Tullow Oil says it has successfully completed the six-monthly redetermination of its Reserve Based Lend (RBL) facility.
RBL is a type of financing where a loan is secured by the undeveloped reserves of oil and gas of a borrower. The facility is repaid using the proceeds that derive from sales in the field or portfolio of fields in production.
According to a statement issued by Tullow, the debt capacity generated by the asset base remains in excess of commitments and, following the scheduled amortisation at the beginning of October, available credit under the RBL is now $3.3 billion.
Tullow also confirmed that it has secured $345 million of new commitments from its existing lenders by exercising an accordion facility embedded in the existing RBL which will take effect from April 1, 2017.
The new commitments will largely offset the impact of the scheduled amortisation in April 2017 and will ensure Tullow has appropriate headroom throughout 2017 as it refinances its bank facilities.
“Overall, Tullow’s capital commitments have reduced substantially following the completion of the TEN Project,” the statement said.
The oil driller said during the fourth quarter, Tullow will be generating free cash flow from its producing assets and can start paying down its debt.
“At the beginning of October, and excluding the additional commitments above which take effect next year, the Group has free cash and unutilised debt capacity of $0.9 billion with no near term maturities, and overall net debt of approximately $4.7 billion,” the company said.
Commenting, Ian Springett, Chief Financial Officer at Tullow said: “This successful redetermination and the new RBL accordion commitments underline the support for Tullow from our relationship banks and the quality of our assets and their ability to generate significant liquidity.”
He said over the past three months, Tullow had started production from TEN and confirmed insurance cover for the Jubilee FPSO turret repair and business interruption.
“With capital expenditure now substantially reduced, we are generating free cash flow and starting to deleverage our balance sheet. This provides us with a solid platform to refinance our RBL and corporate facility during 2017, enhance our capital structure and enable future growth,” he added.
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