Chief Executive’s review

In 2011, Group working interest production increased 35% to 78,200 boepd. While there was a strong performance from the Jubilee production facilities overall, with average FPSO uptime of over 95%, productivity issues were experienced with some of the Jubilee wells related to problems with the original well completion design. The intention is to use 2012 to resolve these issues and a remedial work programme is already under way to rebuild the production rate towards facility capacity and ensure that plateau production is delivered in 2013. Recoverable resource estimates are unchanged and the Group remains focused on the field’s long-term upside potential. We also continue to invest in our other key producing assets and future development projects to ensure that these provide high returns and strong production growth.

Phase 1A development of the Jubilee field was sanctioned in January 2012 and drilling of the first production well commenced on schedule in February 2012. This development will be conducted over an 18 month period and the total cost is expected to be approximately $1.1 billion. In 2012, the Group expects to deliver total net production of 78,000 to 86,000 boepd.

During 2011, good progress was also made in appraising the TEN discoveries in Ghana. In February 2012, this was supported by the flow testing of the Owo-1 well which produced at a combined rate of approximately 20,000 bopd giving confidence in the ultimate commerciality of the field. The engineering design of this development, which will consist of an FPSO and major subsea infrastructure, is progressing and a PoD is expected to be submitted in the third quarter of 2012, with first oil forecast 30 months after approval.

Throughout the year we continued to negotiate with the Government of Uganda and finally achieved a successful outcome with the completion of the $2.9 billion farm-down in February 2012. We are investing in the success of Uganda, not just in oil exploration and appraisal. Our presence there has contributed to social enterprise investment, to local employment and to building capacity for the nascent oil industry through local supplier and institutional development. In addition, there is an opportunity to increase our economic contribution considerably as the partners commence the basin development.

Our EHS performance is robust again this year and in 2012 the EHS strategy team is rolling out a new vision with the ambitious goal of consistently achieving top quartile industry EHS performance. We are continuing to develop our expertise and organisational capacity in key areas, particularly those that help us manage non-financial and non-technical risks. These areas include compliance, government relations, stakeholder engagement, social enterprise and reputation management. Our reputation is based on fair play and a fair deal. It has been built on honesty, seeking the best terms for all parties and honouring our commitments.

Our 2011 employee survey, Talkback, shows that we are achieving high levels of engagement of 81%, in spite of a further 26% increase in our total workforce in 2011. As we continue to build the disciplines and processes of a larger company we are always mindful of protecting our team spirit and entrepreneurial culture. This culture is in the DNA of Tullow and underpins a strong and dynamic future for the Group.

2011 was characterised by major geopolitical, sovereign debt and financial markets events, which contributed to considerable oil price volatility. It was a difficult year for the global economy, with low levels of activity in the US economy, the negative impact of the Japanese earthquake and the persistent and deepening fiscal crisis in Europe. The Brent oil price peaked in April 2011 at $126/barrel, driven by a combination of continued strong demand in Asia and concerns over tightening supply from the growing unrest across the Middle East and North Africa. Brent moderated somewhat during the rest of the year as the global economy slowed, but remained at levels well ahead of 2010 prices. Brent closed the year at $108/barrel, representing a 16% year-on-year increase. We achieved a realised oil price of $108/barrel (post hedging), which was 38% higher than in 2010. Strong oil prices and with good growth in production underpinned the strong financial performance for the Group this year.

Developments in the global economy will, of course, impact oil prices and we will need to continue to manage our exposure to volatility and any potential decline in oil price. Our 2012-2014 business plan supports the delivery of our strategy and is closely aligned with our financial and operational objectives. The business plan assumptions look at a range of scenarios and currently anticipate a moderate softening of oil prices over the period. Nevertheless, forecast price levels are more than high enough to justify continued strong investment in our exploration-led growth strategy. The competition for access to new opportunities continues to increase but we are very well positioned to compete. Our portfolio of opportunities is rich and deep and our 2012 / 2013 exploration and appraisal programme is as exciting as any we have undertaken in the last five years. In addition, we are forging new strategic exploration partnerships including a non-exclusive partnership with Shell in the Atlantic Margins, announced in January 2012, which draws on the complementary skills of both companies.

Tullow has created significant shareholder value and delivered total shareholder return of 389% over five years to the end of 2010, outperforming the FTSE 350 oil and gas sector as a comparator index by 351%. In 2011, the share price was impacted by a number of issues. The global economy weakened during the year creating greater market uncertainty and instability. The longer time frame for completion of the Ugandan transactions and disappointment over deferred production from Ghana also had an effect. Despite this, total shareholder return for 2011 was 12%, compared with a negative 2% return for the FTSE 100 for the same period. The resilience of our investment proposition and the high regard in which Tullow is held recognises, in my view, our consistent and clear strategy and the Group’s ability to continue to add value.

In this year’s ‘special feature,’ we illustrate how we are establishing a distinctive competitive advantage and evolving into the leading global independent exploration and production company with a solid financial foundation differentiated from our E&P peers by high-impact exploration-led growth. The Group has a unique exploration inventory which is focused on frontier areas and concentrates on specific core regions and geological plays. Our multi-basin opportunities are complemented by a series of major development projects. Material growth in production and cash flow gives us the ability to fund aggressive exploration and development programmes as well as deliver returns to shareholders via a growing dividend. We are managing this diversified mix of exploration, development and production assets to create a world-class resource portfolio.

Tullow's core strategy is unchanged. We are still focused on consistently growing our reserves and production, balancing quality high-impact exploration with development, pursuing selective acquisitions and ensuring rigorous capital allocation and portfolio management. What has changed is the scale of the business and the game-changing opportunities we have to pursue. In 2012, we expect significant progress in Ghana and Uganda as we grow Jubilee production and progress the Jubilee Phase 1A, TEN and Lake Albert developments. We have a very exciting exploration programme ahead of us to open new basins, and we expect to extend our reach in Africa and elsewhere along the Atlantic Margins with major new partnerships. With many opportunities for growth, 2012 promises to be another excellent year for Tullow.

Pat Plunkett retired as Chairman of Tullow at the end of 2011. He joined the Board in 1998 and became Chairman in 2000. He presided over an extraordinary period of growth in the Group's history and was one of the key architects of Tullow today.

He ably led and guided the Board as we moved swiftly through a series of major acquisitions, doubled in size every two years, achieved industry-leading exploration success and built Africa's leading independent oil company; breaking many records along the way and transforming the Group.

I would like to thank Pat for his wonderful contribution to Tullow and wish him and his family all the very best for the future.