tullow oil - 2006 results presentationfiles.investis.com/tullowoil/pdfs/fullyear2006b.pdf · tullow...

SlideTullow Oil plc – 2006 Final Results 1

2006 ResultsTullow Oil plc Building a Balanced Portfolio of International

Exploration and Production Assets


Disclaimer

This presentation contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business.

Whilst Tullow believes the expectations reflected herein to be reasonable in light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Group’s control or within the Group’s control where, for example, the Group decides on a change of plan or strategy.

The Group undertakes no obligation to revise any such forward-looking statements to reflect any changes in the Group’s expectations or any change in circumstances, events or the Group’s plans and strategy. Accordingly no reliance may be placed on the figures contained in such forward looking statements.


Presentation Contents

28Appendix 1 – Exploration Programme

46Appendix 4 – South Asia

31Appendix 2 – Europe

34Appendix 3 – Africa

50Appendix 5 – South America

26

15

7

4

Page

Introduction

Business Review

Conclusion and Q&A

Operations Review

Section


INTERIM RESULTS - 06

Introduction – Aidan Heavey


Focused growth from a strong portfolio

• Exploration success and operational delivery

• £1 billion invested in 2006 for long-term growth

• Strong team in place for sustained business growth

• Portfolio of high-impact regional opportunities

• Continuous active portfolio management


PRODUCTION and DEVELOPMENT

EXPLORATION

ACQUISITIONS and PORTFOLIO MANAGEMENT

Tullow’s long term growth strategy

● A track record of production growth and asset enhancement

● 98% reserve replacement over the last three years

● 60 to 70% of Capex reinvested in Production and Development

● Near-infrastructure and high impact exploration both delivering

● Long term growth – key campaigns based on core plays and skills

● Continual rejuvenation of portfolio through new ventures

● A strong track record of deal identification, execution and integration

● Focus on value rather than production targets

● Consistently high-grading the portfolio



Business Review – Tom Hickey


Strong and profitable growth track record

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2002 2003 2004 2005 2006

Net Income Cash Flow

£m

illi

on

Tullow has a strong track record of generating value through acquisitions and organic growth

4.6 4.7 4.4 4.8 4.7

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2006 Results summary

Down 13%

Up 44%

Up 38%

Up 38%

Up 39%

Up 32%

Up 30%

Change

£140.2m

£309.5 m

4.00 p

17.50 p

£113.1 m

£224.4 m

£445.2 m

2005

£122.1 mNet debt3

£446.7 mCash generated from operations2

5.50 pDividend per share1

24.23 p

£157.4 m

£295.1 m

£578.8 m

2006

Sales Revenue

Operating profit before exploration activities

Basic earnings per share

Net profit

Record revenue, operating profit, cash flow and net profit

1Including Interim and Final Dividend2 Before working capital movements3 Including all cash balances


2006 Results – operational performance

Revenue up 30% to £579m

• W.I. production up 11% to 64,720 boepd

• Balanced revenue mix – Oil 46%, Gas 54%

• Realised gas price of 46.2p/therm

• Realised oil price of $52.2/bbl

Gross Profit up 57% to £318m

• Cash Operating Costs of £4.71/bbl

• DD&A charge of £6.13/bbbl (2005:£5.67/bbl)

• Exploration write-off £32.5 million

Operating cash flow1 up 44% to £447m

• £332m capital reinvestment

• £32m dividend payment

• £12.5m total cash borrowing costs

1before working capital adjustments

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Revenue£579m

Revenue£445m

£m

Operating ProfitGross Profit* DD&A Overlift

* Gross Profit before admin costs, exploration and disposals


Hardman Resources acquisition

• Deal announced 25 September 2006, completed 10 January 2007

• Hardman business consolidated in Tullow financials at 31 December 2006

• 65 million new Tullow shares issued to electing Hardman holders

• IFRS 3 – Preliminary Fair Value Allocation exercise undertaken

1Including Deferred tax Uplift of £155.3m

The Hardman portfolio is already delivering positive newsflow:

• Major upside potential in Uganda confirmed by recent Kingfisher well in Block 3A• Encouraging results from Chinguetti C-18 and C-14 wells• Additional licenses in Portugal and Suriname added• Integration effectively complete, asset familiarisation process ongoing

750.0

39.5

623.6

86.9

£m

Chinguetti

Intangible Assets

Total1Net Assets, including cash

Fair Value


Managing the business in a changing environment

Industry Environment

• Oil prices strong and stable

• UK gas prices off recent lows

Tullow Re-investment

• Portfolio analysis supports capital allocation

• £350m 2007 programme well covered by operating cash flow

• Hedged volumes underpin £280m of 2007 Revenue

• Bolt-on deals

Financing

• Net debt - £450 million post Hardman

• Some repayment and term extension likely

• Potential for portfolio rebalancing to enhance financial flexibility


0 100 200 300

2006

20072006 Programmes

• 2006 Capex of £332m largely driven by development programmes in UK, Gabon and Equatorial Guinea

2007 Programmes

• Cost Inflation and low gas prices in UK

have led to some capital reallocation

• 2007 capital split 60:40 between

Development and Exploration

• Balance shifted due to larger appraisal

programmes and postponement of

certain UK development programmes

Well funded capital programmes

DevelopmentExploration

£332m

£350m

South Asia

NW Europe

Africa

2007 Forecast Capex by Core Area

£350 million

7.3% (25.5)

38.4% (133.3)

52.6% (182.4)

South America

1.7% (5.8)


Business summary

•Excellent track record of acquisitions, organic growth and cost control

•2006 – Record results from production growth and strong pricing

•Allocating capital to regions with high value creation potential

•Portfolio rebalancing in 2007 to refresh the portfolio

•Continuing to grow both the dividend and the business



Operations Review – Paul McDade and Angus McCoss


2006 Key operational highlights

Exploration

• 58% success rate in 2006

• Major oil province established in Uganda

• Doubled high impact exploration acreage

Production and Development

• Average production of 64,720 boepd

• Total reserves and resources of 506 mmboe

• Okume, West Espoir and Bangora on stream

Acquisitions

• Hardman acquisition completed – Jan 2007

• Gabon – back-in rights added


Consistently generating reserve and production growth

2006 Production• Average = 64,720 boepd (23 mmboe)

• Year-end = 75,000 boepd

Commercial Reserves – 219 mmboe• Uganda adds 35 mmboe

• Further additions of 15 mmboe

• Organic Reserve Replacement = 89%

Contingent Resources – 287 mmboe• Mauritania adds 93 mmboe

• Further additions of 29 mmboe

Outlook• 2007 production forecast = 80,000 boepd

• Okume and Ketch production growth

• Material Kingfisher discovery with significant further upside potential

Three year organic reserve replacement of 98% Total Reserves and Resources = 506 mmboe

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Reserves Resources Production


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UK business environment

UK gas pricing

• Winter 06/07 pricing fell due to new imports, warm winter and full storage

• Low prices not sustainable

• Forward curve 2008+ remains strong

• UK-European price convergence remains

• Opportunistic hedging to lock in value

• c. 50% of 2007 output hedged at greater than 40p/therm

Market environment

• Tight and inflationary contractor environment in 2006

• Some marginal programmes deferred

• Market expected to soften to more sustainable levels

Gas Price Realisation Forward Curve

p/th

erm

Long term gas prices remain strong


UK Business – Record production with further projects sanctioned

Exploration Success

• Humphrey, Cygnus & K4 gas discoveries

• Up to 6 exploration wells planned in 2007

• 24th Round – 6 blocks awarded

Portfolio Continues to Deliver

• Production increased by 32% to 177mmscfd

• Horne & Wren exceeding expectations

• Strong performance from Ketch-7

• Schooner downgrade offset by strong organic growth elsewhere in the portfolio

Development Investment Ongoing

• Ketch-8 and 9 on stream 2007

• Schooner infill drilling deferred in current environment

• Kelvin & Thurne first gas 2H 2007

• Wissey project sanctioned for 2008 delivery


Strong delivery from the Africa business

Equatorial Guinea• Okume first oil on schedule in Dec 06 • Initial development well results positive• Ceiba uptime significantly improved• Production above 70,000 bopd

Gabon• Production sustained at 15,000 bopd• Acquisition provides further developments• Further infill success at Niungo

Congo (Brazzaville)• M’Boundi production above 50,000 bopd• Initial water injection results positive• Water injection of 120,000 bwpd targetted

Côte d’Ivoire• West Espoir onstream on schedule• Drilling program may be extended• Workover program ongoing on East Espoir

Mauritania• Chinguetti production around 23,000 bopd• C18 well tested at 8000 bopd• 3D/4D seismic initiated


Production and development outlook

Production and Development

• Average production target of 80,000 boepd

• UK

○ Two Ketch wells scheduled for May start-up

○ Thurne and Kelvin to come on stream in Q3

• Africa

○ Okume, Espoir, M’Boundi developments ongoing

○ Kudu gas development

○ Chinguetti redevelopment

○ Uganda Early production system

• Asia

○ Chachar – due on stream in Q2 2007

○ Bangora – full field development plan


Uganda – Preparing for commerciality

World-class basin potential

• Five discoveries from five wells○ First oil ever produced in Uganda

○ Highly productive reservoirs

○ Good quality crude

• Second Kingfisher test has significantly de-risked the large lake structures

Kaiso-Tonya discoveries

• 3D seismic – mid- 2007

• 4 wells commencing in April 2007

• Planned early production sanction - Q3 2007

• First oil targeted for 2009

Kingfisher discovery

• 3D seismic – mid-2007

• 1 well – Q4 2007

Exploration

• 2D/3D seismic

• Ngassa, Kingfisher Deep and ButiabaUp to $100 million to be invested in 2007

Block 12D Seismic

Block 3A3D Seismic1 Well

Block 2 – Kaiso-Tonya3D seismic4 onshore wells1 Ngassa well

Block 2 - Butiaba2D Seismic/1 well


Kudu: developing upside opportunities

Appraisal programme to understand upside

• 2006 – focused on appraisal locations

• Two well programme to start in April

• Development options to be reviewed following the wells results

• Results could dramatically expand options

○ 300/800 MW Gas to Power

○ Direct Gas Export

Strategic partner identified

• Plan to farm down to 70%

• In exclusive negotiations

• Pre-spud completion anticipated


India: four well campaign in proven rift basin

Exciting region with high impact potential

• CB-ON/1 on trend between two proven ‘Billion Barrel’ basins

• Geologically analogous to Lake Albert Basin, Uganda

• Proven plays to north and south

• 2006 seismic has identified a number of prospects

Prospect selection complete

• Four well programme in H2 2007

• Existing infrastructure makes wide range of prospects commercially viable

• Strong local market for energy

Map


Over 40 exploration wells planned for next 12 months

UK6 wells

Cameroon2 wells

Namibia2 wells

Ghana2 wells

Côte d Ivoire1 well

French Guiana2 wells

India4 wells

Suriname15 wells

Pakistan2 wells

Uganda7+ wells

Gabon1 well

Mauritania1 well



Conclusion – Aidan Heavey


Focused growth from a strong portfolio

•Clear, simple, repeatable growth strategy

•Balanced portfolio

•High quality staff

•Strong Cash Flow and Sensible Gearing

•Focus on what we know

•Long term plans and a long term view

Tullow is a flexible Exploration and Production business that can offer maximum value creation in changing market conditions



Appendix 1 – Exploration programme


Over 40 exploration wells planned for next 12 months

UK6 wells

Cameroon2 wells

Namibia2 wells

Ghana2 wells

Côte d Ivoire1 well

French Guiana2 wells

India4 wells

Suriname15 wells

Pakistan2 wells

Uganda7 wells

Gabon1 well

Mauritania1 well


Exploration programme

Q4 200730 mmbo40%2 wellsNgossoCameroon

Q3 200720 mmbo21%Level ZeroCI-26Côte d’Ivoire

H1 2008300 mmbo19%KibaroPSC AMauritania

H1 2008250 mmbo48%Lead 26Block 2Mauritania

Q2 2007100 mmbo40%M’PanoNziembouGabon

SOUTH AMERICA

ASIA

AFRICA

EUROPE

Q3 2007200+ mmbo50%4 well campaignCB-ON/1India

Q2 20071 TCF40%2 well campaignKohatPakistan

H1 20081,000 mmbo77.5%Matamata (2 wells)Guyane MaritimeFrench Guiana

April 20074 TCF90%2 Kudu East WellsKuduNamibia

Q3 2007500 mmbo50%Kingfisher - 2Block 3AUganda

Q3 200750 BCF51.7%Doris48/30aUK

Q2 200750 mmbo100%Nzizi-2Block 2Uganda

Q2+ 2007100+ mmbo40%15 well campaignUitkijkSuriname

Q4 2007900 mmbo100%NgassaBlock 2Uganda

Q2 200760 BCF31.5%North TanoTano ShallowGhana

Q2 2007600 mmbo22.9%MahoghanyWest Cape Three PointsGhana

Q4 2007200 mmbo100%Butiaba (3 wells)Block 2Uganda

Q2/Q3 2007200 mmbo100%Mputa (3 wells)Block 2Uganda

Q4 2007200 BCF25%TBASNS Farm-inUK

Q3 200735 BCF100%TBASNS Farm-inUK

Q2 2007120 BCF22.5%Harrison44/19bUK

March 2007300 mmbo6.25%Acer16/13cUK

March 200790 mmbo30%PeverilQuad 39UK

Date/StatusGross UpsideInterestProspectLicenceCountry

Map



Appendix 2 – Europe


UK business background

Independents continue to build

• Mature basin - Majors continue to manage portfolios but not yet exit

• Various asset sales packages (including cash in of some venture capital)

• DTI continues to be active; 24th Licensing Rounds, stewardship

• Access to rigs and services appears to be softening

Gas supply

• Period of unstable pricing as import capacity is established

• New import projects factored into forward curve

• UK fiscal terms in gas basin continue to be challenged

Map


Southern North Sea: growth in a challenging environment

Overview

• Strong License & Infrastructure Position○ 59 blocks○ Bacton gas terminal & 660km of pipelines○ 35 offshore platforms & subsea hubs

• Operating Capability○ 40% of infrastructure operated○ 79% of production operated

Costs & pricing continue to be managed

• Opex○ being controlled - 9p/therm

• Pricing○ Record pricing achieved in 2006 – 46p/therm○ Hedging protects against 2007 instability and softening ○ Forward curve firming

Key operational highlights

• Exploration○ Excellent track record of success - 100% in 2006○ 6 explorations wells planned for 2007

• P&D○ Record production achieved in 2006 – 177mmscfd○ Mature fields continue to outperform○ Current phase of S&K redevelopment nearing

completion○ Thurne, Kelvin & Wissey developments underway

Hewett/Thames Area

CMS Area

Tullow non-operatedTullow operated

Map



Appendix 3 - Africa


Africa: developing a truly pan-African business

A continent with many opportunities

• Mature basins where majors are exiting

• Significant areas currently unlicensed

• A number of largely-unexplored frontier basins

Strong knowledge base

• Over 20 years of experience in Africa

• Detailed understanding of African petroleum basins

• Good access to a range of opportunities

Extensive portfolio

• Interests in 14 countries, 54 licences and 15 producing fields

• Current production of over 38,000 boepd

• Interests in frontier exploration through to large development projects

• Continually evaluating new venture opportunities


North Africa: unique acreage position across the whole region

Overview• Tullow now “number 2” in Mauritania

following acquisition of Hardman• 9 contiguous blocks in Mauritania/Senegal

○ Producing Chinguetti oil field○ Tiof and Tevet potential developments○ Banda and Pelican gas discoveries○ Significant exploration potential

• Considerable long term exploration potential in this underexplored region

Key operational highlights• Early success in Chinguetti recovery

programme○ C-18 tested at 8,000bopd○ C-14 successful water shut-off

• 3D/4D seismic underway across Chinguettiand Tiof

• Planning for Phase 2b wells underway• Development options for Tiof under review

Map


W. Africa Transform Margin: production & high impact exploration

Overview• Espoir redevelopment commenced in 1999• Tullow now has a full-cycle business there

○ 2 producing fields○ 8 exploration licenses

• West transform margin has potential to add significantly to Tullow’s reserve base in 2007 and beyond

• Several 200mmbo+ structures currently being analysed

• Drilling planned for 2008/9

• Key operational highlights• Côte D’Ivoire – full cycle business

○ Espoir production up 51% to 29,500 bopd in 2006○ Development drilling ongoing○ 4 exploration licences signed in 2006○ 500 sq km 3D seismic data acquired on CI-107/108

• Ghana – building on our knowledge○ Mahogany prospect (250mmbo) to spud May 07○ 3D seismic - good probability of hydrocarbons○ North Tano gas appraisal well to spud June 07

Map


Expanding the Tullow footprint in Gabon

Overview

• Mature area suited to Tullows strengths

• Interests in ~40% of all licensed acreage

○ 12 producing fields

○ 5 exploration licenses

○ Back-in rights to 12 licenses

Key Operational Highlights

• Production sustained around 15,000bopd

• Additional back-in rights will add over 1,000 bopd by early 2008

• Continued success in Niungo infill programme

• Avouma onstream and Ebouridevelopment underway

Map


West Africa: material production growth in 2007

Equatorial Guinea

• Okume○ First oil on schedule in Dec 06

○ Initial wells within prognosis

○ Production ahead of target ~30,000bopd

• Ceiba○ Uptime significantly improved

○ Infill drilling programme ongoing sustaining production above 40,000 bopd

Congo (Brazzaville)

• M’Boundi○ Production sustained around 56,000 bopd

○ Initial water injection results positive

○ Facilities capacity of 90,000blpd liquid and 120,000 bwpd injection planned

Angola

• Block 1 ○ Tullow awarded license in Aug 2006

○ Appraisal drilling and 3D seismic planned for 2008

Map


Basin-wide strategy

• Leverage knowledge and influence

• Quickly discover basin potential

• Scaled development options

Hardman deal

• Increases influence and materiality

• 100% and operatorship of Block 2

Recent news

• Nzizi discovery – potential Mputaextension

• Kingfisher discovery

• Heightened HC potential of Lake Albert

Uganda: leading position in the Albertine Basin

Map


Exciting new hydrocarbon province

Five discoveries from five exploration wells in 2006• Mputa-1 – January

• Waraga-1 – March

• Mputa-2 – May

• Nzizi – November

• Kingfisher – December

Three wells tested• Highly productive reservoirs, multi-darcy permeability

• Good quality but waxy crude - >30 degrees API

• Kingfisher 44m zone to be tested in March

Current Programme• Accelerate drilling of lake prospects

• 3D and 2D seismic programmes

• Appraisal drilling of discoveries

• Review of options for Early Development

Map


Uganda – early development options

Challenges• Good quality but waxy & viscous crude

• Minimise environmental impact

• Ensure selected concept is viable

• Understand equipment lead time to ensure firm schedule

• Confirm proven reserves support early development scheme

Programme to EPS Sanction• Confirm concept definition – Q1 2007

• Detailed engineering studies – Q2 2007

• Sanction viable EPS – Q3 2007

Target• Meet MOU target of first oil 2009

Map


Uganda: early results are very encouraging

Exploration results in the Albert Graben are so far excellent

• Oil discoveries at Mputa-1 & 2, Waraga-1, Nzizi-1 & Kingfisher-1

• Encouraging results significantly enhance Lake Albert basin potential

Very aggressive 2007 exploration programme

• 2D seismic at Butiaba, Paara and on the DRC side of Lake Albert

• 3D onshore and transition seismic at Kaiso-Tonya and Bugoma

• Onshore wells planned (Nzizi-2, Ngassa-1, Kingfisher-2, Kaiso Tonya & Butiaba)

• Gear up to drilling offshore wells in Uganda

• Mputa-Waraga early development scheme under consideration

Map


Kudu: developing upside opportunities

Overview

• Offshore gas field with 3 tcf of proven gas and potential of up to 9 tcf

• 90% working interest

• Namibia in need of 300MW of power

• Currently working with Namibians and South Africans on 800MW gas to power project

Appraisal programme to start imminently

• Two well programme to appraise the upside potential to start in April

• Development options to be reviewed following the wells results○ 300/800 MW Gas to Power

○ Direct Gas Export

Strategic partner identified

• Plan to farm down 20%

• In exclusive negotiations with a single party

• Pre-Spud completion anticipated

Map


Tanzania and Madagascar: feeding the next campaigns

Madagascar• Leads interpreted using existing 2D seismic

and new gravity / magnetic data

• Prospective plays tied to Manandaza–1 light oil discovery

• Preparing for environmental impact assessment


Tanzania• Preparing for 2D seismic acquisition in the

Ruvuma Basin

• Hydrocarbon systems: Msimbati / Mkindani oil seeps & Mnazi Bay gas discovery

• High risk and potentially high reward leads


Map



Appendix 4 – South Asia


South Asia: reinvesting for growth

A growth region for Tullow

• Region of growing energy demand

• Major high-impact exploration potential

• Relatively low-cost exploration/operations

• Limited competition for assets

Developments to fund exploration

• 7 exciting high impact exploration licences

• Delivery of development projects in Pakistan and Bangladesh

Future growth

• Focused on organic growth

• Extensive technical and geological knowledge of South Asia

• High Impact campaigns in India and Pakistan in 2007

Map


Bangladesh: production upside and high impact exploration

Overview• Current energy demand is significant • Established gas pricing provides stability• Prompt payments on initial sales

Key Operational Highlights• Block 9

○ First gas - May 2006

○ Field development plan – April 2007

○ Production to be upgraded from 60 to 75 mmscfd

○ Phase 2 of appraisal programme

• Block 17/18○ 2D seismic acquisition completed

○ Successful farmout and license extension secured

○ Extensive 3D seismic planned for late 2007/8

Map


Pakistan: considerable high impact upside potential

Overview

• Portfolio rationalised

• Production○ Delivery of Chachar development ongoing

○ Sara-Suri compression upgrades sanctioned

• High Impact Exploration○ Kohat seismic complete

○ Drilling planned 4Q 2007

Key Operational Highlights

• Production○ Chachar first gas - 2Q 2007

○ Sara-Suri compression - 2Q 2007

• High Impact Exploration○ Extensive seismic completed in Kohat

○ Up to 2 wells planned starting 4Q 2007

• Further operational access anticipated in 2007/08

Map



Appendix 5 – South America


South America: high impact Atlantic twins

Suriname

• Drilling shallow wells for upside extensions of Tambaredjo heavy oil field

• Low cost tie-backs to existing infrastructure

French Guiana

• 2007 acquiring Controlled Source Electro-Magnetic survey

• Preparing to drill substantial Matamataprospect in 2008

• Maturing drill worthy prospects in the Eastern Kawana area

Falkland Islands

• Acquired 2D seismic and Controlled Source Electro-Magnetic surveys

• High risk and potentially high reward prospects mapped

Map


Tullow Oil plc3rd Floor, Building 11

Chiswick Park, 566 Chiswick High RoadLondon, W4 5YS

Tel: +44 20 8996 1000Fax+44 20 8994 5332

Investor Relations ContactChris Perry: [email protected]

tullow oil - 2006 results presentationfiles.investis.com/tullowoil/pdfs/fullyear2006b.pdf · tullow...

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