Tullow Oil plc (TLW) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our virtual 2020 Capital Markets Day presentation. Firstly, I hope that everyone and their families are keeping well and safe in these difficult times. My name is Rahul Dhir. I'm joined by my colleagues, Les Wood, our CFO; Julia Ross, who is responsible for People and Sustainability; and Wissam Al-Monthiry who runs Ghana. So we're hoping that our presentation today will last about 75 minutes. And then after that, we'll conduct a Q&A session, and we hope -- we think we can finish sharp at 11. The mechanics of asking the question is slightly different. So when you want to ask a question at the end of the presentation, please dial in. There's a conference number, which should have been provided in the press release. Just a brief outline on the structure. You'll hear from me, first of all, we're excited about our new approach. We've been working hard at this, so we're really pleased and we want to share this with you. So our new approach to delivering both value and cash flow. Wissam will then talk about the ongoing operational turnaround and details on our plans to deliver value from the resource in Ghana. I'll then come back, I'll talk about our non-operated portfolio, which is a stable producing assets. And also our approach to unlocking value in Kenya and in the emerging basins. And then I'll hand over to Julia. She'll talk about the continued focus we have on ESG. And importantly, then Les will come in at the end, and he'll explain how all the financials are underpinned by a very robust financial framework. So -- and then I'll conclude, and we'll go into the Q&A. So that's the outline for the day. I think some of you probably know me by now, but for others, I'll just share a very brief on my background. So I've been in the industry for over 3 decades and I've done a lot of different things in the oil and gas sector. So I started life as a petroleum engineer. I worked in the North Sea. I worked in North Africa, worked in [indiscernible] in the U.S. and then I drifted into investment banking, and I was an investment banker for 12 years. Again, working mostly in oil and gas. I started in New York and then spent a bulk of my career in London, first at Morgan Stanley and then I ran the Energy Group at -- what was then known as Merrill Lynch. And then for the last, I guess, now 14 years, I've been -- I've led businesses. I've been a CEO. I started with Cairn India, which grew to about -- God, it was about 200,000 barrels a day in operated production. Then I set up Delonex, which is private equity and IFC funded with a lot of focus on exploration in sub-Saharan Africa. Just statistically and hopefully as you get to know me better, you'd see I'm a very hands-on leader. I've worked across exploration, across development, production operations and have a very deep commitment to both safe and reliable operations. I've also, through my career, spent a lot of time in emerging markets. And I guess, given my background in both finance and private equity, I'm also focused on costs, on the capital structure, capital discipline and value. So I've been here now at Tullow for nearly 5 months. And -- but in fact, I was fortunate even for 2 months prior to that, I had full access to the company and to a lot of my colleagues. So I was able to hit the ground running on July 1. And during this time, it's been fun. I've completely immersed myself in the business. I've got to understand every aspect really well. But I've also had a chance to go to Ghana, where I've met our key stakeholders, including his excellency, the President of Ghana, I've met the Minister of Energy, a lot of our key partners. Also, virtually, I've met pretty much all our key stakeholders across key countries, so in Kenya, in Gabon, in Côte d'Ivoire, in Surinam, in Equatorial Guinea. And what I found through my work in these past months, and this is important, what I found was a business with a really large resource base across our producing assets. And this base is supported by some very extensive infrastructure. What I did realize and did understand was that the resource had not been given the attention that I believe it deserves or in fact, the capital allocated to it. I've asked around and some of my colleagues have attributed this perhaps to a desire to be all things to all people. As a company in the past, we attempted to do a variety of things, onshore developments, frontier explorations and deepwater operations at the same time. So what happens is in the absence of that focus and rigor, operational performance suffered. And also what we ended up doing was burdening the business with very high cost structure and too much debt. And also the historic underinvestment in the core assets that's resulting in the production decline trends that we will need to reverse. Now these are humbling lessons, and we're making sure that we'll learn very carefully from the past. And what we've done is we've approached the business very fundamentally with a very different attitude. Perhaps you could say kind of it's similar to that of a new private equity owner. So what that's led to is a detailed assessment of our costs, our debt levels, our organization, our capital structure and all of our assets. And what we've done through this process is we've leveraged the deep internal knowledge that's there, but also we've incorporated input from outside and also from some of the best minds in the business. So what we have as a consequence of this is a much more focused business. Firstly, through cost savings, safe and reliable operations and active reservoir management, we will maximize operating margins and cash flows in the near term. And what that allows us to do then is to invest in a very deep portfolio of high return, quick payback opportunities, and I'll talk more about those. And that delivers future production and cash flows that we can use to reduce debt and create value. I think we -- and I'll -- we'll demonstrate this. The resource base also provides very ample scope for replenishment and value creation, and importantly, for our host nations and also for our investors. And what's critical is that we can do all this with the assets we have. So we don't need to go out and buy anything. This is on the basis of the assets we have. And what we have today, and I'll share with you is that we have a focused and a lean organization with a very clear sense of purpose. There is a lot of excitement and enthusiasm in the team as we look to rebuild a resilient business. And again, on behalf of my colleagues, I just want to thank you for the opportunity. We're really delighted to share our insights and plans. So let's get into the presentation. So this has been an eventful year, a year of significant change. There are some very fundamental changes to what Tullow is, to how we run our business and very fundamentally to what our value proposition is for you. So I think many of you being shareholders and investors are familiar with the operating challenges we've had in the past. You know the assets are complex, and there's no quick fixes. But what I'm pleased to say is that we've got a very good operational team in place with a well-defined turnaround plan. My colleague, Wissam, will share more details on this with you. Now at the half year results, you heard Les and I talk about the cost focus. That price has been identified in a very systematic way. It's been validated with external challenge. And now in essence, we're in a delivery mode. And I'm pleased to say the response from the organization has been terrific. And what we're doing is we're embedding a real cost focus and a performance mindset in our culture. This is very, very critical. It's very exciting. So I was in Ghana few weeks ago and at a town hall at our logistics space and I was talking about cost focus. And somebody, one of our colleagues had asked me and said well, how could you put this in practice? What does that mean? Like how do I do this, right? And as we talked about, we said, look, the simplest way to do this is to treat every dollar that you spend as if it's your own, right? It's a simple idea and it's resonated across the organization. And it's resulted in a bottom up focus on every aspect of our spend. So that's the kind of culture change that is coming through in the organization. Now as I mentioned to you, I spent couple of months before joining. So back is May, this is probably about 6 weeks before I joined, I had my first deep dive session in Ghana. And what struck me immediately was the scale of the resource. So across Jubilee and TEN, we have 2.9 billion barrels of oil in place. But we've only produced about 400 million barrels of that. So what we have is a resource of 2.5 billion barrels of oil in the ground with major infrastructure in place. That is a pretty incredible position. And we saw similar, but smaller potential across our non-operating assets. So what we did was we initiated a very comprehensive review of every investment opportunity across all of these assets. And what this generated was a very large portfolio of investable opportunities. We then went through a process systematically screening each one of these. And we high-graded the high-return and quick payback investments. And of course, they're all in our producing assets where we have underinvested in the past. This kind of disciplined approach to capital allocation, I would submit to you, that is fundamentally different from what we've done in the past. Now what we have in the plan that we'll share with you is the flexibility to self fund. This is critical, to self-fund our capital spend and to reduce debt even at low prices. And very importantly, these investments will help produce production growth and they create value for all our stakeholders. So the other thing I just want to highlight is our ongoing commitment to ESG. And again, during my last trip to Ghana, I visited our operating base in Takoradi. And I was really impressed with the work we do in the local content. We're working with a lot of local companies, who are supporting us in critical areas like logistics, engineering and fabrication. And as we go forward, as part of our plan, we've reinforced our commitment to developing local content and also to social investment. So that sets us up really well. And let me now talk about just the team that we have that is committed to delivering value for you. So we've gone through a very comprehensive reorganization, right? And through this reorg, what we've done is we've focused on our activities, we've reduced management layers, we've simplified decision-making. And all that has resulted in a reduction of over 60% in our staffing levels, right? We've moved quickly, and we've taken some tough decisions. But the important thing for doing this was that we could provide stability and clarity to those that remain. And I'm pleased to say all that change is behind us now. So the new team is in place, and we're moving forward. So what you see in this -- these are my senior colleagues and -- that you see in this page, right? There's a mix of long-term Tullow people and new talent. So roughly half of the people in this group joined us in the last 12 months and the other half obviously have been here for longer. So what that does is that gives us a very interesting combination of deep institutional knowledge, along with some new ideas. I think collectively as a team, and you'll see on the people's experiences, we have a lot of breadth and depth of experience and very complementary skills. Each person on this page sort of brings a very unique skill set. So it's kind of part of a bigger mosaic. Importantly, as a team, we have a common understanding of the opportunity, and we're united in the mission to deliver value and cash flows. What we're also doing is we're creating a culture of innovation, where we're open to new ideas and challenge. So we know we're a small company, and we want to leverage the best minds in the business from wherever. So working with external advisers as well. So for example, like I give you -- partners in performance, they're supporting us to deliver value in such critical areas like contract management and maintenance planning for Jubilee. Another example is INTERA, which is a very high-end reservoir engineering consultancy from Austin, Texas, and they're working with us to help optimize development of resources in Ghana. So the team then is working on the plan. So maybe now I should -- let me just share more details about our plans. And this slide really summarizes the essence of our value proposition, which is really the focus on delivering cash flows and value. So firstly, we have a solid production base and you've heard me talk about this and you'll hear me talk about this more, which is underpinned by a very large resource base with material organic growth retention. Now importantly, this is where we'll spend 90% of our capital as we go forward. We're in transition to more reliable and consistent operating performance. Wissam will talk more about that. That will help build confidence in our operating -- operational delivery. With a singular focus on cost, we will deliver high margins and we ensure that we generate cash flows to fund our investments and reduce debt. So that disciplined approach to capital allocation that ensures is that we have high returns and rapid paybacks. And so for example, at a $55 flat nominal. So what we're looking at is flat nominal, not real oil prices, we can deliver $7 billion in operating cash flows over the next 10 years. And of that, over $4 billion is available for debt service and shareholder returns. So that puts us in a pretty strong position. Our strong geoscience skills, subsurface skills, that's something that's integral to who we are. That enables us to maximize recovery and to add additional resources to this production base and it enhances further value from here. Now this is on the production side. Now on the right side of the page, you see we have some very interesting positions in emerging basins and in Kenya. So we're reassessing the development in Kenya to make it viable at low oil prices. And also what we're doing is working to better define the prospect inventory in key basins like Guiana. And what this requires is not capital right now. It requires an innovative approach and deep geoscience and engineering expertise. And I think these positions, they offer pretty unique opportunity, I think, to unlock value. So that's why we're very confident that the approach that we have delivers this very kind of interesting combination of highly visible sustainable cash flows, plus some additional material sources of value. So now the $7 billion of operating cash flow, again, is a big and impressive number. So let me over the next couple of slides I will show you how we will achieve this. So as I said, we have a large portfolio of well-defined resilient profitable investment opportunities. Let me explain kind of -- that helps explain kind of why we're excited about investing in our production base. So these are fundamentally our producing assets. I would describe them as they're structurally advantaged. What do I mean by that? What I mean is there's large remaining reserves and resources, which are supported by extends -- very existing infrastructure. So intuitively, you understand that returns from incremental investments on this sort of a set up are going to be very attractive. As I mentioned earlier, over the last few months, we've analyzed every investment opportunity in our producing assets. But what we've also done is we've looked at the cost structures, we've looked at development schedules, we've looked at subsurface assumptions. So we've kind of changed and transformed a lot of these. We've also incorporated challenge from external advisers and from our partners. So that's kind of we've reworked some plans. And I think we have a much more robust understanding of the potential of our resource. And through this exercise, what we've done for now is we've high-graded over 60 investments that are currently included in the plan. So these investments, you see the creaming curve on the left part of the page. That's where these investments are going to map out. And what you see is that they deliver an average of over 80% IRR at $55 long-term flat prices. But even at lower prices, these are very, very profitable. Many of these are short-cycle and they pay back rapidly. What's also critical is given the nature of our production sharing contracts is they create very material value for our host governments as well. So we're all aligned. What's also important, I just want to highlight is that this is not the end of it. There are many more opportunities in the portfolio that are being worked on. And they'll be included in the plan as they mature. But what we wanted to do for today is to just talk about what we can deliver from defined opportunities. These are activity plans, also they have flexibility, so we can manage the capital spend. And Les will talk about the range of capital spend. We will manage the capital spend up or down based on the oil prices. So these investments obviously based on a very material resource. So let me now talk about that. And this is integral resource. And what I'm going to focus on in this slide is really our producing assets. And what you see in the chart on the left is what we've identified today, which is a combination of recoverable reserves and resources of nearly 650 million barrels next to us. And remember, this is in the producing assets only, so it does not include potential, for example, in Kenya. And these volumes, they are derisked. They're underpinned by the defined projects that I just discussed. And what we've demonstrated this year, for example, with the 100% reserve replacement is that we have the ability to replenish our reserves from this very extensive base. In fact, if you look over a 10-year period, where we expect to produce about 260 million barrels over the next 10 years, we will still have at the end of 10 years nearly 400 million barrels left from this resource. And as we do more work on recovery factors, we add near field potential, we expect this to kind of be enhanced, right? So it's not a static picture, but the foundations are such that the resource will grow. And that's an important point. So what we have in essence is, and that's what kind of for me was a big paradigm shift is that this is a resource play. And the resource play has the ability to replenish itself, but it also has the ability to deliver visible production growth over the foreseeable future. And that's what we've tried to illustrate on the chart on the right. And that level of visibility is quite unique. Now as I said earlier, we have underinvested in these assets in the past. So to give you a sense, like the last well we drilled in Jubilee was in July of last year. And this year, we added only 1 well in TEN. So while the story this year has been good, and Wissam will talk about this, we've done a remarkable job operationally. This lack of investment will lead to a decline in production next year, right? And we'll share our guidance with you in 2021 -- for 2021, sorry, in January, so once we have all the budgets approved by our partners in those governments. But what's interesting is that the cost savings that we are sort of banking, they will more than offset the cash flow impact of any production decline. I mean, Les will talk more about it, so I don't want to steal his thunder, but we're looking at very material cost savings, both on G&A side and the OpEx side. And what that does is that allows us to generate sufficient operating cash flows for investments even at low oil prices. So we're looking then to restarting the investment in a very aggressive way next year. Now what that means, therefore, is that with the large resource that we have and the deep inventory of investment projects, the key driver then for production growth becomes capital spend. So as we start this kind of multiyear multi-well drilling campaign by mid next year, that's what enables us then to start growing production and to sustaining it or even accelerating it. Because as I said earlier, the plan generates about $7 billion in operating cash flow, right? And so we've got, at least in this plan right now, we have about a $2.7 billion of capital spend. We're comfortably self-funding that, right? And we have over $4 billion left for that service. So debt levels, net debt, Les will talk about, is about $2.4 billion. So I think we're in a pretty good position and that we can accelerate capital spend if we want to deliver higher production growth. So let me just conclude this section. And I think the key points I wanted to kind of just reiterate was that the production assets have a large resource base. There's well-defined investment opportunities. And we have coupled -- so that's on the production side; and on the resource side, we've got material positions, both in undeveloped resources and with -- in emerging basins. So given this asset base, we don't have to look outside for opportunities. So the focus that we have right now is on delivery and on execution. And we've got a very clear road map to follow. So we're in the midst of an operational turnaround and '21 will be a year of transition when we embed good operating performance, cost savings, reservoir management. And then it's about sustaining this and implementing the mindset of continuous improvement. And I think we're well on our way to becoming a strong operating company. So that's kind of very much the vision that we have. I've talked about our very rich investable opportunity set. And I've said this before, but I'll just reiterate the point, which is that the cost savings and the operating discipline that we have that allows us to deliver high margins even at low prices. So that means -- and with disciplined capital allocation that means you can self-fund all the high return opportunities. And as I mentioned, we're going to start drilling in Ghana, but since we're not short of opportunities, we can accelerate drilling in Ghana, for example, a second rig if oil prices improve. So from this producing asset base, we have strong cash flows. We have proceeds from Uganda. We're considering other asset sales as well. So that gives us a very strong foundation. I know many of you are keen to understand that how we're going to deal with the debt. But that gives us a really strong foundation to address debt maturities and to progress any refinancing options. And also, what you see, and Les will talk about this, with strong cash flows, the business is very well placed to rapidly reduce our debt levels. And in addition to all this, in the near term, we've got some very interesting levers to unlock value. So for example, as we revised the development plan in Kenya, we're drilling an exploration well in Suriname, we're maturing the prospect inventory in Guyana and we're adding to the investment opportunity in our producing assets. So also, I think this is a very exciting journey, but I'm also pleased to say that this journey will create very material value for our host governments. It will deliver a positive impact to our local communities. We will further enhance local content, and we will significantly reduce our emissions in this journey. So it's not often, I think, in a business like this or in life that you have complete clarity on what needs to be done to deliver success. And today, we have that clarity, and we have the team to make it happen. Let me now hand over to Wissam. He will talk to you about our operational turnaround and how we're maximizing value from our resource in Ghana. Wissam, over to you.

Thank you, Rahul, and good morning, everyone. Let me start by briefly introducing myself. So my name's Wissam Al-Monthiry. And as Rahul said, I'm the Managing Director for Tullow's business in Ghana. I was appointed to this position back in July of this year after joining Tullow just a few months before. I'm a chemical engineer by background, and I spent the majority of my career at BP, primarily in offshore and deepwater operations, including leading sites, where I was lucky to be an offshore installation manager as well as asset management in places like the U.S. Gulf of Mexico, the U.K. North Sea and the Caspian Sea. Most recently, I was Vice President of Operations and Head of Country in the North Africa region for BP. What I bring to the senior leadership team of Tullow is a depth of operational know-how and technical and commercial integration at a country level. So I've worked successfully with a number of governments threading that needle between value to the country and value to my company and its partners. And that's what I'm bringing to the table here in the business in Ghana. My aim this morning is going to be to tell you a little bit about our business in Ghana, expanding on some of what Rahul talked about already. And I'm going to start by speaking about what we've done and continue to do to turn around our operational performance, which we genuinely believe is at the heart of becoming a reliable and consistent operator. So start here with Slide 10, which hopefully sets the context and the frame. What was really clear to us right from the start was that the business in Ghana had a prolific discovered resource base. And of course, we put in place significant infrastructure over the years. The opportunity, though, as Rahul mentioned, was in operating TEN and in Jubilee to their maximum potential. We had long-standing equipment defects and a number of surprises over the years, which had required the team to focus on the response to those rather than forward-looking risk mitigation, which we're very much focused on now. Alongside that, we really need to get back to basic. So being focused on meeting our daily, weekly and monthly production targets, making sure our cost base is in line with industry benchmarks. And really working effectively with our partners, including, most importantly, our host, the government of Ghana. So we set about formulating an operational turnaround. And I wanted to tell you a little bit about these transformation work fronts that we categorize this turnaround around. And that's what's showing here on the slide. It all starts with safety. So we believe a safe business is a reliable and efficient one as well as, of course, a place where people want to come to work, and that's very important. We developed and we've been implementing a multi stranded plan to enhance both personal and process safety performance. We also found quickly that we're much stronger working with our joint venture partners rather than in conflict and we began actively leveraging each of their individual strengths and capabilities. They've got a lot to offer. After all, we're a partnership. We may lead as the operator, but always with strong support and collaboration from our partners. We're also enhancing the organization. So we're building a world-class operating team with particular strength in deepwater production, drilling and completions and subsea projects delivery. We're focused a lot, and this is something I'm spending most of my time on, on integration, on how everyone works day-to-day. Decision-making has to be truly representative of all the parts of the total picture that's the Ghana business, and that generates value. What followed is an intense set of efforts to get operations and cost management outcomes to a new benchmark. I'm going to tell you more about those in the next few slides. So moving on to Slide 11. It was clear to us that there was a significant value in enhancing our facility's reliability. So just today, just look at our morning reports today, Jubilee is producing over 80,000 barrels a day on a gross basis and TEN in the mid 40,000 barrel a day range. So think about it, every 1% of extra FPSO uptime has a sizable prize attached to it. And we're getting after that. We're establishing a culture in the company where every barrel matters. Every barrel matters. One where optimization of every element of our operations is closely integrated across all the functions and rigorously performance manage day-to-day, month-to-month and year-to-year. With this strong and globally experienced operating team being built, we've started to realize sizable gains in uptime through taking more direct control of our operations on the Jubilee and TEN FPSOs. Just absolutely laser-focused ownership and oversight. We are complementing this foundation with a plan to fix long-standing equipment defects across both fields and FPSOs and sustaining this by putting in place systemized monitoring and mitigating our risk. Again, going back to my previous point, this way we're proactively addressing emerging issues well before they could impact us. Finally, we're building an equipment systems maintenance management infrastructure to help underpin the upholding of these improvements. We're not there yet. And in operations, I feel you should never, never believe you're fully arrived, but significant progress has been made to date. And you can see that on the results here on this slide. As for the business plan, I should note that we're stopping short of embedding uptimes as high as the 98% we've achieved year-to-date in 2020. So there's more upside to play for. Switching focus to the right side of Slide 11, the reliability story on production applies equally to our water injection systems. They're really important for our business plan delivery, particularly on Jubilee. Our plan is to gradually through equipment fixes and enhancements, build up water injection capacity, which is optimal for our reservoirs. The numbers you see here ultimately growing to 300,000 barrels of water per day, speak to the story for Jubilee. And we've already delivered value against that. We've already seen oil recovery benefits in the improvements to date. And if you couple that with increasing uptime, we'll be really well set up to pull-through sizable amounts of incremental oil barrels for the really long term. Moving on, a really great example of integrated management leading to performance improvement is in the gas export ramp up we've achieved in Ghana this year, showcased right on Slide 12. By the way, exporting more gas helps us produce more oil, it reduces our carbon footprint. And most importantly, it helps deliver valuable free gas to the country of Ghana to fuel its growing demand from its domestic, power and manufacturing sectors. That's a fantastic goal to have. But increasing export isn't easy. It requires continual subsurface assessment to optimize our well mix, lots of engineering, debottlenecking of our plants and operations delivery to create consistent and predictable flow from our side. We also have to couple that with active engagement with the various arms of our host government in Ghana to achieve maximum take from their side day-to-day. Through this, we've managed to get to a peak export rate of 135 million standard cubic feet just actually earlier this month, and 95% of that comes from Jubilee. We're going to use this as a foundation to scale from. From this point, we intend to sustain this, commercially firm it up and grow gas export, as shown on the slide here, in line with forecast growth in demand in Ghana, which is quite appreciable, actually. That's going to require more of what we've done in 2020, but we're confident that with the recent track record achieved, we're well set up to scale that over the years to come. So to become a world-class operator, not only does every barrel have to matter, like I said before, but like Rahul talked about, every dollar matters has to become ingrained in the culture as well. Slide 13 speaks to what we're doing on costs in the Ghana business. While our unit cost is actually competitive, it was important to us that we could sustain that in the face of declining production linked to the lack of investment in recent years, again, as Rahul talked about earlier. We look -- when we looked at things, we found that our cost footprint was really akin to those of -- the elements that make up our cost footprint were akin to those of major. They were really ones commensurate with a small, nimble and efficient operator. We had opportunities in areas like manpower optimization, resource utilization, supplier contracts managements and just overall performance management. Just as a really simple example to give you, when we look at our supply boats, the ones that go every week to our FPSOs and supporting our operations, they're averaging just about 60% capacity utilization on a weekly basis. Getting that 60% to 80% represents millions of dollars in savings annually. And it's things like that, that we're laser-focused on. So we've set out to address all these and other issues, well beyond just reducing contract rates stemming from the well-known industry deflation. We've used external help from industry experienced consultants embedded in our front lines, not sitting in our headquarters, embedded in our front lines to really granularly support us in reducing cost for the long term. There's definitely more to do. And you could see that in the need to reassess our operating cost structure on TEN. But we feel we've put ourselves in a really good place now with what we've done in 2020 to do so effectively. I want to finish this piece by just saying it's really important that our mission to reduce our cost base doesn't come at the expense of improving our safety performance, and it absolutely doesn't. Maintenance and integrity spend is carefully ring-fenced. And from my background, I know the criticality of doing this really carefully. And there are certainly areas where we're going to be spending more -- we're going to be spending more over the coming years, like that. We also continue to plan facility shutdowns to keep up with integrity requirements, as is planned for Jubilee in the coming 18 months. Overall, though, by becoming smarter and more efficient on how we do things, there's much more cost gain to come. So Slide 14 here speaks to an important area of performance improvements for our us in the Ghana  business, which is our drilling capability. It's a major contributor to our annual capital spend. It represents about 2/3 of our spend for the coming years to grow the business. And given the deep bench of small- to medium-sized projects that Rahul alluded to, being able to drill and complete top quartile wells is key to their quick payback horizon. So again, a big area of focus for us. We already see line of sight to about -- to 20% to 30% reduction in our average well costs and we're achieving this through plans -- the focused plans addressing a few high-impact areas I wanted to highlight. I'm going to highlight just 3 of them from this slide. The first is the complexity of our well designs. Our experience has shown us that although well intention, designing wells to access really far step out resource targets and building multi-zone production, it just introduces more risks and costs than benefit it provides. So we're going to be focused on quick, simple and cost-effective barrels brought onstream in Ghana, and we've got a lot of those opportunities. The second area I wanted to highlight is integrated planning. Streamline barrel pull-through in infrastructure-led development basins like TEN and Jubilee, it's very much enabled by subsurface project and operations teams working hand-in-hand from the initial inception of a well opportunity. So we're very focused on creating the habitat and processes to have that continuous workflow through multiyear rig campaigns. The final area I wanted to mention was just leveraging scale in the supply chain. The drilling subsector has some very capable service aggregators many of you will be very familiar with. And they've got proven track records across numerous simultaneous product and service offerings. So our forward strategy entails leveraging this to its full potential and enabling greater concentration of capability, reducing costs and, of course, streamline performance management. We also know that it will give us increased local content through our supply chain, and that's an important objective for us. So in this next section, I'm going to talk you through how we're thinking about our fantastic opportunity set available to us in Ghana. Slide 16 here, let's you know a little bit about how we're thinking about our investable bench, and it's in 4 large categories, all of course connected to each other. So the first category is our existing production. We feel like there's a little under 300 million barrels of oil in place on a gross basis between the TEN and Jubilee field to be produced until the end of the license periods if we took no further capital investment action. Maximizing the recovery of this 300 million barrels of oil in place, it is all about operational excellence, in line with the -- what I talked about in the previous slides. Next, is the infill wells. So these are well options, discovered resources that we know can be accessed with limited incremental infrastructure requirements and they can be drilled into in short order. After that is what we call our project opportunities. These are discovered resources within our plans of development, but they require additional subsea facilities to bring on stream. If you take that projects category and you add it to the well options category before it, we have line of sight to about 350 million barrels of oil in place on a gross basis. Finally, there's a slew of opportunities that we have line of sight to, but they require some form of commercial access ahead of development. So that includes things like infrastructure-led opportunities around TEN and Jubilee, unassociated gas as well as oil production beyond the current license periods. The value gain from these possibilities, it's not been built into our business plan. So again, there is more upside here to play for in this fourth category. Just as a quick illustrative example, if you take the TEN fields, if you just take the well options and define projects categories, you achieve up to 28% recovery within the current license period. So just by industry norms, that would suggest that there's additional upside opportunity to be covered from that fourth value category, and I'm going to shine a light on a little bit of that for you in the next few slides. But altogether, this provides a really rich pipeline of investable opportunities, which -- each of which have really material pieces, but -- and they've got really quick paybacks and high returns. But also, there's -- none of them is large enough such that they're individually make or break for the business. So it gives us a lot of utility in our portfolio in Ghana. What I verbalized, while talking about the previous slide is summarized here on Slide 17. Jubilee and TEN are just 2 big areas composed of multiple fields that have on average about 14% of their resources recovered. That's about 550 million barrels of oil in place on a gross basis to play for. And that's just within access to resources and current license periods. The bench is deep and the major infrastructure is in place with 2 effective and improving, of course, FPSOs, as I talked about, and vast amounts of subsea facilities already linked. On the next slide, Slide 18, we zoom into the map from the previous one, and I wanted to just give you a little sense of the specificity we have around these opportunities. On all 3 of the major TEN fields, there's defined extension prospects, including areas like Tweneboa, West, Enyenra South, Enyenra Central and North. And of course, we also mentioned here Greater Ntomme. On Jubilee, our most immediate projects are Jubilee Southeast and Northeast, which I'll come to on the next slide. Of course, all these projects entail drilling wells and tying them back and producing them through the TEN and Jubilee FPSOs. Hence, there's a lot of synergy with our efforts to build on strengthening our subsurface operations, drilling projects execution capability and reducing our cost base. So these benefits, they just deliver a compounded value for the future. In addition, both Jubilee and TEN have a number of infill drilling options, which could be accessed with limited to no additional infrastructure and brought online very rapidly. So moving on to Slide 19. We're going to take a closer look at the next 10 years of drilling opportunities across TEN and Jubilee. And as you can see, while this is a packed activity set, these are very economic wells even at the lower end of the anticipated production range for each. These wells are either infill options, again, and which can be drilled from existing infrastructure or they fit into our defined projects category. Jubilee Southeast and Northeast are very well defined, and they've actually already had their first phase sanctioned with first wells online in 2020. The TEN projects I spoke about are being matured as we speak, and we should progress through sanction in the next 2 years. My next slide, Slide 20, gets into the fourth category of value, which is, again, over and above the current business plan. One reality seen time and time again in our industry is that big fields just get bigger. And we expect Jubilee and TEN to be no exception. On Jubilee, we're currently targeting up to 40% resource recovery during the license period. But again, we see significant additional resource potential possible through enhanced recovery and base production beyond the current license expiring. On TEN, there's 2 sizable prospects that we're evaluating right now in Tweneboa West and Greater Ntomme both with the entire and the reach of the FPSO. We're assessing these opportunities further and working with the Government of Ghana and our joint venture partners to move these towards development. And finally, beyond these investable oil opportunities, Jubilee and TEN have an appreciable unassociated gas resource in there, post-COVID. We estimate this to be about 1 trillion cubic feet of gas in place on a gross basis. That's a lot of gas. The development of this resource, it aligns well with the Government of Ghana's vision to grow the domestic power and manufacturing sector. So it's worth putting ourselves in a position to pursue it. I'm going to end here on Slide 21, where I want to give you a bit more -- a little bit more on access prospects in and around our fields in Ghana, specifically in this case, on TEN. Again, this is potential value above and beyond our current business plan. In Ghana, we've developed a really exhaustive inventory of potential tie-in targets, and we're maturing multiple options that can contribute over 100 million barrels of oil equivalent in place on a gross basis. So that's attractive growth potential, and it's in our own backyard. So we've begun the engagement with the Government of Ghana towards access rights, of course, where appropriate. And then in neighboring Côte d'Ivoire, we are defining the continuation of this TEN resource play into what's now known as Block 524. And our newly reprocessed seismic data is revealing very attractive potential. We're progressing the technical evaluation, leveraging our existing geoscience expertise. These are all potential opportunities that could be tied into the TEN FPSO and make -- and they make up part of what you've hopefully now seen as a deep bench of value investments for our business in Ghana. With that, I just wanted to say thank you to everybody for listening, and I'm now going to hand back over to Rahul to tell you about our non-operated portfolio. Rahul, back to you.

Okay. Thank you. So I'll talk about our non-operated portfolio, which is a fantastic set of assets. And what's really good about these is they provide again, very visible, stable production, cash flows. And this is all gained through defined projects through near-field exploration and license extension. And it is a diverse portfolio. As you can see, it's across 3 countries. So Côte d'Ivoire, Equatorial Guinea and Gabon. And what we're pleased is that all our partners here, we have good operators. They have tremendous depth and experience, particularly in these countries. And each one of these has very flexible, but very valuable investment opportunities. Also, what it does is this some of the positions that we have, they offer some very interesting short-cycle near-field exploration projects. So a good example is, I don't know how many of you are familiar with this, but we have the Simba field in Gabon. It's operated by Perenco. We have a nonoperating stake of 57.5%. And this was tied back to the Tchatamba platform, which is offshore in Gabon, back in 2019. And it's still producing about 4,700 barrels a day net to us. And the whole cycle from discovery to tieback for just a few months. So that's the kind of opportunities that you have in this business. Now we've made some pretty major changes in how we run this business. So to give you a sense, last year, we had 46 people in the nonoff team, and they were covering a very wide variety of kind of activities and disciplines. When we sat down with John Dodd it was on kind of our team that I described. So with under John Dodd's leadership, we sat down and we said, "Look, let's be clear about where we're adding value and where we're focusing our efforts." So -- and what we've done is through that effort, we're now able to run this business -- he's running this with just 15 people. And let me just kind of then just move to just talk about some of the defined projects that underpin this kind of nonoff-production base. So across the 3 countries, we have a pretty well-defined inventory of investments. And this is a diverse portfolio. So these are fairly mature fields. They're well understood. And it's a mix of infill wells and there's some development projects. On balance, I would say, the projects are in a relatively low risk, and they're technically simple and they're managed by, what, as I said earlier, experienced and efficient operators who've got proven track records. So generally on a fairly low-risk portfolio of investment opportunities. Also, critically, these projects, all of them, as, as shown on this page, they deliver very high returns and very, very rapid paybacks. So for example, in Gabon, we've got expansion opportunities across most of the fields. And this will involve kind of over 40 wells. We have line of sight on at least 2 projects in MODUs, [indiscernible] which is kind of just mobile offshore production units, and that's for increasing water handling and power generation. So that allows increased uptake from fields. And these are, again, very profitable. In Côte d'Ivoire, CNR is the operator. They're looking at the Phase IV infill drilling program. So that's going to add 6 wells -- 6 infill well, so there's I think, 4 producers and 2 injectors. And that's, again, a very high-return project. So it adds resources, but it also extends the economic life. Similarly, in Equatorial Guinea, we have the Okume field. There's an infill program there and that provides, yes, short payback and higher turns. So I think you can see why we're kind of prioritizing capital spend in these nonoperating assets. Let me now kind of shift gears to talk about our nonproducing assets and where we plan to unlock value in Kenya. Our Kenya business is run by Madhan Srinivasan. She -- he's been part of the team for a long time, knows the Kenya assets really well. So -- and the emerging basins portfolio, the exploration business that's being done by Amalia. Amalia joined us earlier this year from Repsol and she was at Exxon before that. So if you look on Slide 26. Really the focus across Kenya and the emerging basins is about how do we unlock value from this part. And it's about disciplined sort of focus. So this year, 2020 has been a year of transformation for this. So we've sold, as you know, we've sold our assets in Uganda. So very disciplined rationalization. We've high-graded our exploration portfolio. So we've exited about 11 blocks, and we're progressing exits in 2 countries. So essentially, the story is about Kenya and about selected emerging basins. So we really like these positions. And the reason why we like them is because we have a differentiated ability to unlock value here. So Kenya has a big resource. I mean, you guys are familiar with this, but it's got many development challenges, and it doesn't work at low prices. So we're working closely the government of Kenya. We're working with our partners, and I was talking more about that to see how we make this project might work. In exploration, we're concentrating on the areas. So Amalia and a few working on the areas where we can leverage our kind of core strength. So what the team is good at is deepwater turbidite system. So that's kind of the theme here. And if you look at the focus on the map, you've got along the transformative margins that brings synergies within the portfolio. And again, on the map, you'll see we've got a very material, very interesting position in the Suriname and Guyana basin. That's really where you'll see the pie chart with the prospective resources in the right. 60% of our risk prospective resources are really in the Suriname and Guyana basin. Now this is one of the hottest emerging basins, and we will have activity here in the near term. Now the important thing is that these are big opportunities, it's a large portfolio, but we have limited commitments, and that gives us the option then to focus on a rigorous application of foreign-related capital. So that gives you kind of an overall picture, but let me now focus first on Kenya. So in my view, kind of the challenge in Kenya is not the resource. It's large. It's well-defined. We've built lots of exploration wells. Lots of appraisal work has been done. The challenge is the complexity of the development. It's the commercial arrangements. It's land and water issues. And it's also the overall economics. So I think some of you are familiar with the original development plan, right? Now that was meant to work at oil prices of at least $50 real, right? So if you think about a longer -- lower for longer oil price well, it doesn't work. The good thing is these are shallow productive reservoirs. It might work. So let's say, this was in West Texas. It would have been really, really valuable. But the problem is, it's not, right? But what we do need is we need a different mindset for this project. We need a different way of thinking about it. And that process of changing the mindset, that review will take some time. Now what we're pleased is that the government has agreed to give us an extension on a conditional basis. We've now submitted what they asked us for and a big conditionality was that we submit a 2021 work program. So the government -- we've submit it to that government, and we're in the process of agreeing the budgets. And pending that, we expect we receive a full license extension until the end of 2021. And what that does is that it gives us time to review the development concept while we work in parallel with the government to address the wider commercial issues and nontechnical issues that we need to address to derisk the project and to make it investable. Now we're not starting with a blank sheet of paper, right? We've got a solid foundation of technical work, commercial work from which we build on. So I think there's a lot of work that's been done on, for example, tendering, which gives us a good sense of the market, the cost. What's important and that's going to change, this is going to be critical is that the earning oil production system is complete. We've got 6 months of production data, right? That's very fundamental because it will help us improve our understanding of the dynamic performance of these wells. So all the other critical areas, which is really land, water, environmental approvals, commercial agreements, which is required to implement the fiscal package to support the development, all these require effort. It is not simple. But what we're encouraged by, the government is very keen to come up with their [indiscernible] base. So let me just kind of talk a little bit more specifically about how we're approaching the redesigns. We don't have numbers yet, but essentially kind of to walk you through. So whilst we're waiting for our work program and budget approval for 20 months, we've already started working with our JV partners. So we've created a very lean and focused team. Working very closely with our JV partners. And that team is doing very detailed work. And we're also leveraging some external expertise, okay? So some of the areas, and I'm not going to go through all of these, but some of the areas that we're focusing on is going to be evaluating. And these are kind of things which think about these as levers that will give us a different perspective on this. So we're looking still at a phased development concept. But the areas that we're looking at for improving our confidence in reservoir performance. So integrating all of the recent production data. We've recent -- we have injection data, but from EOPS, all that will help us increase confidence in terms of our performance. I think one of the big things is going to be, how do we come up with a drilling program that is targeting the most productive parts of the fields in the early phase of the project, but what that does is it allows us to potentially deliver higher RFP. And also in addition to that, we're looking at seeing how we accelerate more production within the license period. So that's on the kind of subsurface. And then we're looking, obviously, at optimizing the CapEx and the OpEx. We're also looking to reassess the water injection plan to improve overall recovery and looking at how we'll enhance kind of [ suite ] efficiency. So again, if this was in West Texas, you'd have a very different approach to water injection. So we're trying to figure out how do we integrate some of those approaches here. And I think all that then creates the kind of potential to accelerate resources within the license period, maybe through a higher and longer kind of [ letter ]. So this is all work in progress. And we'll integrate this with the work we're going to be doing with the government of Kenya on the fiscal packages. And the plan is to kind of create an investment opportunity and deliver a field development plan by the end of 2021. So that's the story in Kenya. Let me now move on to our -- the very material positions that I have we -- I talked about in the emerging basins. So I think many of you are familiar with the recent discoveries in the Guyana-Suriname area. So I've highlighted those in green and red on this map. You can see that. And you can also see that our acreage in this basin is well positioned. So in Guyana, for example, we've tested the extension of these proven plays into both of the Kanuku block and the Orinduik blocks. That's in Guyana with the 2019 [indiscernible] and I think there's a good calibration. So and the team is doing is they're maturing, they're derisking the prospect inventory. So you could see that kind of in orange. And in '21, will -- it will generate some prospects. And that -- and that, again, what that allows us to do is to plan for the next phase of drilling. In Suriname, the blocks are positioned in the further extension of the kind of play that's working. I'll talk about the risks there. We're looking to drill next year the GVN-1 well and that if -- that derisks it, it's got significant follow on potential. So let me share some details on the next slide, which is Slide 30 on the GVN-1 well. So this is in Block 47. We're looking to drill -- start -- starting in Q1 of next year. It's a firm commitment well. It's target to like dual applications targets. So there's a combined-prospective resource, which is in excess of -- which is gross average number. So 400 million barrels of oil equivalent. So it's a material prospect from that perspective. Overall, the reservoir deposition systems are pretty well-defined based on the 3D seismic data. But the key risk here is with petroleum system. So the petroleum system is proven. It's to the basin in the west, but we're stepping about 100 kilometers to the Northeast. So that remains kind of the key risk. Now the great thing about this is if the petroleum system is working, then it would derisk a lot of on -- follow-on potential, which is quite big. So I don't want to overadd this thing, but just to give you a sense of the scale of the follow-on potential, there's over 1 billion barrels of gross average recoverable. So we're going to be kind of watching this well pretty carefully. We've got significant equity, but for this well, we were exposing only about 36% premium just because we could carry. So while it was a firm commitment well, I think we've managed that exposure reasonably well. So on Slide 31, we can highlight the other position we have here, which is in Guyana. So we operate the Orinduik block in the West, and then we're partnered with Repsol -- in the Repsol operator block in -- which is called Kanuku. That's in the East. So you see this cross section. And what I've tried to illustrate here is the kind of 3 plays that are across the acreage. So we've got to put a lot of technical focus to better understand all 3 of these plays. And what we're doing is we're integrating the results of the 2019 discoveries. And also improving our understanding of the complex petroleum system. Because the key here, I think, as many of you know, is where is the good oil? So how do you control the oil quality in the area? So that really comes from understanding the complex petroleum system. So we reprocess data in Kanuku. We're reprocessing the data in Orinduik and all of that will allow us to complete the maturation of that. Remember, I showed you the prospect portfolio in the orange, to define and deliver prospects each year. And the 3 players, as you have the cretaceous turbidite layer, which is, I don't know if you can see this, but it's the yellow kind of double-headed arrow. And you may remember, this is where we found kind of good quality oil in the Carapa discovery. So that was noncommercial. And the idea is, can you find prospects that are of scale or not? And the 2 tertiary plays which, again, hopefully, you can see the map is the pink and the gray arrows. There, the focus is in looking at migration timing and barrier history to help us, again, understand the areas where there is good quality. So the price here is big. It's -- again, I'll talk gross numbers, it's 2 billion barrels of oil equivalent. That's a gross average number. But it makes a lot of sense with that scale for us to focus here. So I hope this section gives you a better understanding of how we're leveraging our intellectual capital in Kenya and across kind of these emerging bases. So let me hand you back to -- or I'm going to hand you over to Julia, who will talk about our commitment to ESG.

First of all, everyone. Thank you for taking the time to join us this morning. Let me introduce myself. I'm Julia Ross. I joined Tullow in 2001 and over the last 19 years, I've spent the most of my time on the corporate finance side of the business. Over the years, I've also had responsibility for finance, insurance, marketing, and I've worked closely with many of the teams across the business. I joined the senior leadership team in January of this year, bringing an in-depth knowledge of the business and also an understanding of Tullow. In my role as Director of People and Sustainability, my responsibilities include show transparency, net 0 strategy, people, culture and internal communications. One of my current areas of focus is ensuring the organization has the right resources and the performance focus to deliver the strategy that's being outlined today. We're also working with partners and performance to help ensure that we achieve significant cost savings across the business, which Les will outline later. So first of all, this morning, I'd like to take you through our approach to ESG, being environment, social and governance. As a responsible operator, we are focused on all elements of ESG. The publication of our sustainability report and the issuance of our climate policy earlier this year demonstrate our commitment to playing a positive role in society and that we're responding to the increasing information needs of our stakeholders. On the environmental side, today, I'm going to focus on the work that we're doing on reducing our greenhouse gas emissions in Ghana. But rest assured, we remain dedicated to being environmentally responsible in all areas of our work. I wanted to reiterate our support for the goals of the Paris Agreement and the UN Sustainable Development Goals or SDGs. We focus on the SDGs where we have the most material impact, such as SDG 13 on the climate action, with the goal of taking action to tackle climate change and its impacts. Our emissions in Ghana have increased from last year. This is due to the elevated levels of flaring in 2020, which were required for better reservoir management and sustained production levels. We do recognize that our emissions are too high, and we are working to address this. For example, in our 2020 scorecard, we set the KPI to deliver the net 0 plan to reduce our Scope 1 and 2 emissions. That plan is well advanced, and we will be presenting that to the Board later this year. And we're also committed to providing the full details of that plan in Q1 of next year. The high level infographic on this slide shows some of the decarbonization options that we're hoping to benefit from. The biggest opportunity comes from the utilization of the gas that we -- the excess gas that we produce. And we're working on a number of those initiatives, not only to abate carbon, but also to deliver energy efficiency, enhanced oil recovery and also to increase the uptime of our assets. Some of those initiatives are underway. As Wissam mentioned, we're working with the government of Ghana to agree higher gas offtake. And this year, we've had record levels of gas export, but we do want to continue to grow that. In addition, we're evaluating various decarbonization options, which are on this slide for the FPSO, which include flaring and vehicle recovery, power generation efficiency, the retrofit and revamp of other equipment and we're also working with our joint venture partners and also the government to rely on both gas utilization and the future decarbonization plans. Let me now take you through our approach to the social element of ESG. Our aim is to create lasting social economic benefits for our host countries. Shared prosperity has been and will continue to be a key part of Tullow's DNA. We've always believed in developing the oil and gas of emerging economies is a privilege, and one where we both have an opportunity and an obligation to share the prosperity with the local communities and economies in which we operate. We seek to align with our host government priorities and sustainable development goals 4 and 8, which focus on health, education and community support. Let me take you through our approach to social investment, local content and how our gas production has benefited at Ghana more broadly, which is explained on this slide. So a key project in our social investment program in Ghana, is the free high school program, a flagship government initiative to provide better access to education. We've committed more than $10 million to the program over 5 years. On local content in Ghana, our focus on building capacity. Our strategy is to concentrate on specific sectors, 2 of those being the marine logistics and also the aviation sectors. We supported the development of the first Ghanian-owned and flagged offshore supply vessel and also the upgrading of the Takoradi Air Force base, which now has the ability to support national and commercial aviation and growth of Ghana's offshore petroleum industry, whilst also providing an enhanced operational base for our [indiscernible] activities. The 200 Bcf of Jubilee Foundation gas, which is supplied to the Ghana National Gas Company has fueled approximately 25% of Ghana's domestic power generation, providing more than 6.5 million people with access to electricity and it also supports the government's strategy of electrification. So we have a long-term commitment to Ghana. And we have made a significant contribution. Now let me take you through our approach to governance. As an emerging market player, we are committed to the highest standards of corporate governance. We strive for full transparency, both internally and externally, and we look to align with SGD 10, which is -- has the aim of reducing inequalities. We make a significant socioeconomic contribution to our host countries. And over the last year -- 5 years, we've contributed around $3.4 billion to our host countries and make full transparent disclosure as of the beneficiaries, but also the amounts paid through taxes, payments to local suppliers and also social economic investments. We were the first oil company to sign up to the Extractive Industries Transparency Initiative, and we have well-established processes and controls to prevent modern slavery in our operations and our supply chain. We run mandatory annual training on our code of ethical conduct for all employees and the Board, and we seek to have a leading approach to even disclosure of our ethics and compliance, and we have a 0 tolerance to bribery and corruption. We also encourage speaking up, and we have a workforce advisory panel, which meets regularly with the Board to ensure communication across the company is open and transparent. So to reiterate, as a responsible operator, we will continue to retain our focus on all aspects of ESG. Thank you for your time today. I'll now hand over to Les, who will take you through the financial strategy of the company.

Thanks, Julia. Good morning, everyone. It's a real pleasure to be here. Thank you for taking your -- the time to listen to us today. And in my section, as Julia just said, I plan to talk about the robust financial framework which underpins the new approach that you've heard from the team today. Many of you will already know me, but here is a brief reminder of my background. I joined Tullow back in 2014 after over 25 years as VP, but you might imagine, I held a variety of roles. These included CFO positions in the Middle East and in Canada. In total, I was previously Vice President of Finance and Commercial. And now I was appointed CFO back in 2017. In that time, we've worked hard on improving Tullow's financial position. And as everyone knows, 2020 this year has been one [indiscernible] focus on addressing our core challenges. But as you've seen today, very much planning for the future. It's actually very important to reflect on how much we've achieve this year despite extremely challenging and very difficult circumstances. Now we have a great opportunity to create and deliver value as we look forward. With Dorothy and Rahul and other members of the senior leadership team. My role now is to draw all of this together as we consider the financial management of the company going forward. But clearly, there is still more for us to do. We are in a stronger place financially, a result of all that hard work. Under the previous strategy, significant priority was given to high-risk for potentially high-return opportunities, notably from field exploration. Now as you heard from Rahul earlier under the new approach, we will focus over 90% of our capital on a strong set of producing assets. These will deliver value and capital. The other thing we've been doing this year, while we've been shrinking the size of the organization, we've been very careful to think how we organize the best for the future. And one important area is under myself, we are -- we've adopted a much more new integrated approach for certain things like commercial, now directly reporting into myself. And what this is allowing us to do is to support the much more granular approach for the allocation of capital at the group level, which I think we have heard clearly from Rahul and Wissam earlier on. This has allowed us through the work we've done this year so far through solid foundations in place to address debt maturities to further strengthen the capital to [ lift ] the company's financial position. So let me first start with Slide 37, which is on the external environment. This is quite a simple chart really. But 2020, as we all know, has been an extremely challenging year globally. It's impacted every single one of us, including our industry. The COVID-19 pandemic continues to create a volatile and challenging trading environment. Brent crude prices, as you see from the chart, fell to a low of only $13 per barrel on the 21st of April. They averaged only $18 per barrel in the month of April and only $29 per barrel in the month of May. We also saw during that period earlier in the year that the differentials for the West African crude blew out by minus $9 per barrel. And that's all driven, as you might recall, by the concerns about tank drops, driven by the demand destruction that was occurring across the globe, again, driven by the pandemic. While we've seen some modest improvement in price, it does continue to be volatile and economic recovery remains fragile. That said, we've seen in just the last few days, we have some real positive news on potential vaccine. And this is helping to provide some early much needed signs of confidence. You will also see on the chart, we've got dotted lines reflecting our hedge position. And our hedging continues to provide important downside protection. And over the last few years we've delivered post cost around $1 billion worth of revenues. Hedging will continue to be been an important risk management to the company going forward. You will also see in the chart that we've displayed a series of external forecast. We're obviously in quite a tight range but are, of course, dynamic. You will see from the financial forecast that we used here to date, we've assumed $45 a barrel for 2021 and as Rahul said earlier, $55 per barrel nominal 2022 and to 2013. We see that as a conservative assumption in the longer term, but realize that -- and also at the bottom end of this external range that you can see on the chart. So now let me turn to Slide 38, which covers our financial framework. It's important, as I said at the outset that our new approach is underpinned by a rough financial framework. And in our case, this was made up of 3 parts: firstly, we need to strengthen the balance sheet. Following the Uganda deal, net debt has now been reduced to around $2.4 billion. We will be prioritizing cash flow in the near to medium-term to follow deleveraging. We're targeting net debt of $1 billion to $1.5 billion and aiming for our gearing to be at the lower end of the 1x to 2x range. All that assuming the prices that I just laid out. And of course, if we see prices recover further, we will be able to get there quicker, which we assume for now is that we should be able to get there in the 2025 year period. All of this will make us much more resilient to oil price volatility. Secondly, we will also ensure that we allocate the capital in a disciplined way. As you've heard, we will focus over 90% of our capital, one of using assets. Well again as you saw earlier in one of the charts that Rahul -- and you -- we have a deep portfolio of good investment opportunities, all of which are resilient to lower oil pricing. The quick payback and high returns from these investments will result in the company being effectively self-funded. We will retain flexibility within a lower range than we had previously with the able -- ability to respond to oil price environment. Then thirdly, we'll be focused on value creation. We have laid out today a very clear set of priorities. We will maximize the value from our producing assets and seek to unlock value from Kenya on emerging basins. But very importantly, we plan to do the latter without entering into any major capital commitments. So now let me turn to Slide 39 and address our cost base. We have 2 charts here, one G&A and one Opex, both of which are showing a downward trend. In reality, we continue to drive out all of our costs to respond to the challenging external environment. Our objective has been to make the business much more resilient to lower oil prices and do it on a sustainable basis going forward. We've been hard -- working hard as we heard from Wissam and Rahul earlier to really instill the mindset of every dollar counts across the company, along with a very strong focus on performance management. We have some -- duty that we've taken advantage of advisers, and we're also using external bench market to challenge our own thinking and identify areas for -- of other cost savings. We're not just satisfied with our composition because we know we can do better. This is meant though that we've had to make some very difficult decisions, but these have been very necessary this year. By way of a few examples, we closed our offices in Dublin and Capetown. We've outsourced staff in finance and supply chain activities, and we've reduced our exploration footprint as you heard earlier. We now have a much leaner, streamlined organization, with headcount reduced by around 60% from the end of 2019. The result of all that work is meaning that we're taking around about $125 million per annum of annual cash cost savings out of the business, worth around $5 per barrel. And as I said earlier, we will continue to pursue further efficiencies. These reductions are substantial, and they're well above the 3-year target of $200 million as you'll recall that we set ourselves earlier this year. Wissam also explained earlier on what he's doing to reduce OpEx as we turn to more steady-state operations, particularly in Jubilee after the removal of the TEN field floatings system and setup that we had as a result of start-up work that have been ongoing in Jubilee. As a result, at the group level, this should allow us to sustain an average unit OpEx of less than $11 per barrel through to 2025. I'm really pleased with the progress that we've made on costs. Resetting the cost base was vital to make us more resilient to lower oil prices going forward. So now on Slide 40, I'm going to cover our capital allocation. As you've heard from Rahul and Wissam, we have a strong portfolio of producing assets, along with the large discover resource base in Kenya and significant resource potential in emerging business. We will invest around $2.7 billion net to Tullow over the next 10 years. Going forward, we'll be much more focused on our producing asset base where we saw earlier, we have a well of hybrid plan for fast-paced investment opportunities. This is a departure from the past when we started to spread our capital more broadly to progress opportunities right across the portfolio. This is not something that we'll be doing going forward. These investment opportunities, as you saw earlier, are also resilient to lower oil prices. And what's helpful about that is that gives us extreme confidence to be able to invest. This will also allow us to maintain flexibility within a lower range that we had previously around $150 million to 100 -- $450 million in any 1 year. If you look at 2020, our forecast for this year is around $290 million, excluding Uganda following the transaction. This is down around 17% from our original guidance of $350 million at the beginning of the year. This underscores our ability to be able to adjust in new capital to be able to respond to the external environment. Looking forward to 2021, specifically, we expect to spend around $325 million. And as you head earlier, this is part of a shift towards more of our producing assets. So that will be about 80% in '21, rising to over 90% in 2022 and beyond. This will allow us to start implementing the plans that Rahul and Wissam laid our earlier. Our exploration spend in 2021 is primarily driven by existing commitments with the well in Suriname and Argentina seismic. So looking forward, we will have a disciplined approach. We will focus on low-risk producing assets, and this will allow us to retain a lot of flexibility to be able to respond to the external environment. So now I'm going to turn to a slide, Slide 41, which covered our decommissioning costs. As you are aware, we have ongoing decommissioning activities in Mauritania and the U.K. Southern North Sea. These total around $500 million of exposure, as you can see from the chart. Over the years, we've been optimizing and deferring expenditure wherever possible to respond to the lower oil price environment. We are about 2/3 through the activity set. And over the course of 2020, so by the end of the year, we will have completed the operating activity, which is under total control. The reason for highlighting this is twofold. One is I wanted to recognize the very good job that the team has done in managing this significant liability, where we have also taken opportunity to optimize the activity set with the other U.K. operators. The other reason I wanted to highlight this is over the next 2 years, there will still be significant spend around about $200 million roughly split evenly $100 million each per year, which is about $106 million after the U.K. [indiscernible] After that, though, this will drop off dramatically and will be done effectively by the end of 2025. All future decommissioning costs are included in forecast cash flows with no significant material execution activities expected over the next decade. So this is a good progress on our decommissioning and our management of this significant liability. So now let me turn to Slide 42 and what we've been doing this year to deliver proceeds from assets. On the 10th of November, we received $500 million worth of consolidation from closing our deal in Uganda. This was just 7 months from announcement of the deal on the 24th of April. As you might imagine, we had a huge amount from the previous last Uganda transaction, which is something I've worked on previously. Most notably, agreeing the tax agreement upfront with the government was an important step. There was excellent collaboration throughout with the government and Total, and we also had strong commitment in the senior most levels and this is proof of their key success and belief. Some aspects of the transaction were much more straightforward than before, but there was no preemption by senior, which obviously was a simplifying step. And we also reached agreement in the transfer of operatorship much more quickly than previously. As a result, and including 3Q performance, net debt has been reduced to $2.4 billion in November with a liquidity headwind of around about $1 billion. We're also looking forward to a $75 million payment when FID is taken and also this future contingent payments, oil price-related when first oil comes in a few years' time. Also very importantly, as you can see on the right of the chart, we have eliminated future capital exposure, and we've also had no impact on the borrowing base with the RBL. Having completed Uganda and in light of the plan that we're presenting today, including the material annual cost savings I talked about earlier, there's now no urgency and a lot less urgency to deliver further asset sales. Having said that, we have continued to receive unsolicited offers for our assets, and we will consider further asset sales provided to do 2 things: one is that value-accretive; and second, that it continues to strengthen the balance sheet. Now finally, on Slide 43, let me do -- describe in a little bit what we're doing with this cash flow that we're describing over the next 10 years. Since early 2017, when I took over as the CFO, we've been rigorously and resolutely addressing the significant debt that was on our balance sheet. From just under the peak of $5 billion at the beginning of 2017, we have reduced net debt by around 50%. As a consequence, if you look at the annual financing costs, from the end of 2016 to now, we've reduced that annual cost by around $100 million per annum, this is significant. Asset debt is reduced. We've also been reducing the size of our facilities. So we reduced the RBL facility size from $3.7 billion to $2.5 billion of refinancing, which is now amortized to just under $2 billion. Also in 2018, we eliminated the undrawn RCF facility, which at its peak in 2016, was $1 billion. We now have a capital structure which is spread about 50-50 between bank debt and bond debt. With a net debt of about $2.4 billion, as we just said, a liquidity headroom of about $1 billion following completion of the Uganda transaction. The plan we have outlined today will draw around the $7 billion of operating cash flow over the next 10 years, with around $4 billion for debt service and shareholder returns. These are significant numbers. This is split relatively evenly between the next 5 years to 2025 and the following 5 years out to 2030. We want to be able to reduce our net debt by a further $1 billion or so to around $1 billion to $1.5 billion. This will bring us well inside the 1x, 2x range for gearing that we want to operate at. We expect we'll be able to reach these by 2025, of course, with material potential and upside at higher oil prices, this will allow us to be able to achieve that much quicker and effectively strengthen the balance sheet much quicker. We've been proactively considering a range of financing options, together with our advisers. You heard earlier that we've been using a series of technical advisers as we have all the time. We've always taken advantage where possible of financial advice, and that's been no different this year. And we've done that in light of our upcoming maturities. We maintain strong relationships with our banks and bondholders with whom we maintain and keep up a regular dialogue. We believe, as you can see from the plan that we laid out, that sufficient medium and long-term free cash flow to provide a credit runway necessary to address our debt maturity. However, I do not plan to make specific comments on potential refinancing scenarios today. All of this activity puts us in a very strong position as we look forward into 2021 and beyond. So now let me hand back to Rahul who will just say a few words to conclude.

Okay. Well, thank you very much, Les. And apologies, guys, because we're running a little bit behind. And you can see we have a lot to share, and there's a lot of excitement and enthusiasm in what we're trying to do. But I do hope you found the presentation useful. And you've got a better understanding of how we've unlocked value and delivered cash flows. So just to conclude, and I'm going to keep this kind of simple, but in a sense, I hope you get a sense that the asset base has very significant value, and it's underpinned by very large, a very well-understood resource base, which has got material growth options. So that means you can sustain this for some time. The other thing is that with all of the stuff that I talked about, Wissam talked about, Les talked about, we've got a lot of focus on operating efficiencies and costs. And what that does is you can make money at low prices. And if you have a high-quality investment portfolio and you're very disciplined in how you're spending your money, you're going to be self-funded from a production growth point of view. And we can calibrate production, it can go up. Growth rates can be calibrated based on how much capital we spend. So all that will deliver is very strong cash flows, $7 billion we talked about. That will enable very rapid deleveraging that Les described. And if you imagine, kind of a very stable and kind of growing asset base that means there is a material accretion of equity value on that, along with the various levers that I talked about in Kenya and Ghana and all of that stuff. And what's critical is along this journey, and this is what Julia talked about is, we will unlock material value for our host governments, we'll positively impact our local communities. That's something that we take a lot of pride in. We create local content and will reduce emissions. So I think you agree, this is a great place for us to be. It's been challenging, but I think we know what we have to do, but we're well on our way to transforming our business. It's a work in progress, but I think we know what we have to do, and we're making good progress in that. And importantly, I think just to underscore this. It's not just me, the team, the rest of the organization is deeply, deeply committed to achieving success. So look, with that, let's kind of hand -- we're going to look at addressing your questions. The way we'll do it is, please, again, you have to dial in and you have the conference call number. But as you ask questions, either I'll answer them or I'll direct to my colleagues kind of as appropriate. And of course, we'll have an opportunity to talk to a lot of you as we go along in the coming days and weeks. So over to you guys, just look forward to your questions now.

[Operator Instructions] Your first question comes from the line of Colin Smith from Panmure Gordon.

Two, please, if I may. Just first of all, with respect to the balance sheet. On your revised price deck, can you talk about whether you still expect to be in breach of the 3.5x RBL gearing covenant at the end of this year and at the end of June of next year? And similarly on the liquidity test, is that still likely to be in breach? That's the first question. And then the second one is just on Kenya. If I understood it rightly at the interims, you said that the license extension in Kenya, which you talked about in your remarks was only until the 31st of December 2021 was the final time that the exploration license could be extended. It looks as though you're spending really very little money next year on Kenya. I'm just wondering whether it's going to be possible to get to an FID by the end of 2021 or whether it actually requires further license extension beyond that, that you would have to build in, in order to make that project go?

So, Colin, thanks for your questions. I think let me take the Kenya question, and then I'll hand over to Les on the balance sheet. I'll do Kenya first. Basically, what -- where we're very well aligned with the government and with our JV partners is we want to try and make this project work and at low prices, right? And so think about the work that we're doing next year is a lot more about tying up stuff that we've done in the past. There's been a lot of appraisal work done. There's been a lot of work done on kind of serving the market and pre-FEED and all sorts of stuff, right? I think what we need to do is to kind of really change our mindset and think about it very differently. So that doesn't require a lot of money. But also, we've changed the approach of even how we are doing that work. So -- and that's thematic across the business. So I talked about non-op sort of going from 45 to 15 people. So again, the Kenya stuff we're doing with a very lean team, closely working with our partners. So it's less about the money we spend. And because it's being done collaboratively with the government, which we are all trying to get ourselves to FDP by the end of next year. That's the kind of objective. And my sense is with the work we're doing and what we'll do with the government of Kenya in terms of aligning all the commercial agreements and all that, I think we have a fair share of the game. So that's the answer, Colin, on Kenya. Let me turn it over to Les, to talk about the balance sheet.

Thanks, Rahul. As you'll recall, we've held 2 RBL redeterminations already this year. We did 1 in March. We did 1 back in September. At September, we had full support from the banks. And we came out, as you'll recall, with the revised $1.8 billion of borrowing base. At the same time, we requested and we had approved our revision to the year-end gearing. So that's now all in place. So while, yes, we will exceed that at the end of the year. We've now got, if you like, some leeway on that. So we don't expect that to be a breach at the end of the year. We also went through with positive response on the test that you referred to. Now if you look forward, we will be having our January redetermination. So it's premature to step forward into that place. But other than to say that what our track record has been, has been when there's been any potential breaches on gearing. This is something which we've had -- don't take it for granted that we've had support from the banks. And we've also laid out today in the business plan a runway on future cash flows, which will help us deal with the forthcoming debt maturities. And that's something I'm not going to get into detail today, but we will be following up on that, of course, on our the Capital Markets Day. So everything resolved in the recent RBL redetermination, and we've got another one coming up in January where we're going to share with the banks in more detail what just described to everyone today.

Your next question comes from the line of Michael Alsford from Citi.

The presentation, it was very helpful. And I guess, it's very clear that you're focusing on maximizing value from the core production assets. One thing that though jumped out, when I look at Slide 13, when you talk about your operating cost guidance for TEN, your operating costs do move up significantly per barrel to $11.5 from around $8.30 in 2020, which would imply, therefore, a pretty steep production decline into 2021 because of the -- your absolute costs look pretty flat. So could perhaps you could talk a little bit about what's going on at TEN and why the steep production decline? Or am I missing something? And secondly, just if you could give us some sensitivity on cash flow or EBITDA or free cash flow to oil price? I know there's a chart in the slide deck. But it looks -- when you look at it that the sensitivity to oil price looks a little bit lower than what you've historically talked about. So if you can give us a sort of a $5 move oil price sensitivity to your plan, that would be helpful.

Okay. So Michael, I'll address the production decline, and I'll then turn to -- Les can address the EBITDA sensitivity. I'll also give you my sense on kind of the operating margins. So it's a good -- that's smart, Michael, you're kind of focusing on the right questions. I think it's very simple, guys. I mean both -- like, I mean, these fields, Jubilee, TEN any of -- are on our portfolio. They're great resources. But you need to invest to drive production growth. And simplistically, we just haven't invested in this. So Jubilee, like I said, the last well we drilled was in mid of July of '19. I think in TEN we just drilled 1 well this year. And so the key for us is as we look forward and look to agree a well schedule with our partners, redesign kind of a bidding program. There will be a decline for 2021 for sure. And that's just a consequence of the fact that we don't have the well stock there. But what is important, I think the key message is that one is that, that decline is going to more than offset by our kind of the savings that we have. And I just want to give you, Michael, this kind of sense. So our 2020 -- this is my numbers, you got just -- I look at after tax kind of operating margins, right? So let me just go forward. So the 10-year number, we had $7 billion of operating cash flows, right? You divide that by we produce 260 million barrels of oil over the 10-year period that's about a $27 a barrel after-tax operating margin. That's pretty healthy. That's at 55%. So if you make -- take next year at 45%, and I just simplistically take $10 off. So that's, call it, $17. That's about 50% higher than our operating margin for this year, right? And why is that? That's because of all the cost savings. So I think when we're looking at this business, we're saying, well, how do we make money? How do I deliver cash flow? How do I create value? And it's that combination of production and costs and all that. And I think next year, because it's a transition year, we're going to recover from our CapEx spend. But what is going to really helping us is that we can more than offset it from the cash flow in sort of savings that we have. So that's the story on the production decline. The other point, I think Wissam said in his comments, and I don't know if you picked it up, but we're doing a lot of work in terms of operating costs. I think we've done a lot on Jubilee. I think TEN the team needs to really look at TEN from a longer-term perspective and say what structural changes can be made on the costs. So I think expect more on that in the coming years, but we don't have visibility on that yet, so we can't give you guidance. So I hope that answers kind of the production question. And maybe give you a sense of kind of what I call sort of -- I look at sort of after tax kind of operating cash flow margins in addition to that. Les, do you want to add more to it for Michael?

No, I think at this stage, it is probably premature to get into talking about EBITDAX. We've laid out today a little bit. The way you described, I think Rahul is accurate. We're laying out a future which is [indiscernible] range to it on future production potential. I think the way you see it gives you a good idea of the operating margin and the cash flow potential from the business. When we towards 2021, we will be able to describe in a bit more detail what exactly will be the numbers for 2021. So we'll discuss that then, Michael, I would say.

Okay. And just to get a quick follow-up though. On that side in 43, when you go sources and uses cash, it looks like $77 billion -- that $55 billion if you look at the shaded area, it gets to about $8.5 billion -- $65 billion. You divide that simply by 10, that's sort of a $150 million move for a $10 move in the oil price. So it looks low relative to history, but I guess we'll go with that for now.

Your next question comes from the line of David Round from BMO Capital Markets.

Great. I just had a couple of questions. The first was on Slide 6. And really, just a question around the fact that it looks like you could maybe do half of the projects identified below $500 million and probably 2/3 of below $1 billion. So can you give us any sense or any indication of the scale of the resource associated with the highest return project. So I suppose another way of asking is if you only spent $1 billion, would the contribution be meaningful in that field? And one for Les. Again, apologies, a follow-up again on the redetermination coming up in January. I appreciate you don't know how that will play out. But what's the art of the possible there? Is it a good outcome just to maintain the borrowing base? Or could we also see some big changes to the amortization schedule? Or is that something that requires a larger refinancing?

So I think that's a good question. And I figured out at the moment, we put these things, you guys would want to get more kind of granularity and detail. But the thing is, if you look at particularly the opportunities that Wissam described in his presentation, I would say kind of a lot of the material ones, you take -- well, firstly, all of the infill ones are very, very high return. But then if you take something like Jubilee Southeast, right, which is a very critical project, and I'm going to take a contract approval on that to my Board next week. That's one which kind of opens up, if you remember, kind of on Wissam's slide, I'm just kind of pulling that up, that's -- it's Slide 18, right? So the whole eastern section of Jubilee, right, that's Jubilee Southeast and Northeast, right? That opens up once we do the kind of Jubilee Southeast project. But the way we've designed it now is it's a very high-return project because you put in the manifold and you follow that up with a series of kind of infill programs. So when you look at the chart on the slide, which is a Slide 6, I think, yes, Slide 6. So what you will have in this is pretty much all the big resource ones, I think, are going to be in a pretty decent return. And -- but what they do is like the Jubilee Southeast, let's say, is a high-return project infrastructure piece of it. But then the infill numbers that come after that become even higher returns because their margin returns are much, much higher. So I think the point that Les mentioned, which is that it's a very scalable capital program, right? So if we have a year of low prices, we'll scale it down. If you have higher prices than we expect and if Les is happy with the rate of debt pay down, we can scale that up, so we can drive production growth much higher. And because they are quick turnaround and quick paybacks, you see the effect straight away.

Okay. So maybe just quickly, just a follow-up on that. What does the risk profile look like with these new opportunities? Obviously, there were some issues at TEN with some of the wells you've drilled recently. Do these come with higher risk?

No. I think what we've done is a lot of work in terms of -- this is just kind of own assessment, but then we've gone out to -- working with external advisers to kind of challenge, validate that stuff. There's been very good cooperations with our partners. So I think it's quite well understood. So -- and what we are doing is, so there is a lot of investment opportunities, right? So what we've tried to focus on this slide is the 60 that are well-defined and they're derisked. Right? But there's others in the hopper, which we haven't included here, which haven't been derisked. So the ones that we have here, we feel pretty good about these, right? But there are others. And what happens in the process, which is -- and again, I go back to kind of what Wissam covered in some of the projects that he talked about, which are the upside, which are not included in this profile. Those we need work to do to derisk those.

Rahul, maybe I can just touch on the question that was asked about borrowing base.

Yes, Please.

So I mean objective before we get into January, as you know, under these processes with the banks they tend to take a conservative approach. So our objective by asking for January was that we knew we were going to be laying out today the future potential of the business and really our objective in January to make sure that, as a minimum, we maintain our composition to actually being able to describe to the banks in much more detail. And I've been working very collaboratively with Wissam and his team, which you might imagine as to how you best describe that to the banks. And we're already in action in preparation for that event. So that's really our objective here is to be able to lay out in some good detail, also working with the external reserves auditor in the same fashion. So that actually was the plan here as we go into January, is to lay all of that out rather than wait until March, which would be a normal timing for the redetermination.

And it's a change in perspective, right? So if -- once the banks understand kind of what we are talking about, which means that this is a massive resource, which has the ability to replenish and sustain. That's -- it's -- I mean this is what I've been -- I've spoken to senior people in the banking group. So I said, look, that's the mindset shift that their technical people need to understand. And that's -- I think that's the conversation we're looking forward to have.

Your next question comes from the line of Matt Cooper from Peel Hunt.

A couple of questions from me, if that's okay. So first one, I just wondered if you could talk a little bit about how many wells you expect to drill next year in Ghana? And how much incremental production in 2P you expect those to deliver? And then the second question is on Kenya. Is your current view that you would need to farm-down from the current 40% working interest in order to sanction that project?

I think the next year -- drilling question, I think that's -- we're in discussions with our partners. So we'll go through the kind of budgeting process, the sequencing and things like that. So if you kind of start midyear, we should at least get a couple of wells in, but it's hard for us to kind of predict that just now. So my request to you would be, we'll have the budgets done. I think in our trading statement in January, we'll give you a more explicit guidance on that. But naturally kind of given the assets have been underinvested, we're keen to get going on that. So we're -- but we're just working -- Wissam is working through that actively as we speak. And -- but again, just to give you kind of just kind of comfort and maybe this is more than you need to know. But as I said earlier, I'm taking the kind of a contract award for Jubilee Southeast to our Board next week. I'm taking an award for our rig contract to the Board next week. So we're getting on with this thing. I think in terms of the Kenya -- look, I think we have to do this in steps, right? So the first thing we need to do is just better define the project and see if it's making it work, and I talked about the details of some of the things that we're looking to do. I think then we would really need to figure out kind of what is -- once the project is investable, then we figure out what's the best kind of way forward for us is. But it's probably not right for me to speculate in that just now. So I think my focus, the team's focus, Madhan and all these guys. We're just trying to make sure we -- let's get the project working. And then if it's good, I'm sure you'll get people to invest. But if it is not, you won't. So I think I would hold off on sort of commenting on the farm-down for now.