Tullow Oil Plc Valuation Report, August 2010 - Strategic and Operational Analysis


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GlobalData

$ 3500

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Tullow Oil Plc (Tullow) is an independent oil and gas company. The company’s exploration, development and producing activities are spread across 23 countries in Africa, Europe South Asia and South America with primary focus on Africa. Further, the company owns almost 90 licenses globally. Tullow’s producing assets are located in Gabon, Equatorial Guinea, Congo, Cote d’Ivoire and Mauritania in Africa; the UK; and Bangladesh. Almost 66% of the company’s total production and 100% of its crude oil and natural gas liquids (NGL) production came from Africa in 2009. Further, the UK contributed almost 32% of Tullow’s total production and 73% of its natural gas production in 2009. The company’s total production is skewed towards crude oil and NGL which represented almost 66% of the company’s total production in 2009. 

Scope

Investment Thesis: This section highlights the companies new ventures, liquidity issues, assets analysis, hedging, new projects details, capex funding, geographical results of oil and gas operations, and other related analysis.

Goals and Strategies: Provide highlights on their existing and upcoming challenges with the possible strategies.

SWOT: This section highlights the companies internal strength, weakness, opportunities and threats to better understand their position in the market

Production and Development profile: This section highlights the companies’ forecasted crude oil and natural gas production from their existing and upcoming assets. It also covers the detailed information and analysis on the producing and development assets.

Exploration and M&A trends: This section includes exploration assets information resulted due to new discoveries, new drilling and other activities. Additionally, M&A section highlights the companies’ recent assets transactions, joint ventures, acquisition, and divestment activities during the specified period.

Financial Forecast and Valuation: This section highlights the detailed financial forecast of the companies for coming five years. This section also provides intrinsic value of the companies’ by using different valuation techniques.

Peer Group: This section compares peer group performance with the main companies on the basis of share prices, financial ratios, operational and financial parameters and other related activities.

Reasons to buy

The report will enhance the decision-making capability in a more rapid and time sensitive manner. It will allow you to:

  • Provide detailed analysis to those who are interested in knowing the companies’ existing and future business strategies.
  • Provide in-depth analysis on the companies E&P profiles along with the exploration and M&A updates.
  • Provide valuable insights to those who are tracking oil and gas markets and wants to know the intrinsic value of the companies.
  • Use the analysis for strategy and planning, M&A identifications, and competitor analysis.
Table of Contents

1 Table of Contents 3

1.1 List of Tables 5
1.2 List of Figures 6

2 Tullow Oil Plc, Company Overview 8

3 Tullow Oil Plc, Watchlist For 2010 11

4 Tullow Oil Plc, Investment Summary 12

4.1 Asset Portfolio Well Balanced Across the E&P Value Chain 12
4.2 Jubilee Field Development To Provide Near Term Upside 13
4.3 Exploration Successes to Support Long Term Production Growth 14
4.4 Substantial Liquidity to Fund Robust Capital Expenditure Plans 14

5 Tullow Oil Plc, SWOT Analysis 16
5.1 Strengths 16
5.1.1 Well Balanced Asset Portfolio 16
5.1.2 Production Skewed Towards Crude Oil and Liquids 16
5.1.3 Sufficient Liquidity to Support Aggressive Capex Requirements 16
5.2 Weaknesses 17
5.2.1 Focused Primarily on Africa 17
5.2.2 Inability to Fund Growth Solely Through Internal Generation of Funds 17
5.3 Opportunities 18
5.3.1 High Quality Exploration Inventory 18
5.3.2 Farm-Down Agreement in Uganda 19
5.4 Threats 19
5.4.1 May Become a Target for Acquisition 19

6 Tullow Oil Plc, Goals and Stategies 20
6.1 Successful Development of Jubilee Unit Area Phase 1 and Subsequent Phases 20
6.2 Implementation of a Basin Wide Development Program of Lake Albert Rift Basin, Uganda 20
6.3 Accelerated Exploration Program to be Funded Through Internal Generation of Operational Cash Flow 21
6.4 Maintenance of Appropriate Capital Structure to Fund Long Term Growth Plans 22
6.5 Increasing Total Shareholder Return 23

7 Tullow Oil Plc, Production and Development Overview 25
7.1 Production & Development Highlights 25
7.2 Aggressive Redevelopment of Producing Assets in Africa to Maintain Plateau Production Levels in the Future 28
7.3 Limited Attention to Production and Development Activities in UK and Bangladesh; Sale of Producing Assets in Pakistan 31
7.4 Upcoming Production From the Jubilee Field to Add Substantial Production From 2011 33
7.5 Other Planned Development Activities During 2010 to Supplement Future Production Growth 35
7.6 Costs Incurred 35

8 Tullow Oil Plc, Exploration and M&A Overview 37
8.1 Exploration and M&A Highlights 37
8.2 Exploration Activities in Uganda, Ghana and West African Equatorial Atlantic (Sierra Leone and Liberia) to Fuel Future Growth in Production 37
8.3 Limited Exploration Activity in Other African Assets 40
8.4 Extensive Seismic Surveys in Equatorial Atlantic Region of South America in Pursuit of a Jubilee Play Analogy 41
8.5 Initiation of New Exploration Drilling in Pakistan and Netherlands 41
8.6 M&A Activity 41

9 Tullow Oil Plc, Outlook 44

10 Tullow Oil Plc, Forecast Financial Statements 45

10.1 Income Statement (20072014) 46
10.2 Balance Sheet (20072014) 47
10.3 Cash Flow Statement (20072014) 48
10.4 Financial Ratios 48

11 Tullow Oil Plc, Valuation 51

11.1 Net Asset Value 51

12 Tullow Oil Plc, Peer Comparison 54

13 Tullow Oil Plc, Key Risks 60

13.1 Delays Related to the Development of the Jubilee Field 60
13.2 Unsuccessful Exploration Program 60
13.3 Inability to Fund Growth Plans 60

14 Tullow Oil Plc, Detailed Financial and Operational Metrics 61
14.1 Tullow Oil plc, Production and Reserves Trends 61
14.1.1 Total Crude Oil and Natural Gas Production and Reserves Trend, 2004-2009 61
14.1.2 Total Crude Oil & Natural Gas Production and Reserves By Country/Region, 2004-2009 62
14.1.3 Total Crude Oil and Natural Gas Reserve Changes, 2004-2009 64
14.1.4 Crude Oil/Liquids Production and Reserve Trend, 2004-2009 65
14.1.5 Crude Oil Production and Reserves By Country/Region, 2004-2009 66
14.1.6 Crude Oil/Liquids Reserve Changes, 2004-2009 68
14.1.7 Natural Gas Production and Reserve Trend, 2004-2009 69
14.1.8 Natural Gas Production and Reserves, By Country/Region, 2004-2009 70
14.1.9 Natural Gas Reserve Changes, 2004-2009 72
14.1.10 Total Crude Oil and Natural Gas Reserves Life Index, 2004-2009 73
14.1.11 Total Crude Oil and Natural Gas Reserves Life Index, By Country/Region, 2004-2009 74
14.2 Tullow Oil plc, E&P Costs Trends 76
14.2.1 Upstream Capital Expenditure, 2004-2009 76
14.2.2 Oil and Gas Cost Per boe, $/boe, 2004-2009 77
14.3 Tullow Oil plc, Reserve Replacement Ratio 79
14.3.1 Oil and Gas Production Replacement Ratio, 2004-2009 79
14.3.2 Oil and Gas Production Replacement Ratio, By Country/Region, 2004-2009 81
14.4 Tullow Oil plc, Results of Oil & Gas Operations Trend 85
14.4.1 Oil and Gas Revenue and Expenses, 2004-2009 85
14.4.2 Oil and Gas Revenue and Expenses, By boe, 2004-2009 86
14.4.3 Oil and Gas Performance Metrics 87

15 Appendix 89
15.1 Methodology 89
15.1.1 Coverage 89
15.1.2 Secondary Research 89
15.1.3 Primary Research 89
15.2 Data Sources 90
15.2.1 Company Source 90
15.2.2 SEC/Other Regulatory Filings 90
15.2.3 Agency Reports 90
15.2.4 Other Sources 90
15.3 Methodology for Company Valuation 90
15.4 Expert Panel Validation 91
15.5 Units of Measure 91
15.6 About GlobalData 91
15.7 Disclosure 92
15.8 Disclaimer 92
Table 1: Tullow Oil Plc, Key Events, August 2009August 2010 10
Table 2: Tullow Oil Plc, Upcoming Production Profile, 20102014 27
Table 3: Tullow Oil Plc, Recent Transactions as a Seller, 20062010 42
Table 4: Tullow Oil Plc, Recent Transactions as a Buyer, 20062010 43
Table 5: Tullow Oil Plc, Forecast Production, 20062014 45
Table 6: GlobalData, Price Forecast, 20102014 45
Table 7: Tullow Oil Plc, Income Statement, $m, 20072014 46
Table 8: Tullow Oil Plc, Balance Sheet, $m, 20072014 47
Table 9: Tullow Oil Plc, Cash Flow Statement, $m, 20072014 48
Table 10: Tullow Oil Plc, Profitability Ratios, 20072014 49
Table 11: Tullow Oil Plc, Other Ratios, 20072014 49
Table 12: GlobalData, Price Forecast, 20102014 51
Table 13: Tullow Oil Plc, Net Asset Valuation, 2010 52
Table 14: Tullow Oil Plc, Acreage and Resource Potential, 2010 52
Table 15: Tullow Oil Plc, NPV Per Unit Crude Oil & NGL, 2010 52
Table 16: Tullow Oil Plc, NPV Per Unit Natural Gas, 2010 53
Table 17: Tullow Oil Plc, NPV Per Unit Crude Oil and Natural Gas, 2010 53
Table 18: Tullow Oil Plc, Sensitivity Analysis on Fair Value, $/share, 2010 53
Table 19: Tullow Oil Plc and Peer Group Comparison, Financial Ratios, 2009 55
Table 20: Tullow Oil Plc and Peer Group Comparison, Operational and Financial Performance, 2009 56
Table 21: Tullow Oil plc, Total Crude Oil and Natural Gas, Production and Reserves, MMboe, 2004-2009 61
Table 22: Tullow Oil plc, Total Crude Oil & Natural Gas Production and Reserves, By Country/Region, MMboe, 2004-2009 63
Table 23: Tullow Oil plc, Total Crude Oil and Natural Gas Reserve Changes, MMboe, 2004-2009 64
Table 24: Tullow Oil plc, Crude Oil Production and Reserves Metrics, MMbbl, 2004-2009 65
Table 25: Tullow Oil plc, Crude Oil Production and Reserves, By Country/Region, MMbbl, 2004-2009 67
Table 26: Tullow Oil plc, Crude Oil Reserve Changes, MMbbl, 2004-2009 68
Table 27: Tullow Oil plc, Natural Gas Production and Reserves Metrics, Bcf, 2004-2009 69
Table 28: Tullow Oil plc, Natural Gas Production and Reserves, By Country/Region, Bcf, 2004-2009 71
Table 29: Tullow Oil plc, Natural Gas Reserve Changes, Bcf, 2004-2009 72
Table 30: Tullow Oil plc, Oil and Gas Reserves Life Index, Years, 2004-2009 73
Table 31: Tullow Oil plc, Oil and Gas Reserves Life Index, By Country/Region, Years, 2004-2009 75
Table 32: Tullow Oil plc, Upstream Capital Expenditure, $m, 2004-2009 76
Table 33: Tullow Oil plc, Reserves Replacement, Finding and Development Costs, Finding Cost and Proved Acquisition Costs Per boe, $/boe, 2004-2009 78
Table 34: Tullow Oil plc, Oil and Gas Production Replacement Ratio, %, 2004-2009 79
Table 35: Tullow Oil plc, 3-Year Wt.Avg. Oil and Gas Production Replacement Ratio, By Country/Region, %, 2004-2009 84
Table 36: Tullow Oil plc, Revenue and Expenses, $m, 2004-2009 85
Table 37: Tullow Oil plc, Oil and Gas Revenue and Expenses, $/boe, 2004-2009 87
Table 38: Tullow Oil plc, Oil and Gas Performance Metrics, 2004-2009 87
Figure 1: Tullow Oil Plc, Operational Map, 2010 8
Figure 2: Tullow Oil Plc, Financial and Operational Overview, 20052009 9
Figure 3: Tullow Oil Plc, Share Price Movement, August 2009August 2010 10
Figure 4: Tullow Oil Plc, Capital Expenditure Split Between Exploration and Development Activities, 20062014 13
Figure 5: Tullow Oil Plc, Cash Flow Position, $m, 2010 15
Figure 6: Tullow Oil Plc, Capex and Operational Cash Flow, 20072010 18
Figure 7: Tullow Oil Plc, Resource Potential, 2010 21
Figure 8: Tullow Oil Plc, Exploration Budget and Operational Cash Flow, 20062014 22
Figure 9: Tullow Oil Plc and Peers, Total Shareholder Returns, 20062009 24
Figure 10: Tullow Oil Plc, Total Production From Legacy and Upcoming Assets, MMboe, 20072014 26
Figure 11: Tullow Oil Plc, Total Production By Type, 20072014 26
Figure 12: Tullow Oil Plc, Total Production By Region, 20072014 27
Figure 13: Tullow Oil Plc, Equatorial Guinea Operational Map, 2010 29
Figure 14: Tullow Oil Plc, Gabon Operational Map, 2010 30
Figure 15: Tullow Oil Plc, Total Production From African Legacy Assets, MMboe, 20072014 31
Figure 16: Tullow Oil Plc, the UK CMS Area Operational Map, 2010 32
Figure 17: Tullow Oil Plc, the UK Thames Area Operational Map, 2010 32
Figure 18: Tullow Oil Plc, Legacy Assets Production From Rest of the World, MMboe, 20072014 33
Figure 19: Tullow Oil Plc, Jubilee Field Operational Map, 2010 34
Figure 20: Tullow Oil Plc, Total Costs Incurred, $m, 20052009 36
Figure 21: Tullow Oil Plc, Planned Capital Expenditure, 2010 36
Figure 22: Tullow Oil Plc, Lake Albert Rift Basin Operational Map, 2010 39
Figure 23: Tullow Oil Plc and Peer Group, Relative Share Price Performance Index, August 2009August 2010 54
Figure 24: Tullow Oil Plc and Peer Group, F&D Costs and Reserve Replacement, 2009 57
Figure 25: Tullow Oil Plc and Peer Group, E&P Operational and Financial Performance, $/boe, 2009 57
Figure 26: Tullow Oil Plc and Peer Group, Total Reserves and Production, MMboe, 2009 58
Figure 27: Tullow Oil Plc and Peer Group, Valuation Multiples, MMboe, 2010 59
Figure 28: Tullow Oil plc, Total Crude Oil and Natural Gas, Production and Reserves, MMboe, 2004-2009 61
Figure 29: Tullow Oil plc, Total Proved Oil & Gas Reserves, By Country/Region, MMboe, 2004-2009 62
Figure 30: Tullow Oil plc, Total Oil & Gas Production, By Country/Region, MMboe, 2004-2009 62
Figure 31: Tullow Oil plc, Total Crude Oil and Natural Gas Reserve Changes, MMboe, 2009 64
Figure 32: Tullow Oil plc, Crude Oil Production and Reserves Metrics, MMbbl, 2004-2009 65
Figure 33: Tullow Oil plc, Total Proved Oil Reserves, By Country/Region, MMbbl, 2004-2009 66
Figure 34: Tullow Oil plc, Oil Production, By Country/Region, MMbbl, 2004-2009 66
Figure 35: Tullow Oil plc, Crude Oil Reserve Changes, MMbbl, 2009 68
Figure 36:Tullow Oil plc, Natural Gas Production and Reserves Metrics, Bcf, 2004-2009 69
Figure 37:Tullow Oil plc, Total Proved Gas Reserves, By Country/Region, Bcf, 2004-2009 70
Figure 38:Tullow Oil plc, Gas Production, By Country/Region, Bcf, 2004-2009 70
Figure 39:Tullow Oil plc, Natural Gas Reserve Changes, Bcf, 2009 72
Figure 40:Tullow Oil plc, Oil and Gas Reserves Life Index, Years, 2004-2009 73
Figure 41:Tullow Oil plc, Gas Reserve Life Index, By Country/Region, Years, 2004-2009 74
Figure 42:Tullow Oil plc, Oil & Gas Reserve Life Index, By Country/Region, Years, 2004-2009 74
Figure 43:Tullow Oil plc, Oil Reserve Life Index, By Country/Region, Years, 2004-2009 75
Figure 44:Tullow Oil plc, Upstream Capital Expenditure, $m, 2004-2009 76
Figure 45:Tullow Oil plc, 3-Year Wt.Avg., Reserves Replacement, Finding and Development Costs, Finding Cost and Proved Acquisition Costs Per boe, $/boe, 2004-2009 77
Figure 46:Tullow Oil plc, 3-Year Wt.Avg., Oil and Gas Production Replacement Ratio, %, 2004-2009 79
Figure 47:Tullow Oil plc, 3-Year Wt. Avg. Gas F&D Production Replacement, By Country/Region, %, 2004-2009 81
Figure 48:Tullow Oil plc, 3-Year Wt. Avg. Gas RRC Production Replacement, By Country/Region, %, 2004-2009 81
Figure 49:Tullow Oil plc, 3-Year Wt. Avg. Oil & Gas F&D Production Replacement, By Country/Region, %, 2004-2009 82
Figure 50:Tullow Oil plc, 3-Year Wt. Avg. Oil & Gas RRC Production Replacement, By Country/Region, %, 2004-2009 82
Figure 51:Tullow Oil plc, 3-Year Wt. Avg. Oil F&D Production Replacement, By Country/Region, %, 2004-2009 83
Figure 52:Tullow Oil plc, 3-Year Wt. Avg. Oil RRC Production Replacement, By Country/Region, %, 2004-2009 83
Figure 53:Tullow Oil plc, Revenue and Expenses, $m, 2004-2009 85
Figure 54:Tullow Oil plc, Oil and Gas Revenue and Expenses, $/boe, 2004-2009 86
Figure 55:Tullow Oil plc, Oil and Gas Performance Metrics, 2004-2009 87