Tullow Oil increases expectation for hedging to account for 60% of production
Tullow Oil, a West Africa-focused oil producer, has announced updates to its commodity hedging policy for the next two years. The company plans to hedge approximately 60% of its output for the next year, an increase from its previous plan of 40-50%.
The updated hedging strategy involves the use of two-way and three-way collars and swaps to set price floors and ceilings for oil, typically Brent crude, over 2025 and 2026. The price floors are set between $50 to $60 per barrel, while the ceilings range from $75 up to $85 per barrel.
These figures are consistent with the hedging practices of peer companies in the same sector. For example, Kosmos Energy, a company with a similar production profile, has hedges for 2025 covering about 5 million barrels with price floors around $55-60 per barrel and price ceilings near $75-85 per barrel. For 2026, Kosmos Energy's hedges include multiple instruments with floors around $50-60 per barrel and ceilings up to about $75-85 per barrel.
Tullow's recent report mentions "significant progress" and a positive outlook on free cash flow and net debt guidance. While the report does not explicitly specify Tullow's updated hedging price range or percentage of production hedged, it is evident that the company continues to hedge a substantial portion of its production, commonly around 40-50%.
The company expects its full-year production to average between 58,000 and 64,000 barrels per day, and it plans a ramp-up of its Jubilee South East wells offshore Ghana in the second half of the year. Tullow's 2023 free cash flow is expected to be $100 million at an oil price of $80 a barrel.
For more precise, company-stated figures, consulting Tullow’s latest official financial statements or investor presentations directly is recommended.
Tullow Oil, like other industry peers in the oil-and-gas sector, is introducing a sophisticated hedging strategy that includes the use of collars and swaps, with price floors set between $50 to $60 per barrel and price ceilings ranging from $75 up to $85 per barrel for the years 2025 and 2026. Similarly, finance experts note that Kosmos Energy, with a production profile akin to Tullow's, has hedged approximately 5 million barrels for 2025 and 2026, with similar price floors and ceilings.
