Tullow Oil plc · LSE:TLW
Tullow Oil — FY2004 Earnings Presentation
48 slides from Tullow Oil's earnings presentation, 2005
Slide 1: 2004 Results
2004 Results Building a balanced portfolio of Exploration and Production Assets
Slide 2: 2004: Creating a "new" Tullow
2004: Creating a “new” Tullow Over $1 billion on acquisitions – Energy Africa, Schooner and Ketch New organisation structure – COO: Production and Development, five business units – Exploration Director, enhanced exploration focus – EHS/CSR policies aligned across enlarged group Exploration su
Slide 3: 2005: The "new" Tullow footprint
2005: The “new” Tullow footprint 3 core areas – NW Europe – Africa – South Asia 16 Countries 90 Licences 25 producing fields NW Europe Strategic focus on: – Gas in the UK SNS – Oil in West Africa – Growth in South Asia Head office in London South Asia C. 200 employees Market capitali
Slide 4: 2005: Ongoing active portfolio management
2005: Ongoing active portfolio management Focus on those assets where we can add value through: – Material influence – Upside potential – Operational innovation Strategic objectives: – Build strong positions in core areas – Consolidate niche positions in developing regions – Exit where we can’t
Slide 5: Financial Review
TULLOW FINANCIAL REVIEW
Slide 6: 2004 Results
2004 Results 31 December 2004 2003 Change Turnover £225.3 m £129.6 m Up 74% Operating profit before exploration activities £83.2 m £44.3 m Up 88% Net Profit £32.9 m £10.9 m Up 202% Basic earnings per share 6.18 p 2.92 p Up 112% Dividend per share 1.75 p 1.0 p Up 75% Operating cash flow £154.3 m £85.
Slide 7: 2004 Balance
2004 Balance Geographic Balance Production Balance 2004: £225 million 2004: 40,600 boepd Product Balance Reserves Balance 2004: £225 million 2004: 326 million mmboe Building a balanced portfolio of Exploration and Production Assets 5
Slide 8: Performance factors: Turnover
Performance factors: Turnover 2004 Turnover up 74% to £225.3 million (£236.0 million pre-hedging) Overall working interest production up 64% to 40,600 boepd Sales up 47% to 36,450 boepd Primarily driven by the Energy Africa acquisition Existing operations flat, impact of UK production declin
Slide 9: Performance factors: Operating Profit
Performance factors: Operating Profit 2004 Operating Profit before exploration activities up 88% to £83.2 million Benefits of increased production and reduced unit operating costs (UK/Africa) Operating costs of £4.40/barrel, working interest basis, down 6.4% – UK costs declining with shift towar
Slide 10: Taxation
Taxation 2004 Lower effective tax rate of 33% pre exploration write-off Reduction reflecting: – Change in asset mix – Deferred tax credit with asset swap in Gabon – Majority of Energy Africa production under Production Sharing Contracts – Overall down 2.5% Production Sharing Contracts – A portio
Slide 11: Robust cash flow and financial capacity
Robust cash flow and financial capacity 2004 performance metrics 2004 operating cash flow up 82% to £154.3 m Net debt at year end £ 67.1 m, net interest charge £9.6 m Total cash balances at year end £85.1 m 2004 financing initiatives $300 m acquisition bridge financing for Energy Africa tran
Slide 12: Commodity price hedge programme
Commodity price hedge programme H1 2005 H2 2005 2006 Commodity mix – Major increase in oil exposure OIL – Significant increase in gas H205 EA hedges Volume hedged (bopd) 12,983 9,946 7,731 – Material position to 31/12/04 – Reduced to 4,000 bopd end 09 Current price hedge ($/bbl) 36.7 36.0 32.8
Slide 13: 2005 Development and Exploration Activity
2005 Development and Exploration Activity Development Exploration Total Development Exploration Total NW Europe 21.0 12.0 33.0 Africa 71.0 25.5 96.5 Asia 8.0 2.5 10.5 TOTAL 100.0 40.0 140.0 11
Slide 14: IFRS
IFRS Internal project transition team, with work underway Principal impacts likely to arise from – IFRS 2 Share Based Payments – IFRS 3 Deferred Taxation on Business Combinations – IFRS 12 Income Tax – IAS 39 Financial Instruments IFRS 6 will have minimal impact – Tullow already operates “succ
Slide 15: Operations Review
TULLOW OPERATIONS REVIEW
Slide 16: 2004 Highlights
2004 Highlights An exceptional year for the production and development businesses Acquisitions: Energy Africa, Schooner & Ketch, Orwell, Horne & Wren Integration: Reorganisation to Business Unit structure UK Opex: Bacton/Hewett 25% reduction, Thames export up >100% Development: CMSIII comple
Slide 17: An organisation to manage growth
An organisation to manage growth New Business Unit organisation structure Enhanced performance management processes – Business Units deliver over budget cycle – Value creation measured over 3 year cycle Shared Group EHS and CSR culture and policies Quality functional teams supporting Busines
Slide 18: Development Strategy
Development Strategy NW Europe - UK Bolt-on acquisitions where Tullow can add value (efficiency, production, returns) Develop fallow fields with new technologies, adjacent to existing infrastructure “Snuggle” exploration and infill field development to enhance production Expansion of 3rd par
Slide 19: 2005 Outlook: UK
2005 Outlook: UK Greater CMS Area CMS AREA Schooner & Ketch redevelopment HAWKSLEY MUNRO McAdam & Murdoch infill drilling McADAM MURDOCH Munro first gas October 2005 BOULTON B WATT F H Additional 3rd party business SCHOONER KETCH Up to 3 explorations wells TOPAZ MARJAN Thames/Hewett Area
Slide 20: 2005 Outlook: Schooner and Ketch
2005 Outlook: Schooner and Ketch Development plan Signed SPA Dec 04 Completed deal March 05 Redevelopment plan H105 Start rig activities Sept 05 Operational & Commercial opportunities Improve facilities uptime OPEX synergies Well recompletions and infill drilling Schooner SE explorat
Slide 21: 2005 Outlook: Gabon
2005 Outlook: Gabon Production KIARSSENY MARIN Now over 19,000 bopd Libreville Drilling Niungo – up to 8 further infill wells AZOBE Tchatamba – further sidetrack Port Gentil GABON LIMANDE Etame – further development wells TURNIX Up to 3 operated exploration wells ABLETTE AKOUM Developments
Slide 22: 2005 Outlook: WAJV - Congo
2005 Outlook: WAJV - Congo M’Boundi Development Production now >35,000 bopd Up to 22 further development wells Pilot water and gas injection projects Facilities expansion to 60,000 bopd Field Areas and Reserves Area 1 Drilled and mapped on 3D seismic 20 mmbo 2P reserves Additional 9 mm
Slide 23: 2005 Outlook: WAJV - Côte d'Ivoire
2005 Outlook: WAJV - Côte d’Ivoire Production East Espoir increase to >25,000 bopd Drilling 4 East Espoir infill wells underway West Expoir drilling starts Q4 05 CHANGE PHOTO West Espoir Development Production 10,500bopd First oil Q2 06 Total Capex of $190m Modifications to FPSO underw
Slide 24: 2005 Outlook: WAJV - Equatorial Guinea
2005 Outlook: WAJV - Equatorial Guinea Production Ceiba production 40,000 bopd Drilling Up to 8 infill wells on Ceiba CHANGE PHOTO Okume Development Production 60,000bopd First oil end 06 Total capex of $1.1 bn 2 deepwater TLP’s, design underway Shallow water Central Processing Facilit
Slide 25: 2005 Outlook: Kudu
2005 Outlook: Kudu Phase 1: Gas to power 800 MW power plant with c. 110 mmscfd gas supply Net Reserves – 780bcf First Gas - 2009 Complete FEED studies, offshore pipeline and well surveys CHANGE PHOTO Finalise GSA/PPA discussions Finalise partnering and funding Phase 2 Upside net reserv
Slide 26: 2005 Outlook: South Asia
2005 Outlook: South Asia Production Target 25 mmscfd within 12 months Drilling - Pakistan Sari/Suri infill under review Chachar development wells Nawabshah exploration well Development CHANGE PHOTO Bangladesh Bangora-1 first gas Q4 05 2D & 3D seismic over Bangora/Lalmai Appraisal drill
Slide 27: Reserves
Reserves Commercial Reserves Up from 70 to 173 mmboe Performance post Energy Africa – Reserve replacement 130% – African replacement 250% Contingent Reserves CHANGE PHOTO 153 mmboe to be commercialised Includes Kudu, Lalmai, UK discoveries 326 mmboe reserves ….significant additional potentia
Slide 28: Exploration Review
TULLOW Exploration Review
Slide 29: Growth through Exploration
Growth through Exploration Strategy aims to add significant reserves on a cost-effective basis through: A focus on growing portfolios in areas with competitive advantage Expansion of prospect inventory in areas with material reserve potential Manage risk through farm-outs 2004 Review 16 expl
Slide 30: NW Europe Exploration
NW Europe Exploration UK IN S A B IN D S N A 2004 Review A B NORTH L EAST T D E VIKING N H SHETLAND A S GRABEN L T - BASIN E E H O S R - E T A 2 wells drilled 04, 1 success (Munro) S F E W > 50 blocks currently being evaluated N AB E G GR IK IN TH V 2005 Outlook S OU WITCH GROUND 4 wells planned
Slide 31: Africa Exploration
Africa Exploration 2004 Review MEDITERRANEAN SEA Energy Africa / Tullow integration Morocco 24 licences in 11 countries Strong combined synergies Egypt Strategic focus on West Africa Mauritania 2005 Outlook Senegal Gabon Ivory 5 major licences Coast 3 back-ins Cameroon Uganda 4 wells t
Slide 32: South Asia Exploration
South Asia Exploration 2004 Review KIRTHAR - POTWAR SULAIMAN 3 wells drilled in Bangladesh BASIN FOLD BELT 2 successes – Lalmai and Bangora New Delhi INDUS ASSAM - BASIN ARAKAN FOLD BELT 2005 Outlook Karachi Extensive regional acreage position CAMBAY RIFT Further New Ventures activity planne
Slide 33: Growth Strategy
Growth Strategy
Slide 34: Growth strategy
Growth strategy Exploitation and expansion of Tullow’s current reserve base “Snuggle” exploration balanced with higher impact/risk prospects Selective acquisitions within our core areas Active portfolio management 29
Slide 35: Our unique characteristics
Our unique characteristics Entrepreneurial spirit – Creative and flexible approach to acquisitions and development Strong relationships – Work hard at being good employer, partner and operator Development focus – Swift response to any development opportunities as they arise Diverse and quali
Slide 36: Supplementary Information
TULLOW Supplementary Information
Slide 37: Shareholder Analysis
Shareholder Analysis Market Capitalisation c. £1.1 bn 31
Slide 38: 2004: Key Performance Metrics
2004: Key Performance Metrics 2004 2003 % change Production (boepd) ¹ 40,600 24,800 64 Average price per boe ($) ¹ 34.13 27.50 24 Turnover (£ million) 225.3 129.6 74 Average production costs per boe (£) ¹ 4.40 4.70 (6) Profit before tax (£ million) 32.9 10.9 202 Earnings per share (pence) 6.18 2.92
Slide 39: Summary of results: profit and loss account
Summary of results: profit and loss account Production (mboepd) 40.6 Realised oil price ($/bbl) 34.1 Realised gas price (£/mcf) 2.3 2004 2003 £ million Tullow EA Total Total Group turnover 126.3 98.9 225.3 129.6 Operating costs (39.7) (23.8) (63.5) (42.6) Amortisation (36.6) (31.0) (67.6) (39.6) Gro
Slide 40: Summary Balance Sheet
Summary Balance Sheet £m 2004 2003 Oil and Gas Interests Tangible 495.9 144.3 Intangible 103.3 48.4 Investments 0.5 0.5 Net Current Assets 23.4 32.5 Long Term Liabilities (143.4) (59.5) Provisions (100.6) (50.3) Shareholders Funds 379.1 115.9 Gearing ratio 1 16.8 17.5 1 Including decommissioning cas
Slide 41: Summary Cash Flow
Summary Cash Flow £m 2004 2003 Net cash flow from Operations 154.3 85.0 Returns on investments (13.1) (7.5) Taxation (14.5) (12.3) Operating cash flow (after interest and tax) 126.7 65.2 Acquisition 2 (166.0) - Disposal 4.7 - Capital expenditure (95.1) (42.0) Financing 132.7 (2.3) Net cash flow 3.0
Slide 42: Fair Value Exercise
Fair Value Exercise Energy Africa/EAGSA Acquired for $570m, as follows: $m Book value (EA Books) 344 Market value of hedge contracts (52) Fair value of other net liabilities (82) Fair Value Adjustment of Oil & Gas Fixed Assets 391 Total Acquisition Cost 601 Acquisitions cost incorporates all exp
Slide 43: Effect of EA Hedge Position
Effect of EA Hedge Position EA Hedge position valued at 31 May 2004 – Collars from $24.50 - $29.50/barrel – H204 – 13,000 bopd – 2005/13 – 4,000 bopd Mark to Market Included in EA other liabilities No impact on transaction valuation – consistent with Tullow Price deck Effect is to increase v
Slide 44: Schooner and Ketch area assets
Schooner and Ketch area assets Producing fields and discoveries Asset Block Field Interest Gross GIIP Recovered Production Ketch Field 44/28b 100% 760 bcf 125 bcf ~30 mmscfd Schooner Field 44/26a+ 90% 765 bcf 230 bcf ~30 mmscfd Topaz Discovery 49/2b+ 18% 140bcf - - Marjan Discovery 49/2a+ 17% 69bcf
Slide 45: Schooner and Ketch work plan
Schooner and Ketch work plan Limited investment in recent years – Not material to previous owners – Isolated assets, no CMS participation 3 year Tullow work plan commencing in 05 – Well integrity and intervention programme – Rejuvenate current wells and production 2006/07 – Infill well drillin
Slide 46: Schooner and Ketch Objectives
Schooner and Ketch Objectives Increase ultimate recovery to 50% of gas in place Achieve production of 140 mmscfd+ during 2007 Development programmed identified: – 2005 average net production = c. 45 mmscfd – 2006 average net production = c. 90 to 95 mmscfd – 2005 capital expenditure = £2 milli
Slide 47: Africa: Exploration Drilling Programme
Africa: Exploration Drilling Programme 41
Slide 48: NW Europe and Asia drilling programme
NW Europe and Asia drilling programme 42