Trading Statement

Tullow Oil PLC
31 January 2007

Tullow Oil plc Trading Statement and Operational Update




31 January 2007 - Tullow Oil plc ('Tullow') issues this Trading Statement in
respect of its financial year to 31 December 2006 and this Operational Update in
respect of recent Production, Development and Exploration activities.



The Trading Statement is in advance of the Group's Full Year Results, which are
scheduled for release on Wednesday, 21 March 2007.  The information contained
herein has not been audited and is subject to further review.



HIGHLIGHTS

Production and Development

•          Working interest production averaged 64,720 boepd for 2006, 11%
higher than 2005, and reached 75,000 boepd by year end;

•          Significant production and development activity is planned for each
of our core areas in 2007. Key development projects include Schooner and Ketch
(UK), Okume (Equatorial Guinea), Chinguetti (Mauritania), West Espoir (Cote
d'Ivoire), M'Boundi (Congo Brazzaville) and Bangora (Bangladesh);

•          Working interest production is expected to average in excess of
80,000 boepd in 2007.

Exploration and New Ventures

•          In 2006 the Group drilled 12 exploration wells, seven of which
discovered hydrocarbons;

•          Five oil discoveries in the Albertine Basin in Uganda have
significantly enhanced the prospectivity of the region. An accelerated programme
of exploration and appraisal activity across the Group's acreage in Uganda is
scheduled for 2007;

•          An active new ventures programme resulted in seven new exploration
licences in 2006. Further awards are expected in Africa during 2007;

•          Drilling plans for 2007 include over 20 exploration wells, with high
impact programmes focused on three key campaigns in Uganda, Namibia and India.

Acquisitions

•          On 25 September 2006 Tullow announced a proposal to acquire Hardman
Resources Limited ('Hardman') for US$1.1 billion.  Following regulatory and
shareholder approval, the transaction became effective on 20 December 2006;

•          The acquisition materially enhances Tullow's portfolio by adding both
exploration and production assets in Mauritania, establishing operational
control in Uganda's Albertine Basin, and significantly extending Tullow's
prospective acreage position in Africa and South America.

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

'During 2006, we consistently demonstrated our ability to deliver focused growth
from our portfolio with seven successful exploration wells, seven new
exploration licences, a major acquisition and a significant increase in annual
production. The integration of the Hardman assets is progressing well and 2007
is expected to be a year of further progress, with strong production performance
and three major drilling campaigns in Uganda, India and Namibia. We are
continuing to build a substantial international oil and gas business.'





Conference Calls
In conjunction with this announcement Tullow has scheduled two conference calls.
Details are included at the end of the release.



Trading Statement



Production

Group working interest production for 2006 averaged 64,720 boepd, 11% higher
than the 2005 average. Sales volumes for 2006 averaged 57,300 boepd. A further
breakdown of these figures is provided in the Operational Update for 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 the terms of
Production Sharing Contracts.

Average working interest production for 2007 is expected to exceed 80,000 boepd.

Realised prices and oil discount

Average prices realised during 2006 were significantly higher than those for
2005. Realised oil price was approximately US$62/bbl (pre hedges) and US$53/bbl
(post hedges) and realised UK gas price was approximately 46p/therm.

During 2006 the Group's oil production sold at an average discount of
approximately 5% to Brent and this level of discount is expected to continue in
2007.

Overlift position

At 31 December 2006, Tullow was in a net overlift position amounting to an
estimated 130,000 barrels. Such overlift positions are valued at market value
and, combined with stock movements during the year, give rise to a charge of
approximately £2.4 million to Cost of Sales.

Exploration Write-Off

Tullow's exploration write-off for 2006 is expected to be of the order of £30
million. This write-off is principally associated with unsuccessful exploration
activities in the UK, Gabon, Pakistan and Angola and new ventures activity
during the year.

Capital Expenditure

During 2006 Tullow invested approximately £330 million in development and
exploration activities. In addition, the Group acquired a package of assets in
Gabon and purchased 4.25% of the share capital of Hardman Resources ahead of
deal completion at a total cost for both transactions of approximately £40
million.



Based on current estimates and programmes, total capital expenditure for 2007 is
expected to amount to approximately £370 million.



Net Debt

Net Debt at 31 December 2006 was £169.1 million, exclusive of Hardman cash
balances of $89.8 million (£45.8 million).

Derivative Instruments

At 31 December 2006 the Group's derivative instruments had a net negative mark
to market  value of approximately £21.0 million.

Commodity Hedging

While all of the Group's commodity derivative instruments currently qualify for
hedge accounting, a credit of approximately £9.8 million (£9.1 million after
taxation) will be recognised in the income statement for 2006. Most of the
credit relates to the improved effectiveness of the hedges, which is largely due
to a better correlation between the underlying oil revenues and the hedges
arising from factors such as narrower crude oil discounts to Brent and the
timing of oil liftings.



Foreign Exchange Hedging

A credit of £5.9 million (£4.1 million after taxation) will be reflected in the
income statement arising from the foreign exchange derivative instruments
entered into in respect of the Hardman acquisition.  The foreign exchange hedges
do not qualify for hedge accounting under IAS39 and consequently the credit
reflects the mark to market value of the foreign exchange hedges as at 31
December 2006.

Commodity Hedging Summary

At 26 January 2007 the Group's hedge position to the end of 2008 is as follows:


Oil                                                 1H-07        2H-07        2008
Volume hedged (bopd)                                12,000       12,000       8,000
Average price of hedged volumes ($/bbl)             48.6         49.7         44.9


Gas                                                 1H-07        2H-07        2008
Volume hedged (mmscfd)                              78.27        63.70        48.0
Average value hedged volumes (p/therm)              49.3         44.0         44.4



Acquisition of Hardman Resources Limited



On 25 September 2006, Tullow announced a proposal to acquire Hardman by way of a
Scheme of Arrangement. Following the approval of the acquisition by Hardman
shareholders and the Australian Courts, the Scheme became effective on 20
December 2006 and formal completion, which involved the payment of AUS$ 819.5
million and the issue of 65 million Tullow Shares, occurred on 10 January 2007.
The integration of Hardman into the Tullow Group is progressing to plan and is
expected to be substantially complete by the end of the first quarter of 2007.



Tullow assumed control of Hardman on 20 December 2006 and Hardman's business and
assets will be consolidated in Tullow's accounts from that date. A fair value
exercise will be undertaken to determine the values attributable to the acquired
assets and liabilities within the Group's Balance Sheet as at 31 December 2006.
Hardman's net cash balances at completion amounted to $89.8 million.



The reserves attributable to the Hardman assets will be reflected in Tullow's
reserves statement at 31 December 2006. Tullow plans to undertake a
comprehensive internal review of the Hardman reserve base, with particular
reference to its Mauritanian interests, and this will take a number of months to
complete.



Operational Update

1) NW EUROPE CORE AREA

Tullow's principal interests in NW Europe are in the Southern Gas Basin of the
UK North Sea. In 2006 Tullow continued its high level of activity in the region,
participating in three exploration discoveries and drilling four successful
development wells.  Production for 2006 averaged 29,530 boepd, 21% above 2005
levels.


Working interest production(1)                      2006 Average (boepd)      Current Production (boepd)


CMS Area                                                   16,380            21,000
Thames-Hewett Area                                         13,150            16,000
UK Total                                                   29,530            37,000

(1) Includes condensate



The commercial environment for producers within the UK gas market remains
positive despite recent falls in the gas price driven by unusually warm winter
weather, high service costs and rig rates and the commissioning of new import
infrastructure into the UK. For Tullow, this has resulted in a rebalancing of
some short term discretionary investment away from the UK, however, longer term
gas price fundamentals remain strong for indigenous producers and gas price
seasonality continues to provide opportunities for Tullow to optimise production
and maximise value.



NW Europe  Production and Development



UK

Growth in Tullow's UK production has been largely driven by the Schooner (Tullow
90.35%) and Ketch (Tullow 100%) redevelopment programme. The Schooner-10 well
came on line in May at 25 mmscfd and Ketch-7 commenced production in October at
50 mmscfd. The Ketch-8 production well was drilled in the fourth quarter of 2006
and encountered 830 ft of good quality gas-bearing reservoir sands. However,
technical problems were encountered during the completion phase and the well has
been temporarily suspended.  Tullow spudded Ketch-9 in early January 2007 and
production is scheduled to commence in May.  At this time, remedial work on
Ketch-8 will commence.  Following completion of Ketch-8, the Ensco 101 rig will
be released. The production capability of the Schooner and Ketch fields is
currently of the order of 100 mmscfd and is expected to reach over 140 mmscfd
during 2007.



Two projects, Thurne (Tullow 87%) and Kelvin (Tullow 22.5%), received
development approval in October 2006. The Thurne field will be developed by
sidetracking the Deben well, which has ceased production, and re-using the
existing pipeline and Thames platform reception facilities. Drilling of the
horizontal well is due to commence in early February, with first gas targeted
for September 2007 at a gross plateau rate of 40 mmscfd. The Kelvin field will
be developed with a single well and platform tied back to the CMS
infrastructure.  Platform fabrication is under way and the well is scheduled to
spud in Q3 2007. First production is targeted for December 2007 at a gross rate
of approximately 80mmscfd.  Tullow is also considering a number of other fields
for potential development.



NW Europe Exploration and New Ventures



UK

Three gas discoveries in 2006, Humphrey, Cygnus and K4, further enhance Tullow's
position in the CMS area.  The 2007 programme includes four Southern North Sea
gas exploration wells in the Thames-Hewett and CMS areas, and two Central North
Sea oil exploration wells, Acer and Peveril, which are scheduled to spud in
February 2007.



Tullow has made applications for six Southern North Sea blocks in the UK 24th
Licensing Round.  The DTI has not yet announced the awards.





2) AFRICA CORE AREA



Tullow's African production and development interests are in Gabon, Cote
d'Ivoire, Congo (Brazzaville), Equatorial Guinea, Mauritania and Namibia. Tullow
also has exploration interests in Mauritania, Gabon, Senegal, Cameroon, Uganda,
Equatorial Guinea, Angola, Tanzania, Madagascar, Ghana, Cote d'Ivoire and Congo
(DRC). In 2006 Tullow continued to invest in its producing and development
assets, which delivered strong production growth and performance whilst
maintaining an active exploration and new ventures programme across the region.
With the Okume Complex on stream and with the addition of the Mauritanian
production following the Hardman acquisition, Tullow's Africa production is
expected to average over 40,000 boepd in 2007.


Working interest production                         2006 Average (boepd)      Current Production (boepd)
Congo (Brazzaville)                             6,170                        5,600
Cote d'Ivoire                                   6,390                        6,400
Equatorial Guinea                               5,740                        7,700
Mauritania                                      Nil                          4,100
Gabon
    Tchatamba                                   6,440                        6,400
    Niungo                                      5,060                        5,900
    Other Gabon                                 3,620                        3,250
Africa Total                                    33,420                       39,350





Africa  Production and Development



Congo (Brazzaville)

The development and infill drilling programme on the M'Boundi Field (Tullow 11%)
continues and 58 wells are currently on stream. Average gross production for
2006 was 55,000 bopd. Water injection into the field commenced on 20 January
2007 and injection rates are expected to increase to 60,000 bwpd during the
year. Once the initial results of the water injection project are assessed, it
is anticipated that a decision will be made to extend water injection to 120,000
bwpd over the full field during 2008, thereby increasing the ultimate field
recovery factor.



Equatorial Guinea

In 2006 three infill production wells and two water injection wells were drilled
on the Ceiba field (Tullow 14.25%) bringing gross production to a 2006 average
of 40,000 bopd and a current rate of 45,000 bopd. The 2007 infill drilling
programme, comprising three water injectors and three producers, is aimed at
maintaining an average production rate of 40,000 bopd for the year.



First oil from the Okume Complex (Tullow 14.25%) was achieved in December.
Drilling is currently in progress on the Oveng and Elon fields and will continue
throughout 2007. In the second half of the year wells will also be drilled on
the Okume and Ebano fields. Current production is in excess of 10,000 bopd from
three wells and will increase steadily to a plateau of 60,000 bopd in 2008 as
more wells are brought on stream.



Cote d'Ivoire

Following the very successful East Espoir (Tullow 21.33%) infill drilling
programme, the rig moved to West Espoir (Tullow 21.33%) in mid 2006 and oil
production from the field commenced on 26 July 2006.  To date, three production
wells and two water injection wells have been completed, resulting in average
gross production in 2006 from the Espoir fields of 31,000 boepd. Six West Espoir
production wells are planned for 2007 and drilling is expected to continue into
2008. These operations, and the onset of water injection are expected to
increase gross Espoir production to a peak of 35,000 boepd in 2007.



Mauritania

The infill drilling programme on the Chinguetti field (Tullow 19.01%) commenced
on 29 December 2006 with the C-18 well in the south west of the field. The well
has been drilled to a total depth of 2,883m and encountered a gross oil column
of approximately 213m which is in line with expectations. The well also appears
to be receiving pressure support from the C-8 water injection well. Following
production optimisation work on the C-14 well, the C-18 well will be prepared
for production and is forecast to come on stream in late February.



Four further infill wells are scheduled to commence during the third quarter.
The final locations of the wells will be subject to the results of the high
density 3D seismic and 4D seismic to be shot over the Chinguetti field in March
2007.



Gabon

Production from Gabon in 2006 averaged 15,120 bopd.  Activity during the year
focused on optimisation of the current producing assets, commercialisation of
undeveloped assets and the acquisition of additional licence interests.



The new phase of appraisal and development drilling in the Niungo field (Tullow
40%) commenced in September 2006. The first appraisal well to the north of the
field proved to be oil-bearing and delineates the northern limit of the field.
Since then, three further successful development wells have been drilled and
have assisted in increasing gross field production to over 15,000 bopd. This
programme is continuing with three further infill wells and will be followed by
an exploration well along trend to the south of Niungo in the Nziembou Licence,
which is expected to commence before the end of the first quarter.



Tchatamba (Tullow 25%) production was curtailed during the year due to down-hole
pump failures in a number of wells and delays in obtaining services and
supplies. However, gross production had recovered to close to 27,000 bopd in
late December 2006 following workovers on three wells in November and December.



Development of the first Etame satellite, the Avouma field (Tullow 7.5%), was
successfully completed in December 2006 with the installation of the platform
and flowlines. First production commenced on 23 January 2007 and is now at a
gross rate of over 5,000bopd.  This will complement Etame Field production
(Tullow 7.5%) which has been outperforming expectations. Detailed planning for a
further Etame satellite, the Ebouri discovery (Tullow 7.5%), is under way with a
view to first production during 2008.



Tullow has acquired a package of assets from the Gabonese Government through a
50:50 Joint Venture with AIC-Petrofi Limited.  The package comprises interests
in three producing fields and back-in rights to a further nine exploration
licences. Two additional fields are awaiting development approval and are
expected on stream over the next 18 months.   The acquisition increases Tullow's
net production by approximately 350 boepd and is expected to contribute
approximately 1,000 boepd by early 2008.





Africa Exploration and New Ventures



Uganda and Congo (DRC)

Tullow has the leading acreage position in the Albertine Basin, holding between
49 and 100% in five licences in Uganda and Congo (DRC). Five successful
exploration wells have been drilled on the Ugandan blocks since the beginning of
2006. Tullow consolidated this position with the acquisition of Hardman assuming
operatorship of Block 2 in Uganda and increasing its interest in the Block to
100%. This enhanced position increases the Group's exposure to significant
upside potential and also enables it to exercise greater operational control.



The most recent exploration well, Kingfisher-1, is currently drilling to a
target depth of between 3,000 and 4,000 metres.  To date the well has
intersected two significant oil-bearing intervals. The first interval, with net
pay of 10m, was encountered at 1,783m and was successfully tested in early
November 2006 at a maximum flow rate of 4,120 bopd. The second interval,
evidenced by wireline logging and formation pressure testing, with a net pay of
approximately 40m, was encountered between 2,260m and 2,370m. It is planned to
test this second interval following completion of the drilling operations.



In light of the drilling and testing results and the large upside potential
associated with the Kingfisher, Ngassa and Pelican prospects, an aggressive
exploration and appraisal programme in Uganda and Congo (DRC) is planned.  This
programme, which comprises 2D and 3D seismic and further exploration/appraisal
drilling, will run into 2008 and probably beyond. In addition, the Group is
reviewing the potential for an Early Production System and conceptual studies
are ongoing.



Namibia

The Kudu gas field (Tullow 90%) represents a major energy opportunity for
Southern Africa and Tullow is focused on achieving significant technical and
commercial progress during 2007.



Successful development of Phase I of Kudu has the potential to make a very
important contribution to Namibia's long term power needs and Tullow places a
high priority on achieving project sanction at the earliest opportunity. In
addition, plans for a two well appraisal campaign to test the reserves upside of
Kudu are progressing and drilling is scheduled to commence in April 2007.



In parallel with the ongoing technical work, Tullow is considering the
introduction of a partner into the project. Strong interest has been shown and
commercial negotiations are expected to be concluded over the coming months.





Ghana

In 2006 Tullow was awarded operated interests in the Shallow Water Tano block
(Tullow 85.5%) and the Deepwater Tano block (Tullow 49.95%) and farmed into the
adjacent non-operated West Cape Three Points (Tullow 22.9%) licence. The
evaluation of the deep water acreage is progressing with the first exploration
well on the Mahogany prospect planned for May 2007. In addition, the evaluation
of the low impact undeveloped oil and gas discoveries in the Shallow Water Tano
block is proceeding and an appraisal well on one of these accumulations is
scheduled to spud in May 2007.





3) SOUTH ASIA CORE AREA



In South Asia, Tullow has exploration, development and production interests in
Pakistan and Bangladesh and exploration interests in India. Development
activities have progressed significantly, culminating in the declaration of
commerciality on the Bangora/Lalmai field in Bangladesh on 3 December 2006. In
India, an extensive seismic programme has been completed on Block CB-ON/1 and
planning has commenced for a multi-well drilling campaign in 2007.




Working interest production                         2006 Average (boepd)      Current Production (boepd)
Pakistan                                                    190                          160
Bangladesh                                                 1,580                        3,000
South Asia Total                                           1,770                        3,160



South Asia Production and Development



Bangladesh

In 2006, the successful appraisal programme for Bangora/Lalmai (Tullow 30%)
continued with a 3D seismic survey and three new wells. The appraisal wells
drilled to date have each encountered good quality reservoir and a further well,
to the north of Bangora-1, was spudded in early January 2007.  Combined
production from Bangora-1 and Bangora-2 is currently 60 mmscfd.



Following the success of the appraisal programme on the Bangora/Lalmai field, a
Declaration of Commerciality was submitted to the Bangladesh authorities in 2006
and field development planning has commenced.



Pakistan

The development project on Chachar (Tullow 75%) is well advanced with two new
development wells and the original discovery well prepared for production.
Construction of the production facility is nearing completion and it is
anticipated that production will commence in March 2007 at 20-25 mmscfd.



South Asia Exploration and New Ventures



Pakistan

A total of 311km of seismic data has been acquired on the Kohat (Tullow 40%)
licence. Data processing is ongoing and Tullow plans to spud the first well on
this highly prospective block in the second half of 2007.

India

Exploration on Block CB-ON/1 (Tullow 50%) in the Cambay Basin is one of Tullow's
three key campaigns for 2007.  Significant progress has been made during the
past year with a block wide, 1,500km 2D seismic acquisition programme.
Interpretation and integration of the data is in progress and there is already
evidence of a diversity of play types including the stratigraphic sections which
occur to the north in the Rajasthan fields and structures analogous to those in
the oil fields to the south. Based on a growing inventory of leads and
prospects, a multi-well drilling campaign is expected to commence during the
second half of 2007.



                                      ENDS

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



CONFERENCE CALLS

Conference calls hosted by Aidan Heavey (Chief Executive), Paul McDade (Chief
Operating Officer), Angus McCoss (General Manager Exploration) and Tom Hickey
(Chief Financial Officer) will be held today at 09:30 (GMT) and 15:00 (GMT):



09:30 UK/European Conference Call

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 for
seven days.  Please call [phone], access code: 9494732#.

15:00 US Conference Call

Please call [phone] and request to be connected to the Tullow Oil
teleconference.

A replay facility will be available from one hour after the conference call for
seven days.  Please call [phone], access code: 3684500.



Disclaimer

This announcement contains certain operational and financial information in
relation to 2006 that 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






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