Tullow Oil plc & Pinsent Masons Share Ownership In Africa Dean Bradford & Lynette Jacobs. 03 October 2017

Transcription

1 Tullow Oil plc & Pinsent Masons Share Ownership In Africa Dean Bradford & Lynette Jacobs 03 October 2017

2 Who are we? Dean Bradford Share Plan Manager, Tullow Oil plc Lynette Jacobs Partner, Pinsent Masons Worked at Tullow since Previously worked as an Assistant Company Secretary at IMG and as a share plan Relationship Manager at Killik and Mourant. Spent 15 years at what is now Equiniti (who manage Tullow s share plans). Been involved in share plans for 27 years! Director at Berkhamsted Football Club and a Tottenham Hotspur fan. Long term experience of equity incentives. Provides wide range advice on share plans in the UK and Internationally. Advises on associated corporate governance and regulatory matters. Regularly presents on share plans and incentives. Member of GEO and the UK Share Plan Lawyers Group Slide 2

3 The Tullow Journey: Where it all started 1985 Tullow started in a small town south of Dublin called Tullow in 1985 The business idea came about after hearing that small oil fields in Africa were being left behind by the majors Senegal were trying to develop some small gas fields so Tullow Oil was set-up to rework the old fields 1986 Licence agreement signed in Senegal 1987 Gas production and sale commenced in 1987 Slide 3

4 The Tullow Journey: Building the portfolio and growing through acquisitions Tullow acquired licences through the 1990s all over the world, including Bangladesh, India, Côte d'ivoire, Egypt and Romania Tullow acquired producing gas fields in the UK Southern North Sea from BP for 201 million Transformational period for the Group In 2004 Tullow acquired Energy Africa and more than doubled in size In 2006 Tullow announced a US$1.1 billion bid for Hardman Resources Limited The acquisitions saw Tullow inherit strong portfolios of assets in Africa and elsewhere Slide 4

5 The Tullow Journey: Transformational discoveries & world class production Discoveries in Uganda, marking the beginning of a worldclass major new oil province Tullow recorded its largest ever discovery, the Jubilee field offshore Ghana Tullow s second new major oil province First oil from the Jubilee Field was achieved in December, in record time Tullow opened its third major new basin, offshore French Guiana Tullow made its fourth major new basin discovery in Kenya 2013 Signing of TEN PoD, basin opening discovery offshore Norway; continued success in Kenya; sale agreements for Tullow s Asian assets 2014 Further discoveries onshore Kenya, high margin production in West Africa; TEN project on track, on budget; ongoing divestment of non-core Europe assets Slide 5

6 Background From December 2016 to February 2018 there were four vesting dates for shares in just 14 months under the Employee Share Award Plan ( ESAP ) and Tullow Incentive Plan ( TIP ): 1 December % of Exceptional ESAP award (from August 2015) m shares. 19 February ESAP/TIP awards - 3.2m shares. 1 August 2017 Remaining 50% of Exceptional ESAP award m shares. 18 February ESAP awards vests - 5.8m shares. Over 1,100 Tullow employees across 12 countries benefited from these shares vesting. Slide 6

7 December 2016 Shares The table below shows the number of participants in each country who benefitted from the first half of the August 2015 Exceptional ESAP awards vesting in December Country Participants United Kingdom 388 Ghana 286 Kenya 130 South Africa 71 Uganda 70 Ireland 68 Norway 55 Gabon 10 Mauritania 7 Ethiopia 6 Uruguay 1 Total 1,092 Slide 7

8 Tullow Oil plc December 2016 South Africa Share Vesting Dean Bradford & John Machin 8 th & 9 th November 2016 Slide 8

9 Tullow Oil plc December 2016 Ethiopia Share Vesting Dean Bradford & John Machin 22 nd November 2016 Slide 9

10 Tullow Oil plc December 2016 Gabon Share Vesting Dean Bradford & John Machin November 2016 Slide 10

11 Tullow Oil plc December 2016 Ghana Share Vesting Dean Bradford & John Machin 12 th -14 th October 2016 Slide 11

12 Tullow Oil plc December 2016 Ireland Share Vesting Dean Bradford & John Machin 16 th November 2016 Slide 12

13 Tullow Oil plc December 2016 Uganda Share Vesting Dean Bradford & John Machin 19 th -20 th October 2016 Slide 13

14 Tullow Oil plc December 2016 Norway Share Vesting Dean Bradford & John Machin November 2016 Slide 14

15 Tullow Oil plc December 2016 Kenya Share Vesting Dean Bradford & John Machin 17 th & 18 th October 2016 Slide 15

16 Tullow Oil plc December 2016 United Kingdom Share Vesting Dean Bradford & John Machin 15 th November 2016 Slide 16

17 Share Options in Tullow Slide 17

18 Share Plan Awards vs. Share Option Share Plan Award Share Option ACTUAL shares in Tullow Oil PLC that are released to the participant after a defined period of time deferral period. Share Plan awards usually RESTRICTED so are tied to continuous employment. I.E. They are subject to forfeiture if the participant leaves during deferral period. A share option is a legal promise providing the participant with the ability TO BUY shares in Tullow Oil plc at a future date, based on today s share price. Like the share award plan, share options are usually RESTRICTED so that potential benefits are tied to continuous employment. The participant CAN NOT sell the shares during the deferral period. Again, the participant CAN NOT exercise their options during the deferral period. Once the shares have VESTED at the end of the deferral period the participant is GIVEN official ownership of the shares. The participant can then KEEP the shares or SELL the shares (subject to award rules.) via EXERCISE process. Once the options have VESTED the participant has the right to BUY shares at the (historic) grant price. The participant can exercise the option immediately or, if the share price is too low, WAIT (subject to award rules) for the price to improve. Slide 18

19 Legal due diligence Alternative approaches: Local lawyer liaison Desktop database Deciding on the approach

20 Legal due diligence (continued) Check position on: securities laws exchange controls employment law translation requirements data protection corporate nominee tax review (on sale of shares)

21 Company filings/approvals Gabon (exchange controls) South Africa (exchange controls) Uganda (securities laws)

22 Local knowledge Asked the question: how common is employee share plan participation in your country? Ethiopia Gabon Ghana Kenya Mauritania South Africa Uganda

23 Due Diligence Summer 2016 Tax: All current globally mobile employees (c. 120) and other employees who have worked in more than one country over the deferral period (numbers TBC) to be assessed individually and be taxed according to time spent as a tax resident in each country between the date of grant and date of vest. PwC to prepare the following: Domestic tax rate(s) for each location. Update of the tax withholding position in each country (further to 2015 report). Whether any pre-election made by an employee to automatically sell shares on vesting (i.e. to cover the tax) would have any tax consequences. Legal: Pinsent Masons to prepare the following: Update on shares legislation in each country (further to Sharesave due diligence earlier this year). How shares can be held in each country certificate or electronically. (Any) tax efficient ways to hold shares overseas. PwC and PM fees re-charged to relevant country cost-centres. Both reports delivered in August Slide 23

24 Exercise Process The intention was to have a pre-election period of 2 weeks from 17 November to 30 November Since we expected a large proportion of the 4.85m shares to be exercised at the first opportunity on 1 December, this allowed Tullow and our brokers to manage the process effectively and fairly for all participants. Participants had two choices on exercise: Sell All: All shares are sold and the proceeds (less relevant local taxes) are paid to the participant. Sell to Cover: Sufficient shares are sold to pay the individuals tax bill and then the remaining shares are owned by the participant. The default to hold owned shares is electronically (via Equiniti) but an employee can choose to have a physical share certificate if they wish (note: a share certificate may not be offered outside the UK). UK employees who choose to Sell All will receive net proceeds directly from Equiniti within seven days of the exercise date. In South Africa, the net proceeds will be distributed to participants as soon as received, with the tax element being processed in the next available payroll. Slide 24

25 Tullow Oil Portal Slide 25

26 Exercise Process In all other countries the gross proceeds were paid by Equiniti to the local payroll who paid the relevant taxes and then distributed the net proceeds to participants in the next available payroll see December 2016 and January 2017 payroll cut-off dates at Appendix A. Due to high expected exercises during December we had a weekly exercise procedure on 8,15, 22, and 29 December. From 1 January 2017, Tullow entered a closed period until our 2016 results were announced in mid- February During this period no shares could be exercised. Outside of closed periods, participants then have until 1 August 2023 to exercise these shares. The exercise process is managed through the employees logging onto the Equiniti share portal and selecting exercise my ESAP award. Slide 26

27 Communications Plan Outside of the UK there was a low understanding of how our share plans operate and the choices that are available to participants on exercise. This was also the first time for 4 years that shares were vesting in the money for current Tullow employees. A Q&A for the HR Team was prepared and circulated in August so that participants queries in the run up to first vesting could be answered. A full presentation pack was put together for each country which included relevant local share legislation and tax information, as well as worked examples on shares vesting. This presentation was signed off by relevant country management in the HR, tax and legal functions. For major (non-uk) countries (Ghana, Kenya, Uganda, South Africa and Ireland) the HR Reward Team (Dean Bradford and John Machin) spent a minimum of two days in country during October 2016 delivering the presentation referred to above to all participants and having individual one-to-one sessions with employees as required. Norway was visited in late August. Travel costs were picked up by the relevant countries. In the UK, weeks commencing 14 and 21 November 2016 were block booked for share plan roadshows to all UK employees. For the remaining countries (with smaller numbers of participants) webinar presentations were given during October and November Slide 27

28 EXCEPTIONAL ESAP Sell All example A. Assume a participant with a salary of 70,000. B. Sells 4,000 shares as part of the pre election period. C. Sale price assumed at 2.85 then the gross proceeds would be 11,400. D. Taxable income for ,000 (salary) plus gross share proceeds of 11,400 = 81,400. E. A tax withholding of 47% is therefore processed through payroll of 5,358. F. The participant receives an extra 6,042 after tax in the December 2016 payroll. s converted to Ush G. All share sales are subject to a 15 dealing fee. Income Slide 28

29 EXCEPTIONAL ESAP Sell to Cover example A. Assume a participant with a salary of 70,000. B. Sells 4,000 shares as part of the pre election period. C. Sale price assumed at 2.85 then the gross proceeds would be 11,400. D. Taxable income for ,000 (salary) plus gross share proceeds of 11,400 = 81,400 25% - TAX E. A tax withholding of 47% is therefore processed through payroll of 5,358. F. Rather than receiving an extra 6,042 after tax in the December 2016 payroll you will become a shareholder of 2,120 shares in Tullow Oil plc (4,000 less 47%). G. As long as the shares do not grow in value by more than the 11,100 Capital Gains Tax Allowance in any one tax year, you will not be further to any further taxable deductions. H. All share sales are subject to a 15 dealing fee 25% - TAX s converted to Ush Income Slide 29

30 The Week 1 Statistics in December 2016 Country Exercises 1 Ghana United Kingdom Kenya 91 4 IMEs 78 5 Uganda 53 6 South Africa 31 7 Ireland 9 8 Norway 2 Pakistan 2 9 Ivory Coast 1 Ethiopia 1 Total 558 Slide 30

31 Appendix A Payroll cut-off dates Country United Kingdom Ghana Kenya Uganda South Africa Cut-off Date 6 th December & 5 th January 4 th of each month 15 th of each month 18 th December & 20 th January N/A as share payments outside of payroll Slide 31

32 2014 HALF-YEARLY RESULTS Download the Tullow Investor Relations and Media App from the Apple and Android stores: Follow Tullow on: Tullow Oil plc 9 Chiswick Park 566 Chiswick High Road London, W4 5XT United Kingdom Tel: +44 (0) Fax: +44 (0) Web: