Notes for this page
Billion cubic feet
Barrels of oil equivalent
Barrels of oil equivalent per day
Barrels of oil per day
Caister Murdoch System
- CMS III
A group development of five satellite fields linked to CMS
Civil Society Organisation
China National Offshore Oil Corporation
Development Leadership Team
Delegation of Authority
Democratic Republic of Congo
Deferred Share Bonus Plan
Exploration and evaluation
Exploration and Appraisal
Exploration and Production
Earnings Before Interest, Tax, Depreciation and Amortisation
Environment, Health and Safety
Environmental Management System
Energy Resource Consultants
Executive Share Option Scheme
Front End Engineering and Design
Floating Production Storage and Offloading vessel
Financial Reporting Council
Financial Reporting Standard
Full Tensor Gravity Gradiometry
- FTSE 100
Equity index whose constituents are the 100 largest UK listed companies by market capitalisation
Fair Value Through Profit or Loss
Global Exploration Leadership Team
Ghana National Petroleum Corporation
Government of Uganda
Company and its subsidiary undertakings
International Accounting Standard
International Accounting Standards Board
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
Information Management System
International Organization for Standardization
London Interbank Offered Rate
Lost Time Incident
LTI Frequency Rate measured in LTIs per million hours worked
Million barrels of oil
Million barrels of oil equivalent
Million standard cubic feet per day
Memorandum of Understanding
Mark To Market
Operational Readiness and Assurance
Reserves and/or resources estimates that have a 10 per cent probability of being met or exceeded
Reserves and/or resources estimates that have a 50 per cent probability of being met or exceeded
Production and Development
Pay As You Earn
Petroleum Revenue Tax
Production Sharing Contract
Performance Share Plan
Supplementary Corporation Tax
Share Incentive Plan
Senior Management Committee
Sale and Purchase Agreement
- sq km
Socially Responsible Investment
- UK GAAP
UK Generally Accepted Accounting Principles
Value Added Tax
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Enhancing financial flexibility
"The Tullow financials are up on 2009 and will be transformed significantly in 2011 by revenues from the Jubilee field in Ghana and the expected proceeds from the Uganda farm-down."
Ian Springett, Chief Financial Officer
Our financial strategy continues to be to ensure we have a strong balance sheet and the flexibility to support the Group's significant growth strategy.
2010 results summary
|Sales revenue ($m)||1,090||916||+19%|
|Operating profit ($m)||235||151||+56%|
|Net profit ($m)||73||31||+137%|
|Basic earnings per share (cents)||6.1||3.2||+90%|
|Dividend per share (pence)||6.0||6.0||No change|
|Capital investment ($m)1||1,235||1,189||+4%|
|Cash generated from operations ($m)2||762||588||+30%|
Supporting our growth strategy
Our financial strategy is to ensure we have a strong balance sheet and the flexibility to support the Group's significant exploration-led growth strategy. In 2011 we expect to spend some $1.5 billion on high-impact exploration, and further significant appraisal and development programmes in Ghana and Uganda while the remainder will be allocated across the rest of the business.
In 2010, Tullow strengthened its balance sheet with $0.9 billion of additional debt facilities and $1.45 billion raised from an equity placing in January. This finance, the expected Uganda farm-down proceeds and the revenues from Jubilee production, will ensure we have a very secure funding base for the next phase of our growth.
Looking forward, our focus will remain on high-impact exploration campaigns funded increasingly by operational cash flow and by making choices on selective developments and portfolio activity. We may also seek to further diversify our sources of debt funding when appropriate.
2010 financial results
2010 profit before tax was higher than 2009 primarily because of the following:
- Increased revenues of $174 million from higher oil and gas prices partially offset by lower sales volumes;
- A lower IAS 39 charge of $28 million in 2010 compared with a charge of $60 million in 2009;
- Partly offset by increased exploration write-offs which were $72 million higher in 2010.
2010 key financial metrics
|Production (boepd, working interest basis)||58,100||58,300||No change|
|Sales volume (boepd)||47,400||48,350||-2%|
|Realised oil price per bbl ($)||78.0||60.0||+30%|
|Realised gas price (pence per therm)||42.0||39.3||+7%|
|Cash operating costs per boe ($)1||12.5||12.4||No change|
|Operating cash flow before working capital per boe ($)||35.9||27.6||+30%|
|Net debt ($ million)2||1,943||1,144||+70%|
|Interest cover (times)3||13.8||10.1||3.7 times|
Production, commodity prices and revenue
Working interest production averaged 58,100 boepd, which is in line with 2009 and was ahead of budget expectations. Additional production from Ghana, Gabon and successful infill drilling in the UK largely mitigated the impact of the decline in other mature fields. Sales volumes averaged 47,400 boepd, which is a reduction of 2% compared to 2009.
On average, oil prices in 2010 were significantly higher than 2009 levels. Realised oil price after hedging for 2010 was US$78.0/bbl (2009: US$60.0/bbl), an increase of 30%. Tullow's oil production sold at an average discount of 2% to Brent Crude during 2010 (2009: 2% discount).
UK gas prices in 2010 were broadly in line with 2009 levels. The realised UK gas price after hedging for 2010 was 42.0 pence/therm (2009: 39.3 pence/therm), an increase of 7%.
Higher commodity prices more than offset the lower sales volumes. Overall revenue increased by 19% to $1,089.8 million (2009: $915.9 million).
Operating costs, depreciation and impairments
Underlying cash operating costs, which exclude depletion and amortisation and movements on the underlift, amounted to $264.3 million; $12.47/boe (2009: $264.7 million; $12.43/boe), in line with 2009 levels.
Depreciation, depletion and amortisation charges before impairment charges for the year amounted to $355.9 million; $16.78/boe (2009: $350.7 million; $16.46/boe). The Group has also recognised a further impairment charge of $4.3 million; $0.20/boe (2009: $12.5 million; $0.59/boe) in respect of the Chinguetti field in Mauritania.
At the year-end, the Group was in a net underlift position amounting to 10,100 barrels. The movements during 2010 in the underlift and stock position have given rise to a credit of $8.3 million to cost of sales (2009: charge of $10.1 million).
Administrative expenses of $89.6 million (2009: $77.6 million) include an amount of $10.2 million (2009: $18.3 million) associated with IFRS 2 – Share-based Payments. The increase in total general and administrative costs is primarily due to the continued growth of the Group during 2010 with employee numbers increasing by 40% to 935 people.
Exploration cost written-off
Exploration costs written-off were $154.7 million (2009: $82.7 million), in accordance with the Group's 'successful efforts' accounting policy, which requires that all costs associated with unsuccessful exploration are written-off in the income statement. This write-off is principally associated with exploration activities in Gabon, Ghana and Tanzania, new ventures activity and licence relinquishments in Angola and Gabon.
With effect from 1 January 2010 Tullow presents its financial statements in US dollars.
Risk management is a dynamic and critical business function as it is important to achieving long-term shareholder value.
The performance of our global assets was very strong in 2010.