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    Annual General Meeting


    Available for sale





    Billion cubic feet


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    Caister Murdoch System


    A group development of five satellite fields linked to CMS


    Corporate Responsibility


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    China National Offshore Oil Corporation



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    Floating Production Storage and Offloading vessel


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    Equity index whose constituents are the 100 largest UK listed companies by market capitalisation


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Moving on to the next level

"Delivering First Oil has been an enormous undertaking, and the steps on the journey to deliver on this scale have literally transformed the business."

Aidan Heavey, Chief Executive Officer

It has been an exceptional period for Tullow. We have developed our deepwater operating capability and major changes are underway in production and cash flow. We have new oil fields to develop and our exploration potential is better than ever.

Delivery and growth

2010 was a year of delivery and growth for Tullow. We are bigger, better and stronger than ever before, but it has also been a year of contrasts. We have experienced great exploration success and the excitement of First Oil in Ghana, contrasted with unanticipated delays and some uncertainty in Uganda. This was undoubtedly a challenge for us, but true to our entrepreneurial spirit we used the time to review and consolidate the business, after the extraordinary year-on-year growth we had experienced since 2004. We also continued to make steady progress across the organisation and there are hallmarks of success in each area of Tullow.

Major successes but taking time in Uganda

We entered 2010 with a major exploration and appraisal programme planned for the year, which subsequently delivered material discoveries. We were also blessed with two, almost simultaneous, world-class oil development projects in Ghana and Uganda.

The commercial threshold for development in Uganda was achieved in 2009. Uganda has prolific oil resources and will have an oil industry for many decades to come. It was therefore fundamentally important to the GoU, Tullow and the new partnership with CNOOC and Total, to establish a strong fiscal and legal framework and this took many months of discussions. The signing of the MoU will establish this framework and enable the GoU to grant consent for Tullow's purchase of Heritage's interests in the Lake Albert Basin and the subsequent farm-downs to CNOOC and Total.

We look forward to working closely with the GoU, in conjunction with CNOOC and Total in developing the Ugandan oil and gas sector.

For the latest information on Uganda visit the press release section of our website www.tullowoil.com/media

Tullow is 25 years old in 2011 and therefore 2010 presented us with a timely opportunity to remember what Tullow is all about, what we are good at and what is important in terms of our personality and our culture.

We are entrepreneurial and driven and we like to do things differently because we take a long-term approach to developing our business. We want to achieve our strategic objectives and goals and do so through exploration-led growth. We fundamentally believe everything is about teamwork and people and we want to be recognised and acknowledged as Africa's leading independent oil company.

We believe we will achieve our vision to become the leading global independent E&P company through our focus on Africa and by opening new basins with related geological plays in South America and elsewhere.

For Tullow, Africa remains our birthplace and as a result it is our heartland. We have an excellent track record there and it provides great opportunities for us to develop new basins and establish a new industry model for partnership and shared prosperity. Our heritage is in Africa and our legacy will be defined by our actions there.

The challenge for us is to characterise what creating shared prosperity means, and what success will look like for all our stakeholders so that we can measure and report our progress towards that goal. For Tullow, creating shared prosperity means behaving responsibly in all aspects of our business to create an environment that helps us to successfully deliver our business plans, continue our growth strategy, and contribute to social and economic development, both within and outside of our core business activities. That means:

  • Being a successful, profitable company that gives an appropriate return to our shareholders and the providers of capital to the business;
  • Rewarding employees for their contribution to our continued success;
  • Ensuring safe people, procedures and operations and minimising environmental impacts;
  • Developing an industry that is run by nationals by addressing the need for in-country skills for the oil and gas industry and hiring local staff;
  • Supporting the growth of national and local businesses and helping those businesses enter into the industry's supply chain;
  • Developing a funding and partnership programme for Social Enterprise projects that contributes to both our business as well as economic and social development in countries where we operate; and
  • Undertaking regular engagement with key external stakeholders to create genuine dialogue at a global and local level to respond appropriately to their needs and concerns. This in turn helps to improve how we run our business.

In keeping with the nature of the industry and the level of investment required, Tullow has always taken a long-term approach. Our goal, over the next 25 years, is for Tullow to have been a great support and service in the development of new oil producing countries; to have made a significant contribution to real progress in economic and social development in those countries; and above all to be a company that has delivered on its responsibilities.

This year we have communicated more about our Group strategy and the key components of our E&A, P&D and Finance strategies in this report. While as entrepreneurs we are always looking for new ways to accelerate the growth of the business, we are first and foremost an exploration-led company with long-term production and cash flow targets to ensure that we can fund our ambitious exploration programme.

We have clear strategic priorities focused on developing our operations and running our business in a responsible way.

With regard to our operational priorities, our 2010 exploration programme delivered an 83% success ratio and we achieved First Oil in Ghana on time and within 5% of the original budget. There were unanticipated delays in finalising transactions in Uganda during the year but an MoU with the GoU will be the first step on an exciting journey to successfully develop Uganda as a significant oil-producing country.

In 2010, we also performed well against our corporate responsibility priorities with a strong EHS performance. We focused mainly on developing our stakeholder strategy this year and we held our first multi-stakeholder forum in London in February 2011. Our total workforce grew 40% in 2010 as we continued to grow our organisation and capabilities. Staff turnover during the year was 1.3%.

Oil rig

To be the leading global independent exploration and production company


To deliver substantial returns to shareholders


To achieve sustainable long-term growth through balanced funding,
exploration and production in core geographical areas

Operational priorities
  • 1Executing selective high-impact exploration programmes funded by surplus cash flow or equity
  • 2Delivering major projects, with a significant focus on increasing bankable reserves
  • 3Managing our assets to high-grade the portfolio, replenish upside and assist funding needs
Corporate responsibility priorities
  • 1Ensuring safe people, procedures and operations, and minimising environmental impacts
  • 2Building long-term relationships with local governments, communities and key stakeholders
  • 3Continuing to develop a strong team with excellent commercial, technical and financial skills
Strategic priorities diagram

Global equity markets exited 2010 largely unchanged as signs of economic recovery were hampered by sovereign debt concerns around Europe. During the year, the global oil and gas sector was placed under severe scrutiny when the Deepwater Horizon well exploded off the Gulf of Mexico in April. Stock markets, and in particular oil and gas stocks, fell significantly. The explosion had a profound impact on the industry, causing governments and regulators to question drilling practices and safety procedures, particularly in relation to deepwater drilling. Unsurprisingly, in terms of share performance price, the sector suffered on the back of the Deepwater Horizon events; but industry responsiveness and an increased focus on safety saw some improvement towards the year end.

Overall, pricing across the sector closed flat in 2010 and Tullow exited the year with Total Shareholder Return (TSR) down 3% (2009: 99% increase) reflecting delays in Uganda and wider market and industry factors. However Tullow's TSR performance over a three and five-year period ranks us number two and one respectively versus our industry peer group.

Total Shareholder Return (TSR)


Over a five-year period Tullow has outperformed the FTSE 100 by 363%.

Line graph showing Total Shareholder Return (TSR)
  • Tullow Oil plc
  • FTSE 100

In 2010, the key driver behind oil price was emerging market industrial demand, particularly from China. Strong demand helped the Brent oil price to rally in the second half of the year and on 31 December 2010 it closed at $93/barrel. Overall, Tullow benefited from a 30% rise in realised oil prices during 2010.

In terms of industry outlook, global oil demand in 2011 is expected to show good growth. The outlook for oil price in 2011 remains robust, mainly supported by a steady tightening of physical supply and emerging market growth. The price of Brent oil is forecast to be higher through 2011 and favourable oil prices are expected to be positive for the sector as a whole. The management of oil price volatility will be of particular significance to Tullow, given our enhanced production profile following First Oil in Ghana in 2010.

2011 represents one of the most active drilling calendars across the industry, combining high-impact exploration and appraisal campaigns with frontier drilling programmes. We expect supply-side cost pressures to increase during 2011 in line with increased activity and as a greater focus is placed on EHS following the Macondo incident in 2010. Given events in North Africa and Western Asia already this year, geopolitical risk is expected to heighten during the year.

Our 2011 to 2013 business plan objectives support our well established growth strategy and they are closely aligned with our operational strategic objectives. Our 2011 to 2013 plans are as follows:

  • Across the Group, to create specific plans to maximise the value of all existing assets, in line with portfolio management criteria. This is an ongoing business objective;
  • Throughout our organisation to ensure we continue to build capability and align our cost base appropriately with our current phase of growth and development. In 2010, over 250 people joined Tullow as employees and our total workforce including contractors grew 40% to over 1,200 people;
  • To deliver the asset farm-down in Uganda and establish the new Tullow, CNOOC and Total partnership, as well as drill out the exploration portfolio and progress development of discoveries to date. As a result of delays in reaching agreement with the GoU we have reframed our 2010 to 2012 business plans and timescales for this project;
  • In E&A, to continue to execute high-impact, material campaigns and high-grade the Group's exploration portfolio in core geological plays and areas of focus. This is similar to our 2010 to 2012 business plan objective in this area and is consistently underpinned by a very active annual E&A programme. 40 wells are planned in 2011;
  • For P&D, in Ghana, our goal is to deliver a gross production plateau of 120,000 bopd in 2011 and Tweneboa/Enyenra project sanction in 2012. In 2010 it was to deliver Jubilee Phase 1 First Oil and commence production ramp up; and
  • In Finance, we will seek to align long-range funding with exploration, appraisal and development business requirements and portfolio management strategy. The successful equity placing in 2010, coupled with the planned Uganda farm-down and the increased cash flow from Ghana will ensure that we remain well funded to execute our exploration-led strategy.

2011 has started very well. Production is increasing from Jubilee. A major exploration campaign is underway to open up several potential new basins in Africa and South America and appraisal programmes will assist the sanctioning of major new oil and gas development projects. We are making significant progress in Uganda and will soon be moving into the development phase for the basin. We look forward to another year of achievement.

Aidan Heavey signature

Aidan Heavey, Chief Executive Officer