Earnings Transcript for TLW.L - Q4 Fiscal Year 2019

Dorothy Thompson: Good morning. I hope you all realize you're seating two meters apart because of our coronavirus protection, but anyway, welcome. For those who don't know me, I'm Dorothy Thompson, Executive Chair at Tullow. And I'd like to introduce my fellow presenters, Les Wood, CFO, who I think most of you probably know already; and maybe less-well-known Mark MacFarlane, our COO at Tullow. We have divided this presentation into four sections. I'm going to do an introduction. Les is then going to take you through the financials. Mark will update you on our operational performance progress. And then I will bring it to a conclusion, and we will take questions. Before I actually go into the presentation itself, I just wanted to say it's now just over three months since I stepped into Tullow. I with the management team, have been working consistently to fix Tullow in this period. We've been very well supported by the Board. And when I say fix, what I mean is what we've been doing is we've been working to create a strong platform for the company to set it in a place where that our new CEO, when appointed, will take the business forward with confidence. I'd like you to understand that actually in what we talk about today there has been a real depth of work and detail that sits underneath it. And part of that depth of work actually has been our response to the coronavirus, where we have well-established business continuity plans. Mark can talk in more detail of this, but we have the President of Ebola in West Africa, which means we already had pretty well-designed plans for this sort of event and propose response plans if we -- should we actually have cases. The other thing I would say is the work of the last 3 months has put us in a much better place than we would have been otherwise for this new recent low oil price environment. So with that, I will go on to the presentation, and I wanted to start with the progress we've made in this first quarter. In terms of production, our new operational leadership is making really great progress actually on the key improvements that we need to deliver to be in line with the guidance for 2020. We have verified our reserves and resources, and that underpins our value, but we also are progressing at a pretty low cost actually, new development opportunities in Ghana to underpin future production. We've made quite significant a change to the organization. Going forward, Tullow is going to have a much leaner and more centralized structure. Government relations have remained a very high priority for us, as well as all stakeholder relations and stakeholder relations in country. It's been an area of focus for me because it's very important at these times of change, but I would also want to say that we really do remain very committed to our shared prosperity strategy. And that very much is at the heart of Tullow's purpose. We have changed our financial strategy. And Les is going to tell you more about that, but the key change is, going forward, we will have a more conservative strategy for the capital structure. And we have identified clear options for portfolio asset management to deliver that more conservative structure. We also have a new exploration strategy. It's really a more focused strategy than the previous strategy, and Mark is going to walk you through that as well. So what's really been happening over the last three months has been a thorough review of the business, and there have been three objectives to this review. One is to stabilize Tullow. Two is to establish transparency, accountability and rigor in our processes, and this includes forecasting; and three, to identify how we create a robust, sustainable and attractive business going forward. And that business needs to build on the strengths of Tullow's. So what we actually have done is we've had -- the two main components of this have been an organizational review and a portfolio review. In terms of the organization, we really did start with a clean sheet of paper. Our objective was to have an efficient and effective organization. We announced the new organization just over a month ago, and we are now well into implementing. I'm confident it's going to give and deliver a more agile, a more focused and a more streamlined organization. We are changing our processes as part of this new organization, and one of the key sort of philosophies behind this is that we have actually decided to centralize some key functions. We think there are real benefits from having these functions under one roof so they can work closely together. And under the old structure, some of these functions will be divided between our main offices of Cape Town, Dublin, Accra, Nairobi and London. So we're bringing them under one roof. So that's the new organization. The other part of the review was a complete portfolio review. We've evaluated each asset. We've assessed the options for monetizing the assets. We've ranked those options. And then we've developed a plan to deliver the monetization to deliver in turn the reduced gearing consistent with our new conservative capital structure strategy. What I would like to say about our portfolio strategy, it is highly commercially sensitive, so we will not be prepared to give any more information on our portfolio strategy, except what is already in the public domain. And what is already in the public domain is the very limited information there is today on our proposed farm-downs of Uganda and of Kenya. So the conclusion of our business review Tullow has quality assets. We have quality people. And we are confident that -- through the plans that have come out of this review that we can deliver a robust, sustainable and attractive business that we will have also options for growth. And with that, I'll hand over to Les.

Les Wood: Thanks, Dorothy. Good morning, everyone. Before I take you through the numbers, what I was going to do is just give a bit of an update, as Dorothy sort of previewed, on the how we've been thinking about our financial strategy as we move the company forward. The business review has provided a real opportunity for us to be really clear about how we're thinking about our financial strategy, and it will be a key component as we take the company forward from the position we're in today. While we've reduced our net debt over the last 2, 3 years or from 2016, we've taken it down by 42% or $2 billion. And we took our leverage down from over 5 times to 2 times at the end of 2019. However, our year-end net debt of $2.8 billion still remains too high, as is our leverage at 2 times. And as Dorothy says, we will be taking a more conservative approach to the balance sheet going forward. We have plans which will be able to take us to a position where we can run the company at more time -- like 1times, with an appropriate headroom. Well, we've taken a much more proactive approach to portfolio management. As Dorothy said, we've already identified actions within the portfolio where we believe we can deliver in excess of $1 billion proceeds, and these are already identified. We will continue with our hedging program to manage oil price volatility. Hedging continues to be a critical part of our financial risk management, even more pertinent with COVID-19 and all the reactions and the way we're having to behave in the light of that and, of course, the recent turbulent oil markets. And it's almost, if you like, a perfect storm in the fact that both things are happening together. We'll maintain a strict discipline on our capital spending. We'll continue to apply strict criteria to how we allocate our capital in order to deliver good value across the entire business. And of course, we'll continue to focus on delivering cash flow. We'll continue to optimize our revenue, and we'll maintain that tight control on costs that we've been doing and that we will continue to do as we move forward. And now to the numbers. These are all line -- in line with the January trading update, with the exception of one item, a further write-off of around $0.5 billion in Uganda. This has been the result of our completion of a detailed business review. The result is a loss after tax of $1.7 billion, and that's primarily driven by 2 things around $0.7 billion of impairments, primarily in TEN, due to price reduction plus the lowering in the end reserves that we've highlighted previously, and now around $1.3 billion of exploration write-offs in Kenya, Uganda across our exploration portfolio, including Guyana. As you can see from the chart, revenue and EBITDAX are lower. OpEx is higher of when compared to our year-end 2018 position. These have all been adversely impacted by the production outturn and therefore the lower performance that we had in Ghana over the course of the year. Then if you look at the free cash flow number of $350 million, of course, that should be considered a solid performance. However, when you combine that with the lapsing of the farm-down that we had in Uganda back in August, we certainly did not make the progress on net debt and gearing that we'd hoped for as we set out our plans for the year at the beginning of 2019. So let me look forward a little bit into 2020. The first thing to say, and we say that in our statement, is that the 2020 guidance is unchanged. However, there is clearly a greater uncertainty created by the recent significant volatility in oil markets. We'd already materially reduced our capital investment program for 2020, down around 30% from 2019, by some 30% to $350 million. And if you look at expedition specifically, that's down by about 45%. Of course, given the dramatic recent declines in oil price, we are and we are currently critically looking at our entire capital program to establish whether there are opportunities to either stop activity, deferred activity or reshaped activity. And that's something, between my team and Mark's team, we are working on very closely. This is obviously work in progress. Some of the events have been very recent, but we are pursuing this quickly. It will also require involvement in some cases with a joint venture partner. So if you think back to when we had the previous oil price decline, we also saw a reduction in our non-op spending driven by a reduction in activity by our non-op joint venture operator. So certainly, we will be working in collaboration. We're on track with that oil production of 75,000 barrels a day, which Mark will cover in more detail shortly. We also expect decommissioning costs to peak in 2020. We expect that to be at similar levels in 2021, but then you'll see a sharp decline in that spending as we move beyond that period. We have updated our free cash flow guidance for 2020, taking into account recent oil price changes. So if we look at an oil price of $50 per barrel, I realize that's not quite where we are today, but we are underpinned by our hedging. We see a range of some $50 million to $75 million. This is only $75 million to $100 million down from our previous guidance of $60 per barrel. And that's really for a couple of reasons -- well, maybe three reasons. One is our hedge portfolio. So we've got a good position for 2020. Adjustments to our latest lifting schedules. We've actually got liftings improvement in this year. And also the incremental cost savings that we have from our restructuring program that Dorothy mentioned earlier. We put all that into account, and our free cash flow breakeven for this year is around $45 per barrel. And that's based on our current activity set. So let me talk a little bit now about how we are addressing our costs. As part of the business review, we identified significant opportunities to create a more efficient and effective organization. There was broad engagement right across the organization. We have many of our people providing input and ideas, and they've helped us drive the clarity that we needed to take the business forward. This has allowed us to move quickly, fully implementing restructuring plans across the entire organization in just three months. So everyone know -- in the company knows their position. There, of course, have been difficult decisions to make, including the proposed closing of offices in Dublin and Cape Town. And of course, we start to see so many of our colleagues leaving Tullow. There'll be an opportunity, we believe, for further efficiencies and cost savings. As one example, we are exploring the potential for outsourcing certain finance activities and supply chain activities. So while we've made big inroads and we've already implemented significant plans, we still see there's further opportunity to move forward. You'll see in the top right-hand side of the slide we expect to realize cash G&A savings across OpEx, CapEx or what we would call our net G&A or corporate overhead, targeting some $200 million savings over the 3-year period. Now I'll go on to say something about how we're dealing with oil price volatility. This is a picture you will all be familiar with. We have -- sorry. We're systematically hedged for an average cost of around $3 per barrel. And you can see in the slide here, if you look at our 2020 position, we've got about 60% with a floor of $57. And if you look into 2021, we've currently got about 30% hedged floor of $53 per barrel. This does provide us with good downside revenue protection, even more important given current oil price volatility and, of course, the uncertain outlook for the remainder of the year. As I mentioned before, this provides us with a breakeven of $45 per barrel on our current planned activity set. So let me just say something about our capital structure. As we reduced our net debt level over the period and mentioned at the beginning, we'd already significantly reduced the size of our RBL facility. We'd eliminated the previous RCF, our corporate facility, so we'd already begun the simplification of our capital structure. As planned, there were no financing activities in 2019. And the first maturity of any of our bond -- capital structure is the convertible bond of $300 million, which will be in 2021. As you'll see from the statement, we are working closely with our RBL banks to complete the March redetermination, with an expectation that the debt capacity will be around $1.9 billion, resulting in a headroom of about $700 million. Debt capacity reduction is driven really by the NPV amortization of our production profile over the last 6 months since the last redetermination, a lower-band price deck and revised asset assumptions. We're implementing a voluntary $210 million reduction in commitments to effectively accelerate the scheduled October amortization, which was due at the back end of 2020, and that in turn will have a reduction on our ongoing financing costs. This, when put together, does provide us with an appropriate headroom in light of our reduced capital expenditure. And of course, portfolio management will be a key component of managing liquidity, with options, as I said earlier, already identified to deliver in excess of $1 billion of proceeds. So in summary, I will say we have a clear financial strategy to move the business forward. We're taking steps to improve the robustness of the balance sheet. We will take decisive portfolio action. We will adopt a more conservative capital structure. And together, these will create a business that grow greater resilience to very much a volatile world and a challenging external environment. And with that, I will now hand over to Mark.

Mark MacFarlane: Thanks, Les, and good morning, everyone. In November last year, the Board asked me to intervene in Ghana to determine a realistic production forecast for Jubilee and TEN to determine the confidence in our reserve base; and to reshape the business to ensure safe, reliable and sustainable operations and sustainable delivery. You can see my operational philosophy on this slide, and I've used this to underpin the changes that I have made. Let me just highlight a couple of points for you. Firstly, before we earn the right to produce even a single drop of oil, we must get safety right. Personnel safety and process safety must be our #1 priority. If you get safety right, then reliable, cost-effective operations usually follow. I also believe that safe, reliable, cost-effective delivery requires the effective integration of everything from the subsurface all the way through to the commercial. The glue that keeps all of that together is effective integrated planning. That planning needs to look at everything from the daily operational plan all the way through to the whole-of-life field development plan. These philosophies underpin the Ghana business, and I'll talk more about that a little later on. We don't normally go into this amount of detail in our reserves and our resources, but I felt it was important to explain the movements that have made -- been made this year. The way to read this particular chart is that the outer donut refers to our year-end '19 reserves, and inner donut refers to the year-end '18 reserves. Our reserves have been fully audited. We added reserves in Jubilee last year. In fact, we almost replaced our production from Jubilee. In non-op, not only were we able to replace our production, but we're able to increase our reserve base by 25%. Enyenra, our 2P reserves, we had to move those into resources, about 40% of those reserves, due to that accelerated water cut from our wells, but in Ntomme we actually increased our reserves from about 31 million to 36 million barrels, more than replacing Ntomme production. On the resources front, we've identified new opportunities in Jubilee and our non-operated fields that with further work we will be able to convert into reserves. In Ntomme, we increased our resources. And we did that due to the 40 million-barrel Ntomme far west field, as we called it, that has been identified through the 4D seismic that we acquired in 2019. And again, with time, these resources also mature into reserves. The Enyenra increase was due to the transfer of reserves to resources. The ongoing Enyenra studies and the development screening that we're doing will determine whether these can be converted back into reserves. Going back to my philosophy. One of the first things that we have addressed is the integrated approach to managing Ghana. It all starts with accountability. I have direct accountability for all of the operations within our business, including production forecasting. In Ghana, we've brought in a new and very experienced asset manager who has accountability for the complete integration of subsurface, production, development, commercial to ensure that we deliver the right business outcomes. We have centralized major functions in London, bringing the right team under one roof in one team. Naturally, the day-to-day running of our operations is from Ghana -- or Jubilee and from TEN under the direct control of our recently appointed Ghana operations director. Last year, I spoke about the 5 key things that we needed to balance to ensure we have the right delivery of our production forecasts. Those are the 5 key areas. So now let's take a look at how this new team is delivering against those 5 key areas. As we stand here today, Jubilee and TEN production is exactly where we planned it to be. It's exactly where we planned it to be to meet our 2020 production guidance. The changes that we have made are delivering their intended results, and that goes to give us the confidence and underpins our confidence in confirming our 2020 production guidance. Now let me give you a little more color on each of these five areas, starting with gas management. Last year, I explained that our gas-oil ratio in Jubilee was increasing and we needed to do 2 things. Firstly, we needed to increase the gas handling capacity on the Jubilee FPSO to around about 175 million cubic feet a day of gas. That was successfully completed in February. The second thing that we needed to do is we needed to increase the amount of gas that we exported from Jubilee. And the government of Ghana have changed its gas nominations policy to prioritize gas from Jubilee and gas from TEN and have committed to take 125 million standard cubic feet a day of gas. And we have the ability to flare gas, if we need to, to ensure that we actually remove the gas from the reservoir. Water injection. During our planned shutdown in January, we took the opportunity to work on the water injection system, and it's now operating at design capacity. And this was the first intervention from our dedicated water injection task force, and they have plans to do more work over the rest of this year to continue to improve the reliability of the water injection system. Both FPSO's uptime have been -- with both TEN and Jubilee are operating in excess of 95% uptime as we start to see those green shoots of improvement translate into results, but we are only 10 weeks into the year. And I can assure you, though, that we'll be maintaining our focus on uptime today, tomorrow and the day after that until the end of the year. And in 2021, we'll start all of that all over again. Our fields have been performing in line with our expectations, but one of the things that we are doing differently is that we are employing a more integrated approach. We're looking at each well's performance, how that relates to each well cluster's performance, how that relates to the subsea infrastructure and how all of that together integrates with the facility constraints that we have on both of our FPSOs. On new wells, drilling is going pretty much as we expect. The Ntomme-9 well is currently being drilled, and we'd expect to bring that online sometime in the second quarter. But we're not just looking at our budget plan. We're looking to see whether we can optimize our 2020 drilling program to improve the short- to medium-term production outlook. Plus given what happened -- has happened to oil price in the past few days, we're also evaluating whether we should be removing CapEx from the program as well. All of this balance has resulted in Jubilee and TEN -- Jubilee producing over 90,000 barrels a day gross and TEN producing over 50,000 barrels a day gross, both right where they need to be to deliver the 2020 production guidance that we committed to last December. Looking beyond 2020, I can also reconfirm production guidance of about 70,000 barrels a day for the next couple of years. This stability in production is going to come from further development in both Jubilee and TEN. As I mentioned before, Jubilee's reserves are robust. As you can see from the picture of the map on the top left-hand corner of the screen, Jubilee is a very large field. And there are significant areas in the Jubilee northeast area and the Jubilee southeast where further development can occur. In fact, the Jubilee southeast project, as we're calling it, is the next stage of development for Jubilee that is already underway. That project is very robust. Not only will it develop existing reserves. It will add reserves. And it's got a break-even price of around about $30 a barrel, so it's highly economically attractive. In Ntomme, last year's 4D seismic identified a development opportunity that we're calling Ntomme far west. And as we do further work on that, like Jubilee southeast, it will facilitate the conversion, in the Ntomme far west case, of some 40 million barrels net resources into reserves. And we aren't forgetting about Enyenra. We will use the 4D seismic, again, that we acquired last year together with field performance data to help determine the what next for Enyenra. 2019 was another solid year of production from our non-operated assets. Our non-operated portfolio gets its strength in its diversity, 3 countries, 6 operators, 23 fields, 250 oil wells. And we believe that we add significant value to our operators with our collaborative way of working and the complementary subsurface work that we do with our joint venture partners. This area is working well, and it is something we will build on. As a part of our business review that Dorothy mentioned, we have made some changes to our exploration approach. We have halved the exploration budget. We have a new Head of Exploration, Amalia Olivera-Riley, a deeply experienced explorationist formally of Repsol and ExxonMobil. We plan to collate the existing 4 disparate exploration offices of Dublin, Cape Town, London and Ghana into a single office in London, one team under one roof. This reconstituted exploration team will focus on finding commercial oil, with an integrated portfolio that balances the equity we drill out, whether we operate or don't operate; with selected opportunities in emerging basins for high materiality; with new plays in proven basins, together with short-cycle-time close-to-infrastructure opportunities. And importantly, leverages all of the African data we've collected over the years, together with the experience that we have developed. And it will be a dynamic, disciplined in the management of those prospects. For every prospect, we need to constantly keep an eye on the likely value versus the market opportunity as we develop our understanding of each of those prospects. So this year, we'll be integrating the data from our Guyana and Peru wells into our geological and petroleum system models before deciding on the next drilling activity in those countries. And we will rebuild our African portfolio based on the principles that I've just spoken about and determine our next steps in the Comoros and in Namibia. In Kenya, we've made really good progress in 2019. We've derisked the project commercially through the heads of terms that were signed last year, the belief that oil could actually be exported from Turkana and Kenya with the first oil export cargo last year. We've made solid technical progress on the feeds and the ESIAs. And the government has started the land acquisition process for the pipeline and for the upstream facilities. There's no doubt that FID at the end of this year is going to be ambitious, but with the active government support, it's achievable. On Uganda, the fundamentals of the project remain strong. This is a 1 billion-barrel world-class field with very strong and capable partners that has all of the technical work complete, but as we stated in our release this morning, we're constructively working with our joint venture partners and the government to agree a way forward. And that's all I can say about that. So before I hand back to Dorothy. In summary, we are on track to deliver the 70,000 to 80,000 barrels a day production guidance for 2020. The staff changes and improved processes we have implemented in Ghana are already delivering the necessary results. Our non-operated business continues to deliver strong production. Our exploration team is becoming more integrated and focused on that balanced portfolio. And our projects in East Africa are progressing well. Thank you. Dorothy?

Dorothy Thompson: So to conclude, I just wanted to talk a little bit about strategy because, as we've gone through the last 3 months, we've thought about strategy. And what we've actually been working in the context of strategy is a more focused strategy, but essentially it's a refinement of Tullow's previous strategy. Africa still remains very much at the heart of our strategy, and the core of our business is our oil and gas production in Africa. And it's a very robust business. And the number that I've now learned is that in Ghana our OpEx per barrel or our marginal OpEx is less than $10, which is a very healthy number in the context of the current market. Mark has explained to you that we now have a more focused exploration strategy, but we still think this is a very important core component of Tullow's strategy. And then in terms of organization, I just want to make clear that I really believe that actually the right organization strategy is absolutely pivotal to successful delivery of a overall business strategy. Safety is absolutely our highest priority, but it is also very important that we are effective, efficient and focused on what we do. And that is what we are seeking to deliver through our new organization structure. And finally, we and we as the Board and the management team remain committed to sustainability. It's something we take very, very seriously. And this year, for the first time, we will be reporting in line with the task force on climate-related financial disclosure. What this actually means is that we have, amongst other things, tested the resilience of our portfolio to a 2 degrees scenario. And you'll see some of the analyses of that on one of the appendices to your pack there. The other thing we've done is we've increased our reporting -- or we will be increasing our reporting and disclosure on sustainability. We're going to publish a more fulsome sustainability report later this month alongside our annual report. We also in our 2020 plan have a plan to create a sustainability strategy for the energy transition, and that will target net 0 emissions for our scope 2 and scope 1 emissions. And actually, what I should explain is we've also put that into management's KPIs. So a part -- it will drive part of remuneration related to performance pay and so since sustainability is very, very important for us. As I walk through that strategy, the key underpinning of it is the more conservative capital structure strategy that Les walked you through. And it's that strategy that has driven our actions in these first 3 months. It's driven our restructuring of the organization. It's delivering the improved the -- operational performance that Mark talked about. It means that we can, with confidence, confirm that the 2020 plan is on track, and then we're in line -- we're currently in line with guidance. It's given us a better ability to respond to both COVID-19 and the current oil price environment. And finally, we are confident that the portfolio actions underway will deliver a robust, sustainable and attractive business going forward, with growth options as well. And with that, we'll take questions.

Q - Chris Wheaton : Chris Wheaton from Stifel. First, Mark, congratulations on your promotion. I hope you see it as a promotion, anyway, to [indiscernible]. Can I start? I've got a number of questions. Firstly, coronavirus, as we kind of started there. What contingency plans have you got for keeping it from not spreading into the offshore environment? We've already seen the first cases in North Sea, both U.K. and Norway. Could you talk about that first, please? Because clearly, if your vessels get shut down, that's going to be a disaster for Les and his balance sheet management problems. And also, are you covered by business interruption insurance given you've already claimed on business interruption for the turret shutdowns over the last 2 years?

Mark MacFarlane: So let me talk to you about the contingency plans that we have in place. And I have to say we are very well prepared for coronavirus, and the reason why we're very well prepared is that -- you might recall the outbreak of Ebola on the West Coast of Africa in 2015. Because of that exercise and that event that took place, we developed very detailed contingency plans for managing emerging infectious diseases across our operation. So we have updated those existing plans to make sure that we manage that risk of coronavirus getting offshore. The most important thing is to prevent it rather than actioning once it's on the FPSO, so we are doing things such as banning flights to and from the scope status one, Tier 1 projects -- countries as defined by the Foreign and Commonwealth Office. Anyone traveling from a Tier 2 country requires my approval. So it's controlled by, "this is absolute business-critical travel." Before you get offshore, you need to fill-in a questionnaire to explicitly state where you have been over the past 14 days. And then we also have the temperature testing both at our airport at Takoradi and also before you get on the helicopter to go offshore and before you get on a vessel to travel close to the offshore facilities. So that management of it, they're just examples of the infectious disease management plans that we have in place not only for Ghana but also for our offices in Accra, in London office and similarly in Kenya.

Chris Wheaton : Les, can I fire some questions at you, please? Can we ask, what's the minimum level of cash you need to run the business? You referred to $700 million liquidity in the statement. Slide 13, I think it is, says $560 million is the gap which would be undrawn RBL. I presume the difference versus the $288 million of cash you have on balance sheet at year-end is the cash you need to run the business, which would suggest around $140million, $150 million. Could you just confirm those numbers?

Les Wood: That's correct, yes.

Chris Wheaton : Sorry. I'll go for that. Sorry. Because Dorothy, I wanted to ask a question for you as well, please. Can I ask about the $1 billion of proceeds, how you've worked that out? I struggle to understand where you get $1 billion of proceeds without selling some producing assets, in which case both your EBITDAX goes down and your RBL goes down, as your RBL facility goes down as well. That makes you getting to 1x net debt-to-EBITDAX that much harder. Can you square that circle for me, please?

Dorothy Thompson: So if I may answer on Les's behalf...

Chris Wheaton : I'm sure you'd say the same things.

Dorothy Thompson: Just on this specific one because it really is very commercially sensitive, what our plan is. So I'm really sorry. We're not going to, but you have to put the two together. You have to say what are our plans and what are we looking to deliver, and it's important you look at both sides. And we are confident that the plans we have will deliver a robust, sustainable business with attractive cash for it.

Chris Wheaton : And Dorothy, a question for you, please. I think the root cause of the issues at Tullow is one of Board effectiveness. It's corporate governance. Could you talk about what you've done at Board level to change the -- or improve the level of scrutiny, the level of oversight down into the business that, frankly, has clearly been lacking, which is why Tullow is at the state it is today? Could you talk about that? Because that to me didn't come out in the statement today. And I'm sure you've made a lot of changes in the time you've been in-charge.

Dorothy Thompson: So if you're talking about the Board as of the nonexecutive directors and the executive directors, firstly, I'd say the Board has been much more engaged than you would normally see a Board being engaged through definitely the last quarter of last year and the first quarter of this year. There are a few specific areas when we realized the nature of some of the challenges where we have put more focus. The control would be a very good example. And one particular area is we have made sure that there is a very, very clear and open and regular communication between the nonexecutive director who is most skilled or has the expertise in oil reserves and oil resources with our chief petroleum engineer...

Unidentified Company Representative: That would be Mike Daly.

Dorothy Thompson: That would be Mike Daly. And also, he has kindly, which is something we did -- have made a mistake on which we haven't sort of thought through. He actually is also now one of the people who is contactable through our Safecall. So if someone does an anonymous -- one of the problems we hadn't realized we'd done this, but we didn't have a technical person available for the other side, so that meant that someone from the technical side would not bother to call Safecall because they couldn't have that technical engagement. So he is now. What I'd also say is that in other controls we've done a very extensive review of controls. In fact, we just had a very long audit committee going through the different controls. So yes, the Board has been more engaged. And it's needed to be more engaged, and it's been supporting us well.

Nicola Rogers: Any more questions in the room?

Matthew Cooper: Matt Cooper of Peel Hunt. I just wondered how much of the $350 million 2020 CapEx is discretionary.

Les Wood: Yes. So when I was on the podium there, if you kind of looked year-to-year. So we've already taken sort of a 30% reduction from 2019 into 2020. Mark talked a little bit about, when he was at the podium as well, is that we're currently going through a scrutiny right now of our capital. So what can we stop? What can we defer? And that work is ongoing. Now the thing we want to balance is that there is activity in -- the activity in Ghana is a good example, where even at these sorts of oil prices it's still good economic activity. And what you need to be able to trade off is the short-term cash impact in year versus what that impact is for next year and then years after. So we're doing quite a detailed review. We're not going to do a snap judgment, but we're looking at things like we've got soon a well that's coming up at the end of 2021 -- sorry, at the end of 2020. Is that an activity that we do in 4Q, or do we do it in 2021? Now no decisions made, but that's the sort of things that we're looking at to see whether we can actually further optimize a program that's already 30% down from year to year. And then the other, maybe the last thing to say is that we have to do that in conjunction with our joint venture partners. So when oil prices were low previously, we saw our non-op portfolio, which we're going to spend about 80 million in this year, fell as low as about 20 or 25 million. So we need to take a bit of a steer for what our non-op operators do. And at the same time and using Ghana as an example, we would need to collaborate with our joint venture partners in Ghana if we were going to adjust our capital program in Ghana. So it's dynamic. It's already down, and we'll be seeing what we can do for the balance of the year.

Matthew Cooper: [indiscernible] go back to a previous question just quickly. If your offshore installations had to be shut down due to coronavirus, would that be covered by any form of insurance?

Les Wood: We -- our insurance program is for operational, as opposed to -- I mean it's unlikely that, that will be covered through the BI program.

Colin Smith: Colin Smith from Panmure Gordon. Three for me as well, please. First of all, I was kind of hoping that on Ghana we might have a little bit more depth about what happens after 2020 because I think one of the things that really hurt the company was the suggestion that forward guidance might be as low as 70,000 on a prospective basis, which is about 20,000 to 30,000 barrels a day lower than previous guidance have been. So that's my first question. Then second one is just I think you've said that you expect the $1.9 billion -- or the RBL, that $1.9 billion, to be reaffirmed when you go through the full redetermination process. But if banks come to put $35 oil in for this one or perhaps more likely the next one, is that still a feasible number? And my last question is you mentioned that the CEO appointment is down to a shortlist in front of the Board and I wondered when we might be able to expect to hear an announcement on that.

Mark Stuart: I'll go in order. I'll answer the 2021, 2022 production. You sort of hinted at some of the reasons why it might change. If we change our capital program because there's a belief that it's a sustained lower-for-longer oil price, it will change our guidance, but the point I wanted to get across is that, let's say, at oil prices in excess of $50 a barrel we have a development program. We understand our field decline such that we can confirm, reconfirm that our guidance for 2021, 2022 is in the order of 70,000 barrels per day. As we refine our plans through this year, we'll advise everyone, but as we sit here today, 70,000 barrels a day net production for Tullow 2021, 2022.

Les Wood: And then on the RBL question. It's quite interesting actually. When you run the lower oil price because you get the benefit of hedging and you have the lower taxes, actually the borrowing base amount on that lower oil price is effectively the same. So the $1.9 billion is $1.9 billion. So we take good comfort from that. And where we are in our process, we've agreed all the technical and economic assumptions. And the way it works is -- of results that are a little bit later than we were previously is that, once the banks get the results, they then take it through the credit committee. And that's a process that happens over the next 2 weeks, but that's the number that they're going in with. But of course, you get to get all the credit committee approval, and then that's when it's then endorsed. So we're just going through that process right now.

Dorothy Thompson : And then in terms of the CEO appointment, we are really at the final shortlist. We're at the final interviews. It's always hard to put a time line on this, but what I must say is we're trying to do it -- [indiscernible]. We're trying to do it as fast as possible. It's going to be very important to get that new CEO in place, but what I would say is that we're not sort of floundering without a CEO. We've had a very clear plan, a very clear strategy with lots of support from the Board. And what I hope we're really going to deliver for that CEO is this strong platform so he or she can take it forward with confidence.

Nicola Rogers: Can you see if there's any questions on the phone?

Operator: [Operator Instructions] The first question comes from the line of Gabi Jowen from Royal London.

Unidentified Analyst: I've got a couple, if I may. Please, can you explain the rationale for voluntarily reducing the RBL facility by $210 million? If you can't raise the $1 billion, won't you need all the liquidity you can get? Second one is can you confirm that you can repay the 2021 converts with the RBL and what the RBL gearing covenant is? And then lastly, what type of working capital impact do you expect for 2020? You previously had a figure on the December update and there's been nothing in this presentation.

Dorothy Thompson : I think those are all for you.

Les Wood: Yes, they're all for me. So on the first one, it just actually made good sense to us that, when we've got a $1.9 billion borrowing base and a profile that's 2.4, it will decrease by the $210 million, but actually that's not something that we're going to be accessing. Therefore -- so it's a difference between the commitment and the borrowing base. Therefore, that actually will save us some money. So it will save us some financing costs. Then with respect to the 2021, yes, we have the ability to -- because we can use the RBL for general uses, we can use that to pay off the 2021 convertible. RBL covenant is 3.5x. And there was no deliberate leaving off the working capital. I mean, if you look at my sort of commentary on the financial strategy, these last 12 to 24 months, we've put a huge amount of focus actually into managing working capital, particularly at period end. And I'm pleased to say that we've actually been able to tighten our forecasting in that area, so -- but always there is movements you -- at period end. But we've been giving that a real tight look, so it wasn't deliberately all netted. So that's the questions answered, I think.

Dorothy Thompson : Question here

Nicola Rogers: I don't think there's any more on the phone, so we'll take our final question in the room.

Unidentified Analyst: Nick Stefen from Reka, yes. So Les, can you please elaborate on what you meant? If the oil price were at $35, are you assuming hedges just for the next couple of years? Would you have already wrote it down? Or is it like a perpetual hedge so that the borrowing base will still remain at $1.9 billion? Because that's -- it effectively has no -- has not changed to valuation if you just like assume, like, perpetual hedges. Can you -- yes.

Les Wood: So yes. So there's 2 different things going on here, I think. One is, if you look at the hedging program, it's something we do systematically. We do little by little. So we don't set a program at the beginning of the year and layer in 60% of a project -- production. We do it little by little. What that allows us to do is to be able to respond to the changing external market. So you would expect that in this period where things are much, much lower we're being much more careful about how we're thinking about hedges at this moment in time. The good news is that, for 2021, we're already halfway through the program that we'd like to do for 2021. So we're already at $53 per barrel on that part of the program. So that's on the hedging. On the RBL itself

Unidentified Analyst : Okay. And then what is your strategy on how you plan on repaying both the convertibles and the 2022s? Because -- do you think you'd be going on and to maybe refinance the bonds which now trade at about 0.40 to the dollar -- or is it -- or do you think that you might be able to like draw more from the RBL and then just keep on like going...

Les Wood: So I think 2 things to say. The good news is we don't have anything maturing until June 2021, so we've got time. But the second, which we -- as Dorothy said and we're very, very much in action on is actually delivering proceeds of in excess of $1 billion. And that will be very, very important to getting net debt moving towards this much more conservative approach which we're going to have going forward. So the asset sales or farm-outs or however you want to call them do play an important component in getting us into the right position.

Nicola Rogers: All right, thank you. That's all our questions for today, so we'll bring the presentation to a close. Thanks very much for coming.

Dorothy Thompson : I'd like to add to that. Thank you very much for coming.