OilVoice - Tullow Oil Reports 2009 Full Year Results

Tullow Oil Reports 2009 Full Year Results

Wednesday, March 10, 2010

Tullow Oil plc (Tullow), the independent oil and gas exploration and production group, announces its results for the year ended 31 December 2009.

Results summary
The reported financial results for 2009 are in line with market expectations and down compared with 2008. The successful completion of new debt facilities and equity placings, coupled with the proposed Uganda farmdown, are major steps in ensuring that the Group remains well funded to continue to execute its medium term exploration, appraisal and development programmes.

Key highlights
• Outstanding exploration performance: 13 discoveries from 15 wells
• Major discoveries: Jobi-Rii (previously Buffalo-Giraffe) in Uganda; Tweneboa in Ghana
• Venus wildcat result extends the Jubilee play to the Equatorial Atlantic Liberian and Guyana Basins
• Total and Shell farm in to French Guiana supporting Jubilee play extension to South America
• Exercised pre-emption over Heritage Oil's Ugandan sale in Jan 2010 for up to US$1.5 billion; CNOOC and Total proposed as new joint venture partners in Uganda to facilitate aligned and accelerated basin development
• Jubilee project remains on schedule and on budget; first oil expected Q4 2010
• US$2.25 billion debt facilities secured; £1.33 billion raised through equity placings in 2009 and 2010

Commenting today, Aidan Heavey, Chief Executive, said:
'A strong performance in 2009 and an excellent start to 2010 has enabled the Group to continue to create material exploration and development opportunities. Although our 2009 reported results still reflect a period of financial transition, first oil in Ghana from the Jubilee field later this year will result in considerable production growth and increased cash flow. Our transformational exploration programme continues apace with up to 30 wells planned for 2010. In Uganda we are working closely with the government and two potential new partners to accelerate development. Our future growth is well underpinned by a significantly strengthened capital structure and overall the performance prospects for the Group are very strong.'

Full year results overview

Results reflect financial transition phase
In 2009, the Group's financial results were down compared with a record 2008. This is mainly as a result of lower production volumes and commodity prices and an increased IAS 39 charge. However, the financial results reflect the stage the Group is currently at with its key development projects and the investment required to fundamentally transform the business. With first oil from Ghana due later this year, Tullow is now entering a phase that should deliver major production growth from the end of 2010.

Record exploration success
Exploration and appraisal activity continued apace, delivering a record 87% success rate. Highlights included the 300 million barrel Jobi-Rii discovery in Uganda, and the Tweneboa discovery in Ghana. The successful Venus B-1 exploration well in Sierra Leone demonstrated a petroleum system that significantly extends the Jubilee play making the deepwater Equatorial Atlantic region amongst the most exciting and highly prospective in the world today.

Solid production and fast track development
A strong performance from our producing fields delivered working interest production of 58,300 boepd and a Reserves and Resources replacement of over 400% in 2009. The industry-leading fast track delivery of the Jubilee deepwater development should substantially increase production over the coming years. Development work has now started in Uganda and is targeting early production from well testing in 2010 and first commercial oil production and a gas to power development in 2011. Working interest production for 2010 is forecast to average 55 - 57,000 boepd.

Environment, Health and Safety
Tullow's 2009 Lost Time Incident Frequency Rate was 0.76 (2008: 0.54) and there were no major environmental incidents during the year. Very sadly, Tullow had its first fatality in 25 years of operations in 2009 when a building contractor died at the Bangora gas facility in Bangladesh.

Strong portfolio management
Tullow is working closely with the Ugandan Government to gain approval for the pre-emption of Heritage Oil's interests in Blocks 1 and 3A in parallel with a farmdown process which is now at an advanced stage. Two new potential partners have been identified, CNOOC and Total, and the farmdown will result in a unified partnership with excellent industry experience and considerable financial capability to facilitate accelerated development.

Building a very strong team
In 2009, the Tullow team grew by 24% with 670 people employed by the Group at year-end. We have 78% Ugandan nationals working in-country and over 80% Ghanaians in our operations in Ghana. Our 2009 independent employee survey delivered excellent engagement results and our staff turnover rate was only 2.0% for the year.

Strengthened capital structure
A US$2 billion refinancing was secured in March 2009 and a further $250 million corporate facility was finalised in December 2009. Gross proceeds of £1.3 billion were raised from two successful equity placings in January 2009 and January 2010. Coupled, with the anticipated Ugandan farmdown, the Group will have successfully restructured the balance sheet and put in place a more appropriate capital structure for the medium term.

Prudent dividend policy
Tullow has significant opportunities to increase shareholder value by continuing to invest in its portfolio of assets, principally in Ghana and Uganda, and the Board feels that it is appropriate to maintain the final dividend at the 2008 level. The final dividend proposed is 4.0 pence per share bringing the total payout for 2009 to 6.0 pence per share (2008: 6.0 pence per share). The dividend will be paid on 21 May 2010 to shareholders on the register on 16 April 2010. The Annual General Meeting will be held on May 12 at Haberdashers Hall in London.

A very bright future
Tullow delivered another outstanding year in 2009 and the pace of activity continues as we move into 2010, with some remarkable achievements already. We fully expect 2010 to be another strong year. We plan to consolidate the exceptional progress achieved in the last five years and leverage our unique position, particularly as Africa's leading independent oil company.