Tullow Oil plc Results. Building a Balanced Portfolio of International Exploration and Production Assets

Transcription

1 Building a Balanced Portfolio of International Exploration and Production Assets

2 Disclaimer This presentation 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 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. 2

3 Presentation Contents Section Introduction Page 4 Financials 6 Production and Development 18 Exploration 26 Summary 35 Appendix 1 Tullow Overview Appendix 2 NW Europe Appendix 3 Africa Appendix 4 - South Asia 57 X 3

4 2005 Results Introduction 4

5 Tullow - Continuously delivering growth Strategy continues to create long term value for shareholders Business performing across all areas Financial strength to achieve our objectives Production and Development assets continue to deliver growth Exploration portfolio demonstrating high potential Continuing to attract quality people Benefiting from the advantages of scale 5

6 2005 Results Financials 6

7 Record results supporting business growth Strong operating and financial performance Cash generation strong with significant financial flexibility Investment programmes fully funded Benefiting from positive oil and gas pricing Dividend growth reflects positive long term outlook 7

8 2005 Results - IFRS 31 December Change Turnover m m Up 98% Operating profit before exploration activities m 72.5 m Up 160% Net Profit m 31.3 m Up 261% Basic earnings per share p 5.88 p Up 188% Final Dividend per share 4.00 p 1.75 p Up 129% Cash generated from operations m m Up 107% Net debt m 67.1 m m 1 Excludes disposal profits 2 Before working capital movements 3 Including all cash balances Record turnover, operating profitability, cash flow and net profit 8

9 Key 2005 Accounting issues Transition to IFRS Six principal adjustments from UK GAAP Most significant IAS 39 material Balance Sheet entries, moderate earnings impact Acquisition of Schooner/Ketch Another Fair Value exercise Disposal of Alba/Caledonia and offshore Congo Detailed Profit calculation impacts Fair Value, Tax, Operating Costs Different treatment between Interim and Final Overlift Arising in three areas Interaction with disposed assets 9

10 2005 Revenue up 98% to 445 million Increased Revenue arising from both price and volume rises Energy Africa full year Schooner/Ketch from 31 March , ,000 South Asia Africa NW Europe Revenue 445m 0.2% 59.5% Overall working interest production up 44% to 58,450 boepd 400, ,000 Steady pricing increases Average UK gas prices p/therm p/therm Effective average oil price up 26% to $43.0/bbl million 300, , , ,000 Revenue 225m 0.6% 47.8% 40.3% Average discount to Brent of 13% excluding Alba discount is 10% 100, % 50,000 UK tariff income of 14.7m (2004: 9.4m)

11 2005 Gross Profit up 140% to 202 million Underlying Cash Operating costs of 4.84/barrel, working interest basis ( /bbl) 500, ,000 Overlift Cash Operating Costs DD&A Gross Profit* Revenue 445m 21,295 Reported Operating Costs materially affected by overlifted volumes m ( 1.0/barrel) 400, , ,158 DD&A charge of 5.67/barrel, affected by Acquisitions and Reserves Upgrades Exploration costs write-off m million 300, ,000 Revenue 225m 119,696 Romania, UK, Angola, Gabon 200,000 63, , ,000 67,571 Outlook 100,000 94, operating costs to remain steady at c. 4.60/barrel Group DDA approximately 5.50/bbl 50, *Gross Profit before admin costs, exploration and disposals 11

12 Acquisitions and Disposals Accounting Portfolio Management $184m ( 101m) disposal of Alba/Caledonia and offshore Congo (Brazzaville) assets Reported Profit on disposal 30.5m 25m on sale 5.5m related to reversal of overlift (also shown in Operating Costs) 6.9 million Horne & Wren profit based on successful development and level of reserves 1.3 million loss on Congo (Brazzaville) disposal Late lifting in August created overlift position Schooner and Ketch Schooner/Ketch m Headline consideration 200m Cash payment 189.3m after adjustments DD&A rate 6.89/boe based on current reserves however c. 80bcf in Contingent reserves Tangible Assets Intangible Assets Working capital Gas sales contract Decommissioning (31.3) (13.2) Net cash consideration

13 Taxation: effective tax rate of 35% 2005 effective tax rate of 35% pre exploration write-off, profit on disposals Principal Corporation Tax exposures in UK and Gabon Effective Tax rate for period as follows m Profit Before Tax - Profit on Disposals - Impact of Overlift on Operating Costs - Exploration Write-Off Taxable Base Tax Charge/(effective rate) (36.1) (35%) Profit on sale of subsidiaries reported net of tax UK tax charge impacts on Current/Deferred split 13

14 Robust cash flow and financial capacity 2005 performance metrics 2005 operating cash flow* up 106% to 288 m 44.5p/share Net debt at 31 Dec m, (2004: 67.1m) 450 Foreign exchange gain Proceeds on disposals Operating Cashflow Interest, Tax And Dividends Acquisitions Capex Gearing at 31 December of 36% (26% pre-hedging) financing initiatives 350 $850m Group refinancing completed September 2005 Reduction in cash collateralisation of over 20m Over $400m of unused capacity Outlook Ongoing investment programme funded from cash flows and facilities Brent discounts narrowing m UK Gas Pricing at record levels 100 Completion of developments further enhances financial capacity 50 *Before working capital 0 Cash Inflow Cash Outflow 14

15 Capital Expenditure: well-funded programme 300 Development Exploration 2006 Forecast Capex by core area 250 South Asia 6% NW Europe 43% Rest of Africa 43% Gabon 8% million 2005 Capex of 193m largely driven by development programmes in UK, Gabon, Equatorial Guinea Programmes in place to achieve 75,000 boepd by end 2006 Cost Inflation had limited impact on 2005 programmes but is impacting 2006/7 Exploration activities both cost and timing 15

16 Commodity price hedge programme OIL H H Volume hedged (bopd) 10,242 11,217 7,000 Current price hedge ($/bbl) GAS Volume hedged (mmcfd) Current hedged p/therm EA hedges 4,000 bopd until end 2009 at $29.30 Oil Hedging - Modified profile following disposals Zero cost collars still very attractive Development projects limit scope further out Gas hedging Continued strong forward curve Capitalising on strong 2006 to

17 Financial Outlook Over $1 billion of deals integrated since m+ of investment programmes fully funded Financial building blocks in place for long-term growth Increased dividend shows confidence in the business Taking advantage of strong oil and UK gas prices 17

18 Results Production and Development

19 2005: an exceptional year for Production and Development Production and Reserves Replacement targets exceeded Schooner & Ketch integration completed on schedule Over 60% of UK production now operated Major African developments on schedule Asian business expansion under way Strong CSR/EHS performance 19

20 Production Summary Production (mboepd) South Asia Africa NW Europe 58,450 boepd 33,600 24,400 69,000 boepd 33,800 33, Production Average Year-end 58,450 boepd 65,000 boepd 2006 Production Forecast Average Year-end 2007 Outlook Average 68-70,000 boepd 75,000 boepd 80,000 boepd

21 2005 Reserves Summary NW Europe 91.3 mmboe Total Reserves mmboe South Asia 18.6 mmboe Commercial Reserves up 19 to 192 mmboe Contingent Reserves up 13 to 166 mmboe 2005 production - 21 mmboe Reserves up 53 mmboe Organic reserves replacement 118% Gabon 225% Ceiba 126% M Boundi 248% Africa mmboe TOTAL RESERVES 358 mmboe (all reserves audited by ERC) 21

22 UK: gas basin business continues to deliver results Thames/Hewett Area (110 mmscfd) Thames throughput +400% Horne & Wren on stream, further developments planned Delilah well on stream at 11 mmscfd net Hewett equity increased to 51.69%* Costs continue to be reduced - Hewett demanning CMS Area (100 mmscfd) Schooner/Ketch Redevelopment under way, SA10 encountered high quality reservoir Uptime now stable around 97% Murdoch & McAdam infill wells on stream, three more under review Munro development on stream, concept studies for recent discoveries under way Three significant discoveries, further three exploration wells planned Production and tariff income Tullow net production currently around 210mmscfd Tariff income of 14.7 million in 2005 *expected to complete April

23 Africa: continued organic growth Gabon (17,000 bopd) Up to 8 wells planned for Niungo Avouma-South Tchibala development first oil Q Congo (Brazzaville) (6,500 bopd) M Boundi field delineation almost complete Facilities upgrade, water injection project and further 30 wells under way Côte d Ivoire (5,500 bopd) East Espoir infill delivered record field production West Espoir first oil Q Equatorial Guinea (5,500 bopd) Ceiba infill drilling will maintain field production through 2006 Okume development first oil December 2006 Namibia Significant progress towards Phase 1 sanction Rig secured for appraisal drilling Q Production Tullow net production currently over 34,000 boepd 23

24 South Asia: organic production growth expected in 2006 Pakistan Sara/Suri field production compression project Chachar first gas in Q Bangladesh Block 9 appraisal under way up to 1 tcf potential Bangora-1 production - April 2006 Bangora/Lalmai 3D seismic completed Confirms extensive structure Appraisal well programme to commence April 2006 Up to four wells planned 24

25 2006 outlook for production and development even stronger Further production and reserves growth Average 68,000 to 70,000 boepd Year-end production of 75,000 boepd Delivery of Schooner & Ketch redevelopment Production from African developments (Okume & West Espoir) Commercial agreement on Kudu Phase 1 Further progress towards materiality in Asia Continue to deliver a strong CSR/EHS performance 25

26 2005 Results Exploration 26

27 A consistent exploration strategy Exploration strategy is working Balanced portfolio of high impact and snuggle exploration Potential significant impact from frontier exploration UK snuggle exploration providing development opportunities A number of new licences awaiting final approval 27

28 2005: a successful year of exploration NW Europe Three North Sea gas discoveries Opal, K3 and Humphrey (in early 2006) New play fairway established Six new blocks won in 23 rd licensing round Africa Uganda Block 2 - two oil discoveries demonstrate a working petroleum system Mauritania Block 1 - Faucon gas discovery enhances regional prospectivity Gabon - Niungo North oil discovery, further exploration in 2006 Angola initial results disappointing but further opportunities anticipated South Asia Pakistan - Four high impact licences acquired Bangladesh Block 17&18 farmout concluded 28

29 2006: active exploration across the portfolio Overview Up to 20 exploration wells planned for 2006 NW Europe Southern Gas Basin - five wells will follow up new gas plays Humphrey discovery, Cygnus well currently drilling Two wells to target oil prospects Africa Uganda - two discoveries, five further wells in 2006 Gabon - five wells planned, two have been completed with negative results Five new exploration licences are expected in Africa South Asia Pakistan Nawabshah well currently drilling Major seismic programmes under way in India, Bangladesh and Pakistan Significant potential already identified in CB-ON/1 onshore India 29

30 Uganda: extensive acreage in new hydrocarbon province Background Largely unexplored graben Tullow has a 50% equity in all three blocks Licence areas cover over 12,000 km2 Analogous to Muglad Basin in Sudan Numerous oil seeps on basin margins Potentially prolific hydrocarbon basin Successful 2005/6 Programme Mputa-1 oil discovery January 2006 Waraga-1 oil discovery March 2006 Proved a working hydrocarbon system 30

31 Uganda: significant exploration programme initiated Block 1 2D seismic programme after EIA Block 2 Mputa appraisal well - mid April 2006 Potential stratigraphic trap in basal sands Also test downdip extent of oil-bearing sands Well test for Waraga planned for April Potential for three additional onshore wells Infill seismic planned for Waraga and Mputa Further seismic planned for northern area Block 3A Large structural prospects identified Kingfisher-1 well - Q Contingent programme thereafter Offshore Pelican well

32 UK: snuggle exploration identifies new play 43 44/16-NW Opal Cygnus Complex Cygnus Draco Hawksley Humphrey Munro 17b Harrison McAdam Halle K3 Cameron Murdoch Boulton K4 B Kilometres Three discoveries Opal June 2005 K3 September 2005 Humphrey - March 2006 K3 significantly de-risks 2006 programme Cygnus currently drilling K4 April Cameron - October Boulton H Watt Two additional CMS exploration wells to be drilled in Schooner Topaz Garnet Marjan 49 Ketch 49/03-3 Six blocks awarded in 23 rd round, open acreage under review for 24 th Round Tullow acreage Licensed acreage Producing fields Undeveloped Discovery Prospects Open acreage 32

33 India: major acreage position in prolific Cambay Basin Overview Tullow have a 50% interest in CB-ON/1 On trend with recent major oil discoveries in RJ-ON-90/1 to the north Adjacent to sizeable producing fields in the South Cambay Basin Well developed infrastructure in the region Relatively low-cost drilling and operations Work Programme Seismic reprocessing in 2005 indicates a multitude of structural traps 1,000 km of 2D seismic currently being acquired over the block A number of potential prospects already identified Planning under way for a minimum of four exploration wells in early

34 2006: Exploration Drilling Programme COUNTRY LICENCE PROSPECT INTEREST DATE/STATUS Uganda Block 2 Mputa 50% Oil Discovery Gabon Akoum Akoum West 100% Dry Hole U.K. 44/16-3 Humphrey 35% Gas Discovery U.K. 44/12-2 Cygnus 35% Drilling Uganda Block 2 Waraga 50% Oil Discovery Pakistan Nawabshah Shahpur Chakar 30% Drilling Gabon Akoum Soulandaka 25% Dry Hole Gabon Gryphon Dogbolter 23.5% April Eq. Guinea Block L Banyan 10% April U.K. 44/23b K % April Uganda Block 2 Mputa-2 50% May Uganda Block 3A Kingfisher 50% July Uganda* Block 2 Oil Prospect 50% July U.K. Quad 39 Farm-in 30% August U.K. 16/13c Acer 6.25% September Uganda* Block 2 Oil Prospect 50% September Gabon Nziembou Oil Prospect 40% September U.K. 49/28a Chesham 66.67% October U.K. 44/19b Cameron 22.5% October Gabon Nziembou Oil Prospect 40% October Uganda* *Provisional Block 2 Oil Prospect 50% November 34

35 Results Summary

36 A strong outlook for 2006 Strong organic growth from existing portfolio The financial strength to achieve our objectives Production and Development assets have significant upside Aggressive exploration programme in high impact areas A number of new opportunities under consideration 36

37 2005 Results Appendix 1 Tullow Overview 37

38 The Tullow footprint NW Europe 50% Production Gas focus Mature Basin Operator Exposure to UK gas market NW EUROPE Africa 50% Production Oil Focus Pan-African E&P business High Impact Exploration Kudu gas development Asia Materiality through organic growth High impact exploration SOUTH ASIA AFRICA 38

39 Tullow Growth Strategy PRODUCTION & DEVELOPMENT STRATEGY Exploitation and expansion of Tullow s current reserve base Producing efficiently, replacing production, growing reserves EXPLORATION STRATEGY A balance of low risk and high impact exploration New ventures looking to expand acreage positions in both areas STRATEGY ACQUISITIONS Selective acquisitions within core areas Ongoing programme of bolt-on acquisitions PORTFOLIO MANAGEMENT STRATEGY Focus on assets where we have influence Maximise value of each region 39

40 Evolution of the Tullow Business Group Turnover Company-transforming acquisitions Southern North Sea Assets 2001 Energy Africa May 2004 Schooner/Ketch March 2005 Organic growth llion mi UK CMS III, Horne & Wren and Munro developments West Africa West Espoir, M Boundi & Okume developments Asia Chachar and Bangora developments

41 Results Appendix 2 NW Europe

42 SNS Business Background Exit of Majors Mature basin - assets not material for the Majors and not attracting investment Acquisitions from BP, Shell, ExxonMobil, ENI, ConocoPhillips, Chevron Maximise indigenous supply from mature basin Annual licensing rounds to churn acreage Promote licences to attract small players Stewardship drive to maximise reserves recovery SOUTHERN NORTH SEA Gas Supply Transition from self sufficiency to importation Increasing importance of indigenous gas Pricing reflects market balance 42

43 Thames/Hewett Area: continue to consolidate position Thames Area Thames throughput increased by 400% Horne & Wren first gas Arthur third party gas secured Unit operating reduced significantly Further developments under review Throughput (mmscfd) Thames Facilities Throughput * Forecast peak throughput Hewett Fields Equity further increased to 51.69% 30% reduction in operating cost since 2004 Demanning project under way Delilah sidetrack yields 11mmscfd net Bacton Terminal Further cost step change project initiated Continue to deliver excellent uptime to customer fields Strong Safety Performance * 43

44 CMS Area: a region of significant further prospectivity Exploration Opal, Kelvin (K3) and Humphrey successes 23 rd round six blocks awarded Further three wells in 2006 Developments Munro development on stream Development of recent discoveries under review Hunter 3 rd party development tied in Producing Fields McAdam, Murdoch infill success Further wells under review Outlook Continue to develop subsurface carboniferous expertise and enhance operating capability to exploit prospectivity 44

45 Schooner & Ketch: significant production growth in 2006 Team Experienced subsurface, drilling and operations team now in place Production & uptime Production maintained above 50 mmscfd Facility uptime now steady around 97% Redevelopment Ensco 101 secured through early 2007 SA-10 drilling under way Simultaneous well intervention work programme ongoing Further four wells planned Exploration/Appraisal Schooner NW rig secured April 2006 Additional blocks secured in 23rd Round 45

46 2005 Results Appendix 3 - Africa 46

47 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 11 countries, 33 licences and 9 producing fields Current production of over 34,000 boepd Interests in large development projects Continually evaluating new venture opportunities 47

48 Gabon: targeting growth in production and operating capability Niungo Field 9 wells drilled in 2005 Reserves replacement 225% Up to 8 wells planned in 2006 Nziembou Two exploration wells planned Etame Area ET-6H success sustained production Avouma developments first oil Q Tchtamba Field Production sustained around 7,500 bopd net Studies under way to exploit significant sour crude potential Azobe Pursuing operatorship & increased equity Assala appraisal/development under review 48

49 Congo: focus moving from delineation to recovery factor M Boundi Field STOIIP & Reserves Field delineation almost complete Current range 1.0 to 1.3 billion bbls Reserves 22.5mmbo, 21% recovery factor 2006 Activity Over 60,000 bopd achieved, facilities constrained Upgrades to facilities ongoing Currently 43 wells on the field with up to 30 wells planned 2006 Pilot water injection startup 2H2006 (3 injection wells, capacity 30000bpd) Oil Export Oil now sold as N Kossa Blend Significant reduction in discount to Brent 49

50 Equatorial Guinea: production growth through 2006 and 2007 Ceiba Field Six infill wells drilled in 2005 with further six planned for 2006 Reserves replacement 126% Highest field production since 2002 Okume Development Remains within budget All six platforms en route to EG 40 well drilling programme to commence August 2006 First oil on schedule for December Plateau production in 2007 Operating cost synergies 50

51 Côte d Ivoire: production growth and unit cost reduction East Espoir Infill drilling programme completed Well performance significantly better than anticipated Record current production of 7400bopd West Espoir Facilities installed within budget Seven well drilling programme starts in April 2006 First Oil 3Q 2006 CI-107 and CI-108 2D seismic survey complete 3D seismic scheduled for Q Wells planned for

52 Kudu: an important year for commercial progress Kudu Opportunity Tullow operated asset 90% working interest Reserves potential up to 9tcf Phase 1 Gas to power (800MW) FEED study completed GSA and PPA negotiations under way First gas ~2010 Phase 2 Two well appraisal programme Rig secured 1Q 2007 Ongoing concept studies (Gas to Power, Modular LNG, gas export) 52

53 Mauritania/Senegal: encouraging results from gas discovery Mauritania Block 1 (20%) Block 1 - Faucon gas discovery in November 2005 proves up a regional working hydrocarbon system Mauritania Block 2 (20%) Block 2 - New well results being integrated into geological model Block 2 Exploration well in 2007 Senegal (60%) St Louis several leads identified Block 1 discovery reduces risk for the region 53

54 Angola: further licence opportunities being considered Overview Tullow acquired 15% interests in Blocks 10 and 24 offshore Angola through farm-in deal with Sonangol P&P Covered by good quality 3D seismic Largely unexplored region Work Programme Three unsuccessful wells drilled Provided a good understanding of the region Other opportunities in the region being considered 54

55 Madagascar: a proven prospective region for oil Overview Block 3109 Tullow 50% 11,700 sq km block in the Karoo Rift Potential high impact (100 mmbbl+) oil prospects Work Programme Tullow operated Initial work programme - 30 months Gravity survey, aeromag and seismic Contingent wells planned 55

56 Cameroon: current 3D seismic, potential drilling in 2006 Overview 40% interest in the offshore Ngosso Block 3 oil discoveries on the block plus gas potential Work Programme D seismic programme focused on development opportunities Potential drilling - Q

57 Results Appendix 4 South Asia

58 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 15 Exploration and development licences Development projects in Pakistan and Bangladesh Exciting exploration acreage in Pakistan, India and Bangladesh Future growth Focused on organic growth Extensive technical and geological knowledge of South Asia Continue to assemble an attractive high-impact portfolio 58

59 Pakistan: significant high impact exploration potential Production & Development Sara-Suri gas field Compression project planned to enhance production Chachar gas field Development under way three wells planned May 06 First gas 4Q 06 Exploration Nawabshah well in progress Kohat Block Seismic in progress Well planned 1Q 07 59

60 Bangladesh: considerable potential upside in Bangora Bangora-1 Production Development under way First gas April 2006 Gas sales ~ 50mmscfd Bangora/Lalmai Appraisal Appraisal programme approved 620km 2 3D seismic acquired Up to 4 appraisal wells planned GIIP potential of up to 1tcf Block 17/18 Total farmout completed 2D seismic under way Extensive 3D seismic planned late 06 60

61 Tullow Oil plc 3 rd floor Building 11 Chiswick Park 566 Chiswick High Road London W4 5YS ir@tullowoil.com A leading independent oil and gas exploration and production group 61