Tullow Oil’s shares soared in London on Monday as the explorer secured a $400 million (€375 million) loan facility from Swiss commodity trading group Glencore, which will help it manage the repayment of bonds that fall due before the summer of 2026.
Shares in Tullow closed 4.9 per cent higher in London – though the remain down a third over the past 12 months.
The facility will be available to draw for 18 months and allow Irish-founded Tullow to address all its outstanding 2025 notes and also refinance its 2026 notes, chief executive Rahul Dhir said in a statement.
Tullow had around $300 million of cash on hand at the end of June. It has $628 million of bonds that fall due in March 2025 and $1.6 billion of notes that mature in May 2026.
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The facility “significantly de-risks” Tullow’s ability to refinance its 2026 notes, Peel Hunt analysts said in a note to clients.
“This uncertainty has been a key drag on the share price,” the analysts added.
Glencore also entered a deal to buy and market Tullow’s crude oil entitlements in Ghana, home to its key Jubilee and TEN fields and Gabon. This deal will run concurrently with the loan facility agreement. Tullow had previously marketed the crude in-house.
Tullow expects net volumes from its Ghana fields to amount to about 46,000 barrels per day (bpd) this year in addition to around 10,000 bpd from Gabon.
Tullow reiterated it’s that it expects to generate $800 million of free cash flow between this year and 2025, will allow it to " fully address” all outstanding 2025 notes and position it for “a successful refinancing” of its 2026 bonds.
The Glencore facility “is a significant turning point for Tullow in de-risking its balance sheet”, said Colin Grant, an analyst with Davy.
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“Our forecasts assume net debt at end-2025 of just under $1 billion,” he said, adding that this would equate an “underleveraged” net debt burden of only 0.7 times earnings before interest, tax, depreciation, amortisation and exploration expenses.
Tullow’s net debt peaked at $4.8bn at end-2016. The improved outlook contrasts with a tumultuous 2019 and 2020, that saw Tullow’s shares plunge 85 per cent amid a series of drilling and production disappointments, exits of its chief executive and exploration director, massive asset writedowns and warnings about potential cash shortfalls.
Asset sales and cost-cutting under its current chief executive – together with higher oil prices – had helped Tullow pull off a make-or-break $1.8 billion debt refinancing in 2021 and chip away at its debt mountain.
Tullow closed its Dublin office in 2020 as part of a round of corporate restructuring and quit the Irish stock market last year. It had moved its domicile to the UK two decades ago.
