Interim Results
Tullow Oil PLC
03 September 2002
3 September 2002
Tullow Oil plc ('Tullow' or 'the Group')
Unaudited Interim Results to 30 June 2002
Tullow Oil plc is an independent oil and gas exploration, development and
production company with interests in the UK North Sea, Onshore UK, Cote
d'Ivoire, Pakistan, Bangladesh, India, Romania and Algeria.
Highlights
Record Results
• Turnover doubles to £55 million (H1 2001: £27.1m)
• Operating profit before exploration activities increased by 50% to £16.8m
(H1 2001: £11.2m)
• Strong operating cashflow of £36.9m (H1 2001: £16.7m)
Effective UK Gas Sales Programme Protects Against Volatile Spot Prices
• Gas production from Southern North Sea averaged 98 mmscfd
• 54% of sales from contracted gas, average prices 25.4 p/therm
• Forward sales programme for uncontracted gas, average price 22 p/therm
compared with average daily spot price of 15.3p/therm
• Successful forward gas sales continuing with 65% of H2 uncontracted
production already sold or hedged forward
Further Value added to Southern North Sea Assets,
• First gas from CMS III development likely to be delivered ahead of
schedule
• Successful Hawksley development well tested at 150 mmscfd, second well
currently being drilled
• Award of seven blocks in 20th offshore licensing round
Active International Programme in Progress
• First oil from Cote d'Ivoire, Espoir Field in February, gas sales
commenced in August
• Espoir Field on target to reach 30,000 boepd (gross) by year end
• Espoir Reserves upgrade potential following completion of 4th producer
well.
• Pakistan production on budget, plans in place to double production
• First well planned on Bangladesh Block 9 for early 2003
• Farm out agreement concluded in India, drilling commences Q4 2002
Commenting on the results, Tullow Chairman, Pat Plunkett, said:
'This has been a period of good progress for Tullow. Cash flow continues to be
strong from both our UK and Pakistan assets while our developments in the UK and
Cote d'Ivoire are both ahead of schedule. With an active drilling programme
ahead, I look forward to a positive outcome for the full year'
Enquiries:
Tullow Oil plc Binns & Co PR Ltd
Aidan Heavey, Managing Director Judith Parry/Emma McCaffrey
Tom Hickey, Finance Director
Graham Martin, Legal & Commercial Director
Tel: 020 7333 6800 Tel: 020 7786 9600/07811 151 487
TULLOW OIL PLC ('Tullow' or 'the Group')
Unaudited Interim Results to 30 June 2002
Chairman's Statement
The first six months of 2002 have shown a steady continuation of the
transformation of Tullow.
Strong production continues from our UK Southern North Sea ('SNS') assets and a
number of interesting new exploration and development opportunities are being
assessed in this area. On our international acreage, we have benefited from
first oil production in the Cote d'Ivoire. Turnover for the period was Stg
£55.0 million, double that of the corresponding period in 2001. Operating profit
before exploration costs of Stg £16.8 million was 50% ahead of 2001, leading to
a pre tax profit of Stg £12.6 million. Operating Cash Flow of Stg £36.9 million
was 120% ahead of the corresponding figure in 2001. Due to continued capital
investment associated with CMS III in the UK and the Espoir project in the Cote
d'Ivoire, no dividend is proposed, however Tullow reaffirms its intention to
consider a dividend in respect of the full year.
This strong SNS performance demonstrates both the quality of the UK assets and
the effectiveness of Tullow's forward sales programme for uncontracted gas.
While prices remained relatively favourable in January to March, the average
day-ahead spot price from April-June was below 12p/therm. Tullow will continue
to actively sell forward its uncontracted gas; to date approximately 65% of our
uncontracted production for the remainder of 2002 has been sold or hedged
forward.
UK
Offshore
The full production income from our SNS assets is included as turnover during
the period in contrast to 2001 when income was included on a phased basis as
completion of the acquisition of the SNS assets occurred in stages between
February and August.
Production over the period averaged 98 mmscfd of which some 54% was contracted
gas. These numbers were slightly below expectations, principally due to reduced
takes under certain long-term contracts against a background of volatile spot
gas prices. We expect overall production to increase slightly in the second
half and to average approximately 100 mmscfd for the year as a whole. Average
prices realised were 25.4 p/therm for contracted gas and 22 p/therm for
uncontracted gas. Tariff revenues amounted to Stg £5.4 million.
Our principal SNS project has been the ongoing development of the Caister
Murdoch System III ('CMS III') which is a unitised development of five natural
gas fields. Substantial progress was made during the period; drilling commenced
in April and new offshore facilities were installed in May. This encouraging
progress continued with the recent successful test of Hawksley at 150 mmscfd of
gas and we are delighted to announce that we anticipate that first gas from this
development will now be produced in September, almost a month ahead of schedule.
The second CMS III development well, Murdoch K, is currently being drilled and
we look forward to more success throughout the remainder of the development
programme.
Elsewhere in the CMS complex, the Boulton F well was successfully completed and
tested gas at approximately 55 mmscfd, while a workover on the Boulton B well
has allowed gas production to be restored to approximately 90 mmscfd.
Since the end of the period, Tullow has added to its SNS portfolio through the
award of a total of seven blocks in the recent 20th offshore licensing round.
UK Tax Changes
In his 2002 Budget on 17 April, the Chancellor introduced a number of new
provisions relevant to Tullow's SNS assets, most notably the imposition of a
10% supplementary Corporation Tax on UK North Sea profits.
Due to the pattern of production and pricing during the period, which
effectively resulted in the bulk of Tullow's revenue occurring before 17 April,
the incremental impact on Tullow's Corporation Tax charge for the first half of
the year has not been material.
The changes also impact on Tullow's Deferred Tax provision and, accordingly, an
incremental charge of Stg £0.5 million has been booked which primarily adjusts
the provision made in 2001 to reflect the new and higher rate which will now
apply when timing differences reverse.
As a recent entrant to the UK North Sea, Tullow, like the majority of companies
operating in this relatively mature area, believe that the Chancellor was
seriously mistaken in choosing to raise taxes on UK North Sea production
revenues. We believe that this does nothing to encourage the new, and
predominantly smaller companies that the Government has been actively
encouraging and introduces an unwelcome element of uncertainty into the future
fiscal stability of North Sea operations.
International Assets
Cote d'Ivoire
The first phase of development work on the Espoir Field, offshore Cote d'Ivoire
is nearing completion. First oil was produced on 4th February 2002 and the
field is currently producing approximately 14,000 bopd gross from 3 producing
wells. Gas sales from Espoir commenced on 10 August and are expected to reach 20
mmscfd by the end of the year. While sales in the first 6 months were relatively
modest at Stg £2.2 million and gross production averaged c.7,400 bopd, the field
remains on target to achieve a rate of 30,000 boepd by the end of the year.
At present, the fourth producer well is in progress and we are hopeful that this
well will be successful in accessing a previously untested area of the
reservoir; this may allow reserves to be upgraded by some 10-15%. One of the
key attractions of Espoir is this substantial potential for additional reserves
- the next well in the schedule is the Emien exploration well in October while
the Acajou prospect has recently been granted highly favourable deepwater cost
recovery terms and is now scheduled to spud early in 2003.
Pakistan
The Sara and Suri wells have continued to perform at an average rate of
approximately 32 mmscfd to date in 2002 and are currently producing 38 mmscfd.
In addition, a successful development well on Suri and workover on Sara have led
to plans to double field production in the near future, subject to Government
approval.
Bangladesh
Tullow commenced work on Block 9 and during the period undertook an intensive 2D
and 3D seismic survey over targeted regions of the Block involving a contracted
team of over 3,000 personnel. This survey, which is now substantially complete,
was the first occasion on which 3D seismic has been deployed onshore in
Bangladesh and we are optimistic that the results will be of assistance in
selecting optimal drilling locations later this year.
India
During 2001, Tullow negotiated a farmout agreement with Reliance Industries in
relation to 5 of its licences in India. All conditions to the agreement have
now been satisfied and we anticipate that the first well to be drilled by
Reliance, on the GK-OSJ-1 licence, will spud in October. As a result of this
transaction, Tullow has recorded a profit of Stg £1.0 million, representing the
surplus on the premium received, in the Profit and Loss Account.
In addition, Tullow has entered into arrangements to dispose of its two other
Indian licence interests.
Algeria
Geological and geophysical work continued on the Agip-operated 222b licence with
the objective of selecting a drillable prospect. We now anticipate drilling will
occur in early 2003.
Elsewhere in Algeria, Tullow applied for stakes in two field redevelopment
projects in Tinrhert and South East Illizi, where the bid process is ongoing.
Egypt
Tullow has drilled two wells on the North Abu Rudeis licence in 2002. The first
well, designed to re-enter an existing discovery in the Thebes Limestone failed
to produce oil in commercial quantities. The second well, intended to test a
deeper Nubian target was plugged and abandoned. The costs of these wells were
substantially covered by a farmin arrangement with PetroSA. This licence has
now lapsed and Tullow's share of the costs incurred have been written off as
exploration costs. Tullow, however is continuing to seek new opportunities in
Egypt.
Romania
Following completion of 2002 seismic programme work continues on both blocks
EPI-3 and EPI-8 with a view to defining a prospect and location for drilling in
2003.
Business Development
Tullow retains an active focus on new exploration and development opportunities
in the Group's existing core areas of the UK SNS, West Africa and Pakistan.
We are delighted with the recent award of new licences in the 20th UK licensing
round. Six of these blocks are contiguous to Tullow's existing CMS acreage, and
include two undeveloped gas discoveries. Following the acquisition of new 3-D
seismic data, or the reprocessing of existing data, we are confident that a
number of new exploration or appraisal prospects will materialise, which if
successful could form the nucleus for a future CMS IV development. In addition,
Tullow was awarded its first acreage in the oil rich sector of the Central North
Sea, and we hope that this will be the start of a new core area for the Company.
In Cameroon, West Africa, following an encouraging data room and field visit
Tullow prepared a development bid for the 600-800 BCF Sanaga Sud field offshore
Cameroon. The authorities have scheduled until mid-October for evaluation of
tenders whereupon the short-listed bidders will be invited for further
discussions.
We remain focused on expanding the Group's operations through suitable
acquisitions and exploration new ventures.
Duilio Ciriani
The untimely death in early July of our former Director, Duilio Ciriani, has
robbed us of one of our most loyal and passionate colleagues. Duilio joined
Tullow in 1987 as Exploration Manager and during his career with Tullow was
instrumental in bringing the Company to prominent positions in areas as diverse
as Italy, Yemen, Syria, Africa and the Indian subcontinent. Many of these
ventures form the cornerstone of our current activities throughout the world.
Duilio always had a great appreciation for the people and cultures he
encountered and we are justly proud of his many achievements. Our thoughts and
prayers are with his wife and daughter at this time.
Conclusion
The first half of 2002 has been a period of continued progress for Tullow. Our
UK and Cote d'Ivoire developments continue to gather momentum, each with major
scope for both increased revenue and reserves while our UK and Pakistan assets
also continue to produce strong cashflows. Over the coming six months the Group
will embark on a period of intensive exploration in the UK, Cote d'Ivoire,
Bangladesh, India and Algeria; we are hopeful that some of these projects will
form the basis of a new value creation area for Tullow over the coming years.
I look forward to the remainder of 2002, which will be an interesting period in
the development of the Group.
Pat Plunkett
Chairman
Tullow Oil Plc
Group Profit and Loss Account
Six Months Ended 30th June 2002
6 Months 6 Months 12 Months
30.06.02 30.06.01 31.12.01
Unaudited Unaudited Audited
Stg£'000 Stg£'000 Stg£'000
Turnover 55,021 27,072 76,633
Cost of Sales
Operating Costs (16,654) (6,501) (20,607)
Depletion and Amortisation (19,010) (7,946) (25,873)
(35,664) (14,447) (46,480)
Gross Profit 19,357 12,625 30,153
Administrative Expenses (2,407) (1,424) (3,673)
Depreciation (152) (31) (186)
(2,559) (1,455) (3,859)
Operating Profit Before Exploration 16,798 11,170 26,294
Activities
Exploration Costs Written Off (1,182) (2,383) (3,945)
Profit on Farm Out of Indian Licence 1,033 - -
Interests
Operating Profit 16,649 8,787 22,349
Interest Receivable and Similar 771 562 1,371
Income
Interest Payable and Similar Charges (4,800) (2,733) (7,708)
Profit on Ordinary Activities before 12,620 6,616 16,012
Taxation
Taxation on Profit on Ordinary
Activities
Current and Deferred Petroleum (721) (1,060) (2,740)
Revenue Tax
Current and Deferred Corporation Tax (4,332) (895) (3,962)
(5,053) (1,955) (6,702)
Profit for the Financial Period 7,567 4,661 9,310
Stg p Stg p Stg p
Earnings Per Ordinary Share (Note 2)
- Basic 2.11 1.32 2.61
- Diluted 2.02 1.30 2.56
Tullow Oil Plc
Group Balance Sheet
As at 30th June 2002
6 Months 6 Months 12 Months
30.06.02 30.06.01 31.12.01
Unaudited Unaudited Audited
Stg£'000 Stg£'000 Stg£'000
Fixed Assets
Intangible Assets 32,684 29,552 32,505
Tangible Assets 174,399 147,615 174,855
Investments 299 250 299
207,382 177,417 207,659
Current Assets
Stock 814 773 -
Debtors 19,764 18,203 21,837
Cash at Bank and in Hand 49,063 37,109 45,468
69,641 56,085 67,305
Creditors - Amounts falling due
within one year
Bank Loans and Overdrafts (21,155) (20,382) (16,942)
Trade and Other Creditors (32,889) (37,059) (41,678)
(54,044) (57,441) (58,620)
Net Current Assets/(Liabilities) 15,597 (1,356) 8,685
Total Assets Less Current 222,979 176,061 216,344
Liabilities
Creditors - Amounts falling due
after one year
Bank Loans (80,386) (57,351) (83,152)
Provisions for Liabilities and
Charges
Decommissioning Costs (42,178) (30,159) (37,438)
Deferred Taxation (2,655) - (3,754)
Net Assets 97,760 88,551 92,000
Capital and Reserves
Called Up Share Capital 35,959 35,782 35,847
Share Premium Account 2,277 1,650 1,993
Merger Reserve 69,213 69,213 69,213
Profit and Loss Account (9,689) (18,094) (15,053)
reholders' Funds 97,760 88,551 92,000
Tullow Oil Plc
Group Cash Flow Statement
Six Months Ended 30th June 2002
6 Months 6 Months 12 Months
30.06.02 30.06.01 31.12.01
Unaudited Unaudited Audited
Stg£'000 Stg£'000 Stg£'000
Net Cash Inflow from Operating
Activities
Operating Profit for the Period 16,649 8,787 22,349
Depletion and Amortisation 19,010 7,946 25,873
Depreciation of Other Fixed Assets 152 31 186
Exploration Costs 1,182 2,383 3,945
Profit on Farm Out of Licence (1,033) - -
Movement in Operating Debtors 8,192 (3,924) (16,613)
Movement in Operating Creditors (6,479) 2,264 17,164
Movement in Stocks (814) (773) -
36,859 16,714 52,904
Returns on Investments and (2,345) (328) (5,404)
Servicing of Finance
Taxation (1,915) - (1,397)
Capital Expenditure and Financial (30,547) (83,014) (129,317)
Investment
Net Cash Inflow /(Outflow) before
Management of Liquid Resources
and Financing 2,052 (66,628) (83,214)
Management of Liquid Resources - 3,158 2,642 12,426
Term Deposits
Financing (9,470) 54,813 76,868
(Decrease)/Increase in Cash for the (4,260) (9,173) 6,080
Period
Reconciliation of Net Cash Flow to Movement
in Net (Debt)/Funds
Increase/(Decrease) in Cash for the (4,260) (9,173) 6,080
Period
Cash Inflow from Increase in Debt (1,309) (66,348) (92,850)
Cash Outflows from Decrease in (3,158) (2,642) (12,426)
Liquid Resources
Change in Debt arising from (8,727) (78,163) (99,196)
Cashflows
Translation Difference (237) (345) 602
Net (Debt)/Funds at Beginning of (73,832) 24,762 24,762
the Period
Net Debt at End of the Period (82,796) (53,746) (73,832)
Tullow Oil Plc
Group Cash Flow Statement (contd)
Six Months Ended 30th June 2002
Analysis of Changes in Net Debt
01.01.02 CashFlow Exchange 30.06.02
Stg£'000 Stg£'000 Stg£'000 Stg£'000
Cash at Bank and in Hand 24,188 (4,079) (119) 19,990
Overdrafts (708) (181) (40) (929)
23,480 (4,260) (159) 19,061
Debt Due Within One Year (16,234) (5,601) - (21,835)
Debt Due After One Year (86,670) 4,292 (422) (82,800)
(102,904) (1,309) (422) (104,635)
Term Deposits 5,592 (3,158) 344 2,778
Net Debt (73,832) (8,727) (237) (82,796)
Cash at Bank and in Hand at 30th June 2002 per the Group Balance Sheet
includes £19,990,422 of Cash, £2,777,240 of Term Deposits and £26,295,580 on
Fixed Deposit principally in support of future decommissioning costs.
Long Term Loans are stated in the Group Balance Sheet net of unamortised
related arrangement fees.
Tullow Oil Plc
Notes to the Interim Financial Statements
1. Accounting Policies and Presentation of Financial Information
The financial information presented above does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. The
financial information for the year ended 31st December 2001 has been derived
from the statutory accounts for that year. The statutory accounts, upon which
the auditors issued an unqualified opinion, were delivered to the Registrar
of Companies.
The Group adopted FRS 19 'Deferred Tax' on 1st January 2002. There was no
effect of adopting FRS 19 on amounts reported for the current period or
comparative amounts.
With the exception of the adoption of FRS 19 outlined above there are no
changes to the accounting policies as set out on pages 39 to 41 of the Annual
Report and Statement of Accounts for the year ended 31st December 2001.
2. Earnings per Ordinary Share
The Calculation of basic earnings per ordinary share is based on the Profit
for the Period after Taxation of £7,566,737 (first half 2001 - £4,661,274)
and a weighted average number of shares in issue of 358,904,674 (first half
2001 - 354,378,682).
The calculation of diluted earnings per share is based on the Profit for the
Period after Taxation as for basic earnings per share. The number of shares
is adjusted to show the potential dilution if employee and other share
options are converted into ordinary shares. The weighted average number of
shares in issue is increased to 373,734,888 (first half 2001 - 359,138,284).
3. Statement of Total Recognised Gains and Losses
6 Months 6 Months 12 Months
30.06.02 30.06.01 31.12.01
Unaudited Unaudited Audited
Stg£'000 Stg£'000 Stg£'000
Profit for period 7,567 4,661 9,310
Currency translation adjustment on
foreign currency net investments (2,203) 2,566 712
Total Recognised Gains 5,364 7,227 10,022
4. Dividends
No dividend was declared in the half year to 30th June 2002 or in 2001.
5. Proven and Probable Reserves Summary
EUROPE AFRICA ASIA TOTAL
Oil Gas Oil Gas Oil Gas Oil Gas Petroleum
mmbo bcf mmbo bcf mmbo bcf mmbo bcf mmboe
At 1st 0.04 201.15 19.84 40.74 - 157.48 19.88 399.37 86.44
January
2002
Revisions - 0.50 - - - - - 0.50 0.08
Production(0.01) (18.52) (0.23) (0.15) - (2.05)(0.24) (20.72) (3.69)
At 30th 0.03 183.13 19.61 40.59 - 155.43 19.64 379.15 82.83
June
2002
6. Auditors' Review
The interim accounts (unaudited) have been reviewed by the Group's joint
auditors, Deloitte & Touche and Robert J Kidney & Co.
7. Approval of accounts
These interim accounts (unaudited) were approved by the board of Directors on
2nd September 2002.
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