Interim Results
Tullow Oil PLC
14 September 2005
2005 Interim Results
Tullow Oil plc announces record Interim Results
14 September 2005 - Tullow Oil plc (Ticker: TLW), the independent oil and gas,
exploration and production Group, today announces its interim results for the
six months ended 30 June 2005. These interim results are prepared under
International Financial Reporting Standards (IFRS) including the prospective
adoption of IAS 39 from 1 January 2005. All comparisons are based on an IFRS
restatement of 2004 UK GAAP financial information, which was announced on 12
August 2005, and is available on the Group's website at www.tullowoil.com.
Interim Results Analysis
The exceptionally strong oil and gas pricing environment, the benefit of the
inclusion of Energy Africa for a full six months, a three month contribution
from Schooner and Ketch, combined with steady growth in Group production
resulted in a record performance for Tullow in the first half of 2005.
Financial Highlights
H1 2005 H1 2004
£'000 £'000
Revenue increased £124.9 million, up 163% 201,434 76,533
Operating profit before exploration activities increased £82.5 million, up 318% 108,404 25,887
Exploration Costs Written Off (4,019) (4,430)
Net Interest (7,416) (4,122)
Profit before Tax increased £74.0 million, up 427% 91,377 17,335
Taxation (28,291) (8,998)
Profit for the period increased £54.7 million, up 660% 63,086 8,337
Pence Pence
Basic earnings per share 9.82 1.98
Operating cash flow before working capital per share 18.11 7.74
Dividend per share 1.0 0.5
Operational Highlights
• In 2004 the Group successfully completed the full integration of
Energy Africa, which doubled the size of Tullow. The new management and
organisation structures are working well, resulting in a strong first half
performance.
• During the period, material development programmes included two
projects in the UK Southern North Sea (SNS) and over 30 wells in West Africa,
delivering steady organic production and reserve growth.
• In March Tullow completed the acquisition of the Schooner and Ketch
fields and a redevelopment programme is currently ahead of schedule.
• Tullow's net UK gas production reached an all time high of 180 mmscfd
in the first half and first gas was achieved from the Horne & Wren
development.
• Weighted average working interest production was 57,350 boepd, more
than double that of the same period last year and is forecast to average
60,000 boepd in the second half of the year.
• Group reserve replacement was 97%, led by Gabon, which now accounts
for 30% of the Group's total production.
• A successful exploration programme in the SNS and Gabon led to three
discoveries close to Tullow infrastructure
• Good progress was made in relation to the commercialisation of the
giant Kudu gas field offshore Namibia with the completion of the FEED study,
preparation for invitations to bid for construction are getting underway and
progressive approvals in regulatory arrangements.
• As part of ongoing portfolio management, the disposal of the non-core
Alba and Caledonia assets was completed in June, with a profit on disposal of
£33.2 million. The Congo (Brazzaville) offshore asset disposal was completed
in August. Total proceeds from these disposals amounted to $184 million.
2005 Outlook
2005 continues to be another exciting year for Tullow and the industry. Oil and
gas prices are exceptionally strong and are forecast to remain so in the current
supply environment. In the first half the Group has successfully integrated the
major acquisitions of the last 12 months and has begun adding significant value
to those assets through sound management and technical and development
excellence. Performance throughout the Group is encouraging, with material
upside potential for Tullow in Kudu, Schooner and Ketch redevelopment and the
imminent high impact exploration wells in Uganda and Mauritania.
Commenting today, Aidan Heavey, Chief Executive, Tullow Oil plc, said:
'The record first half performance announced today demonstrates the continuing
progress of our business. The deals completed in recent years have been
successfully integrated, our assets are showing strong organic growth and we
have developed an exploration portfolio which combines lower risk 'snuggle'
projects with exciting high impact opportunities. I believe that these
attributes will continue to deliver long term growth and superior performance
for the Group.'
Webcast and Conference Calls
In conjunction with the Group's Interim Results presentation for the financial
community in London there will be a simultaneous conference call and webcast. In
addition there will be a conference call in the afternoon. Replay and archive
facilities will be available for all events later today via our website,
www.tullowoil.com. All events are hosted by Aidan Heavey, Chief Executive and
other participating senior management are Tom Hickey, Chief Financial Officer,
Paul McDade, Chief Operating Officer and Adrian Nel, Exploration Director.
9.30 am (BST): Conference Call - In the UK/Europe please call +44(0)20 7365 1843
and in Ireland please call +353(0)1 659 8311. A replay facility will be
available from one hour after the conference call for seven days. To access the
replay facility in the UK/Europe please call +44(0)20 7784 1024 and in Ireland
please call +353 (0)1 659 8321. The passcode is 6691834#.
9.30 am (BST): Webcast - Please visit the Results Centre on our website at
www.tullowoil.com to access the webcast. An archive of the Webcast will be
available from this afternoon.
2.30 pm (BST): Conference Call - In the US please call +1 913 981 5571 and in
the UK please call +44(0) 20 7984 7756. A replay facility will be available one
hour after the conference call for seven days. To access the replay facility,
please call + 1 719 457 0820 or +44(0)20 7984 7568. The passcode is 4479007.
About Tullow Oil plc
Tullow is a leading independent oil and gas, exploration and production group,
quoted on the London and Irish Stock Exchanges (symbol: TLW) and is a
constituent of the FTSE 250 Index. The Group has interests in over 90 production
and exploration licences in 15 countries and focuses on three core areas: NW
Europe, West Africa and South Asia.
For further information please refer to our website at www.tullowoil.com.
2005 Interim Statement
Results for the six months ended 30 June 2005
Finance Review
Tullow Oil had a very good first half of 2005, achieving record results. This
performance was underpinned by focused execution across all aspects of the
business and exceptionally strong oil and gas pricing.
Operating Performance
Working interest production averaged 57,350 boepd, while sales volumes averaged
54,200 boepd. These production figures are 106% above the corresponding period
in 2004. This increase was driven by a full period contribution from the Energy
Africa assets (acquired May 2004) supplemented by a three month contribution
from Schooner and Ketch (acquisition completed 31 March 2005).
Average prices realised during the period were $41.7/bbl (post hedging) (1H
2004: $34.2/bbl) for oil and 28.8p/therm for UK gas (1H 2004: 23.0p/therm).
Tullow's oil production sold at an average discount of 12% to Brent during the
period. The combination of the positive price and volume influences meant that
revenue amounted to £201.4 million (2004: £76.5 million), an increase of 163%
over the corresponding period in 2004.
First Half Revenue by Core Area (£m)
Oil Gas Total % of
Total
NW Europe (UK) 17.6 66.7 84.3 42%
West Africa 116.6 - 116.6 57%
South Asia - 0.5 0.5 1%
Total 134.2 67.2 201.4
% of Total 67% 33%
Operating profit before exploration activities amounted to £108.4 million (1H
2004: £25.9 million), an increase of 318%, reflecting the strong growth in Group
production and pricing as set out above. While underlying cash operating costs
within the portfolio amounted to £45.5 million (£4.38/boe) and are expected to
remain steady over the remainder of 2005, reported cost of sales before
depreciation, depletion and amortisation (operating costs) for the period of
£64.9 million (1H 2004: £20.3 million) are distorted by the inclusion at market
value of £14.0 million associated with overlifted volumes at 30 June and £5.5
million of overlift associated with the disposal of Alba and Caledonia. Under
and overlift positions arise when partners elect not to share all field liftings
in proportion; they have no impact on the economics of the business.
Depreciation, depletion and amortisation for the period amounted to £60.4
million (£5.82/boe). This amount includes £3.9 million (£0.37/boe) associated
with the provision of deferred tax in relation to the fair values of the assets
acquired through the Energy Africa acquisition as required by IAS 12; this
amount is offset in full by a related tax credit within the Group's tax charge.
Depreciation also includes a total of £4.5 million of impairment costs
associated with Tullow's producing interests in Pakistan (£2.4 m) and offshore
Congo interest held for resale (£2.1 m) at 30 June.
Other Income and Expenditure
At 30 June Tullow's portfolio of hedges and derivatives had a negative mark to
market value of £141.3 million. While the bulk of these arrangements qualify for
hedge accounting and will consequently be largely reflected in the Income
Statement as the related contracts mature, IAS 39 (adopted 1 January 2005) also
requires the establishment of a high degree of effective correlation between the
valuation of the hedge instrument and the underlying physical commodity being
hedged, with any hedge ineffectiveness being reflected as a charge to income
during the period. Realised oil prices from Tullow's portfolio are predominantly
priced off Brent; however, the variations in crude oil discounts and gas
nomination patterns for Tullow have led to a degree of hedge ineffectiveness and
accordingly a charge of £5.6 million has been recognised in the Income Statement
for the period.
Exploration costs written off were £4.0 million (1H 2004: £4.4 million), in
accordance with the Group's 'successful efforts' accounting policy which
requires that all costs associated with unsuccessful exploration are written off
to the Income Statement.
In June, in keeping with its strategy of active management of its portfolio of
assets, the Group completed the disposal of Alba and Caledonia offshore assets,
which were non-core to the longer term development of Tullow. The profit on
disposal amounted to £33.2 million, which includes some £5.5 million of overlift
outlined above. Additional income of £5.6 million has also been recognised in
relation to incremental consideration receivable based on reserves and
performance of the Horne and Wren fields, which commenced production in June.
During the period the Group also agreed terms for the disposal of its offshore
Congo interests, with this transaction completing in August. These assets have
thus been classified as 'held for resale' under IFRS 5 and the anticipated loss
on disposal of £2.1 million recognised as an impairment charge as set out
above.
The net interest charge for the half year was £7.4 million (1H 2004: £4.1
million). The increase reflects higher levels of net debt arising from
acquisitions and the increased working capital requirements of the enlarged
Group.
Taxation
The tax charge of £28.3 million (1H 2004: £9.0 million) is associated with the
Group's North Sea and Gabonese activities. After adjusting for exploration
costs and non-recurring items associated with overlift and profit on asset
disposals, the Group's overall effective tax rate for the period is 38%.
Dividend
Financial and operating performance in the first half has been exceptionally
strong. The Group's capital expenditure programmes are comfortably funded from
operating cash flow and gearing is comparatively modest. Against this background
the Board has recommended an interim dividend of 1p per share (1H 2004: 0.5p).
The dividend will be paid on 9 November to shareholders on the register at 7
October.
Schooner and Ketch Acquisition
During the period Tullow completed the acquisition of the Schooner and Ketch
assets for a net cash payment on completion of £189.3 million. A purchase price
allocation exercise has been undertaken on these assets incorporating the fair
value of all reserves, costs and contractual arrangements acquired, resulting in
a total acquisition cost of £218.0 million. A creditor of £31.3 million in
respect of the gas contracts which were out of the money as at 31 March 2005 has
also been recognised. Based on proven and probable reserves at the date of
acquisition, this has resulted in a depreciation charge for Schooner and Ketch
of £6.89/boe.
Cash Flow and Financing Activities
The strong pricing environment, allied to increasing production and effective
control of underlying operating costs, led to record operating cash flow before
working capital movements of £116.4 million, over 130% ahead of 1H 2004.
Tullow invested a total of £73.4 million in exploration and development
activities over the period. Of this total, over 80% was associated with ongoing
development and production enhancement projects in the UK, Gabon, Congo,
Equatorial Guinea and Cote d'Ivoire. The current oil price environment has
resulted in a number of incremental infill and development projects being
sanctioned during the year, along with the extension of existing programmes in
Gabon and Equatorial Guinea. Accordingly, Tullow now anticipates total capital
expenditure of the order of £175 million for the full year.
Over the last five years Tullow has undertaken a range of acquisitions and field
developments, all of which have been wholly or partly debt financed. During 2005
the Group has undertaken a refinancing exercise to consolidate existing
borrowings into a single facility to create a more efficient Group financing
structure, reduce cash collateralisation obligations and create flexibility for
future growth both in the UK and internationally. This $850 million refinancing
is now substantially complete with the syndication process significantly
oversubscribed.
IFRS
In common with all fully listed companies, Tullow has adopted IFRS with effect
from 1 January 2004, with the exception of IAS 39, which has been adopted
effective 1 January 2005. While IFRS has no impact on the commercial substance
or cash flows of the business, it does amend UK GAAP accounting treatment and
disclosures in a number of important respects. Tullow has accounted for its oil
and gas interests under the successful efforts method for many years and
consequently the adoption of IFRS 6 has had no impact on reported results.
First Half Summary Impact of IFRS Adoption on Interim Results, as compared to the UK GAAP Accounting
Policies applied by Tullow in 2004(1)
Income Statement Net Assets
£ million £ million
IAS 2: Share Based Payments (0.2) 0.4
IAS 3: Deferred Tax on Business Combinations - -
IAS 12: Income Taxes 0.2 (4.3)
IAS 16: Depreciation 0.2 (8.1)
IAS 17: Leases (0.1) (0.3)
IAS 39: Financial Instruments (4.8) (115.3)
Total (4.7) (127.6)
(1) Information relating to the impact of IFRS adoption on Interim Results does
not form part of Deloitte and Touche LLP's Review Report. The IFRS Restatement
of 2004 UK GAAP Financial Statements, together with Deloitte and Touche LLP's
related Audit and Review Reports are available the Group's website,
www.tullowoil.com.
Operations Review
Tullow has activities in 15 countries and interests in over 90 licences. The
Group's core areas of operation are NW Europe, Africa and South Asia with a
balanced portfolio of oil and gas, and exploration and production assets.
NW Europe - Leading producer and operator in the UK gas market
During 2005 a number of successful development projects and the acquisition of
Schooner and Ketch have led to net UK gas production reaching an all time high
of 180 mmscfd. The UK gas supply/demand characteristics have led to a continued
improvement in gas pricing during the period and the forward curve is currently
at record levels.
Since 2001, Tullow has built a strategic position in the UK SNS, accumulating an
outstanding portfolio of acreage and infrastructure, which continues to provide
production growth and significant development and exploration opportunities.
Over the next 12 months Tullow plans to drill a minimum of 10 exploration,
appraisal and development wells to enhance production and further extend the
Group's exposure to uncontracted gas over the years ahead.
Thames/Hewett Area
First gas from the Horne & Wren fields, Tullow's first operated development in
the UK, was achieved on 9 June, less than 12 months after project sanction. The
fields, developed from a minimal facilities platform, have a combined production
of 90 mmscfd through two horizontal wells with gas being exported through the
Tullow owned Thames and Bacton infrastrucure.
The third party field, Arthur, was also brought on stream via the Thames and
Bacton infrastructure in early January with a second well coming onstream in mid
July. The Arthur field is exporting over 130 mmscfd contributing to cost sharing
and adding significant tariff income at both Thames and Bacton. The overall
increase in throughput at Thames, up from 50 mmscfd to over 200 mmscfd, has
significantly reduced the unit operating costs of this infrastructure thereby
further extending its economic life. The original Hewett, Thames and Orwell
fields all continue to produce above expectation.
The Oval prospect in Block 54/1a was spudded in mid-July but was plugged and
abandoned having encountered water-bearing sands in the target interval.
CMS Area
Following the completion of the Schooner and Ketch acquisition in March 2005,
Tullow has been working to enhance production from these fields through a
concentrated campaign of facilities maintenance and well optimisation. The work
has already resulted in an increase in average gross production, currently 50 to
60 mmscfd, and a material improvement in the performance and reliability of the
facilities. Additionally, Tullow has secured the ENSCO 101 rig for a period of
18 months to actively pursue a series of development drilling and workover
opportunities on both fields. Drilling is scheduled to commence at the
beginning of November with the Schooner-10 development well. This will be
followed by a programme of up to eight workovers and at least three new wells,
one of which will target the undrilled NW Schooner Area. Rig modifications will
allow the Group to simultaneously progress a programme of well interventions on
existing producers on both fields, with the aim of further increasing production
capacity in the short term. An independent review of reserves on Schooner and
Ketch has been completed, with a total of 330 bcf of acquisition reserves
confirmed, of which 246 bcf have been classified as Proven and Probable Reserves
at 30 June.
First production from the Munro field commenced on 22 August 2005 with the
capacity to deliver at up to 80 mmscfd. This project was completed six weeks
ahead of schedule and 16 months after field discovery. The development well is
tied back to the Tullow-owned CMS III and CMS infrastructure via a minimum
facilities platform and a 5km sub sea pipeline.
The McAdam infill development well, an extension of the CMS III project, reached
its target depth in late August with sand quality proving to be above
expectations. The well will now be completed as a producer and is expected to
commence production in October adding gross incremental production of
approximately 40 mmscfd.
The Opal exploration well in Block 43/25a, close to the Tullow-owned CMS
infrastructure, successfully encountered gas bearing reservoir sands. The well
was suspended on 9 June 2005 and the extent of the accumulation is currently
being evaluated. The K3 exploration well, currently being evaluated, has
provided a second exploration success in the CMS area. This important discovery
significantly upgrades a number of regional prospects which are expected to be
drilled in 2006.
On 6th September, Tullow was awarded all 6 blocks for which it made applications
in the UK 23rd Licensing Round. Blocks 44/28a and 49/3 (part) were awarded to
Tullow 100%, with both development and exploration opportunities being
identified on these blocks. Blocks 43/30b, 48/5 (part) and 49/1 (part) will be
operated by GDF Britain, with Tullow holding a 33.33% interest. Tullow has also
been awarded a 50% interest in a promote licence, Block 43/23b, operated by
Endeavour UK. All the blocks awarded are in the area surrounding the Schooner
and Ketch Fields.
Africa - A diversified pan-African oil and gas business
In Africa, Tullow has production and development interests in Gabon, Cote
d'Ivoire, Congo (Brazzaville), Equatorial Guinea and Namibia and exploration
interests in Morocco, Mauritania, Senegal, Cameroon, Uganda, Equatorial Guinea
and Cote d'Ivoire. Tullow is also in negotiations to participate in additional
material development and exploration projects in West Africa.
Gabon
Production in Gabon continues to be enhanced through a combination of appraisal
and development drilling, workovers and upgrades to existing facilities. Working
interest production has averaged over 18,000 bopd during the period contributing
over 30% of the Group's total production. A further upward revision in
commercial reserves of 6.8 mmbo has been booked at mid year bringing the total
reserves revisions in Gabon since acquisition to 16.3 mmbo, a replacement ratio
of 250%.
On the Niungo field, eight appraisal and development wells have been drilled
this year of which 6 are already on stream, maintaining gross production rates
at close to 15,000 bopd, with a plateau of 16,000 bopd expected by year end.
While these wells successfully tested and appraised the northern limits of the
field, an exploration well was drilled in a separate fault block and has
established a northern extension of the field. The current phase of drilling
has ended and the partners are now considering a programme of up to 12 further
infill and appraisal wells during 2006.
The Tchatamba field has been maintained at a gross rate of approximately 33,000
bopd, through a successful programme of well and facilities optimisation.
In the Etame licence area, the Etame field production has increased to 22,000
bopd following the successful completion of the Etame 6 well. In addition, the
Government has approved the development of the Avouma/North Tchibala discovery,
and work is ongoing to achieve first oil in the second half of 2006. Through its
back-in rights in this licence, Tullow is entitled to obtain a 7.5% interest in
the field from the commencement of production.
A three-well exploration drilling programme in the Tullow-operated Akoum and
Kiarsseny licences is expected to begin in mid-November. Two wells in Akoum are
targeting prospects in the vicinity of the existing Tchatamba field while the
well in Kiarsseny will evaluate the undeveloped Equata discovery with a view to
future development.
Congo (Brazzaville)
The four rig development drilling programme on the M'Boundi field is continuing
with 14 successful wells drilled since January. These wells have extended the
field limits and, in the northeast, intersected a higher productivity reservoir.
A new seismic survey, to evaluate further extensions of the field, has been
completed and is currently being interpreted. Average gross field production has
increased from 35,000 bopd in January to the current rate of 44,000 bopd, with
30 producing wells on production. Engineering work is in progress at the export
terminal to facilitate the blending and export of M'Boundi crude with the higher
quality N'Kossa blend, this is expected to significantly reduce the M'Boundi
crude discount to Brent by year-end. The upgrade of the production facilties to
60,000 bopd has been completed and a further expansion to 90,000 bopd has been
approved by partners.
Equatorial Guinea
Production from the Ceiba field continued to increase as a result of an ongoing
infill drilling programme and active reservoir management. During the period,
two infill production wells, a work-over and two injection wells were
successfully completed. Average gross field production has increased from
approximately 38,000 bopd in January to around 44,000 bopd at present. A
minimum of one further production well is planned before year end and the infill
drilling programme will continue throughout 2006.
The Okume Complex development, which comprises the Okume, Oveng, Ebano and Elon
fields, remains on budget and on schedule for first oil in late December 2006.
Two deep water Tension Leg Platforms are being constructed in Korea and the
shallow water Central Processing Facility is being constructed on the US Gulf
Coast. The construction of these facilities has not been materially impacted in
the aftermath of Hurricane Katrina. The development drilling will commence in
Q2 2006 following the installation of these facilities.
Cote d'Ivoire
Two new infill production wells have been completed on the East Espoir field,
increasing production from 18,500 boepd to the current rate of 25,000 boepd.
This programme is ongoing, with two further wells planned. The West Espoir
development is progressing well and the project is on target for the
installation of the jacket, well head tower and pipeline hook-up in the final
quarter of 2005 leading to first oil, on schedule, in Q2 2006.
Namibia
Good progress has been made in relation to the commercialisation of the giant
Kudu gas field offshore Namibia via a gas-to-power generation project. The FEED
study for a four well subsea development and onshore gas conditioning plant has
been completed and invitations to bid for the various construction contracts are
being prepared and are expected to be issued in early 2006. In addition to
technical preparations, advances have been made on the commercial and regulatory
arrangements, the Gas Sales Agreement negotiations are underway, in parallel
with Power Purchase Agreement negotiations between Nampower and Eskom. The
Environmental Impact Assessment study for the upstream development has also been
approved by the Ministry of Mines and Energy.
While the Kudu power generation project remains the key area of focus, Tullow is
also committed to proving and commercialising the potentially significant
reserves upside within the Kudu Field. To facilitate this, Tullow has initiated
the planning for two appraisal wells on Kudu which are expected to be drilled
during 2006.
South Asia - Refocused and targeting high impact prospects
In South Asia, following the strategic review in late 2004, significant progress
has been made in both targeting exploration licences with high impact
prospectivity and creating value from existing discoveries.
Pakistan
The development of the Chachar gas field has been approved and detailed design
and procurement work is underway to produce first gas by Q2 2006. The disposal
of Tullow's interest in the Sara West discovery is currently awaiting Government
approval. Average production for the Sara and Suri fields for the period
amounted to 3 mmscfd net to Tullow.
Bangladesh
Significant progress was made during the first half in relation to the appraisal
plan for the Bangora and Lalmai discoveries. Over the coming 12 months, Tullow
will acquire 310km2 3D seismic and drill up to three appraisal wells along the
40km anticline connecting the discoveries to determine the ultimate reserve
potential of the structure. Tullow has also received Government and partner
approval to initiate production from Bangora under a long term test arrangement.
This will supply much needed gas into the Block 9 market and provide valuable
additional reservoir and geological data. First Gas from Bangora is targeted for
early 2006 at an initial rate of upto 50 mmscfd.
Exploration
Exploration Strategy
While exploration activity in the first half of the year has been limited to 4
wells in the Southern North Sea and Gabon of which three have been discoveries,
an exciting programme is planned for the next 12 months. In addition, Tullow
has undertaken a major review of its exploration activities with a view to
defining a high-impact exploration portfolio for 2006 and beyond. This project
has been focused on increasing the Group's exposure to high potential
opportunities in regions where Tullow has specialised knowledge or competitive
advantage and accelerating work over existing acreage wherever possible.
Pakistan and Cote d'Ivoire were identified as two such regions, with prospective
acreage available on attractive terms. Since June 2004, the Group has added 6
licences in these two countries, and further opportunities remain under review.
Exploration Programme
Over the next 12 months Tullow expects to participate in up to 15 exploration
wells, of which 3 will be operated by Tullow. Six of these wells are 'snuggle
exploration prospects' which will target reserves close to existing
infrastructure, whilst the wells in Mauritania, Uganda, Equatorial Guinea and
Romania, have the potential to add very significant reserves. Major 3-D seismic
acquisition programmes are also planned in Bangladesh, Cameroon and Cote
d'Ivoire with 2-D programs in Pakistan and India.
In November it is planned to spud a well to test the Faucon prospect in
Mauritania Block 1. Tullow's share of potential reserves from this high risk
prospect are material and success in proving a working petroleum system would
have very positive implications for further exploration, not only for Block 1
but also for Block 2 and the St Louis Block in Senegal.
In Uganda, following the disappointing discovery of high CO2 gas in the Turaco-3
well in Block 3, geochemical studies have indicated that the CO2 risk is limited
to the southern portion of the Albertine Graben. Additional seismic surveys in
Blocks 2 and 3A have defined structures with potential for large oil reserves
and a two well drilling programme on the shores of Lake Albert in Block 2 is
planned later in 2005. As in Mauritania, any demonstration of a working
petroleum system would have very positive implications for further exploration.
In Pakistan, a seismic programme was completed on the Nawabshah Block in the
first half. A prospect, Shahpur, has been identified on trend with a discovery
in the adjacent block and this well will be drilled in the final quarter of
2005. Tullow was recently awarded two exploration blocks (Kohat and Bannu West)
in the Potwar-Kohat Basin adjacent to the exciting MOL oil and gas discoveries.
Cross assignments have been made between these blocks and blocks held by OGDCL
and Mari Gas in the Sulaiman Fold Belt, Kohlu and Kalchas areas, thereby further
increasing the Group's acreage in these high potential regions. Seismic
acquisition will start in the Kohat Block before year end.
In Romania Tullow operates the EPI-3 Brates concession where an exploration
well, Costisa-1, was spudded in February 2005. This 4,100 metre well will
evaluate a significant structural closure at Sarmatian, Badenian and Cretaceous
levels, all of which are productive in offset wells. This geologically complex
well is progressing steadily and is expected to penetrate the primary objectives
during September. In the event of success, the Costisa location is close to well
developed infrastructure and there is a ready market for gas or liquids in
Romania.
2005 Second Half Exploration Activity
Country Licence Prospect Interest Spud Date
Mauritania Block 1 Faucon -1 20% November 2005
Gabon Kiarsseny Equata -1 47.5% November 2005
Pakistan Nawabshah Shahpur -1 30% November 2005
Gabon Akoum Akoum West -1 100% December 2005
Uganda Block 2 M'Puta -1 50% December 2005
In Bangladesh, a new seismic survey is scheduled in the highly prospective
Blocks 17/18 in the Bay of Bengal. Work will initially focus on oil prospects
within the blocks, however recent discoveries in adjacent acreage enhance the
gas prospectivity of several sizeable structures previously identified. Tullow
is in advanced discussions with a view to farming out a portion of its equity in
this licence to a major international oil company.
Looking ahead, 2006 will see further wells drilled on acreage awarded to Tullow
in the UK's 20th and 21st licensing rounds and this is likely to include at
least 3 wells in the CMS Area. Material progress has also been made in the
evaluation of the CB-ON-1 Block in India, where recently reprocessed 2D seismic
indicates potentially significant structures similar to those containing
discoveries in adjacent acreage. These will be subject to further seismic over
the coming months with a view to potentially undertaking a multi-well drilling
programme during 2006.
2005 Outlook
2005 continues to be another exciting year for Tullow Oil and the industry. Oil
and gas prices are exceptionally strong and are forecast to remain so in the
current supply environment. In the first half the Group has successfully
integrated the major acquisitions of the last 12 months and has begun adding
significant value to those assets through sound management and technical and
development excellence. Performance throughout the Group is encouraging, with
material upside potential for Tullow in Kudu, Schooner and Ketch redevelopment
and the imminent high impact exploration wells in Uganda and Mauritania.
Ends
Disclaimer
This announcement contains certain operational and financial information in
relation to 2005, which is subject to final review and has not been audited.
Furthermore, it contains certain forward-looking statements that are subject to
the usual risk factors and uncertainties associated with the oil & gas
exploration and production business. Whilst the Group believes the expectations
reflected herein to be reasonable, the actual outcome may be materially
different owing to factors either within or beyond the Group's control and
accordingly no reliance may be placed on the figures contained in such forward
looking statements.
Independent Review Report
To the Shareholders of Tullow Oil plc
We have been instructed by the company to review the financial information for
the six months ended 30 June 2005 which comprises the Group income statement,
the Group statement of changes in equity, the Group balance sheet, the Group
cash flow statement and the related notes numbered 1 to 4. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
International Financial Reporting Standards
As disclosed in Note 1, the next annual financial statements of the group will
be prepared in accordance with International Financial Reporting Standards as
adopted for use in the EU. The interim report has been prepared in accordance
with the recognition and measurement criteria of IFRS and the disclosure
requirements of the Listing Rules.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.
Deloitte & Touche LLP
Chartered Accountants
13 September 2005
Group Income Statement
Six months ended 30 June 2005
Six months Six months Year ended
ended 30 ended 30 31 December
June 2005 June 2004 2004
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 201,434 76,533 225,256
Cost of Sales (125,425) (46,912) (141,228)
Gross Profit 76,009 29,621 84,028
Administrative Expenses (6,798) (3,516) (10,926)
Profit on Sale of Oil and Gas Assets 39,571 - 2,292
Exploration Costs Written Off (4,019) (4,430) (17,961)
Other Expenses (378) (218) (647)
Operating Profit 104,385 21,457 56,786
Loss on Hedging Instruments (5,592) - -
Interest Receivable 2,046 1,407 3,458
Finance Costs (9,462) (5,529) (13,449)
Profit before Tax 91,377 17,335 46,795
Income Tax Expense (28,291) (8,998) (15,460)
Profit for the Period 63,086 8,337 31,335
Earnings per Ordinary Share Stg p Stg p Stg p
Basic 9.82 1.98 5.88
Diluted 9.69 1.95 5.81
Group Statement of Changes in Equity
Six Months ended 30 June 2005
Six months Six months Year ended
ended 30 ended 30 31 December
June 2005 June 2004 2004
Unaudited Unaudited Audited
£'000 £'000 £'000
Opening Equity 375,467 113,363 113,363
IAS 39 Adjustment (29,256) - -
Revised Opening Equity 346,211 113,363 113,363
Currency Translation Differences 17,314 303 (19,338)
Hedge Movement (81,246) - -
Total Expense recognised directly in Equity (63,932) 303 (19,338)
Profit for the Period 63,086 8,337 31,335
Total recognised Income for the Period 63,086 8,337 31,335
Total recognised Income and Expense for the (846) 8,640 11,997
Period
New Shares issued for Cash - 254,268 253,547
New Shares issued in respect of employee share 847 471 2,999
options
Share Based Payment Charges 370 278 556
Dividend paid - - (6,995)
Closing Equity attributable to Company's 346,582 377,020 375, 467
Equity Holders
Group Balance Sheet
As at 30 June 2005
Six months Six months Year ended
ended 30 ended 30 31 December
June 2005 June 2004 2004
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-Current Assets
Property, Plant and Equipment 693,749 542,538 545,527
Other Intangibles 136,806 121,871 103,944
Investments 496 496 496
831,051 664,905 649,967
Current Assets
Inventories 2,445 1,453 3,392
Trade Receivables 39,145 21,637 37,156
Other Current Assets 24,072 34,818 17,051
Assets Held for Resale 42,804 - -
Cash and Cash Equivalents 122,913 113,431 85,070
231,379 171,339 142,669
Total Assets 1,062,430 836,244 792,636
Liabilities
Non-Current Liabilities
Trade and Other Payables 23,245 14,932 13,014
Long-term Borrowings 298,587 169,296 143,398
Deferred Tax 27,236 76,188 68,803
Long-term Provisions 82,450 80,442 70,679
Derivative Financial Instruments 83,915 - -
515,433 340,858 295,894
Current Liabilities
Trade and Other Payables 90,883 77,224 102,614
Current Portion of Long-term Borrowings 23,140 25,589 5,302
Current Tax Payable 23,183 15,553 13,359
Liabilities held for Resale 6,476 - -
Derivative Financial Instruments 56,733 - -
200,415 118,366 121,275
Total Liabilities 715,848 459,224 417,169
Net Assets 346,582 377,020 375,467
Equity
Equity attributable to Equity Holders of
Parent
Share Capital 64,654 64,156 64,537
Share Premium 122,385 120,230 121,656
Other Reserves 55,774 168,232 148,591
Retained Earnings 103,769 24,402 40,683
Total Equity 346,582 377,020 375,467
Group Cash Flow Statement
for the 6 Months Ended 30 June 2005
Six months Six months Year ended
ended 30 ended 30 31 December
June 2005 June 2004 2004
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash Flows From Operating Activities
Profit before Taxation 91,377 17,335 46,795
Adjustments for:
Depletion, Depreciation and Amortisation 60,811 28,216 81,098
Foreign Exchange Loss (242) (248) (3,489)
Exploration Costs 4,019 4,430 17,961
Profit on Disposal of Oil and Gas Assets (39,571) - (2,292)
Operating cashflow prior to working capital 116,394 49,733 140,073
(Increase)/Decrease in Trade & Other (32,798) 2,425 (34,215)
Receivables
Decrease/(Increase) in Inventories 947 (1,591) (1,721)
Increase in Trade Payables 17,147 2,837 40,179
Hedge Ineffectiveness 5,592 - -
Interest Receivable (2,046) (1,407) (3,458)
Finance Costs Payable 9,462 5,529 13,449
Cash Generated from Operations 114,698 57,526 154,307
Income Tax Paid (25,381) (6,206) (14,497)
Net Cash from Operating Activities 89,317 51,320 139,810
Cash Flows from Investing Activities
Acquisition of Subsidiary - Energy Africa(1) - (166,384) (166,055)
Disposal of Subsidiary 58,487 - 4,730
Purchase of Property, Plant and Equipment (267,417) (27,966) (95,105)
Interest Received 2,081 1,407 3,436
Net Cash used in Investing Activities (206,849) (192,943) (252,994)
Cash Flows from Financing Activities
Net Proceeds from Issue of Share Capital 847 116,661 120,913
Debt Arrangement Fees (2,095) (2,864) (3,050)
Repayment of Existing Loans (26,750) (33,313) (33,437)
Drawdown of Bank Loan 191,476 145,327 98,620
Repayment of Bank Loans Acquired - (32,922) (33,824)
Interest Paid (8,649) (3,283) (9,494)
Dividends Paid - - (6,995)
Net Cash used in Financing Activities 154,829 189,606 132,733
Net Increase in Cash and Cash Equivalents 37,297 47,983 19,549
Cash and Cash Equivalents at the 85,070 65,631 65,631
Beginning of the Period
Translation Difference 546 (183) (110)
Cash and Cash Equivalents at the End 122,913 113,431 85,070
of the Period(2)
(1) Net of Cash Acquired
(2) Includes restricted amounts at 30 June 2005 of £43.9 million (30 June 2004
- £36.9 million) in respect of decommissioning reserves on fixed term deposits
and £10.0 million (30 June 2004 - £10.6 million) held on deposit in connection
with expected future payments under the Borrowing Base facility.
Notes to the Interim Financial Statements
1. Accounting Policies and Presentation of Financial Information
These June 2005 interim consolidated financial statements are for the six months
ended 30 June 2005. The information for the year ended 31 December 2004 does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. A copy of the statutory accounts for that year, which were prepared under
UK Generally Accepted Accounting Policies (GAAP), has been delivered to the
Registrar of Companies. The auditor's report on those accounts was unqualified.
The reconciliations of equity at 1 January 2004 (date of transition to IFRS) and
at 31 December 2004 (date of last UK GAAP financial statements) and the
reconciliation of profit for 2004, as required by IFRS 1, including the
significant accounting policies to 31 December 2004, have been published on the
company's website, www.tullowoil.com, on 23 August 2005.
The reconciliation of equity at 30 June 2004 and the reconciliation of profit
for the six months ended 30 June 2004 have been included on the company's
website to enable a comparison of the 2005 interim figures with those published
in the corresponding period of the previous financial year.
The accounting policies set out below have been adopted to prepare the interim
2005 financial information under International Financial Reporting Standards
(IFRS). These will be the principal accounting policies used for Tullow's future
financial statements.
(a) Basis of Accounting
The financial information has been prepared under the historical cost convention
and using accounting policies consistent with IFRS.
(b) Basis of Consolidation
The consolidated financial statements consist of the financial statements of the
Company and all its subsidiary undertakings. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
Turnover and results of subsidiary undertakings are consolidated in the Group
Income Statement from the dates on which control over the operating and
financial decisions is obtained.
Acquisitions
On an acquisition that qualifies as a business combination, the assets and
liabilities of a subsidiary are measured at their fair value as at the date of
acquisition. Any excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill. Any deficiency of
the cost of acquisition below the fair values of the identifiable net assets
acquired is credited to the Income Statement in the period of acquisition.
Joint Ventures
The Group is engaged in oil and gas exploration, development and production
through unincorporated joint ventures. The Group accounts for its share of the
results and net assets of these joint ventures as jointly controlled assets. In
addition, where Tullow acts as operator to the joint venture, the gross
liabilities and receivables (including amounts due to or from non-operating
partners) of the joint venture are included in the Group consolidated Balance
Sheet.
(c) Revenue
Revenue represents the sales value, net of VAT and overriding royalties, of the
Group's share of production in the period together with tariff income.
Revenues received under take-or-pay sales contracts in respect of undelivered
volumes are accounted for as deferred income. Revenue is recognised when goods
are delivered and title has passed.
(d) Over/Underlift
Lifting or offtake arrangements for oil and gas produced in certain of the
Group's jointly owned operations are such that each participant may not receive
and sell its precise share of the overall production in each period. The
resulting imbalance between cumulative entitlement and cumulative production
less stock is 'underlift' or 'overlift'. Underlift and overlift are valued at
market value and included within debtors and creditors respectively. Movements
during an accounting period are adjusted through Cost of Sales such that Gross
Profit is recognised on an entitlements basis. The Group's share of any physical
stock is accounted for at the lower of cost and net realisable value.
(e) Foreign Currencies
The Pound Sterling is the presentation and functional currency of the Group.
Financial statements of foreign currency denominated subsidiaries are translated
into Sterling whereby the results of the overseas operations are generally
translated at the average rate of exchange for the period and their balance
sheets at rates of exchange ruling at the Balance Sheet date. Currency
translation adjustments arising on the restatement of opening net assets of
foreign subsidiaries, together with differences between the subsidiaries'
results translated at average rates versus closing rates, are taken directly to
reserves. All resulting exchange differences are classified as equity until
disposal of the subsidiary. On disposal the cumulative amounts of the exchange
differences are recognised as income or expense.
Transactions in foreign currencies are recorded at the rates of exchange ruling
at the transaction dates. Monetary assets and liabilities are translated into
Sterling at the exchange rate ruling at the Balance Sheet date, with a
corresponding charge or credit to the Income Statement. However, exchange gains
and losses arising on long-term foreign currency borrowings, which are a hedge
against the Group's overseas investments, are dealt with in reserves.
(f) Exploration, Evaluation and Production Assets
The Group adopts the successful efforts method of accounting for exploration and
appraisal costs. All licence acquisition, exploration and evaluation costs are
initially capitalised in cost centres by well, field or exploration area, as
appropriate. Directly attributable administration costs and interest payable are
capitalised insofar as they relate to specific exploration and development
activities. Pre-licence costs are expensed in the period they are incurred.
These costs are then written off unless commercial reserves have been
established or the determination process has not been completed and there are no
indications of impairment.
All field development costs are capitalised as property, plant and equipment.
Property, plant and equipment related to production activities are amortised in
accordance with the Group's Depletion and Amortisation accounting policy.
(g) Commercial Reserves
Commercial reserves are proven and probable oil and gas reserves, which are
defined as the estimated quantities of crude oil, natural gas and natural gas
liquids which geological, geophysical and engineering data demonstrate with a
specified degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially producible. There should be a
50 per cent statistical probability that the actual quantity of recoverable
reserves will be more than the amount estimated as a proven and probable
reserves and a 50 per cent statistical probability that it will be less.
(h) Depletion and Amortisation - Discovery Fields
All expenditure carried within each field is amortised from the commencement of
production, on a unit of production basis, which is the ratio of oil and gas
production in the period to the estimated quantities of commercial reserves at
the end of the period plus the production in the period, on a field-by-field
basis. Costs used in the unit of production calculation comprise the net book
value of capitalised costs plus the estimated future field development costs.
Changes in the estimates of commercial reserves or future field development
costs are dealt with prospectively.
Where there has been a change in economic conditions that indicates a possible
impairment in a discovery field, the recoverability of the net book value
relating to that field is assessed by comparison with the estimated discounted
future cash flows based on management's expectations of future oil and gas
prices and future costs. Any impairment identified is charged to the Income
Statement as additional depreciation, depletion and amortisation. Where
conditions giving rise to impairment subsequently reverse, the effect of the
impairment charge is also reversed as a credit to the Income Statement, net of
any depreciation that would have been charged since the impairment.
(i) Decommissioning
Provision for decommissioning is recognised in full when the related facilities
are installed. A corresponding amount equivalent to the provision is also
recognised as part of the cost of the related property, plant and equipment. The
amount recognised is the estimated cost of decommissioning, discounted to its
net present value and is reassessed each year in accordance with local
conditions and requirements. Changes in the estimated timing of decommissioning
or decommissioning cost estimates are dealt with prospectively by recording an
adjustment to the provision, and a corresponding adjustment to property, plant
and equipment. The unwinding of the discount on the decommissioning provision is
included as an interest expense.
(j) Property, Plant and Equipment
Property, plant and equipment is stated in the Balance Sheet at cost less
accumulated depreciation. Depreciation on property, plant and equipment other
than exploration and production assets, is provided at rates calculated to write
off the cost less estimated residual value of each asset on a straight line
basis over its expected useful economic life of between three and five years.
(k) Finance Costs and Debt
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Finance costs of debt are allocated to periods over the term of the related debt
at a constant rate on the carrying amount. Arrangement fees and issue costs are
deducted from the debt proceeds and are amortised and charged to the Income
Statement as finance costs over the term of the debt.
(l) Share Issue Expenses and Share Premium Account
Costs of share issues are written off against the premium arising on the issues
of share capital.
(m) Taxation
Current and deferred tax, including UK corporation tax and overseas corporation
tax, are provided at amounts expected to be paid using the tax rates and laws
that have been enacted or substantially enacted by the Balance Sheet date.
Deferred corporation taxation is recognised on all temporary differences that
have originated but not reversed at the Balance Sheet date where transactions or
events that result in an obligation to pay more, or right to pay less tax in the
future have occurred at balance sheet date. Deferred tax assets are recognised
only to the extent that it is considered more likely than not that there will be
suitable taxable profits from which the underlying temporary differences can be
deducted. Deferred tax is measured on a non-discounted basis.
Deferred tax is provided on temporary differences arising on acquisitions that
are categorised as Business Combinations. Deferred tax is recognised at
acquisition as part of the assessment of the fair value of assets and
liabilities acquired. Any deferred tax is charged or credited in the income
statement as the underlying temporary difference is reversed.
Petroleum Revenue Tax (PRT) is treated as an income tax and deferred PRT is
accounted for under the temporary difference method. Current UK PRT is charged
as a tax expense on chargeable field profits included in the Income Statement
and is deductible for UK corporation tax.
(n) Pensions
Contributions to the Group's defined contribution pension schemes are charged to
operating profit on an accruals basis.
(o) Derivative Financial Instruments
The Group uses derivative financial instruments to manage its exposure to
fluctuations in foreign exchange rates, interest rates and movements in oil and
gas prices.
Derivative financial instruments are stated at fair value.
The purpose for which a derivative is used is established at inception. To
qualify for hedge accounting, the derivative must be highly effective in
achieving its objective and this effectiveness must be documented at inception
and throughout the period of the instrument.
For the purpose of hedge accounting, hedges are classified as either fair value
hedges, when they hedge the exposure to changes in the fair value of a
recognised asset or liability, or cash flow hedges, where they hedge exposure to
variability in cash floes that is either attributable to a particular risk
associated with a recognised asset or liability or forecasted transaction.
In relation to fair value hedges which meet the conditions for hedge accounting,
any gain or loss from re-measuring the derivative and the hedged item at fair
value is recognised immediately in the income statement. Any gain or loss on the
hedged item attributable to the hedged risk is adjusted against the carrying
amount of the hedged item and recognised in the income statement.
For cash flow hedges, the portion of the gains and losses on the hedging
instrument that is determined to be an effective hedge is taken to equity and
the ineffective portion is recognised in the income statement. The gains and
losses taken to equity are subsequently transferred to the income statement
during the period in which the hedged transaction affects the income statement
or if the hedge is subsequently deemed to be ineffective.
Gains or losses on derivatives that do not qualify for hedge accounting
treatment (either from inception or during the life of the instrument) are taken
directly to the income statement in the period.
(p) Leases
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases and are charged to the Income
Statement on a straight-line basis over the term of the lease.
Assets held under finance leases are recognised as assets of the group at their
fair value or, if lower, at the present value of the minimum lease payments,
each determined at the inception of the lease. The corresponding liability to
the lessor is included in the Balance Sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income, unless
they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the group's general policy on borrowing costs.
(q) Share Based Payments
The Group has applied the requirements of IFRS 2 Share-based Payments. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
January 2004.
The Group issues equity-settled and cash-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair value at the
date of grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the group's estimate of shares that will eventually vest.
Fair value is measured by use of an actuarial binomial model. The expected life
used in the model has been adjusted, on the basis of management's best estimate,
for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
For cash-settled share-based payments, a liability is recognised based on the
current fair value determined at each Balance Sheet date and that portion of the
employees' services to which the payment relates that has been received by the
Balance Sheet date.
2. Earnings per Ordinary Share
The Calculation of basic earnings per ordinary share is based on the profit for
the period after taxation of £63,086,455 (first half 2004 - £8,337,436) and a
weighted average number of shares in issue of 642,685,021 (first half 2004 -
422,516,777).
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 651,235,398 (first half 2004 - 427,087,202).
3. Assets held for Resale
The sale of the Congo (Brazzaville) offshore assets was completed on 18 August
2005. As the net assets carrying amount was recovered through a sale transaction
and at 30 June 2005 the sale was highly probable, the assets meet the criteria
included in IFRS 5 - non-current assets held for sale and discontinued assets.
Accordingly the assets and liabilities are disclosed as an asset held for resale
and included within current assets and current liabilities.
IFRS 5 requires that an impairment loss is recognised if the carrying value of
the asset is lower than the sale proceeds, and consequently a charge of £2.1m
has been recorded within depreciation in the income statement.
4. Dividends
The Company's shareholders approved a dividend payment of 1.25p per share at the
Annual General Meeting on 29 June 2005. This amount was paid on 8 July 2005 to
shareholders on the register of members of the Company on 3 June 2005.
The board have recommended an interim dividend of 1.0p per share in the half
year to 30 June 2005 to be paid on 9 November 2005 to shareholders on the
register of members of the Company on 7 October 2005 (2004 - 0.5p per share).
5. Approval of accounts
These interim accounts (unaudited) were approved by the Board of Directors on 13
September 2005.
6. Proven and Probable Reserves Summary on a Working Interest Basis(1)
NW Europe West Africa South Asia Total
Commercial Oil Gas Oil Gas Oil Gas Oil Gas Petroleum
mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf Mmboe
At 01.01.2005 14.60 131.95 116.07 28.00 - 96.20 130.67 256.15 173.36
Revisions - 3.24 8.79 - - - 8.79 3.24 9.33
Acquisitions/
Disposals (net) (13.81) 250.74 - - - - (13.81) 250.74 27.98
Production (0.79) (20.52) (6.08) (0.18) - (0.54) (6.87) (21.24) (10.41)
At 30.06.2005 - 365.41 118.78 27.82 - 95.66 118.78 488.89 200.26
Contingent Oil Gas Oil Gas Oil Gas Oil Gas Petroleum
mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf Mmboe
At 30.06.2005 - 208.30 - 781.20 - 16.20 - 1,005.70 167.62
Total Oil Gas Oil Gas Oil Gas Oil Gas Petroleum
mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf Mmboe
At 30.06.2005 - 573.71 118.78 809.02 - 111.86 118.78 1,494.59 367.88
(1) Not reviewed by the Auditors
Proven and probable commercial reserves are based on a Group reserves report
produced by an independent engineer. Proven and probable contingent reserves
are based on both Tullow's estimates and the Group reserves report produced by
an independent engineer.
The Group provides for depletion and amortisation of oil and gas assets within
plant, property and equipment on a net entitlements basis, which reflects the
terms of the Production Sharing Contracts related to each field. Total net
entitlement reserves were 169.01 mmboe at 30 June 2005 (149.99 mmboe - 31
December 2004).
Contingent reserves relate to reserves in respect of which development plans are
in the course of preparation or further evaluation is underway with a view to
development within the foreseeable future.
7. Reconciliation of IFRS to UK GAAP
Group Income Statement(1)
For the six months ended 30 June 2005
IFRS UK GAAP
IFRS 5 IAS 12 IAS 39 Other
Six months Six months
ended 30 June ended 30 June
2005 2005
(Unaudited) (Unaudited)
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 201,434 201,434
Cost of Sales (125,425) 3,860 (512) (122,077)
Gross Profit 76,009 - 3,860 - (512) 79,357
Administrative Expenses (6,798) 370 (6,428)
Profit on Sale of Subsidiaries 39,571 39,571
Exploration Cost Written Off (4,019) (4,019)
Other Expenses (378) (378)
Operating Profit 104,385 - 3,860 - (142) 108,103
Loss on Hedging Instruments (5,592) 5,592 -
Interest Receivable 2,046 2,046
Finance Costs (9,462) 216 (9,246)
Profit before Tax 91,377 - 3,860 5,592 74 100,903
Income Tax Expense (28,291) (4,098) (743) 1 (33,131)
Profit for the Period 63,086 - (238) 4,849 75 67,772
Stg p Stg p Stg p Stg p Stg p Stg p
Earnings per Ordinary Share
Basic 9.82 - (0.04) 0.75 0.01 10.55
Diluted 9.69 - (0.04) 0.74 0.01 10.41
(1) Not reviewed by Auditors
7. Reconciliation of IFRS to UK GAAP (contd)
Group Balance Sheet(1)
As at 30 June 2005
IFRS UK GAAP
IFRS 5 IAS 12 IAS 39 Other
Six months Six months
ended 30 ended 30
June 2005 June 2005
(Unaudited) (Unaudited)
£'000 £'000 £'000 £'000 £'000 £'000
Assets
Non-Current Assets
Property, Plant and Equipment 693,749 40,149 (44,768) 70 689,200
Other Intangibles 136,806 2,547 (632) 138,721
Investments 496 496
831,051 42,696 (45,400) - 70 828,417
Current Assets
Inventories 2,445 108 2,553
Trade Receivables 39,145 39,145
Other Current Assets 24,072 24,072
Assets Held for Resale 42,804 (42,804) -
Cash and Cash Equivalents 122,913 122,913
231,379 (42,696) - - - 188,683
Total Assets 1,062,430 - (45,400) - 70 1,017,100
Liabilities
Non-Current Liabilities
Trade and Other Payables 23,245 23,245
Long-term Borrowings 298,587 298,587
Deferred Tax 27,236 (49,723) 18,296 5,781 1,590
Long-term Provisions 82,450 1,185 83,635
Derivative Financial Instruments 83,915 (83,915) -
515,433 1,185 (49,723) (65,619) 5,781 407,057
Current Liabilities
Trade and Other Payables 90,883 5,291 (13,628) 82,546
Current Portion of Long Term 23,140 23,140
Borrowings
Current Tax Payable 23,183 23,183
Liabilities held for Resale 6,476 (6,476) -
Derivative Financial Instruments 56,733 (49,731) 7,002
200,415 (1,185) - (49,731) (13,628) 135,871
Total Liabilities 715,848 - (49,723) (115,350) (7,847) 542,928
Net Assets 346,582 - 4,323 115,350 7,917 474,172
Equity
Equity Attributable to Equity
Holders of Parent
Share Capital 64,654 64,654
Share Premium 122,385 122,385
Other Reserves 55,774 110,501 166,275
Retained Earnings 103,769 4,323 4,849 7,917 120,858
Total Equity 346,582 - 4,323 115,350 7,917 474,172
(1) Not reviewed by Auditors
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