country of Guyana.
The Africa-focused explorer said in an annual report that it had to pursue the farm-down to manage risk. The firm was unable to limit its capital exposure to historical exploration commitments in the emerging basins of Guyana and Argentina, and this created the risk of having to divert capital from producing assets. Consequently, the farm-down decisions were made, with a view of ensuring Tullow can participate at an equity consistent with its capital allocation guidance.
The company recently announced write-offs of US$97.7 million costs related to the Kanuku and Orinduik blocks, partly due to ‘license relinquishments, expiry, planned exit or reduced activity’.
Specific to Kanuku, the Petroleum agreement is expected to come to a natural end in May 2023. After drilling the Beebei-Potaro well in 2022 and not finding commercial oil, the partners have given no indication that they will seek an extension and are expected to relinquish the entire acreage.
As for Orinduik, Eco Atlantic said the partners are expected to drill at least one light oil Cretaceous target in the next 12-18 months. Tullow is the operator.
Tullow said its Business Plan is anchored on production from the Jubilee and TEN fields in Ghana and non-operated fields in Côte d’Ivoire and Gabon. If a decline in the performance of those wells or facilities occurred, it could prevent those assets from meeting planned production levels which, in turn, would lead to a reduction in revenue and cash flow.