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(Bloomberg) — Tullow Oil Plc is exploring a refinancing of debt it reworked earlier this year as improving fundamentals open the door to lower borrowing costs, according to people familiar with the matter.
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Any refinancing is more likely in 2027 provided Tullow continues to strengthen its balance sheet and operating performance, some of the people said, asking not to be identified discussing a private matter.
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Tullow declined to comment in an emailed response to questions.
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The Africa-focused oil and gas producer said in a June trading update that it expects to generate “significant” free cash flow this year and realized a record $130 a barrel for an April crude cargo. Shares of independent oil producers including Tullow and Kosmos Energy Ltd. have more than doubled this year as oil prices climbed on supply disruptions linked to the Iran conflict.
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A refinancing is Tullow’s preferred method of dealing with its large and expensive debt load, but the management is also exploring a sale of the business or its assets, the people said, for which it has established a committee to oversee the process.
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Tullow spent months negotiating with creditors before completing a debt overhaul in April. The deal extended the maturity of about $1.2 billion of bonds and revised their payment terms. Tullow also replaced a $400 million loan from commodities trader Glencore Plc with $423 million of notes and secured a new cargo prepayment facility.
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The company, which had borrowed heavily to develop oil fields that were slower than expected to come online, faced a $1.3 billion bond maturity in May and declining production, closing it off to a standard refinancing.
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Since then, Tullow’s changing fortunes have triggered a rally in its debt, with bonds issued in April’s revamp trading above their face value, near 102 cents on the dollar, according to pricing compiled by Bloomberg.
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The bonds and cargo prepayment facility include a springing maturity clause that accelerates repayment by six months unless the company has signed a sale and purchase agreement by Sept. 30, 2027.
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