Tullow Oil Shares Volatile Following Mixed Trading Statement

Tullow Oil (LON: TLW) experienced volatile trading following the release of its 2025 trading statement, which highlighted both operational successes and financial headwinds.

The statement, issued ahead of the full-year results, detailed strong production performance alongside concerns about delayed payments and commodity price pressures. TLW shares are currently up around 0.4% but spiked higher and pulled back sharply following the report.

The company reported average working interest production of 40.4 kboepd, including 7.1 kboepd of gas, reflecting the sale of Gabonese assets. Jubilee field gross production reached 60.9 kbopd, supported by the J72-P well. TEN field production was approximately 16.0 kbopd. These figures indicated solid operational execution, but the financial results painted a more complex picture.

Revenue for 2025 totaled approximately $847 million, including $19 million in hedge costs, with an average realized oil price of $67.8/bbl (pre-hedging). Capital and decommissioning expenditures were $166 million and $17 million, respectively, aligning with previous guidance. However, free cash flow was significantly lower than anticipated, landing at approximately $100 million.

The shortfall in free cash flow was attributed to several factors: a $40 million delay in receiving the second tranche of proceeds from the Kenya asset disposal, approximately $140 million in delayed cash calls and gas payments from the Government of Ghana, and $20 million in lower revenue during November and December. These delays raised concerns about Tullow's near-term financial stability, despite efforts to streamline operations.

Tullow Oil's year-end net debt stood at $1.35 billion, with liquidity headroom exceeding $300 million. The company announced an extension to its Senior Secured Notes and Glencore facility to November 2028 and May 2030, respectively. It has also agreed a new $100 million cargo pre-payment facility with Glencore to provide additional liquidity.

Independently audited 2P reserves at year-end 2025 were 100.4 mmboe, valued at approximately $1.3 billion (NPV10 at Strip Price). The reserves reduction included 14.7 mmboe of Group production in 2025, the disposal of the Gabon assets (36.0 mmboe), a downward revision on Jubilee reflecting production performance (11.8 mmboe) and a minor reduction on TEN (1.6 mmboe) which reflects rephasing of projects and an earlier assumed cessation of production due to a lower evaluation oil price.

Tullow completed the sale of its entire working interest in Kenya for $40 million upfront, with another $40 million due upon ratification of the Field Development Plan (FDP), expected in the first quarter of 2026. A final $40 million payment will be received over five years from the third quarter of 2028. The company also completed the sale of Tullow Oil Gabon SA for $307 million net of tax.

Notably, Tullow has signed an agreement to acquire the TEN FPSO for $205 million ($125.6 million net to Tullow), payable upon completion at the end of the first quarter of 2027. The company anticipates operational synergies with the Jubilee Field following the acquisition.

Looking ahead to 2026, Tullow expects group working interest production to average 34-42 kboepd, including approximately 6 kboepd of gas. Capital expenditure is forecast at around $200 million, with decommissioning expenditure expected to be approximately $25 million. Pre-financing cash flow is projected to be $150-180 million at $65/bbl.

Ian Perks, Chief Executive Officer, Tullow Oil Plc, said: “2025 has been a year of disciplined execution across the business…However our 2025 full year free cashflow was negatively impacted by the commodity price environment towards the end of the year and delays in receipt of Government of Ghana receivables and the second instalment of proceeds from the Kenya disposal…The refinancing transaction we have announced today enables us to focus on delivering our near-term priorities, which include driving further cost efficiencies, improving cashflow management and optimising our production.”