Tullow Oil is in talks with bondholders to refinance a $1.3 billion bond due next year. Discussions have focused on the company’s struggling performance and refinancing options. Some bondholders have worked with Weil, Gotshal & Manges LLP ahead of more formal discussions. Tullow has agreed to sell Kenyan fields and offloaded assets in Gabon to pay down debt, but asset sales may impact production. The company’s shares dropped to their lowest since 2020 earlier this month.
Tullow Oil Plc is in discussions with its bondholders to refinance a nearly $1.3 billion bond due next year, as the imminent maturity adds pressure to the Africa-focused oil explorer. The discussions, which have focused on both the company’s struggling performance and its refinancing options, have seen some bondholders working with the law firm Weil, Gotshal & Manges LLP ahead of more formal talks and potential amendments to the debt [1].
Corporates typically look to refinance bonds 12 to 18 months ahead of their redemption, but Tullow’s weakening performance and high leverage have added to the challenges. The company’s spokesperson confirmed that they are making good progress with plans to refinance and simplify the group’s capital structure during 2025. Tullow has been facing difficulties in bringing Kenyan fields onstream and has agreed to sell the Kenyan deposits and offload assets in Gabon to pay down debt [1].
The sale of these assets is expected to generate $300 million from Gabonese assets and $80 million from the sale of Kenyan assets to Gulf Energy Ltd by the end of the year. However, such asset sales may impact production, with the firm warning that full-year output may slump, sending its shares to their lowest since 2020 earlier this month [1].
The approaching maturity of Tullow’s bond in May next year has weighed on sentiment, with refinancing risks highlighted by Moody’s Ratings and S&P Global Ratings in their recent downgrades of the firm. The cash price at which the debt is quoted is down to around 85 cents on the dollar, according to data compiled by Bloomberg [1].
Tullow’s debt reduction efforts come after the cancellation of its merger project with Kosmos Energy. The failure of the merger has forced the company to reassess its financial priorities, focusing on reducing its debt to ensure long-term viability. Tullow’s gross debt exceeded $3 billion at the end of 2023, a situation considered unsustainable in a volatile global energy market [2].
The company is exploring refinancing options and restructuring its debt through more flexible financial instruments. Tullow has also reviewed its asset portfolio, focusing on high-yield projects while avoiding long-term or high-risk investments. Strategic partnerships are being sought to enhance the profitability of existing projects and reduce financial exposure [2].
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