Europe, South America & Asia

Tullow has gas production assets, ongoing developments and exploration acreage in the UK and the Netherlands which provide valuable cash flow to the Group. Tullow’s experience in the North Sea provides a strong platform for expansion in this region. Tullow has qualified as an operator in Norway as a first step in the Group’s strategy in the North Atlantic.

In South America, Tullow has significant exploration acreage in French Guiana, Guyana and Suriname where the Group is attempting to replicate the success of the West African Jubilee play across the Atlantic. The first test of this was the Zaedyus-1 well in French Guiana which successfully discovered oil in September 2011. In 2012, follow-up drilling in French Guiana and Guyana aims to further establish this area as a new and exciting petroleum province.

The Group also produces from the Bangora field in Bangladesh and has an exploration portfolio in Pakistan. In March 2012, Tullow took the decision to commence a process to sell these Asian assets in order to focus on its core African and Atlantic Margin strategy.

UK

Net production from the UK assets in 2011 was in line with expectations averaging 12,500 boepd (2010: 13,300 boepd). These mature fields performed well, with high production efficiency despite their natural decline.

In the Thames Area, net production averaged 1,000 boepd supported by a combined flow from Wren, Wissey and Horne fields. In August 2011, Tullow drilled the 49/30b-10 well on the Foxtrot prospect, the sands were found to be water wet and the well has been suspended for later re-entry following evaluation of the deeper Rotliegendes play.

In the CMS Area, 2011 net production averaged 11,500 boepd. Tullow has well intervention programmes in place to ensure optimal well performance to maximise reserve recovery. In September 2011, the Katy development project was sanctioned, consisting of a single well tie-back to the CMS facilities. The KA-10 infill well commenced in mid-November 2011 and drilling progress is in line with expectations, with production due to commence in March 2012.

Further exploration activity took place in the CMS Area in 2011, with Tullow operating the Cameron-1 exploration well (44/19a-7a). The well commenced drilling in April 2011 and discovered gas within the Carboniferous play. Since the discovery, the commerciality of the Cameron field has been assessed and a decision on development options will be made with partners in the first half of 2012.

Looking forward, Tullow’s strategy for the UK is to ensure rigorous technical assessment of all opportunities in an effort to offset natural decline and to prolong the life of the fields.

Netherlands

In May 2011, Tullow significantly enhanced its Dutch portfolio through the acquisition of Nuon Exploration & Production from the Vattenfall Group for a cash consideration of €300 million ($432 million). This is a non-operated portfolio of gas producing fields, a range of exploration opportunities and an equity interest in infrastructure. Net production in the second half of 2011 was between 6,000 and 7,000 boepd, an improvement on the rates at the time of the acquisition. Additional production came from the GdF Suez L15-FA 107 well which was brought onstream in November 2011. The well tested around 30 mmscfd and is anticipated to recover around 25 bcf of gas.

In late 2011, a significant well and reservoir campaign commenced on the Joint Development Area (JDA) offshore the Netherlands. Four additional non-operated wells are expected to be drilled on the acreage in 2012 and 25 JDA wells will be worked over by mid-2013. This will extend the field life by 10 years and the combined net incremental production of these activities is expected to be over 1,500 boepd.

Tullow considers the area to have great potential and purchased 51,174 sq km of PGS MegaMerge 3D seismic data in the Dutch Southern North Sea to evaluate future regional exploration. In the Tullow operated E-Block, a risked and ranked prospect inventory was completed in 2011 and Tullow will drill the Vincent prospect in Block E11 in 2012. Tullow’s high success ratio in this Carboniferous play in the UK bodes well for the adjacent Dutch portfolio.

French Guiana

In September 2011, the Zaedyus-1 exploration well made a significant oil discovery offshore French Guiana, encountering 72 metres of net oil pay in two turbidite fans. This is the first well in Tullow’s extensive Guyanas Basin acreage and successfully opened a new basin, proving that the Jubilee play is mirrored across the Atlantic from West Africa to South America.

Drilling operations, which commenced in March 2011, continued after the discovery until mid-November 2011. An extensive data gathering programme was conducted including sidetracking of the well to cut a core through the reservoir and gather essential data. A liner was run over the main oil bearing reservoir and the well was suspended for future re-entry. The rig went off contract on 23 November 2011.

The Joint Venture partners are discussing a comprehensive follow-up exploration and appraisal programme which will include 3D seismic acquisition and a drilling programme, scheduled to commence in mid-2012. The drilling programme is expected to start with an appraisal well on the Zaedyus discovery and be followed by an exploration well on one of the neighbouring prospects. The Ministerial Order granting Tullow, Shell and Total approval for both the transfer and renewal of the Guyane Maritime licence was received on 22 December 2011. Shell took over Operatorship of the block on 1 February 2012.

Suriname

In Suriname, Tullow finalised the farm-down of a 30% interest in Block 47 to Statoil in December 2011. Planning is now well advanced to acquire over 2,500 sq km of 3D seismic which will commence in the second quarter of 2012, subject to the necessary environmental approvals. The 3D programme is scheduled to take approximately four months to complete.

On the onshore Coronie licence, drilling operations began at the beginning of December 2011 on the first of five initial exploration wells. The first well has encountered oil shows which is encouraging for the following four wells in the programme. It is anticipated that drilling operations will continue until the second quarter of 2012. Having fulfilled all contractual obligations on the Uitkijk Block, Tullow returned its equity to Paradise Oil in June 2011 and no longer retains any equity in the block.

West African and South American exploration acreage

In 2011 Tullow proved the transatlantic nature of the Jubilee play in the Equatorial Atlantic region with the successful Zaedyus-1 well in French Guiana. Tullow has a major exploration campaign across this region on both sides of the Atlantic in 2012 with high impact wells in Ghana, Côte d'Ivoire, Liberia, Sierra Leone, French Guiana and Guyana.