Tullow Oil secures future with $1.8bn refinancing

Tullow Oil has raised $1.8bn via a bond offering to repay existing debt, ending a tense refinancing process the company had warned posed a “significant risk” of insolvency proceedings had it ended in failure.

The Africa-focused group, which has endured a difficult few years since it slashed its production outlook and parted ways with its former chief executive at the end of 2019, will use the proceeds to repay loans including bonds due this year as well as a lending facility linked to its oil reserves.

The company does not face another significant debt repayment until 2025, while the repayment of its so-called reserves-based lending facility removes the requirement for the company to undergo burdensome twice-yearly redeterminations of those loans with its lenders.

Shares in the group have gained more than 8 per cent since its late-April announcement that it intended to launch the bond offering, although analysts have pointed out that the restructuring will increase the company’s financing costs by about $40m a year.

Tullow had previously warned that an unsuccessful end to refinancing discussions by September would have posed a “significant risk of the group entering into, or being in, insolvency proceedings”.

Chief executive Rahul Dhir, who joined in July last year, has been battling to turn the company round after a torrid end to 2019, when it suspended its dividend and said production would be almost a third lower than it had forecast at the start of that year.

Dhir has taken an axe to costs and is refocusing the business on its core assets off the coast of Ghana.

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