Trading Statement

Tullow Oil PLC
31 January 2006


News release



Tullow Oil plc Trading Statement and Operational Update

31 January 2006 - Tullow Oil plc (Tullow) issues this combined Trading Statement
in respect of its financial year to 31st December 2005 and Operational Update in
respect of Production, Development and Exploration activities during the period
September 2005 to January 2006.

Tullow is a leading independent oil and gas, exploration and production group.
The Group has interests in over 90 production and exploration licences in 16
countries and focuses on three core areas: NW Europe, West Africa and South
Asia.

The Trading Statement is in advance of the Group's Full Year Results, which are
scheduled for release on 29 March 2006.  The information contained herein has
not been audited and is subject to further review.

HIGHLIGHTS

Trading for 2005 was at record levels, with a strong production performance
combining with continuing favourable oil and gas pricing.

Production and Reserve Enhancement
     
•    In 2005 the Group drilled 50 development wells and completed the operated 
     Horne and Wren development increasing average Group working interest
     production to 58,450 boepd, 44% ahead of the average for 2004.

•    Current group working interest production is approximately 66,000 boepd 
     with Tullow's net UK gas production contributing at an all time high of
     200 mmscfd.

•    Further strong production growth is expected from the ongoing development 
     of the Schooner and Ketch fields, the Okume Complex and the M'Boundi, West 
     Espoir, Bangora and Chachar fields.
     
•    Working interest production in 2006 is anticipated to average approximately 
     68,000 boepd and to reach 75,000 boepd by year end.
     
•    Drilling activity on the Schooner and Ketch project will be enhanced by a 
     second rig to drill the Schooner NW Extension prospect during Q2 2006.

Exploration and Appraisal Drilling
     
•    During 2005, 11 exploration wells were drilled including the recent wells 
     in Angola, Mauritania and Uganda of which five discovered hydrocarbons.
     
•    The Mputa-1 discovery in Uganda has proved the existence of a working
     petroleum system in the basin, which has significantly reduced the risk on
     Tullow's prospects in this extensive region.  A second well will be drilled 
     in February on the Waraga-1 prospect.
     
•    UK exploration has been particularly successful.  The K3 discovery
     significantly boosts the potential of adjacent blocks where numerous 
     prospects have been identified of which four will be drilled as part of the 
     2006 drilling campaign.

•    Over the next three months a further eight exploration wells will be 
     drilled including three wells in the UK and high impact wells in Uganda and
     Equatorial Guinea.

•    A rig has been contracted to drill two appraisal wells on Kudu, to test the 
     significant upside potential of this gas field, and will start drilling in 
     early 2007.

Commenting today, Aidan Heavey, Chief Executive of Tullow said:

'The strong asset performance and production growth seen in 2005 is expected to
continue with significant ongoing development projects in each of our core
areas.  This development work will be complemented by an exciting exploration
programme that includes a number of wells in regions with very high impact
potential.'

CONFERENCE CALL

There will be a conference call at 09:30 (GMT) today, hosted by Aidan Heavey,
Chief Executive, Paul McDade, Chief Operating Officer and Tom Hickey, Chief
Financial Officer of Tullow Oil plc:

For UK and international participants please call [phone] and request
to be connected to the Tullow Oil teleconference.

For participants in Ireland, please call [phone]

A replay facility will be available from one hour after the conference call
until 18:00 (GMT) on Tuesday 7 February.  Please call [phone], access
code: 4764302#.



For further information contact:
Tullow Oil plc                     Citigate Dewe Rogerson     Murray Consultants
([phone])                 ([phone])         ([phone])
Aidan Heavey                       Martin Jackson             Joe Murray
Tom Hickey

Chris Perry



Trading Statement

This trading statement is provided for the year ended 31st December 2005 in
advance of the Group's 2005 Preliminary Results, which are scheduled for release
on 29 March 2006. The information contained herein has not been audited and is
subject to further review.

Production

Group working interest production for the second half of 2005 averaged 59,550
boepd, giving a 2005 average of 58,450 boepd, which is 44% ahead of the 2004
production level.

A further breakdown of these figures is provided in the Operational Update under
each core area. Production figures remain subject to final reconciliation and do
not equate to sales volumes. This is due to variations in lifting schedules and
because a portion of the production is delivered to host governments under terms
of Production Sharing Contracts. The production figures include 5 months
production from the Alba and Caledonia fields and 7 months production from the
Nkossa field (offshore Congo (Brazzaville)) prior to their disposals and 9
months of production from Schooner and Ketch following completion of the
acquisition in late March 2005.

Working interest production for 2006 is expected to average approximately 68,000
boepd, with year end production reaching 75,000 boepd.

Overlift position

At 31 December 2005, Tullow was in a net overlift position amounting to an
estimated 98,000 barrels. Such overlift positions are valued at market value and
accordingly a charge of approximately £8.2 million will be made to Cost of
Sales. In addition a charge of £5.5 million in respect of the Alba and Caledonia
overlift position at the time of disposal has been made to cost of sales; an
equal and opposite amount has been recognised as part of the profit on disposal
and consequently the net impact on the income statement is zero.

Exploration Write-Off

Tullow's accounting policy is to write off in full, to the Income Statement, all
costs relating to pre-licence costs and unsuccessful exploration activities.
Based on current estimates, Tullow's exploration write-off for 2005 is expected
to be of the order of £25 million subject to any further technical work.

Portfolio Management

The Group completed the disposal of the Alba and Caledonia offshore assets in
the UK and the offshore Congo (Brazzaville) assets in June and August 2005
respectively. In addition, final income has been recognized in relation to
incremental consideration receivable based on reserves and performance of the
Horne and Wren fields. The profit on disposal amounts to £40.1 million
(inclusive of £5.5 million of overlift outlined above).

Capital Expenditure

During 2005 Tullow invested a total of £192 million in development and
exploration activities.

Planned capital investment during 2006 is in the order of £280 million, of which
approximately 70% will be spent on development activities in the UK, Gabon,
Congo (Brazzaville), Cote d'Ivoire, Equatorial Guinea, Pakistan and Bangladesh
with the balance focused on exploration activities.

Net Debt and Refinancing Initiatives

Net Debt at 31 December 2005 was £138.7 million, inclusive of all cash balances.

In September 2005 the Group completed an $850 million refinancing exercise. This
exercise consolidated existing borrowings into a single facility, which has
created a more efficient Group financing structure, has materially reduced cash
collateralisation and has created significant flexibility for future growth.

International Financial Reporting Standards (IFRS)

The Group has adopted IFRS with effect from 1 January 2004, with the exception
of IAS 39, which has been adopted effective 1 January 2005.

IFRS 2 - Share based payments, requires that the fair value of all share based
payments are charged through the income statement over the vesting period of the
relevant awards. The charge in the income statement for 2005 is of the order of
£1.5 million.

IAS 39 - Financial Instruments, requires all derivatives to be recorded on the
balance sheet at market value. At 31 December 2005 the Group's portfolio of
derivatives had a negative mark to market value of £140.4m. The majority of the
Group's arrangements qualify for hedge accounting and will therefore be largely
reflected in the Income Statement as the related contracts mature. Effectiveness
testing has been undertaken on all the Group's hedges and due to the variations
in crude oil discounts and gas nomination patterns there has been a degree of
hedge ineffectiveness. However it is anticipated that the charge recognised in
the Income Statement for the year ended 31 December 2005 will not differ
materially from the charge of £5.6m recorded for the first six months of the
year.

Hedging Summary

At 24 January 2006 the Group's hedge position to the end of 2007 is as follows:

Oil Hedges                                        H1 06         H2 06       2007
         Volume - bopd                           10,242        11,217       6,000
         Average Price* - $/bbl                    41.0          43.7       41.9

Gas Hedges                                        H1 06         H2 06       2007
         Volume - mmscfd                           81.7          42.5       10.0
         Average Price* - p/therm                  57.1          41.5       59.2

* Average hedge prices are based on market prices as at 24 January 2006 and
represent the current value of hedged volumes


Operational Update

This Operational Update summarises recent key activities in the Production (P),
Development (D), Exploration (E) and Appraisal (A) assets of Tullow Oil plc.

1) NW EUROPE CORE AREA

UK

In the UK North Sea, Tullow's principal interests are in the Southern Gas Basin.
During 2005 Tullow consolidated its position and influence in the region through
the acquisition of the Schooner and Ketch assets, active participation in the
23rd licensing round and the drilling of 3 exploration wells. Each of these
factors has contributed to the Group's strong production growth in this core
area enabling UK production to recently reach an all time high of 200 mmscfd.


Working interest production                     2005 Average (boepd)         Current Production (boepd)
UK Southern North Sea (1)                       22,245                       33,000
UK Oil                                          2,168                                Assets Sold
UK Total                                        24,413                       33,000

(1) Includes condensate

Schooner (P/D)(Tullow 90.35%) and Ketch (P/D) (Tullow 100%)

The facilities maintenance campaign implemented last year has already
significantly improved the uptime of the assets to over 95% and increased
production potential to over 50 mmscfd.

The field redevelopment programme commenced in November 2005 with the arrival of
the Ensco 101 drilling rig to drill five new wells and conduct nine workovers on
the Schooner and Ketch fields. The first of these wells, Schooner-10, was
spudded on 24th November and is expected to be completed in February. The
drilling of Schooner-10 will be followed by the re-drilling of Schooner-7, an
existing but non-producing well. A concurrent campaign of stimulation and
remedial work on the existing production wells is also ongoing. The rig will
then move to the Ketch field and drill three development wells and conduct a
well optimisation programme on existing producing Ketch wells.

A second rig, the Borgsten Dolphin, has recently been contracted to drill the NW
Schooner Extension appraisal area during Q2 2006. This opportunity has been
accelerated to minimise weather downtime by drilling during the summer months
and, if successful, to benefit from 2007/08 winter gas prices.

McAdam (P/D) (Tullow 14%)

First production from the McAdam infill development well, an extension of the
CMS III project, commenced on 13 October 2005 adding incremental gross
production in excess of 50 mmscfd.

Murdoch (P/D) (Tullow 34%)

The Murdoch D10 well, a sidetrack of the D4 well that has been shut in since
1998, was completed at the end of December and put on production on 18 January
2006 at a gross rate in excess of 30 mmscfd.

UK Exploration (E)

The K3 exploration well (Tullow 22.5%) in block 44/23b completed drilling in
September 2005, having encountered excellent quality gas bearing sands in the
targeted Lower Ketch interval.  Development planning is now under way.  The
success of this well gives a significant boost to the exploration potential of
the adjacent blocks where numerous further prospects have been identified. four
of which will be drilled in 2006.

Four of these prospects will be drilled in 2006, the first, to test the Humphrey
prospect in block 44/16 (Tullow 17.5%), was spudded on 3 January 2006.  This
well is expected to reach its target depth during February and will be followed
by a well on the K4 prospect (Tullow 22.5%) in block 44/23b. A second rig has
been contracted to drill the Cygnus prospect in block 44/12 (Tullow 35%), and is
scheduled to commence in the first week of February.

The fourth of these prospects and up to three further exploration wells are
planned for later in 2006.

Romania

Costisa-1 (EPI-3) (E) (Tullow 42.06%)

The Costisa-1Z exploration well, located in the EPI-3 Brates block in Romania,
reached a final total depth of 4,350m on 30 November 2005. An approved
abandonment programme was performed and the Romanian authorities granted the
well 'abandoned with conservation' status. This will enable future re-entry if
required.  Tullow will relinquish operatorship at the end of the First
Exploration Period.

2) AFRICA CORE AREA

In Africa, Tullow has production and development interests in Gabon, Cote
d'Ivoire, Congo (Brazzaville), Equatorial Guinea and Namibia. Tullow also has
exploration interests in Morocco, Mauritania, Senegal, Cameroon, Uganda,
Equatorial Guinea, Angola and Cote d'Ivoire.  During 2005 Tullow undertook
significant development and drilling work in its producing assets, whilst
maintaining an active exploration and New Ventures effort throughout the region.
The Production and Development successes in the Group's African assets continue
to contribute to strong production growth.  African production is expected to
reach 40,000 boepd in 2007. The recent Exploration successes in Mauritania and
Uganda also provide enormous encouragement for the future of both basins.


Working interest production                         2005 Average (boepd)      Current Production (boepd)
Congo (Brazzaville)                                     6,052*                         6,600
Cote d'Ivoire                                           4,039                          4,350
Equatorial Guinea                                       6,052                          5,450
Gabon                                                  17,480                         16,800
West Africa Total                                      33,623                         33,200

*includes 1,166 boepd in respect of disposed interests


Republic of Congo (Brazzaville)

M'Boundi Field (P/D) (Tullow 11%)

The development and infill drilling programme on the M'Boundi Field continued
throughout 2005 and is ongoing, with 11 successful wells completed since
September 2005. These wells were primarily infill wells targeting the higher
productivity reservoir in the northeast and the thicker section of the lower
quality reservoir in the west. Current gross field production is 60,000 bopd,
with 40 wells currently on stream. Four rigs are currently in operation with a
fifth rig en route. Engineering work at the export terminal was completed at
year-end to facilitate the blending and export of M'Boundi crude with the higher
quality N'Kossa blend, thus significantly improving per barrel realisations. The
further expansion of the production facilities to 90,000 bopd is in progress,
with long lead items already on order. A water injection pilot project will be
undertaken during 2006 and if successful will be expanded to the full field.

Equatorial Guinea

Ceiba Field (P/D) (Tullow 14.25%)

The infill drilling programme continued throughout 2005, most recently two
injection wells C-28i and C-29i were drilled to support the central and southern
field production areas. The first of these wells was completed in September 2005
and C-29i is being completed at present. In the third quarter 2005 the C-30
production well was drilled and successfully brought on production in December.
This infill drilling programme maintained gross field production in excess of
40,000 bopd throughout 2005; this infill programme will continue through 2006,
with four producers and two injection wells planned.

Okume Complex Development (D) (Tullow 14.25%)

The Okume Complex comprises the Okume, Oveng, Ebano and Elon fields.  Two
Tension Leg Platforms (TLPs), being constructed in Korea, are nearing completion
and will be installed on the deepwater fields Okume, Ebano and Oveng in March/
April 2006. The Central Processing facility and other shallow water facilities
for the Elon field are being constructed in the US Gulf Coast. These facilities
will be installed in two phases, concluding in September 2006. Drilling is
expected to commence with a shallow water jack-up rig and a tender assisted
semi-submersible rig in late 3Q 2006.  The development remains on budget and on
schedule for first oil by year end 2006. Oil will be blended with Ceiba and
exported via the Ceiba FPSO.

Cote d'Ivoire

East Espoir Field (P/D) (Tullow 21.3%)

Two of the planned infill production wells, EP-7 and EP-8 are now on production.
These wells have produced beyond expectation, contributing in excess of 5,000
boepd each to the increased average field production for the fourth quarter of
25,440 boepd. The third infill well, EP-10, a challenging 4.5km step-out, was
drilled in the last quarter of 2005 and the fourth and final infill well EP-9 is
currently in progress.  These two wells are expected to be on production by end
Q1 2006 and are expected to increase field production by a further c.7,500
boepd.

West Espoir Development (D) (Tullow 21.3%)

Progress on the West Espoir development project is well advanced. The jacket and
wellhead tower were successfully installed in November 2005, all pipelines have
been laid and successfully tied back and the Espoir FPSO upgrade is complete.
Drilling is expected to commence in May with first oil scheduled for the third
quarter of 2006. Three production wells and the commencement of the first West
Espoir water injection well are planned for 2006.

Gabon

Niungo (P/D) (Tullow 40%)

The final well in the 2005 Niungo development and appraisal programme, Niu 28,
was brought on stream in December.  Following the success of the 2005 programme
an additional five infill wells and a minimum of two step-out appraisal wells
are planned for 2006.

Tchatamba (P/D) (Tullow 25%)

A number of electrical submersible pump failures reduced the output from the
Tchatamba field by 22% in the second half of 2005. These problems have now
largely been resolved and the field is producing approximately 30,000 bopd.

Gabon Exploration (E)

The Tullow-operated exploration well on the Equata prospect (Tullow 47.5%)
commenced drilling in early December.  The well was unsuccessful as the results
indicated likely compartmentalisation of the structure which would make
development sub-commercial.  The well has been plugged and abandoned.

Up to four further Gabon wells are planned for 2006, the Akoum-West prospect
(Tullow 100%) commenced on 16 January and is expected to complete in February.

Namibia

Kudu (D/A)  (Tullow 90%)

Good progress has been made in relation to both the first phase of
commercialisation of the Kudu gas field, offshore Namibia, via a gas-to-power
generation project and the appraisal of the significant upside potential.

Following completion of the Front End Engineering Design (FEED) study a
prequalification enquiry was issued for the four well subsea development and
onshore gas conditioning plant.  Invitations to bid for the various construction
activities are expected to be issued during 2006.  In parallel with these
technical preparations significant progress has been made on the commercial and
regulatory arrangements.  The Ministry of Mines and Energy in Namibia has
approved the production licence for the Kudu field area and the Gas Sales
Agreement negotiations are nearing completion in parallel with the Power
Purchase Agreement negotiations between Nampower and Eskom.

The planning of the two well appraisal programme, to prove the potentially
significant upside reserves within the Kudu field, has advanced to the point of
procuring all the long lead items and contracting a rig to start drilling in
early 2007.

Uganda

Block 2 (E) (Tullow 50%)

The Mputa-1 exploration well in Uganda commenced drilling on 22 December 2005
reaching its target depth of 1,186 metres in early January 2006.  The well
encountered oil zones over a 221 metre interval and oil samples were recovered
from an upper interval between 965 and 975 metres.  The well is now being cased
and suspended for potential future re-entry.  The results are very encouraging
as they prove the existence of a working petroleum system in the extensive
Albertine basin in which Tullow has a 50% interest throughout.

While it is too early to determine the size or potential commerciality of
Mputa-1, the results significantly reduce the risk of the prospects mapped in
Blocks 2 and 3A.  The rig will now move to the Waraga-1 location, where drilling
is expected to commence in mid-February.  The Waraga prospect is a deeper well
of 1,650 metres and has an anticipated well duration of approximately 20 days.
Tullow is also in discussion with partners in relation to the potential drilling
of the Kingfisher well in Block 3A as part of the current programme.

Mauritania

Block 1 (E) (Tullow 20%)

The Faucon-1 exploration well in Block 1 offshore Mauritania was drilled in
December 2005 and reached a total depth of 4,170m, encountering a total 96.5m of
potential reservoir of which the upper 14m is hydrocarbon bearing.  The
hydrocarbon fluid samples recovered from the well are currently undergoing
laboratory analysis.  While the hydrocarbons encountered are unlikely to be
commercial on a standalone basis, the discovery of a working petroleum system in
this under-explored region provides encouragement for Tullow's regional position
in Mauritania and the adjacent St Louis block in Senegal.

Angola

Block 10 (E)  (Tullow 15%)

In November 2005 Tullow concluded a farm-in agreement with Sonangol P&P to
assume a 15% interest in Block 10 offshore Angola.    A two well exploration
programme commenced in early November and concluded on 15 December with both
wells being plugged and abandoned.  Although the wells did not encounter
commercial hydrocarbons, they provided critical information to allow further
evaluation of the prospectivity of this largely unexplored block.

Block 24 (E)  (Tullow 15%)

In January 2006 Tullow concluded a farm-in agreement with Ocean Angola
Corporation, a subsidiary of Devon Energy, to assume a 15% interest in Block 24
offshore Angola.  A well commenced drilling on the Kabetula-1 prospect in the
block on 22 December 2005 but failed to discover hydrocarbons and was plugged
and abandoned.

Both Block 10 and Block 24 are expected to yield further high impact
opportunities.

3) SOUTH ASIA CORE AREA

In South Asia, Tullow has production, development and exploration interests in
Pakistan, development and exploration interests in Bangladesh and exploration
interests in India. While activity in this region was limited in 2005, the
initiation of production from the Chachar and Bangora projects, along with
ongoing exploration and appraisal work in Pakistan, Bangladesh and India have
the potential to materially enhance reserves and revenue from this core area.


Working interest production                         2005 Average (boepd)      Current Production (boepd)
Pakistan                                                    413                          250
South Asia Total                                            413                          250


Bangladesh

Block 9, Bangora-1 (A) (Tullow 30%)

The Bangora/Lalmai Appraisal Programme, approved in early 2005, made significant
progress during Q3/Q4 2005.  The processing equipment for the long term test is
in transit to Bangladesh, and the Bangora pipeline has been installed.  It is
planned that installation and commissioning of the facility will be completed in
the first quarter of 2006, with first gas at an anticipated rate of 50 mmscfd in
the second quarter.  A 3D seismic programme over the entire Bangora-Lalmai
structure is well advanced and the two well drilling programme with two further
optional wells is scheduled to commence in the second quarter.

Blocks 17 and 18 (E) (Tullow 32%)

In December 2005, Tullow reached agreement to farm out a 60% interest in Blocks
17 and 18, offshore Bangladesh, to Total. Tullow will retain a 32% interest and
Operatorship of the blocks.

Pakistan

Chachar (D) (Tullow 75%)

Following the approval by the Government of Pakistan of the development of the
Chachar field, the design of the wells and production facilities have been
finalised.  It is planned to drill two wells in the second quarter with
production scheduled to commence in the third quarter of 2006 at a rate of 20
mmscfd.

Kohat (E) (Tullow 40%)

Following award of the highly prospective Kohat Block in early 2005, a seismic
test line was acquired in November 2005, and the full survey is scheduled to
commence shortly.

India

Block CB-ON-1 (E) (Tullow 50%)

The acquisition of approximately 1,200 km of 2D seismic commenced in December
2005 on the high potential CB-ON-1 block in the Indian Cambay Basin.  It is
anticipated that acquisition and processing will be completed in the second
quarter of 2006 and that the first well will be drilled in early 2007.

                                      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.

For further information please refer to our website at www.tullowoil.com


                      This information is provided by RNS
            The company news service from the London Stock Exchange