2005 Analyst DayUK Business Unit
Building a balanced portfolio of Exploration and Production Assets
2005 Analyst Day – Bacton Gas Terminal
Introduction – Paul McDade
2005 Analyst Day – Bacton Gas Terminal
The Tullow footprint
NW Europe
□Leading Gas Producer
□Mature basin Operator
□Growth through exploration, development and acquisition
Africa
□Pan-African E&P business
□High impact exploration
□Growth through exploration, development and acquisition
Asia
□Materiality through organic growth
□High impact exploration
□Growth through exploration and development
2005 Analyst Day – Bacton Gas Terminal
Tullow Growth Strategy
Exploitation and expansion of Tullow’s current reserve base
1H Reserve Replacement 97% before acquisitions
Ongoing development progress in Africa, UK and Asia
2005/6: Organic growth to over 70,000 boepd by end 2006
Broad portfolio with proven skills, knowledge and database
H1 – Two successes from 3 wells in SNS, 1 success in Gabon on Niungo
Next – High impact programme due to start including Mauritania and Uganda.
2006 onwards - continuing to build a high impact portfolio
Selective acquisitions within core areas
2001: £200 million of Southern North Sea assets acquired from BP
2004: $570 million acquisition of Energy Africa
2005: £200 million acquisition of Schooner and Ketch in the S. North Sea
Active Portfolio Management
Focus on assets where we can add value and upside potential exists
Build positions where we have a material influence
2005: Sale of UK oil and Congo (Brazzaville) offshore assets for total of $184 million
PRODUCTION &DEVELOPMENT
EXPLORATION
ACQUISITIONS
PORTFOLIOMANAGEMENT
2005 Analyst Day – Bacton Gas Terminal
Southern North Sea – Focussed Approach
2001 acquisition of infrastructure, fields &acreage delivered two focus areas:
□CMS Area
- Non-operated position
- Established operator with no exit plan
- Significant development and exploration upside
- Infrastructure operating close to capacity
□ Thames/Hewett/Bacton Corridor
- Non-operated with minor operated position
- No dominant operator
- Significant development upside
- Limited exploration potential
- Infrastructure operating at ~30% of capacity
- Unit operating costs becoming a key issue
CMS Area
Hewett/Thames Area
2005 Analyst Day – Bacton Gas Terminal
SNS Introduction – Alan Linn
□ Management Team
□ Business Framework
□ Safety and Responsibility
□ Business and Edge
□ Agenda
2005 Analyst Day – Bacton Gas Terminal
Business UnitManager – UK
Alan Linn
Business UnitManager – UK
Alan Linn
Technical/TeamAssistant
Cathy Edgington
Technical/TeamAssistant
Cathy Edgington
Regional Asset MgrAlan Marshall
Operated Assets Bacton/Hewett
Orwell/Horne & Wren
Regional Asset MgrAlan Marshall
Operated Assets Bacton/Hewett
Orwell/Horne & Wren
Commercial MgrMike SimpsonJV Assets & BusDevelopment
Commercial MgrMike SimpsonJV Assets & BusDevelopment
UK Finance Manager
Rob White
UK Finance Manager
Rob White
BUSINESS UNIT SUPPORT FUNCTIONSBUSINESS UNIT SUPPORT FUNCTIONS
EngineeringEngineering Data/ITTechnology
Data/ITTechnology
Contracts &ProcurementContracts &
ProcurementDrillingDrilling EH&SEH&SCommercialCommercial FinanceFinanceGeoscientistsGeoscientists LegalLegal Bus DevBus Dev
UK Business Unit – Organising for Growth
Asset ManagerSchooner & Ketch
Peter Evans
Asset ManagerSchooner & Ketch
Peter Evans
ExplorationAssets
Chris Flavell
ExplorationAssets
Chris Flavell
UK Development & Engineering
ManagerMark Allen
UK Development & Engineering
ManagerMark Allen
UK DrillingManager
Charlie Taylor
UK DrillingManager
Charlie Taylor
2005 Analyst Day – Bacton Gas Terminal
Tullow Integrated Management System (IMS)
Tullow IMS
Framework
Tullow Corporate Guidelines
Local Compliance Document
Operational/Local Procedures
□ Tullow Corporate IMS sets 18 standards and guidelines to support operations
□ Assets meet defined standards through local compliance documents.
□ Internal and External audits for compliance provide assurance at corporate level.
2005 Analyst Day – Bacton Gas Terminal
Environment , Health and Safety (EH&S)
□ Our EH&S policy sets the standard for performance
□ Add value by investing & empowering our people and those we work alongside.
□ In practice, this means:
- Implementing safe systems of work
- Horne and Wren development and Bacton, Hewett, Schooner and Ketch transitions
- Certification of our Environmental Management System to ISO14001 in UK
- Relationship building through UKOOA and other industry forums
- Building strong working relationships with Partners and Contractors
2005 Analyst Day – Bacton Gas Terminal
Corporate Social Responsibility (CSR)
□ Proactive commitment to conduct our business with high standards of integrity.
□ Corporate CSR report in 2006 to publicly report our 2005 performance.
□ Provide support for Tullow personnel and external sponsorship for projects which benefit local communities
Bacton :
Environmental Liaison Committee –forum where Local Council Members, Police and Environmental Agency can participate and actively consult on terminal activity.
2005 Analyst Day – Bacton Gas Terminal
SNS Business Background
DTI – maximise indigenous supply from mature basin
□ Fallow fields initiatives
□ Annual licensing rounds to churn acreage
□ Promote licences to attract “small players”
□ Low Cost mature basin approach – initiative to attract GoM players
□ Stewardship drive to maximise reserves recovery
HSE - Recognition of changing environment
□ Cost reduction does not have to compromise safety or the environment
□ Openness to discuss “new concepts”
Exit of Majors
□ Mature basin - assets not material for the Majors and not attracting investment
□ Acquisitions from BP, Shell, ExxonMobil, ENI, ConocoPhillips, ChevronTexaco
2005 Analyst Day – Bacton Gas Terminal
Gas Supply
□ Transition from self-sufficiency to importation
□ Increasing importance of indigenous gas
SNS – Gas Pricing Background
Forward Curve Comparison
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p/t
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Arco Schooner / Ketch 30/09/2005
2005 Analyst Day – Bacton Gas Terminal
Southern North Sea – Focussed Approach
2001 acquisition of infrastructure, fields &acreage delivered two focus areas:
□CMS Area
- Non-operated position
- Established operator with no exit plan
- Significant development and exploration upside
- Infrastructure operating close to capacity
□ Thames/Hewett/Bacton Corridor
- Non-operated with minor operated position
- No dominant operator
- Significant development upside
- Limited exploration potential
- Infrastructure operating at ~30% of capacity
- Unit operating costs becoming a key issue
CMS Area
Hewett/Thames Area
2005 Analyst Day – Bacton Gas Terminal
SNS Business Edge
Explore Appraise Develop Produce Abandon
Divest Acquire
Tullow Oil is a full-cycle E&P Business
Risk/Equity ProfileRisk/Equity Profile Fast Track DevelopmentsFast Track Developments Field Life ExtensionField Life Extension
Infra-Structure LeverageInfra-Structure Leverage Low Cost OperationLow Cost Operation
Portfolio ManagementPortfolio Management Alternate UseAlternate Use
2005 Analyst Day – Bacton Gas Terminal
SNS Position in Tullow Portfolio
□ 30% group commercial reserves and 20% of group contingent reserves
□ Schooner and Ketch acquisition reserves confirmed at 330 bcf
- Re-development moving ahead at pace
- Material “early gains” from production stability
□ SNS Gas production of 112mmscfd ytd 40% of group 2005 production (with Alba)
□ Horne & Wren development completed in June and production exceeding expectation (110mmscfd gross/ 55 mscfd nett)
□ Significant exploration potential in CMS area
□ Working to further extend Hewett/Bacton economic life
2005 Analyst Day – Bacton Gas Terminal
Summary – Strategy Implementation
□ Tullow has built a significant platform for growth in the UK SNS
□ Successfully pursuing Tullow’s four “value adding routes”
- P&D, Exploration, Acquisitions & Portfolio management
□ Continuing to leverage the team’s commercial, technical and operating skills
□ Material activities in both SNS core areas in 2005 and beyond
□ Opportunities to maximise benefits of favourable gas market
□ Pursuing suitable opportunities to build a third core area (Dutch Sector?)
The SNS is a key component of Tullow’s future
2005 Analyst Day – Bacton Gas Terminal
Agenda
Thames/Hewett Area - Cost Control and Consolidation (Alan Marshall)
CMS Area - Preparing for Further Growth (Mike Simpson)
Schooner and Ketch - Re-development Programme (Peter Evans)
Exploration - Maximising Near Field Potential (Chris Flavell)
UK Gas Market - Marketing and Hedging (Brian Williams)
Q&A
2005 Analyst Day – Bacton Gas Terminal
Thames/Hewett Area – Alan Marshall
2005 Analyst Day – Bacton Gas Terminal
Thames/Hewett Corridor 2005
21
0 Kilometres
Tullow non-operated Tullow operated
□ Thames-Hewett-Bacton infrastructure position purchased from BP – 2000/01
□ Series of Bolt-On Acquisitions and operatorships added
□ Development, operatorships, and third party opportunities continue to be pursued
Licensedacreage Openacreage
10
Laps/BactonPipeline
Thames/BactonPipeline
Hewett/Bacton Pipeline
2005 Analyst Day – Bacton Gas Terminal
Hewett/Bacton Case Study
Hewett/Bacton
□ Hewett Complex feeding into the Bacton terminal
□ Terminal processes gas from the Hewett, Thames and LAPS complexes
Tullow Progress
□ 2000 – 20% non operated stake acquired from BP
□ 2003 – Additional 19% acquired from ConocoPhillips
□ 2003 - Operatorship transferred to Tullow - strategic importance
- Establish Operator capabilities and credentials
- Build foundations for other operated activities
- Controlling influence in Hewett field direction
- Influence on Thames infrastructure through Bacton initiatives
□ 2004 – Delivered 25% cost reduction target
Hewett Growth Opportunities
□ Focus on extending field life
- Continued pursuit of cost reductions
- Maximise in-field reserves recovery
- Marginal field developments
□ Gas storage opportunity
2005 Analyst Day – Bacton Gas Terminal
Hewett Field Cost Challenge
Complex Infrastructure
□ 3 platform central facility
□ 3 normally unmanned installations
□ 9 subsea wells
Cost challenge
□ 2004 – 25% cost reduction achieved
2005 Analyst Day – Bacton Gas Terminal
Hewett-Bacton Management Responsibilities
Tullow OilTullow Oil PetrofacPetrofac
□ Business Support:
□ JV Operator
□ DTI Interface
□ Subsurface Management
□ Drilling
□ Well Operations
□ Field Development/Economics
□ Legal and Commercial
□ Finance
□ Public Relations
□ Facilities Management :
□ HSEQ (Duty/COMAH holder)
□ Emergency Response
□ Production Services
□ Maintenance and Inspection
□ Ops & Maintenance Organisation
□ Facilities Engineering
□ Project Management
□ Information Management
□ Cost Control
□ Planning and Co-ordination
□ Supply Chain
□ Logistics
2005 Analyst Day – Bacton Gas Terminal
Hewett Field Cost Challenge
Complex Infrastructure
□ 3 platform central facility
□ 3 normally unmanned installations
□ 9 subsea wells
Cost challenge
□ 2004 – 25% cost reduction achieved
□ 2005-2006 offshore
- Simplification
- Reliability improvements
- De-manning
□ Operational model applicable in other assets
□ Bacton cost challenge
2005 Analyst Day – Bacton Gas Terminal
□ Late life reserves recovery – low pressure operation
□ Production efficiency – compression optimisation
□ Third Party Business – Blythe, sour gas
□ Zechstein velocity string campaign
Hewett Area Opportunities
0 10Kilometres
20b 1625a 25b 21
30
1a1b
4b4a
5a5b
B1028b
3b2
19e 19d
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28a27
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494852 53
England
Bacton
Blythe
DawnDeborah
Delilah
Big Dotty
HewettLittle Dotty
Della Leman
Tullow non-operated
Tullow operated
Licensed acreage
Open acreage
Ongoingdevelopmentevaluation
Delilah work overand sidetrack □ Delilah workover /
sidetrack 1Q 2006
Zechsteinkalkopportunities
2005 Analyst Day – Bacton Gas Terminal
Hewett– Extending Field Life
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ate
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2005 Forecast
Post OCC2 Min Econ Rate
Delilah workover
Economic cut-off date whenTullow assumed operatorship
2005 Analyst Day – Bacton Gas Terminal
Thames Facilities Case Study
Thames Facilites
□ Central processing hub for five field groups, pipeline to Tullow’s Bacton terminal
□ Operated by ExxonMobil, supported by Tullow subsurface and commercial expertise
Timeline
□ 2000 – various interests acquired from BP
□ 2003 – Agip’s interest in Thames acquired
□ 2004 – ChevTex interest in Orwell acquired
□ Jan 2005 – First gas from Arthur field
□ June 2005 – First gas from Horne and Wren
□ July 2005 – 2nd Arthur dev well on line
Forward Plan
□ Maintain facilities at capacity
- Progress marginal developments
- Attract further third party gas
Thames Facilities Throughput
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2005 Analyst Day – Bacton Gas Terminal
Horne and Wren Case Study
Horne and Wren Development
□ Marginal fields development with 2 wells and a minimum facilities not normally manned installation
□ Tullow’s first UK operated development –delivered on time and within budget
Timeline
□ 2000 – 8% acquired from BP
□ 2003 – Additional 38% acquired from BP
□ 2004 – Remaining 54% and operatorship acquired from Shell and 50% sold to Centrica.
□ Mid 2004 – Project sanction
□ 2005 – First gas flowed in June
Forward Plan
□ Maximise reserves recovery over 3-4 year field life.
□ Seek re-use opportunities for platform facilities
2005 Analyst Day – Bacton Gas Terminal
Thames Fields
Producing Fields:□ BGT Contract
- Thames, Bure, Bure West, Yare, Wensum- Considering benefits of accelerated
production through blowdown profile
First gas 1986□ Production to 30/6/2005 401.5 Bscf (plus 16.4
Bscf from Deben)
Tullow proposed Infill Opportunities:□ Thurne (49/28-14 “L” discovery)□ Bure East
□ Bure North
Tullow 66.66%ExxonMobil (op) 23.33%Centrica 10.0%
EQUITY :
Bure
DebenThames
Wensum
YareLeman
Thames NW
Q
Latimer
Chalfont
Amersham
Chesham
Bushey
S Updip
Thurne
2005 Analyst Day – Bacton Gas Terminal
Thames Area Third Party Potential
□ Potential developments have been identified and are under review using Thames Infrastructure as an evacuation option.
□ These are:–Tristan–Wissey–Fizzy–Camelot –Dutch sector
□ Further exploration potential also exists
Tullow non-operated Tullow operated
Licensedacreage Openacreage
21
0 Kilometres 10
2005 Analyst Day – Bacton Gas Terminal
Thames/Hewett Growth Potential – 2005 and beyond
□ Establish a dominant and controlling position in existing Assets and in the area
- Influence strategic direction of Assets
□ Further consolidate Operatorship in the region
- Extract additional cost savings through operational efficiencies and synergies
□ Achieve 250 mmscfd throughput through the Thames facilities
- Further Arthur area gas and production from Horne and Wren
- Progress developments of marginal fields in the area
□ Extend field life of Hewett infrastructure
- Deliver Hewett OCC Phase 1&2 and additional in-field reserves.
□ Gas storage potential in Hewett
- Meeting with interested parties. Business development options currently being studied
2005 Analyst Day – Bacton Gas Terminal
CMS Area – Mike Simpson
2005 Analyst Day – Bacton Gas Terminal
CMS area – Focus on growth
Tullow’s game plan for CMS□ Acquire producing assets and strong infrastructure position
□ Recognised under explored and exploited area
□ Build a material position in operated exploration and production
□ Work with established and committed Operator
Success to date□ Rapid development of CMS III, Munro
□ Acquired significant op/non-operated exploration acreage
□ Acquisition of Schooner & Ketch
□ Commercial successes (gas contract, blend issues, third party gas)
□ Prospectivity confirmed
Still to do…□ Redevelopment of Schooner & Ketch
□ Accelerate pace of exploration and development
□ Expand and further align interests
2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area - 2001
25a21a
22b
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149 10
15
43
48 49
44
Boulton
Murdoch
0 10Kilometres0 10Kilometres8
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Tullow non-operated
Tullow operated
Licensed acreage
Open acreage
□ BP asset acquisition-Infrastructure and assets purchased from BP 2000/01
□ All assets non-operated
□ Significant potential-Field development (CMS III DTI approval)
-Exploration upside-Third party gas-Bolt-on acquisitions
2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area – 2002/3
25a21a
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Murdoch
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13a6
Hawksley
Tullow non-operated
Tullow operated
Licensed acreage
Open acreage
□ Development - CMS III
-Five unitised fields-Subsea development-Export via CMS facilities-First gas Aug ’02
□ Exploration
-Portfolio enhanced through the 20th and 21st Licensing rounds
□ Commercial
- Murdoch/Boulton depletion contracts terminated
2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area – 2004/5
□ Development - Munro-Discovered Feb 04-First gas Oct 05
□ Schooner & Ketch-Completed end March 05-Uptime improved-Redevelopment planning underway
□ Exploration- Operated success in 22nd Licensing Round
- 3 wells in 200528b27a26a
26b
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2928
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Boulton
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Murdoch
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Garnet
Marjan
Munro
Tullow non-operated
Tullow operated
Licensed acreage
Open acreage
Caister28a
2a
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49
3(N)49/03-3
23b
30b
05 1b
McAdam
Topaz
2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area - 2005 +
□ Development
-Numerous development opportunities
-Coordinated/integrated programme – CMS IV?
-Reservoir infill opportunities
□ Schooner & Ketch-Drilling campaign to deliver significant production and reserve upside
□ ExplorationNew prospectivity identifiedUp to 4 expl wells planned for 2006
28b27a26a
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17b
11 12
2928
23a22b
27b
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1015
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48
44
Ketch
Schooner
Boulton
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B1 Watt
Murdoch
0 10Kilometres0 10Kilometres8
12
18
711
17a16
13a6
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Garnet
Marjan
Munro
Tullow non-operated
Tullow operated
Licensed acreage
Open acreage
Caister28a
2a
2b
49
3(N)
23b
30b
05 1b
Cygnus Complex
Humphrey
McAdam
Arroll
Brunel
Prospects & Leads
Yawl
Opal
K3
K4
Harrison
Cameron
49/03 3Topaz
2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ BP CMS area acquisition – August 2000
Tullow Equity (CMS area)
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2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ CMS III development – August 2002
Tullow Equity (CMS area)
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2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ Munro development – October 2005
Tullow Equity (CMS area)
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2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ Schooner / Ketch acquisition – March 2005 (do nothing profile)
Tullow Equity (CMS area)
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2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ Schooner / Ketch - May 2005 (Tullow base plan)
Tullow Equity (CMS area)
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2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ Schooner / Ketch redevelopment plan 2006+
Tullow Equity (CMS area)
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S&K UpsideS&K ContingentS&K FirmS&K BaseMunroCMS3BoultonMurdoch
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2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ Potentially commercial developments / exploration upside - unoptimised, unrisked
Tullow Equity (CMS area)
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K3 areaExploration upside
S&K UpsideS&K ContingentS&K FirmS&K BaseMunroCMS3BoultonMurdoch
2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area
□ Tullow as an infrastructure owner : CMS current & potential tariff business (unoptimised, unrisked)
CMS area throughput (Gross Pipeline)
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Further exploration
success predicted
Cameron
K3 areaExploration upside
S&K UpsideS&K ContingentS&K FirmS&K BaseMunroCMS3
Boulton
Murdoch
CavendishHunter
Notional pipeline capacity
Caister
2005 Analyst Day – Bacton Gas Terminal
Greater CMS Area - Summary
□ Aligned infrastructure and field equity partnerships
□ Significant growth in Tullow equity gas developments
□ Tullow’s CMS portfolio all at UK market price and produced at high load factor
□ Substantial tariff income potential (Tullow 17% ownership)
□ Blending limits may constrain capacity but;
-New blend management system optimises throughput
-Relaxation of Wobbe limits negotiated at
Theddlethorpe
2005 Analyst Day – Bacton Gas Terminal
Schooner and Ketch – Peter Evans
2005 Analyst Day – Bacton Gas Terminal
Schooner and Ketch Acquisition
Development plan□ Signed SPA Dec 04□ Completed deal March 05□ Redevelopment plan Mid 05□ Rig Mobilisation Oct 05
Operational & Commercial opportunities□ Improve facilities uptime□ OPEX synergies□ Well recompletions and infill drilling □ Schooner Exploration well□ Topaz development & tariff□ Other 3rd party business
Rationale□ Gas in place of 1,500bcf□ c. 350bcf (23%) recovered to date□ Potential to double rate and recovery
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch – Facility Infrastructure/Organisation
□ Tullow Equities : Schooner 90.35% Ketch 100%
□ S&K Facilities Consist of Two Normally Unmanned Installations (NUI) tied back to the Murdoch Platform and CMS infrastructure by a 22 and 26 km sub-sea pipelines.
□ Tullow Operates S&K and ConocoPhilips operates Murdoch and CMS
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch – Integration and Early Opportunities
□ Asset Integration
- Recruitment process commenced ahead of acquisition- Early integration into existing Bacton operations management structure- Rapid access to experienced operations team- Focussed facility integrity inspections during hand over- Detailed reviews of well and operational histories- Well failure modes understood and re-medial programmes developed- Work programme potential understood early
□ “Quick Wins”
- Production up from between 22-44 mmscfd, to 50-75 mmscfd- Facility uptime increased from low of 28% to steady +95%- Offshore data capture and analysis accelerated to help maintain
redevelopment schedule- Redevelopment team in place early generating opportunities- Specialist drilling and work-over team recruited- Committed to Ensco 101
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch – Re-development
□ Redevelopment
- New wells are a blend of experience and technology- Sand connectivity issues recognised and wells designed to maximise
recoveries - Ensco 101 secured for 18 months with firm programme- Balanced work programme is a combination of work-over and new wells- 2006 production >100mscfd- Plans in place to manage drilling and completion challenges- Significant upside potential identified
□ Success from blend of experience, fresh ideas, pace and the application of technology
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch : Early Success
□ Uptime for Schooner from 28% (the 6 weeks before operatorship) to 95%
□ Well deliverability improvement – further gains when rig arrives
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Took overoperatorshipTook over
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2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch : Well Optimisation Project
□ Schooner
-Velocity strings and straddles on Schooner 1, 3, 4, 5, 6, 8 and 9
-Water shut-off and perforations (possible stimulations) Schooner 8
-Perforation and stimulation Schooner 4, tubing wash Schooner 9
□ Ketch
-Velocity string Ketch 5 and straddles Ketch – 1 and 3
-Re-perforation and additional perforations Ketch 1 and 3
- Tubing wash Ketch - 6
0
5
10
15
20
25
30
Jul05
Jan06
Jul06
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
Jan10
Jul10
Gas
pro
duct
ion m
msc
fd-1
00%
Ketch workovers and stimulation
Schooner workovers and stimulation
2005 Analyst Day – Bacton Gas Terminal
□ Schooner - 10- 60 degree deviated development well - 23 BCF incremental reserves- £ 15.9 MM Capex- Production peak 41 mmscfd- Declines to 20 mmscfd after 1 year- Up-dip attic well in main field (650 ft sand)
Schooner & Ketch: Schooner-10
Schooner - 10
0
10
20
30
40
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Gas
pro
duct
ion m
msc
fd
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch : Ketch – 7, 4st & 8
□ Ketch - 7- Horizontal development well in Carboniferous
- 23 BCF incremental reserves
- Production peak 30 mmscfd
- Declines to 15 mmscfd after 1 year
□ Ketch - 8- Four legged multi-lateral
- 15 BCF incremental reserves
- Production peak 65 mmscfd
- Declines to 26 mmscfd after 1 year
- Contingent on KA-7 horizontal drilling success
00021
12100
00121
00121
00121
12100
12100
00121
00121
00121
12200
12200
12200
0022
1
12200
0022
1
00221
00221
12200
12300
00321
00321
0032
1
0032
1
00321
00321
00421
12400
0042
1
00421
0042
1
00421
00521
12500
0052
1
00521
00521
00521
00521
12500
12500
12600
00621
12600
12600
00621
00621
12600
00621
00721
0072
1
0072
1
00721
00721
00721
00721
0072
1
00821
0082
1
0082
1
00 8 21
00821
12800
0082
1
0921
0092
1
12900
00921
0
0013
1
00231
13300
13300
00331
13400
13400
13400
0053
1
13500
00531
00631
13600
44280112379
44280211939
4428K111959
4428K212182
4428K4z12349
4428K512253
4428K6y12543
4428K6z12536
yrotcejarT70AK
yrotcejarTts40AK
yrot
cejar
T80
AK
52821
5282
1
52821
12825
12825
5282
1
□ Ketch – 4st- Replacement well for KA04
- 12 BCF incremental reserves
- Production peak 20 mmscfd
- Declines to 12 mmscfd after 1 year
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch : Re-Development Work Programme Phase 1
□ Development potential recognised - Early rig commitment and 12 months infill drilling campaign firm- Increase wellbore utility with re-perforation and stimulation programmes- Mechanical interventions to accelerate production- New field potential attractive – NW Schooner
Base – further activityConcurrent well optimisation workContingent resourcesRig moveUpside
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2005 2006
Schooner SA10 (attic)
Schooner – perforations, stimulation
Schooner (5 workovers – vel/strad)
Ketch KA07 (three stage horizontal)
Ketch – perforations, stimulation
Ketch (3 workovers)
Ketch KA04 (horizontal sidetrack
Ketch KA08 (4 leg vert multi-lateral)
Jan Feb Mar Apr
2007 2008
Schooner NW appraisal (SB-1 location
Schooner SA-07 sidetrack
Schooner SA2 workover
Schooner SA-11 development well
Schooner NW development well 2
Schooner Ketch follow-up well
Yawl/SW Ketch exploration
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch : Schooner NW Appraisal
□ NW Schooner Appraisal
- 140 BCF Gas In Place (success)
- New location
- Drill Q4 2006
- High production rates
- Three legged multi-lateral
GWC
2005 Analyst Day – Bacton Gas Terminal
0
20
40
60
80
100
120
140
160
180
200
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
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Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Gas
Pro
du
ctio
n
mm
scfd
UpsideContingentBase - further activityBase - no further activity
````````````````````````
Schooner & Ketch : Success Case Production Profile
□ Base further activity is 15 months drilling activity – 5 wells, 9 workovers and well stimulation
□ Total Drilling and Optimisation Capex £88 MM for the 2005 - 2006 firm programme
□ Facilities capacity upgrades and metering
2005 Analyst Day – Bacton Gas Terminal
Schooner & Ketch : New Exploration Acreage
□ Arrol 44/26a to NE of Ketch (100% Tullow)
□ Ketex 49/3 south of Ketch – good material prospect west of Ketex discovery (100% Tullow)
□ Stephanian Play – West of Schooner (GdF operate exploration phase, Tullow 33.33%)
43/23bEndeavour 50%Tullow 50%
43/30b, 48/5(p) & 49/1(p)GDF 33%Tullow 33%Endeavour 33%
Ketex
Arrol
44/28a & 49/3(p)Tullow 100%
2005 Analyst Day – Bacton Gas Terminal
Exploration – Chris Flavell
2005 Analyst Day – Bacton Gas Terminal
Ingredients for Exploration Success
□ Existing infrastructure position
□ Pragmatic operators of nearby infrastructure
□ High quality and experienced team
□ Good database
□ Acreage position
- Growth of UKCS portfolio
- Focus on CMS exploration
2005 Analyst Day – Bacton Gas Terminal
Thames & Hewett Regional MapAcreage post BP acquisition
EnglandBacton
4a
5a
23a
29 30 29c
29d
28 26a
21
30b
26b
1a
4b4c
3c
48
5352
49 50
54
Orwell
Bure
DebenYare
Thames
Wensum
Gawain
Welland
Wissey
Horne
Wren
Little DottyDella
Delilah
DeborahBig Dotty
Dawn
Hewett
0 10Kilometres
Blythe
Fizzy
4a3d
Tullow non-operated Tullow operated Licensedacreage Openacreage
2005 Analyst Day – Bacton Gas Terminal
Thames & Hewett Regional MapCurrent acreage position
EnglandBacton
4a
5a
22a
23a
29 30 28 26a
21
30b
26b
1a
4b
3a
3c
48
5352
49 50
54
0 10Kilometres
Arthur4a
4a
3b
Tullow non-operated Tullow operated Licensedacreage Openacreage
Clear move to Operatorship
Ongoing development evaluation
Hewett – Significant reduction in operating costs in 2004 & 2005
Zechsteinkalk infill opportunities
Thurne-development opportunity
Ongoingdevelopment
evaluation
Chesham-exploration opportunity
Horne and Wren development1st gas June 2005
Delilah developmentwell late 2005
Ongoingdevelopment
evaluation
Orwell
Bure
DebenYare
Thames
Wensum
Gawain
Welland
Wissey
Horne
Wren
Little DottyDella
Delilah
DeborahBig Dotty
Dawn
Hewett
Blythe
Fizzy
2005 Analyst Day – Bacton Gas Terminal
25a21a
22b
22a
149 10
15
43
48 49
44
Boulton
Murdoch
0 10Kilometres0 10Kilometres8
12
18
711
17a16
13a
6
Tullow non-operated
Tullow operated
Licensed acreage
Open acreage
CMS Regional MapAcreage post BP acquisition
□ 4 blocks
2005 Analyst Day – Bacton Gas Terminal
CMS Regional MapCurrent acreage position
28b27a26a
26b
25a21a
21c
22b
22a
23b
149
18b19b
17b
11 12
2928
23a22b
27b
16
1015
43
48
44
McAdam
Ketch
Schooner
Boulton
Boulton H
B1 Watt
Murdoch
0 10Kilometres0 10Kilometres8
12
18
711
17a16
13a6
Hawksley
Topaz
Garnet
Marjan
Munro
Tullow non-operated
Tullow operated
Licensed acreage
Open acreage
Caister28a
2a
2b
49
3(N)49/03-3
23b
30b
05 1b
□ 29 blocks
Opal exploration success 2005
Munro exploration success 2004
K3 exploration success 2005
Schooner/Ketch acquisition 2005
23rd Round Awards 2005
23rd RoundAwards 2005
23rd RoundAwards 2005
44/19b explorationwell 2006
44/12 appraisalwell 2006
44/23b explorationwell 2006
49/3a explorationwell 2006 ?
44/16 explorationwell 2006
2005 Analyst Day – Bacton Gas Terminal
CMS Exploration Focus
□ Play types
□ Identifying the Lower Ketch play
□ Portfolio summary
□ Potential future activity levels
2005 Analyst Day – Bacton Gas Terminal
CMS Exploration Focus – Play Types
□ Structural fault blocks- Principal target Westphalian B Murdoch sands- Murdoch, Caister, McAdam, Boulton H- Good productivity- Easier to recognise, therefore more mature play
□ Deep Carboniferous structure- Principal target Namurian sands- Cavendish, Kepler, Trent- Difficult to map reservoir on seismic data- Moderate/good productivity, despite age and depth
□ Combined structural/stratigrahic play- Principal target Lower Ketch Westphalian C/D sands- K3, Munro, Opal, Boulton B, Schooner & Ketch- Excellent productivity- Dificult to locate, under-explored
2005 Analyst Day – Bacton Gas Terminal
Top Rotliegendes
BPU
Silverpit – must seal
Carboniferous Isopachs
Seismic Marker
Base Murdoch
Reliable seismic picks at Top Rotliegendes and Base Murdoch.
Lower Ketch 2 Reservoir(similar to Munro, K3, Hawksley, Murdoch K & Boulton B)
KEY:
BPU
CMS Area – Play Concept – Westphalian C/D
2005 Analyst Day – Bacton Gas Terminal
□ Reservoir interval seismically opaque
□ Top Seal horizon only sporadically imaged
□ Reliance on substantial well data to build interval isopachs
□ Note Plattendolomite‘hole’
CMS Area – Play Concepts – Westphalian C/D
2005 Analyst Day – Bacton Gas Terminal
K3 DiscoveryN S
Zechstein
WpA WpA
B B’
Silverpit
Greater CMS Area – Impact of K3 Success
2005 Analyst Day – Bacton Gas Terminal
-12600-12420
K3 K444/23-844/18-3N S
44/18-3 44/23-8
-12420-12600
13 km
Hard kick
Depth Converted Seismic & Geological Model
2005 Analyst Day – Bacton Gas Terminal
SNS exploration still ‘alive and kicking’
□ Technical
- Carboniferous is still under-explored
- Multiple plays in Carboniferous (Namurian, Westphalian B)
- Technological advancements still to be made, esp seismic
□ Commercial
- Infrastructure access improving
- High gas prices are rendering smaller prospects commercial
- Smaller Independents influencing activity levels
- Future activity levels probably linked to Majors’ exit strategy
Tullow is well positioned to take advantage
Summary and Conclusion
2005 Analyst Day – Bacton Gas Terminal
UK Gas Market & Hedging
□UK Gas Market- Overview- Pricing - UK Supply/Demand
□Tullow UK Gas Portfolio
□Hedging/IAS39
2005 Analyst Day – Bacton Gas Terminal
UK Gas Market
□Overview
2005 Analyst Day – Bacton Gas Terminal
Markets Overview
□ Oil and gas prices recently at record highs
□ Oil market supply/demand tight
□ UK believed to be short of peak winter gas; UK indigenous decline
□ Eon acquisition of Caledonia; security of supply
2005 Analyst Day – Bacton Gas Terminal
UK Gas Market Liberalisation
□ Gas & Power liberalisation (& utility un-bundling) on EU agenda
□ Drive towards competitive gas markets
- 1996: BG demerges into Transco & Centrica
- 1998: Entire gas supply market open to competition
□ Growth of liberalised UK spot market (most competitive in Europe) and hubs (Bacton)
Liberalised UK market doesn’t equal low price environment…
2005 Analyst Day – Bacton Gas Terminal
UK Gas Market Observations
□ The UK government, in its 2003 White Paper, identified major challenges facing UK Energy including
- Decline of UK’s indigenous energy supplies- Modernisation / update of energy infrastructure is required
□ Indigenous UK gas supply /demand gap is now a reality
□ UK NBP pricing now reflecting shortfall fears
□ UK import infrastructure (pipe and LNG) builds to fill indigenous supply shortfall; consider offtake flexibility to arbitrage markets
□ Future Questions- Linkage between markets and gas on oil pricing?- Continued oil indexation dominating European pricing; UK/Europe convergence? - Globalisation of gas due to increasing role of LNG; Europe/USA convergence?
2005 Analyst Day – Bacton Gas Terminal
UK Gas Market
□Pricing
2005 Analyst Day – Bacton Gas Terminal
Gas Supply
□ Transition from self-sufficiency to importation
□ Increasing importance of indigenous gas
Gas Pricing Background
Forward Curve Comparison
0
10
20
30
40
50
60
70
80
Apr01
Oct01
Apr02
Oct02
Apr03
Oct03
Apr04
Oct04
Apr05
Oct05
Apr06
Oct06
Apr07
Oct07
Apr08
p/t
her
m
Arco Schooner / Ketch 30/09/2005
2005 Analyst Day – Bacton Gas Terminal
UK Gas NBP Historical Prices, Calendar 2006 and Calendar 2007 Swaps
Calendar 2006
Calendar 2007
Spot History
UK Gas NBP: Spot History and SwapsG
B P
en
ce/
therm
10
20
30
40
50
60
70
80
90
100
110
120
Jan Apr Jul Oct Jan Apr Jul Oct2004 2005
Past performance is not indicative of future performance.
Source: trading history as at 6 Oct05
2005 Analyst Day – Bacton Gas Terminal
Past performance is not indicative of future performance.
Source: trading history as at 6 Oct05
Dated Brent Historical Prices, Calendar 2006 and Calendar 2007 Swaps
Dated Brent: Spot History and SwapsU
SD
/b
arr
el
20
25
30
35
40
45
50
55
60
65
70
Jan Apr Jul Oct Jan Apr Jul Oct2004
Calendar 2007
Calendar 2006
Spot History
2005
2005 Analyst Day – Bacton Gas Terminal
Past performance is not indicative of future performance.
Source: trading history as at 6 Oct05
NBP Calendar 2006
Dated Brent Calendar 2006 relative to UK Gas NBP Calendar 2006
UK Gas NBP and Dated Brent Comparison
2.6
2.8
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0
0.8
Jan Apr Jul Oct Jan Apr Jul Oct2004 2005
Dated Brent Calendar 2006
2005 Analyst Day – Bacton Gas Terminal
Spot, Quarterly and Winter 04 Averages
Spot
0
10
20
30
40
50
60
70
80
90
100
110
120
Oct Jan Apr Jul Oct Jan Apr Jul2003 2004 2005
1st August 2003 3rd August 2005NBP Win05 vs History
Quarter average Win04 average=33 pence/therm
2005 Analyst Day – Bacton Gas Terminal
Note: Pricing as of Close of Business 05 October 2005. Source: Goldman Sachs International “Gasunie” is based on our understanding of what the current lagged gasoil and fuel-oil linked formula is
Natural Gas: Current Annual Forward Prices p/therm
35
40
45
50
55
60
65
2006 2007 2008 2009 2010 2011 2012
NBP
Zeebrugge
US NG
"Gasunie"
2005 Analyst Day – Bacton Gas Terminal
UK Gas Market
□UK Supply/Demand
2005 Analyst Day – Bacton Gas Terminal
Transco View of Implied Import Requirement
2005 Analyst Day – Bacton Gas Terminal
Transco View of Supply/Demand Balance
2005 Analyst Day – Bacton Gas Terminal
New UK Infrastructure: Pipeline & LNG
2005 Analyst Day – Bacton Gas Terminal
UK/Europe
HUELVA CARTAGENA
ALGERIAN GAS
ALGERIAN GAS
2005 Analyst Day – Bacton Gas Terminal
Globalisation: LNG
Major LNG Supply Routes
2005 Analyst Day – Bacton Gas Terminal
Tullow UK Gas Portfolio
2005 Analyst Day – Bacton Gas Terminal
Tullow UK Gas Portfolio: Contracted Gas
□ Diversified SNS portfolio (~15 producing fields)
□ Gas landed at Bacton (~35%) & Theddlethorpe (65%)
□ Significant migration from Contracted to Uncontracted gas since 2000
- Then ~60% contracted
- Murdoch and Boulton contracts terminated
- 2006 ~15% contracted
□ Remaining contracted gas:
- Thames: Field dedicated depletion contracts (~39p/therm)
- RWE: Schooner/Ketch supply contract (19p/therm)
- Eon: Supply contract (~28p/therm; )
2005 Analyst Day – Bacton Gas Terminal
Tullow UK Gas Portfolio: Uncontracted Gas
□ Originally uncontracted gas marketed via Beach aggregator (Amerada); then acquired by TXU!
□ Physical now marketed via Tullow gas marketing group (based in Newcastle)
□ Physical currently sold at Beach via good credit quality counterparties (remember Enron, TXU!)
□ Will move to shipping soon with better liquidity
□ Gas sold at benchmarks including D-1 and M-1 indices
□ Hedging via financial products (up to 3 years forward)
2005 Analyst Day – Bacton Gas Terminal
NBPNBPNTS
Beach Trading
Traditional swing contract Delivery Point
Retro Trading
Offshore
NBP Trading
LDZ End UsersStorage
Cash out
OfgemDTI
FlangeGas
ProcessingFacility
Gas Processing
Facility
CVSLEntry Capacity
TranscoEntry
Facility
TranscoEntry
Facility
Offshore to NBP
2005 Analyst Day – Bacton Gas Terminal
Hedging/IAS39
2005 Analyst Day – Bacton Gas Terminal
Hedging: Objectives
□ Improved security of cash flow and liquidity (banking lines)
□ Reduce exposure to price volatility
□ Manage downside price risk
□ Improved ability to fund investments (incl. discretionary capex)
□ Match underlying physical commodity offtake (note IAS39)
□ Build revenue predictibility (Budgets, bank price decks, market benchmarks)
2005 Analyst Day – Bacton Gas Terminal
Hedging: Commodity Hedge Parameters
□ Minimum Hedge Levels
-Target 30% of all Oil and Uncontracted Gas entitlements from producing interests in any 12 month period
□ Maximum Hedge Levels – Delivery Risk
-70% cap on hedging volumes in any calendar year – no intention to reach this level
□ Term
-Previously credit challenges; now liquidity through at least 2008
□ Volumes/Frequency
-Tend to hedge regularly in relatively small volumes
□ IAS39
-Hedge instruments should be compliant to retain hedge accounting
…no price levels specified although hedging in excess of bank price deck creates debt liquidity
2005 Analyst Day – Bacton Gas Terminal
Hedging: How & Who With
□ How:
- Swaps downside protection; no exposure to upside
- Put Options downside protection; retains exposure to upside
- Zero Cost Collars downside protection; retain market pricing within collar, no exposure to upside above collar
- Participations downside protection; some exposure to upside
- Physical Forwards as in Swap but Shortfall exposure
□ Who With:
- Participants in Refinance Facility Syndicate
- US Investment Banks
- Trading Houses
2005 Analyst Day – Bacton Gas Terminal
Hedging: Recent Hedge Trades
□ Gas:
- Put Option Oct 2005: Strike 33p/therm, Premium 1p/therm
- Swap Nov 2005: Strike ~ 46p/therm
- Swap Summer 2007: Strike ~ 44p/therm
- Swap Q1 2008: Strike ~ 62p/therm
□ Oil:
- Put Options - Calendar Year 2006: Strike $50/bbl, Premium $1.50/bbl
- Collar - Calendar Year 2006: Put $50/bbl, Call $80/bbl, Nil Net Premium
2005 Analyst Day – Bacton Gas Terminal
Hedging: Volumes & Prices
59.543.934.9Current hedged p/therm
45.1
35.0
8,231
2006
6.357.1Volume hedged (mmcfd)
GAS
33.036.3Current price hedge ($/bbl)
7,7319,946Volume hedged (bopd)
OIL
2007H2 2005
□Commodity mix – significant oil exposure, increase in gas H205
□EA hedges – 4,000 bopd until end 09
□Oil Hedging - Modified profile following disposals- Zero cost collars still very attractive - Development projects limit scope further out
□Gas hedging- Continued strong forward curve - S&K, H&W now available- Capitalising on strong 2006
2005 Analyst Day – Bacton Gas Terminal
Key issues
□ No cash impact, other than normal flows associated with hedge settlement
□ 3 main categories of financial instruments- EA Barclays hedges: Call $29/bbl, Put $24.5/bbl, 4000 bopd to 2009- LT Gas contracts – Thames, Powergen, Schooner/Ketch- Others: swaps, collars etc
□ Treatment as follows- EA Barclays hedge - Negative MTM 1/1/05 £21.0 million, 30/6/05 £81.5 million
□Designated as cashflow hedges□ Ineffective element of £4.0 million to income statement
- LT Gas contracts□All classed as ‘own use’□No impact under IFRS
- Others□Designated as cashflow hedges□ Ineffective element of £1.6 million to income statement
□ Higher volatility of future earnings until longer dated hedges mature
IAS 39: Financial Derivatives
2005 Analyst Day – Bacton Gas Terminal
Summary – Alan Linn
2005 Analyst Day – Bacton Gas Terminal
SNS Position in Tullow Portfolio
□ 30% group commercial reserves and 20% of group contingent reserves
□ Schooner and Ketch acquisition reserves confirmed at 330 bcf
- Re-development moving ahead at pace
- Material “early gains” from production stability
□ SNS Gas production of 112mmscfd ytd 40% of group 2005 production (with Alba)
□ Horne & Wren development completed in June and production exceeding expectation (110mmscfd gross/ 55 mscfd nett)
□ Significant exploration potential in CMS area
□ Working to further extend Hewett/Bacton economic life
2005 Analyst Day – Bacton Gas Terminal
Summary – Strategy Implementation
□ Tullow has built a significant platform for growth in the UK SNS
□ Successfully pursuing Tullow’s four “value adding routes”
- P&D, Exploration, Acquisitions & Portfolio management
□ Continuing to leverage the team’s commercial, technical and operating skills
□ Material activities in both SNS core areas in 2005 and beyond
□ Opportunities to maximise benefits of favourable gas market
□ Pursuing suitable opportunities to build a third core area (Dutch Sector?)
The SNS is a key component of Tullow’s future
2005 Analyst Day – Bacton Gas Terminal
Tullow Oil plc3rd floorBuilding 11Chiswick Park566 Chiswick High RoadLondonW4 5YSEmail: [email protected]
A leading independent oil and gas exploration and production group
www.tullowoil.com