Operating profit, costs, taxation and dividend
Operating profit grew 332% to $1.13 billion (2010: $262 million). The increase was principally due to increased sales volumes and higher commodity prices, partly offset by higher operating costs and DD&A charges following Ghana First Oil production in November 2010.
Net financing costs
The net interest charge for the year was $86 million (2010: $55 million) and reflects the increase in net debt levels during 2011, offset by an increase in interest capitalised during the year on qualifying assets and by a one-off gain of $22 million resulting from the purchase of the FPSO by the Jubilee partners in December 2011 and consequent settlement of the Ghana FPSO finance lease liability.
The tax charge of $384 million (2010: $90 million) relates to the Group's North Sea, Gabon, Equatorial Guinea and new significant Ghanaian activities. After adjusting for exploration costs and profit on disposal of subsidiaries, the Group's underlying effective tax rate is 32% (2010: 27%). The increase in the effective tax rate is mainly due to the increase in profits before tax driven by the new Ghanaian activities which are subject to a 35% tax rate.
The Board is proposing a final dividend of 8.0 pence per share (2010: 4.0 pence per share). This doubles the total payout in respect of 2011 to 12.0 pence per share, compared with 2010. Tullow's finances have fundamentally changed with material growth in production and record cash flow from operations. As a result, the Board believes that it is appropriate to continue with its progressive dividend policy.
The dividend will be paid on 24 May 2012 to shareholders on the register on 20 April 2012. Shareholders with registered addresses in the UK will be paid their dividends in pounds Sterling. Those with registered addresses in European countries which have adopted the Euro will be paid their dividends in Euro. Such shareholders may, however, elect to be paid their dividends in either pounds Sterling or Euro, provided such election is received at the Company's registrars by the record date for the dividend. Shareholders on the Ghana branch register will be paid their dividends in Ghana Cedis. The conversion rate for the dividend payments in Euro or Ghana Cedis will be determined using the applicable exchange rate on the record date.