Other statutory information
The profit on ordinary activities after taxation of the Group for the year ended 31 December 2011 amounted to $689.0 million (2010: $89.5 million).
An interim dividend of Stg 4p (2010: Stg 2p) per ordinary share was paid on 3 November 2011. The Directors recommend a final dividend of Stg 8p (2010: Stg 4p) per ordinary share which, if approved at the 2012 AGM, will be paid on 24 May 2012 to shareholders whose names are on the Register of Members on 20 April 2012.
Since the balance sheet date, Tullow has continued to progress its exploration, development and business growth strategies.
In February 2012, Tullow signed two new Production Sharing Agreements (PSAs) with the Government of Uganda. The new PSAs cover the EA-1 and Kanywataba licences in the Lake Albert Rift Basin. Tullow has also been awarded the Kingfisher production licence.
In February 2012, Tullow completed the farm-down of one-third of its Uganda interests to both Total and CNOOC for a total consideration of $2.9 billion paving the new way for full development of the Lake Albert Rift Basin oil and gas resources.
In February 2012, the Group announced the Jupiter-1 exploration well in Block SL-07B-11 offshore Sierra Leone had successfully encountered hydrocarbons. This has been confirmed by the results of drilling, wireline logs and samples of reservoir fluids.
As at 13 March 2012, the Company had an allotted and fully paid up share capital of 905,004,587 ordinary shares of 10 pence each with an aggregate nominal value of £90,500,458.70.
As at 13 March 2012, the Company had been notified in accordance with the requirements of section 5.1.2 of the UK Listing Authority’s Disclosure Rules and Transparency Rules of the following significant holdings (being 3% or more) in the Company’s ordinary share capital.
|Shareholder||Number of shares||% of issued capital|
|IFG International Trust Company Limited||38,960,366||4.30%|
|Legal & General Group plc||35,414,975||3.91%|
The rights and obligations attaching to the Company’s shares are as follows:
- Dividend rights – holders of the Company’s ordinary shares may, by ordinary resolution, declare dividends but may not declare dividends in excess of the amount recommended by the Directors. The Directors may also pay interim dividends. No dividend may be paid other than out of profits available for distribution. Subject to shareholder approval, payment or satisfaction of a dividend may be made wholly or partly by distribution of specific assets;
- Voting rights – voting at any general meeting is by a show of hands unless a poll is duly demanded. On a show of hands every shareholder who is present in person at a general meeting (and every proxy or corporate representative appointed by a shareholder and present at a general meeting) has one vote regardless of the number of shares held by the shareholder (or represented by the proxy or corporate representative). If a proxy has been appointed by more than one shareholder and has been instructed by one or more of those shareholders to vote 'for’ the resolution and by one or more of those shareholders to vote 'against’ a particular resolution, the proxy shall have one vote for and one vote against that resolution. On a poll, every shareholder who is present in person has one vote for every share held by that shareholder and a proxy has one vote for every share in respect of which he has been appointed as proxy (the deadline for exercising voting rights by proxy is set out in the form of proxy). On a poll, a corporate representative may exercise all the powers of the company that has authorised him. A poll may be demanded by any of the following: (a) the Chairman of the meeting; (b) at least five shareholders entitled to vote and present in person or by proxy or represented by duly authorised corporate representative at the meeting; (c) any shareholder or shareholders present in person or by proxy or represented by a duly authorised corporate representative and holding shares or being a representative in respect of a holder of shares representing in the aggregate not less than one-tenth of the total voting rights of all shareholders entitled to attend and vote at the meeting; or (d) any shareholder or shareholders present in person or by proxy or represented by a duly authorised corporate representative and holding shares or being a representative in respect of a holder of shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sums paid up on all the shares conferring that right;
- Return of capital – in the event of the liquidation of the Company, after payment of all liabilities and deductions taking priority, the balance of assets available for distribution will be distributed among the holders of ordinary shares according to the amounts paid up on the shares held by them. A liquidator may, with the authority of a special resolution, divide among the shareholders the whole or any part of the Company’s assets; or vest the Company’s assets in whole or in part in trustees upon such trusts for the benefit of shareholders, but no shareholder is compelled to accept any property in respect of which there is a liability;
- Control rights under employee share schemes – the Company operates a number of employee share schemes. Under some of these arrangements, shares are held by trustees on behalf of employees. The employees are not entitled to exercise directly any voting or other control rights. The trustees will generally vote in accordance with employees’ instructions and abstain where no instructions are received. Unallocated shares are generally voted at the discretion of the trustees; and
- Restrictions on holding securities – there are no restrictions under the Company’s Articles of Association or under UK law that either restrict the rights of UK resident shareholders to hold shares or limit the rights of non-resident or foreign shareholders to hold or vote the Company’s ordinary shares.
There are no UK foreign exchange control restrictions on the payment of dividends to US persons on the Company’s ordinary shares.
The following significant agreements will, in the event of a 'change of control’ of the Company, be affected as follows:
- US$3.235 billion senior secured revolving credit facility agreement between, among others, the Company and certain subsidiaries of the Company, BNP Paribas, Bank of Scotland plc, The Royal Bank of Scotland plc, Standard Chartered Bank, Lloyds TSB Bank plc and Crédit Agricole Corporate and Investment Bank and the lenders specified therein pursuant to which each lender thereunder may demand repayment of all outstanding amounts owed by the Company and certain subsidiaries of the Company to it under the agreement and any connected finance document, which amount will become immediately due and payable and, in respect of each letter of credit issued under the agreement, full cash cover will be required immediately, in the event that any person (or group of persons acting in concert) gains control of the Company;
- US$100 million junior secured revolving credit facility agreement between, among others, the Company and certain subsidiaries of the Company, BNP Paribas, Bank of Scotland plc, The Royal Bank of Scotland plc and Lloyds TSB Bank plc and the lenders specified therein pursuant to which each lender thereunder may demand repayment of all outstanding amounts owed by the Company and certain subsidiaries of the Company to it under the agreement and any connected finance document, which amount will become immediately due and payable, in the event that any person (or group of persons acting in concert) gains control of the Company;
- US$165 million finance contract in respect of a senior secured revolving credit facility agreement between, among others, the Company and certain subsidiaries of the Company and International Finance Corporation and the lenders specified therein pursuant to which each lender thereunder may demand repayment of all outstanding amounts owed by the Company and certain subsidiaries of the Company to it under the agreement and any connected finance document, which amount will become immediately due and payable, in the event that any person (or group of persons acting in concert) gains control of the Company; and
- US$500 million secured revolving credit facility agreement between, among others, the Company and certain subsidiaries of the Company, BNP Paribas, Credit Agricole Corporate and Investment Bank, Standard Chartered Bank and HSBC Bank plc and the lenders specified therein pursuant to which each lender thereunder may demand repayment of all outstanding amounts owed by the Company and certain subsidiaries of the Company to it under the agreement and any connected finance document, which amount will become immediately due and payable, in the event that any person (or group of persons acting in concert) gains control of the Company.
Under the terms of each of these agreements, a 'change of control’ occurs if any person, or group of persons acting in concert (as defined in the City Code on Takeovers and Mergers) gains control of the Company.
The Group does not have any contractual or other arrangements that are essential to the business of the Group as described by section 417 (5)(c) of the Companies Act 2006.
The biographical details of the Directors of the Company at the date of this report are given on the Board of Directors page.
Details of Directors’ service agreements and letters of appointment are outlined in service agreements, material contracts, external appointments. Details of the Directors’ interests in the ordinary shares of the Company and in the Group’s long-term incentive and other share option schemes are outlined in Directors' interests in the share capital of the Company.
As at the date of this report, indemnities are in force under which the Company has agreed to indemnify the Directors, to the extent permitted by the Companies Act 2006, against claims from third parties in respect of certain liabilities arising out of, or in connection with, the execution of their powers, duties and responsibilities as Directors of the Company or any of its subsidiaries. The Directors are also indemnified against the cost of defending a criminal prosecution or a claim by the Company, its subsidiaries or a regulator provided that where the defence is unsuccessful the Director must repay those defence costs. The Company also maintains Directors’ and Officers’ Liability insurance cover, the level of which is reviewed annually.
A Director has a duty to avoid a situation in which he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Group. The Board has satisfied itself that there is no compromise to the independence of those Directors who have appointments on the boards of, or relationships with, companies outside the Group. The Board requires Directors to declare all appointments and other situations which could result in a possible conflict of interest and has adopted appropriate procedures to manage and, if appropriate, approve any such conflicts.
The general powers of the Company’s Directors are set out in Article 104 of the Articles of Association of the Company. It provides that the business of the Company shall be managed by the Board which may exercise all the powers of the Company whether relating to the management of the business of the Company or not. This power is subject to any limitations imposed on the Company by applicable legislation. It is also limited by the provisions of the Memorandum and Articles of Association of the Company and any directions given by special resolution of the shareholders of the Company which are applicable on the date that any power is exercised.
Please note the following specific provisions relevant to the exercise of power by the Directors:
- Pre-emptive rights and new issues of shares – the holders of ordinary shares have no pre-emptive rights under the Articles of Association of the Company. However, the ability of the Directors to cause the Company to issue shares, securities convertible into shares or rights to shares, otherwise than pursuant to an employee share scheme, is restricted under the Companies Act 2006 which provides that the directors of a company are, with certain exceptions, unable to allot any equity securities without express authorisation, which may be contained in a company’s articles of association or given by its shareholders in general meeting, but which in either event cannot last for more than five years. Under the Companies Act 2006, the Company may also not allot shares for cash (otherwise than pursuant to an employee share scheme) without first making an offer on a pre-emptive basis to existing shareholders, unless this requirement is waived by a special resolution of the shareholders. The Company received authority at the last Annual General Meeting to allot shares for cash on a non pre-emptive basis up to a maximum nominal amount of £4,445,679. The authority lasts until the earlier of the Annual General Meeting of the Company in 2013 or 30 June 2013;
- Repurchase of shares – subject to authorisation by shareholder resolution, the Company may purchase its own shares in accordance with the Companies Act 2006. Any shares which have been bought back may be held as treasury shares or must be cancelled immediately upon completion of the purchase. The Company does not currently have shareholder authority to buy back shares; and
- Borrowing powers – the net external borrowings of the Group outstanding at any time shall not exceed an amount equal to four times the aggregate of the Group’s adjusted capital and reserves calculated in the manner prescribed in Article 105 of the Company’s Articles of Association, unless sanctioned by an ordinary resolution of the Company’s shareholders.
The Company shall appoint (disregarding Alternate Directors) no fewer than two nor more than 15 Directors. The appointment and replacement of Directors may be made as follows:
- The shareholders may by ordinary resolution elect any person who is willing to act to be a Director;
- The Board may elect any person who is willing to act to be a Director. Any Director so appointed shall hold office only until the next Annual General Meeting and shall then be eligible for election;
- Each Director is required in terms of the Articles of Association to retire from office at the third Annual General Meeting after the Annual General Meeting at which he was last elected or re-elected although he may be re-elected by ordinary resolution if eligible and willing. However, to comply with the principles of best corporate governance, the Board intends that each Director will submit themselves for re-election on an annual basis;
- The Company may by special resolution remove any Director before the expiration of his period of office or may, by ordinary resolution, remove a Director where special notice has been given and the necessary statutory procedures are complied with; and
- There are a number of other grounds on which a Director’s office may cease, namely voluntary resignation, where all the other Directors (being at least three in number) request his resignation, where he suffers physical or mental incapacity, where he is absent from meetings of the Board without permission of the Board for six consecutive months, becomes bankrupt or compounds with his creditors or is prohibited by law from being a Director.
Tullow is committed to eliminating discrimination and encouraging diversity amongst its workforce. Tullow’s aim is that its workforce will be truly representative of all sections of society and each employee feels respected and able to give their best. Decisions related to recruitment selection, development or promotion are based upon merit and ability to adequately meet the requirements of the job, and are not influenced by factors such as gender, marital status, race, ethnic origin, colour, nationality, religion, sexual orientation, age, or disability. Tullow commits to provide equal opportunities for all. Tullow’s Code of Business Conduct and Equal Opportunities Policy provides guidelines on fair employment practices and fair treatment.
All employees are helped and encouraged to develop their full potential. Tullow aims to provide an optimal working environment to suit the needs of all employees, including the needs of employees with disabilities. For employees who become disabled during their time with the Group, Tullow will provide support to best accommodate continuous employment. Tullow’s EHS Function actively seeks to keep people safe, whatever their needs.
The Group made charitable, social and community-related donations during the year totalling $11.6 million (2010: $2.6 million). In line with Group policy, no donations were made for political purposes.
The Group is fully committed to high standards of environmental, health and safety management. A review, together with an outline of the Group’s involvement in the community, is set out in the Corporate Responsibility section. In addition, Tullow publishes annually a separate Corporate Responsibility Report which is available on the Group website: www.tullowoil.com.
It is Company and Group policy to settle all debts with creditors on a timely basis and in accordance with the terms of credit agreed with each supplier. The Company had no trade creditors outstanding at 31 December 2011.
Having made the requisite enquiries, so far as the Directors are aware, there is no relevant audit information (as defined by section 418(3) of the Companies Act 2006) of which the Company’s auditors are unaware and each Director has taken all steps that ought to have been taken to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.
A resolution to re-appoint Deloitte LLP as the Company’s auditors will be proposed at the AGM.
Your attention is drawn to the Notice of Meeting accompanying this Annual Report which sets out the resolutions to be proposed at the forthcoming AGM. The meeting will be held at Haberdashers’ Hall, 18 West Smithfield, London EC1A 9HQ on Wednesday 16 May 2012 at 12 noon. This Directors’ Report comprising pages 4 to 109 and the information referred to therein has been approved by the Board and signed on its behalf by:
General Counsel and Company Secretary
13 March 2012
9 Chiswick Park
566 Chiswick High Road
London W4 5XT
Company registered in England and Wales No. 3919249