Tullow Oil - Re: TLW Stream Log - London, 22 January 2018 --...

London, 22 January 2018 -- Moody's Investors Service, ("Moody's") has today upgraded Tullow Oil plc ("Tullow")'s Corporate Family Rating (CFR) to B1 from B2 and probability of default rating (PDR) to B1-PD from B2-PD. Concurrently, the ratings on its USD650 million 2020 and USD650 million 2022 senior unsecured global notes were upgraded to B3 from Caa1. The outlook on all Tullow's ratings was changed to stable from positive. RATINGS RATIONALE The upgrade of the rating to B1 from B2 mainly reflects all the positive developments in 2017 which strengthened the financial profile of the company. Moody's expects adjusted gross debt/EBITDA to fall to around 3.2x in 2017 after peaking at 5.5x in 2016, mainly due to higher production from TEN and higher oil prices. The deleveraging was also a result of the successful rights issue raising net proceeds of $721 million in March 2017 which allowed the company to reduce debt. The company's liquidity profile was also strengthened after the successful refinancing of the Reserve Based Lending (RBL) facility in November 2017 with a three year grace period until October 2020. The B1 rating reflects the stronger financial and liquidity profile which should provide the company with greater operational flexibility to grow the business and consider the acceleration of investment in projects and selective growth opportunities. The upgrade of the rating to B1 reflects (a) its solid business profile with sizeable oil and gas resource base (b) its growing low cost production offshore Ghana, with TEN fields ramping-up in 2017-18 (c) successful exploration programme and strong execution track-record, with significant oil discoveries in Uganda and Kenya, that underpin the company's long-term production growth trajectory, and (d) proactive steps taken by the company to manage its liquidity position in 2017 and a prudent hedging programme which covers approximately 60% of its oil sales each year. However, Tullow's rating demonstrates a linkage to the sovereign rating of Ghana (B3, stable) given its sizable country exposure expected to account for around 69% of production in 2017 and therefore a further upgrade of the B1 rating is unlikely.