Board and management

Strategy

Annual strategy review to focus on risk management; resource allocation within the portfolio of exploration, appraisal and development projects; and building organisational capacity to meet our growth expectations.

Strategy to be regularly updated, incorporating external views on economic and political developments in host countries.

Risk management

Continue to ensure that the Group's financial and operating risks are identified and that adequate systems and processes are in place to monitor and mitigate them, with a particular focus on:

1. External stakeholder relationships;
2. Portfolio management;
3. Improving quality of Board reporting on evolving risks;
4. Building organisational capacity;
5. EHS and asset integrity; and
6. Maintaining and enhancing the Tullow culture.

Succession planning

Review remuneration structure and KPIs to ensure alignment with evolving strategic objectives and risk management.

Agree strategy and criteria for Director succession at the full Board.

Reduce size of Nominations Committee and use it to execute the agreed strategy.

Board committees

Review remuneration structure and KPIs to ensure alignment with evolving strategic objectives and risk management.

Agree strategy and criteria for Director succession at the full Board.

Reduce size of Nominations Committee and use it to execute the agreed strategy.

Board visibility, engagement and communication

Ensure appropriate frequency of Board level interactions with employees, key decision makers and other opinion formers in countries of operation.

Review 'Talk Back' staff climate survey and take appropriate actions.

Board procedures

Implement electronic distribution of Board papers.

Implement 12 month rolling agenda to enhance Board planning.

Strategy

The receipt of the Uganda sale proceeds allowed for a more comprehensive review of strategy at the two-day Board offsite and at regular Board meetings. A substantial part of the Board's discussions focused on strategy, particularly resource allocation. At each meeting the Board received an extensive briefing on current and prospective exploration opportunities, and updates on development projects.

The Board's deliberations were informed by the views of a number of external presenters, covering issues such as East African politics, the aid versus investment debate in Africa, corporate developments in the oil industry and in the City, and an analysis of the environment risks, politics and investment climate in Greenland.

Risk management

New country entry assessment and approval processes improved significantly during the year with greater emphasis being placed on understanding the social impact challenges in countries where Tullow has current and expected future large-scale operations, especially onshore. Restructuring the business into three Regional Units has allowed more focus on particular areas and identified the need for additional capacity and expertise, recruitment for which is well underway.

As a result of the focus in 2012 on risk management, and the variety of issues to be covered as the organisation grows, a decision was taken to form an EHS Committee to be chaired by one of the non-executive Directors, devoted to monitoring personal and process safety, community health and the environment.

Succession planning

Considerable progress was made this year on succession planning for the Executive Directors with an extensive presentation on the topic at the Board offsite and as a result appropriate plans were agreed, but they will be kept under regular review. Personal development plans are also being prepared for most of the senior managers, and succession planning encouraged with particular focus where appropriate on localisation.

Two non-executive Directors retired during the year, including the Audit Committee chairman, and were replaced as a result of an external search process and following in each case agreement on a comprehensive role specification to meet the growing needs of the business.

Board committees

The Remuneration Committee was particularly active this year in redesigning a new and simplified remuneration structure for the Executives and senior management, to ensure retention of our successful team, to align with our strategic objectives and the interests of our shareholders.

A consultation process on this with our larger shareholders on this new structure is already well under way. The Nominations Committee was also very active in the recruitment of two new non-executive Directors and in starting the search process for another.

Board visibility, engagement and communication

With the increasing profile of Tullow in key areas of our operations and with the increased staff numbers, the Board is keenly aware of the importance of communications with all stakeholders, and the Directors have continued to find ways of engaging with them appropriately. The Executives held actual and virtual town hall and other staff meetings in various offices throughout the year and engaged in formal and informal settings with government officials and other key stakeholders. On occasions they were accompanied by the Chairman and other non-executive Directors.

The Board reviewed the results of the Tullow staff feedback survey and the HR team led workshops at country, business and/or functional levels as appropriate to discuss the issues raised and to take appropriate actions. This remains a continuing key challenge and priority for the business.

Board procedures

Enhancements to Board meeting processes, changes to sub-committee structures and leadership, and improved corporate governance planning, implemented under the new Chairman in 2012, have been well received.

The move to electronic distribution of Board papers was successfully implemented early in the year and there is now more forward planning of Board agenda items and external presentations, while continuing to allow flexibility for changing circumstances.

Strategy

Regularly update strategy to maximise value creation, taking into account external views on political and economic developments in host countries. Ensure adequate time is allocated for Board discussions on:

• The exploration opportunity set;
• Resource allocation to exploration, appraisal and
  development projects;
• Finance and portfolio management options; and
• Maintaining operating cost and capital discipline.

Risk management

Continue to ensure that appropriate systems and processes exist to identify, monitor and manage evolving risks, with a particular focus on:

• Social impacts and external stakeholder relations;
• Country risk;
• EHS;
• Security and human rights; and
• Treasury and financing options.

Governance and values

• Maintain and enhance the Tullow culture and values;
• Reinforce compliance with the Tullow Code of Business Conduct;
• Continue to strengthen internal controls and reporting;
• Seek shareholder approval for new remuneration policy; and
• Form a new EHS Board sub-committee.

Organisational capacity

• Continue to build organisational capacity through recruitment, induction, development, recognition and reward;
• Ensure organisational design is fit for purpose and evolves to
  reflect the growth in size and complexity of the business;
• Continue to monitor senior executive development plans to
  provide succession for all key positions; and
• Continue to increase the diversity of the management team.

Stakeholder engagement

• Continue to enhance Board-level interaction with shareholders, employees, politicians, key decision-makers, NGOs and
  other stakeholders; and
• Arrange Board visit to Kenya.

Board development

• Undertake agreed personal development plans; and
• Arrange external presentations on agreed topics