Tullow Highlights 2010 Financial, Operational Results

Tullow announced its results for the year ended December 31, 2010.

Results summary

In 2010, Tullow demonstrated continued exploration and appraisal success and delivered first production from the Jubilee development in record time. The reported financial results for 2010 are materially ahead of 2009 and broadly in line with the market's expectations. The successful equity placing in 2010, coupled with the planned Uganda farm-down, and the increased cash flow from Ghana, will ensure that the Group remains well funded to execute its exploration-led strategy and continue to grow the business.

Key highlights

  • Jubilee production offshore Ghana achieved in November, some 40 months after discovery.
  • Working interest production averaged 58,100 bopd; three year reserves replacement ratio of 250%.
  • Exceptional E&A performance: 83% success ratio in 2010; seven successes year-to-date in 2011.
  • Important Equatorial Atlantic discoveries: Enyenra & Teak offshore Ghana; Mercury offshore Sierra Leone.
  • A 50% operated interest in six licenses covering 100,000 sq km was secured in Kenya and Ethiopia.
  • A 40-well E&A campaign including basin-opening wells is planned for 2011.
  • Financial results up on 2009 and will be transformed in 2011 by Jubilee production.
  • Balance sheet strengthened during the year through additional debt and equity totaling $2.35 billion.

Commenting, Aidan Heavey, Chief Executive, said, "With First Oil in Ghana and an excellent exploration and appraisal success rate, 2010 was undoubtedly a transformational year for Tullow. This contrasted with slower progress on our agreed farm-down in Uganda. However, good progress has recently been made towards gaining Government approval and establishing a strong fiscal and legal framework for the successful development of the basin. 2011 has started very well with production increasing from Jubilee and continued exploration and appraisal success. With a diverse 40-well E&A campaign planned for 2011, we look forward to another year of significant progress."

2010 Full year results overview 

Making history in Ghana

Tullow's highlight of 2010 was achieving First Oil from the Jubilee field in Ghana with formal celebrations held on 15 December 2010. We are now a deepwater development operator having delivered production on schedule, within 5% of the original budget. The facilities uptime has been exceptional at over 90% and we will continue to ramp-up production over the next few months. 

Establishing a major new partnership in Uganda

In 2010, we took the opportunity to pre-empt a deal agreed by our partner in Uganda when it decided to sell its stake. In parallel we agreed a farm-down of two thirds of our interests to CNOOC and Total to create a like-minded, aligned partnership. However, a transaction of this size and importance takes time to negotiate and finalize particularly in an election year. Large scale oil development is new to Uganda and it is important to get the appropriate fiscal and legal framework in place for the long-term benefit of all parties. Tullow and the Government of Uganda are currently engaged in finalizing a Memorandum of Understanding (MOU). The signing of this MOU will be the first step on an exciting journey to successfully develop Uganda as a significant oil-producing country. 

Strong financial performance

2010 revenue benefited from higher oil prices offset by slightly lower sales volumes. First Oil in Ghana was a major milestone for the Group and will transform Tullow's financial profile in 2011. During the year we raised $1.45 billion from an equity placing and took the opportunity, based on good operational performance and a strengthening external environment, to increase our debt capacity. Finalization of the Ugandan farm-down will secure significant funding for the medium-term and ensure we are well capitalized for an ambitious growth program. 

Exceptional exploration and appraisal success

2010 was another year of exceptional exploration and appraisal success. We achieved an 83% success ratio; finding hydrocarbons in 24 out of 29 E&A wells during the year. Highlights in Ghana included the discovery of Enyenra (formerly Owo), subsequently proved to be a major oil field, and the successful appraisal of the Tweneboa field; the Mercury-1 discovery well in Sierra Leone extended the Jubilee play more than 1,000 km west of Ghana; and a 10 out of 10 success ratio in Uganda. We are now seeking to replicate our Ugandan success elsewhere in the East African Rift Basins and have acquired six contiguous licenses in Kenya and Ethiopia. 

Strong development and production performance

The performance of our global assets in 2010 was very strong with production exceeding our guidance at 58,100 boepd, a three year reserves replacement ratio of 250% and 500mmboe of Contingent Resources added. The contribution from the Jubilee field will considerably increase group production in 2011, expected to average between 86,000 and 92,000 boepd. A pipeline of development projects which continues to be replenished from the exceptional results of our exploration programs will build our production profile in the medium-term. 

Environment, Health and Safety

The management of Environment, Health and Safety remains a core priority and, during 2010, the Tullow Team delivered excellent EHS performance across the organization while progressing a number of key EHS initiatives. Of particular note was the strong EHS performance on the Jubilee Project which delivered excellent EHS results during the course of a diverse and challenging project with many complex and potentially hazardous operations. 

Dividend policy aligned with growth opportunities

The Board feels it is appropriate to continue to observe a stable dividend policy for 2010. The final dividend proposed is 4.0p per share, which brings the total payout for 2010 to 6.0p per share. The dividend will be paid on 20 May 2011 to shareholders on the register on 15 April 2011. The Annual General Meeting will be held on 12 May 2011 in Haberdashers Hall in London and the Dublin Shareholders' Meeting will be held on 2 June 2011 in the Royal College of Physicians of Ireland in Dublin. 

Another exciting year in prospect

2011 looks to be an equally exciting year with finalization of the farm-down in Uganda and moving forward on basin development with our new partners, a major exploration campaign to open up several potential new basins in both Africa and South America and appraisal programs designed to enable the sanctioning of major new oil and gas development projects. 

Operations Review


2010 Results highlights

  • 2010 average working interest production in line with forecast at 39,000 boepd.
  • 82% exploration and appraisal success rate.
  • First Oil production from the Jubilee field commenced in November 2010.
  • Successful exploration and appraisal of the Enyenra (formerly Owo) and Tweneboa fields.
  • Mercury-1 exploration well confirms Jubilee play extends 1,000 km from Ghana to Sierra Leone.
  • Extensive West Cape Three Points exploration program in the first half of 2011.
  • Uganda transaction nearing final government approval.
  • Rig secured for Equatorial Atlantic drilling campaign including Montserrado-1 well in Liberia. 

Ghana and West African Equatorial Atlantic

In the Equatorial Atlantic region offshore West Africa Tullow has interests in 10 blocks across four countries: Sierra Leone, Liberia, Côte d'Ivoire and Ghana. 2010 has been a period of strong delivery for Tullow's operations in Ghana, culminating in the delivery of First Oil from the Jubilee field in November. Exploration and appraisal success continued throughout the year in Ghana and Sierra Leone where significant new fields have been discovered. The Group's extensive 2011 drilling program has the potential to transform this area into one of Africa's most substantial oil producing regions. 

First Oil from Jubilee field Phase 1 development

Production from the Phase 1 development of the Jubilee field commenced on 28 November and was inaugurated by the President of Ghana on 15 December 2010. This milestone was achieved around 40 months after discovery of the field, with top quartile safety performance and the final cost is expected to be within 5% of the original $3.1 billion budget. The project has set a significant new global benchmark for the delivery of major deepwater developments. 

Gross production of over 69,000 bopd has been achieved from five wells and full production capacity of 120,000 bopd is expected to be reached in the next five months as the remaining four production wells are completed and brought on line. On 5 January 2011, the first lifting of Jubilee crude oil, a 650,000 barrel Tullow cargo, was successfully completed and three liftings have now been completed to date. Once plateau production is reached an average of three offtakes are expected each month. Water injection to two wells is currently around 110,000 bwpd and a further four water injection wells will be completed during 2011 to maintain plateau oil production levels. Gas injection will commence in March to a single well, the second injection well is expected to be completed in the third quarter of 2011. 

Further phases of Jubilee development

Planning work for Phase 1a of the Jubilee development, to comprise between five and eight further wells, commenced in the fourth quarter of 2010. This development will help maintain field production at plateau levels and develop further reserves. It is anticipated that the investment decision will be made in the third quarter of 2011 following analysis of reservoir performance and submission of plans to the Government of Ghana. Sub-surface planning work is well advanced and has already identified the additional well locations. A deepwater rig to execute the program starting early in 2012 is currently being tendered. 

The Operator of the West Cape Three Points (WCTP) license submitted a Declaration of Commerciality for the Mahogany East (previously known as 'Southeast Jubilee') area in September 2010. The Plan of Development for Mahogany East is currently under discussion with the Government of Ghana. The development of the Mahogany East reservoirs, which are extensive but generally thinner than in the main Jubilee reservoirs, is currently planned to consist of a four to six well tie-back to the existing Jubilee subsea infrastructure when capacity is available. However, an accelerated development as part of an integrated project with other WCTP discoveries, may be considered depending upon exploration and appraisal success in the WCTP license. 

Enyenra (formerly Owo) and Tweneboa

In February 2010, the first appraisal well on the Tweneboa field, Tweneboa-2, in the Deepwater Tano license offshore Ghana intersected a significant combined hydrocarbon column. Combined with the Tweneboa-1 discovery in 2009, Tweneboa was established as a major gas-condensate and oil field. 

In July 2010, the Owo-1 and Owo-1 sidetrack wells continued the success of Tullow's West African Equatorial Atlantic drilling campaign. The wells intersected a total of 69 meters of net oil pay in a substantial gross oil column of 200 meters and established Enyenra (formerly Owo) as a major new oil field in its own right. The wells also intersected 13 meters of net condensate pay and 6 meters of net gas pay below the Enyenra oil field. 

A campaign of appraisal wells and flow tests has now commenced across both the Enyenra and Tweneboa fields. The program is designed to determine reservoir extent and connectivity and to provide rock and fluid data. The first well in this campaign was Tweneboa-3, drilled in December 2010, which confirmed producible gas-condensate at this location. In February 2011, Enyenra-2A was drilled and encountered oil in excellent quality reservoirs in communication with the original Owo-1 discovery well located 7km up-dip. The result confirms Enyenra as a major light oil discovery. The activity program this year will lead to a Declaration of Commerciality for the Enyenra and Tweneboa areas being submitted to the Government of Ghana later in 2011. The expected schedule of wells includes Tweneboa-4, Tweneboa DST, Enyenra-3A, Enyenra-DST and Enyenra-4A. 

Development studies for both fields are focused on optimizing the recovery of the light oil discovered at Enyenra and maximizing both liquid and gas recovery from the Tweneboa field. Conceptual developments include the use of a large FPSO with liquid rates in the range of 75,000 to 125,000 barrels oil per day. Water and gas is expected to be injected into the reservoirs to optimize both oil and condensate recovery levels. Gas export infrastructure to shore will also be put in place to satisfy the growing demand in Ghana. A Plan of Development will be prepared for submission in the first quarter of 2012 and, pending approvals and a timely sanction of the project, first production would be anticipated before the end of 2014. 

Further West African Equatorial Atlantic exploration and appraisal activity

In 2010, Tullow has continued to progress the Jubilee play in the West African Equatorial Atlantic region including Côte d'Ivoire, Sierra Leone and Liberia. In addition to the successes with Tweneboa and Enyenra, Tullow has also made other important discoveries through a campaign of wells in Ghana and Sierra Leone. 

Following the interpretation of 10,000 sq km of 3D data over Tullow's acreage in Sierra Leone and Liberia, several Jubilee-type prospects have been identified. The Mercury-1 well, offshore Sierra Leone was drilled in November and encountered 35 meters of excellent quality oil pay in the primary objective and a further six meters oil pay in a shallower secondary objective. These accumulations are currently being assessed with a view to drilling a potential appraisal well during 2011. In Liberia, the high potential Montserrado (formerly Cobalt) prospect is now scheduled for drilling in the third quarter of 2011 with the operator having recently secured the Transocean Discoverer Spirit drillship for a campaign in the region. 

In Ghana, another important discovery was made in February 2011 when the Teak-1 well in the West Cape Three Points license found hydrocarbons in all five prospective horizons. An extensive multi-well exploration campaign is continuing in the license before the exploration period expires in mid-2011. The current well, Teak-2, is being drilled into an adjacent fault block to that intersected by Teak-1 and a result is expected later in March. 

The Dahoma-1 exploration well in the West Cape Three Points license and the Onyina-1 exploration well in the Deepwater Tano license were drilled in April and October 2010 respectively and were unsuccessful. The results from these wells have helped us to calibrate the basin and the Onyina-1 result also supported the required 25% relinquishment of non-prospective acreage in January 2011. 

In Côte d'Ivoire, advanced processing of the large 3D surveys acquired in blocks CI-103 and CI-105 in 2010 have been completed and the interpretation of these datasets has revealed a number of potential targets for the two wells scheduled for the second half of 2011. Interpretation of the reprocessed 3D seismic data over CI-102 revealed limited prospectivity so Tullow withdrew from this Joint Venture at the end of December 2010. Until the current political uncertainty in Côte d'Ivoire is resolved our exploration licenses have been placed in Force Majeure however there has been no impact on production. 

Production and Development in Côte d'Ivoire

Net production from the East and West Espoir fields was in line with expectations averaging 3,850 boepd (2009: 5,000 boepd). The decrease in production from 2009 was due to planned shutdowns to facilitate the upgrade to the FPSO and because of the natural decline of the fields. The upgrade to the processing facilities was completed successfully in the middle of the year. An investigation into the feasibility of adding extra well slots to both platforms is at an advanced stage and infill drilling from both the East and West wellhead towers is anticipated in 2012 or 2013. 

Ghana Listing

In November 2010, Tullow announced that in order to create a more accessible opportunity for Ghanaian individuals and institutions to invest in the future of their oil industry through Tullow, the Group was planning a secondary listing on the Ghana Stock Exchange. Originally planned for December, the Listing has been postponed due to the requirement over that period to focus on First Oil from the Jubilee field and year-end corporate planning. The Listing is now planned to go ahead as soon as practicable after our year-end results and the issue of our Annual Report. 


Tullow has had interests in the Lake Albert Rift basin in Uganda since 2004 when it acquired Energy Africa. Since then, the Group has drilled approximately 40 wells with all but one encountering hydrocarbons. To date, one billion barrels of P50 resources have been discovered and 1.5 billion barrels of P50 prospective resources remain. Over this period, Tullow has acquired additional equity by purchasing Hardman Resources in 2007 and Heritage Oil's interests in 2010. Tullow is now finalizing plans to farm-down a one third interest to both CNOOC and Total to align interests across the basin and accelerate basin-wide development. Ultimately, Tullow expects the basin to be producing in excess of 200,000 bopd. 

Purchase of Heritage interests and farm-down to CNOOC and Total

On 17 January 2010, Tullow exercised its right to pre-empt Heritage Oil and Gas Limited's ("Heritage") sale of its interests in Uganda to a third party. This resulted in Tullow acquiring a 50% interest in Exploration Areas 1 and 3A (EA 1 and EA 3A) for $1.45 billion on 26 July 2010. $1.05 billion was paid directly to Heritage, $121 million was deposited with the Ugandan Revenue Authority and $283 million was put into Escrow pending resolution of a dispute between the Government of Uganda and Heritage over payment of capital gains tax. Conditional approval from the Government of Uganda has been received for the purchase and a subsequent farm-down to CNOOC and Total, however the Government of Uganda has stated that final approval for both transactions will not be received until a basis for resolution of the Heritage capital gains tax dispute has been achieved. 

Tullow and the Government of Uganda have been engaged in negotiations aimed at resolving this issue. A legally binding Memorandum of Understanding has been drafted to pave the way for the farm-down and development of all assets within the Lake Albert Rift basin by Tullow, Total and CNOOC. Although good progress has been made recently, the elections in Uganda, on 18 February 2011, have impacted the timing of a final agreement. 

Exploration and Appraisal

The successful exploration and appraisal campaign in Uganda continued in 2010 with ten wells drilled, all of which encountered hydrocarbons. This led to the estimated P50 resource base for Uganda being revised upwards from 800 million barrels at the beginning of the year to 1 billion barrels at year-end. 

The 2010 Ugandan drilling campaign commenced in January with the Kasamene appraisal program where the OGEC-750 rig drilled three wells: Kasamene-2, 3 and 3A. Positive results from these wells give strong support to the development of this field. 

In May, the Nzizi-3 appraisal well was drilled, establishing reservoir connectivity with the Nzizi-2 well and proving the well's viability as a future gas producer for the integrated power project. In June, the OGEC-600 rig arrived in EA 1 and a comprehensive two-rig exploration and appraisal campaign commenced across EA 1 and EA 2. In total, a further six successful appraisal wells were drilled and the Mpyo-1 exploration well made a material discovery. 

Good progress is being made in defining numerous new exploration and appraisal drilling targets for the drill-out campaign in 2011 which will accelerate once the transaction with CNOOC and Total is approved. Following a short drilling hiatus, one rig is now operational in EA 2, a second rig is on standby and further rigs are being contracted. In 2011, two successful appraisal wells have been drilled; Nsoga-2 and Kigogole-6. Ngege-2 is currently drilling. 

During the year, three 2D seismic surveys have been completed in the Butiaba Area of the basin resulting in a total of 767 line kilometers of good quality data. These surveys have firmed up a series of large prospects and have assisted in the placement of wells to finalize the appraisal of a number of discoveries. In addition, a new 3D survey is ongoing and will run through to the fourth quarter of 2011.

Lake Albert Rift Basin Development

During the year, good progress has been made on the first phase of the EA 2 development. An Extended Well Testing program is planned to start in the second quarter of 2011 with test crude to be sold to a domestic industrial user. Field Development Plans have also been submitted to the Government of Uganda for the Waraga, Mputa and Nzizi discoveries as required at the end of the appraisal period. It is anticipated that the Kasamene Field Development Plan will be submitted in the second quarter of 2011. 

The Front-End Engineering and Design (FEED) phase for the Nzizi and Kasamene development projects has been completed and work is underway to progress these developments to sanction. The Nzizi gas field development will deliver gas to a new power plant in the Lake Albert area. First gas from Nzizi is subject to gas sales agreements and the readiness of the new Lake Albert Power Plant, which is expected in 2012. The timing of the Kasamene development, based on a production facility with an initial capacity of up to 10,000 bopd, is under review to determine how this development will be best integrated into the overall Lake Albert development plan. 

Following completion of the farm-down to CNOOC and Total, the partners will work closely with the Government on a development plan aimed at delivering in excess of 200,000 bopd which will include refinery options to supply petroleum products for the region as well as pipeline export routes to international markets. The target for achieving significant oil production from this phase of the development is currently 2015. 

Focus on Capacity Building in Uganda

Tullow has facilitated considerable growth in the petroleum sector in Uganda. Tullow's Kampala team has grown with the focus firmly on maximizing recruitment of Ugandan nationals in order to ensure the long-term sustainability of the project and of the industry as a whole. Over 80% of the team working in Kampala, Cape Town and London are Ugandans and competencies continue to build through on-the-job experience and formal training. 

Tullow has also stepped-up its program this year to build capacity in the supply sector by encouraging local businesses to partner with international specialists. A Logistics Suppliers Open Day, held in January 2011, attracted over 500 service providers and provided a forum for debate on the way in which access to the industry by local entrepreneurs can be supported. Further events planned in 2011 will expand these efforts to every sector of the industry. 

Kenya and Ethiopia

In the second half of 2010, Tullow farmed into blocks 10A, 10BA, 10BB, 12A & 13T in Kenya and the South Omo block in Ethiopia. The deal was completed in early 2011 and Tullow now operates all six blocks covering an area of around 100,000 sq km. The acreage covers the Turkana Rift Basin which is similar in character to the Lake Albert Rift Basin and also a south-east extension of the geologically older Sudan rift basins trend. A 600 km 2D seismic survey has already been completed in Block 10BB and an 800 km 2D seismic survey covering Block 10A is in progress. A Full Tensor Gravity Gradiometry (FTG) survey will commence in the first quarter of 2011 followed by multiple 2D seismic programs across all the blocks. Two wildcat exploration wells are planned for late 2011. In March 2011, Tullow also farmed in to Block L8 offshore Kenya, subject to certain approvals. On completion, Tullow will gain a 10% interest and an option to increase by a further 5% in this highly prospective acreage. 

Congo (DRC)

In 2006, Tullow was awarded two Congo (DRC) licenses adjacent to its Ugandan acreage on Lake Albert through a transparent bidding process. In June 2010, the Government awarded the licenses via Presidential decree to two British Virgin Islands-registered companies. Tullow commenced legal proceedings to challenge that award and obtained an interim injunction preventing those companies carrying out any work until Tullow's rights had been legally determined. In subsequent proceedings, it became clear that Tullow's rights were not likely to be upheld so long as the DRC Government maintained its position that it had the right to ignore or revoke the earlier award to Tullow. Given the expense of further proceedings and the difficulty in enforcing any award against the DRC even in the event of success, the Board has regretfully taken the decision to discontinue the legal proceedings and withdraw from the DRC. 

Equatorial Guinea

Net production from the Ceiba field was ahead of expectations, averaging 3,950 bopd in 2010, due to the optimised use of the subsea pumps. Net production from the Okume Complex averaged 11,750 bopd in 2010 as new production wells kept the field on plateau whilst uptime and throughput was enhanced leading to slightly higher average production than 2009. 

During the year, two drilling rigs completed separate development drilling campaigns on the deep water and shallow water sections of the Okume Complex, with eight new wells drilled ahead of schedule. In the third quarter of 2010, a time lapse 3-D (4-D) seismic survey was acquired over the Ceiba field and the deep water part of the Okume Complex which is expected to assist with selecting future infill well locations. 


Net production in Gabon averaged 12,850 bopd from 13 fields during 2010, an increase of 7% over the previous year. The Niungo, Echira and Tchatamba fields all performed well and work is ongoing to further enhance production. Tullow and its partners drilled 53 wells in Gabon during 2010, including a series of very successful exploratory appraisal wells and in 2011 the level of drilling activity will be sustained with over 50 wells planned. Further seismic evaluation is also planned to support the 2012 drilling campaign. 

In February 2010 the Maroc-Nord-1 exploration well discovered 50 meters of net oil pay in an emerging under-explored stratigraphic trap play which is currently being appraised and will be brought into the Onal area development in 2011. The Noix de Coco-1 exploration well was drilled in April 2010 on the Tullow operated Azobe Exploration Block but the well encountered non-commercial levels of hydrocarbons and following a full review the licence was relinquished. Tullow entered an agreement with Perenco to farm-in to the offshore Arouwe Exploration block for a 35% interest. The Falcon North-1 exploration well was drilled in December 2010 and encountered non-commercial volumes of hydrocarbon, however material prospectivity remains in the license for the new exploration campaign ahead. 

Congo (Brazzaville)

Net production from the M'Boundi field averaged 4,000 bopd in 2010. A delay in the ramp up of water injection has resulted in a decline in average reservoir pressure and hence a decline in well productivity. Infill drilling however continued throughout the year, with the delivery of 30 new wells. Hydraulic fracturing has been successful in improving productivity of a number of wells and downhole pumps are being installed in producer wells to deal with the rising watercut. 

Mauritania and Senegal

In Mauritania, the Chinguetti field production rate declined in line with expectations, averaging 1,500 boepd net to Tullow. Towards the end of 2010, a program of well and flowline optimization resulted in a reduction in the rate of decline and the potential for further optimization in 2011 and beyond is being evaluated.

The Cormoran-1 exploration well, located in offshore Block 7, completed drilling in January 2011. The objective of the well was to appraise the Pelican gas discovery and to target two underlying exploration prospects; Cormoran and Petronia. The well successfully intersected gas in both Pelican and Cormoran. The Pelican interval was flow tested at a stabilised flow rate of approximately 23 mmscfd. In the deeper Petronia target, the well encountered rich gas in Turonian-age reservoirs. However, drilling had to be stopped for operational reasons soon after penetrating the trap. 

The result from the Gharabi-1 well, in Mauritania Block 6, was announced in February 2011. The well, which was selected by the operator to meet license commitments, intersected poorly developed water-bearing reservoirs. The result has no impact on Tullow's future plans for its Mauritanian or other West African acreage. In 2011, Tullow will continue defining prospects throughout the Mauritania-Senegal basin with further planned exploration activity in 2011 and 2012. 


In April 2010, the Likonde-1 exploration well in the Lindi Block was drilled to a depth of 3,647 meters testing Tertiary and Cretaceous sequences. Significant amounts of residual oil and gas were found, however no commercial quantities would have been producible from the well. Tullow's strategy of exploring for oil in the Ruvuma Basin continued throughout 2010 with the entire seismic dataset being reprocessed to better image potential objectives in the Lindi and Mtwara blocks with a second commitment well planned later in 2011. 


Due to the political instability in Madagascar during 2010, Tullow elected to delay the 2D seismic acquisition program until 2011. However, Tullow completed an extensive geological field study program to better define areas of high prospectivity targeting a light oil play in the Permo-Triassic Karoo interval. Oil sampled from natural seepages along the faults which bound the prospects, is being analyzed. Tullow has also completed a reprocessing project of the historical seismic data which has resulted in a large improvement of the dataset. The assignment of Madagascar Oil's 50% equity in Block 3109 to Tullow completed by the end of 2010 and a well in Block 3111 is planned for 2012. 


Terms of a new Kudu Petroleum Agreement have been agreed with the Ministry of Mines and Energy and a revised 25 year Production License is expected to be issued in the first quarter of 2011. Tullow, on behalf of the Production License partners NAMCOR, Gazprom International and Itochu, has completed the concept selection study for the offshore development of the Kudu gas field and is now entering into technical integration discussions with NamPower to optimize design concepts of both the offshore development and the Kudu Power Station. In parallel, discussions are underway with NamPower on the gas supply agreements and for the 800MW power station and, subject to progress, Tullow expects to initiate detailed design of the offshore development in the second quarter of 2011. 


On 30 November 2010, Tullow elected to withdraw from the Block 1/06 license in Angola on commercial grounds. The first exploration period has terminated and in-country operations are due to complete by mid-year.


2010 Results highlights

  • 2010 average working interest production ahead of forecast at 19,100 boepd.
  • UK production ahead of expectation due to strong CMS Area performance.
  • Successful Shekhan-1 exploration well in Pakistan commenced long-term production test in December.
  • Rigs secured for South American basin-opening exploration campaigns which commence in March 2011.

The Group's Rest of the World assets form an important part of Tullow's business. Gas production in the UK and South Asia contribute important revenues while low risk exploration prospects and development opportunities in Europe combine with high-impact potential in South America and South Asia to provide an exciting exploration portfolio. 


Tullow's well established producing assets lie in the Southern Gas Basin offshore UK and are centered around two gas producing hubs, associated fields and infrastructure. Tullow also has a portfolio of mostly operated exploration blocks offshore the Netherlands where it is looking to capitalize on the exploration success it has experienced in adjacent UK blocks in recent years. 


Production in 2010 from the UK assets exceeded expectations averaging 13,300 boepd (2009: 14,450 boepd). In the Thames Area, production was in line with expectations supported by a full year of combined flow from the Tullow-operated Horne, Wren and Wissey fields. In the CMS Area, higher rates were achieved as a result of the successful implementation of a detailed well performance improvement program on the Ketch field, the earlier than forecast tie-in of the Ketch-8z well, the successful in-fill drilling on the Boulton field and various well interventions across the portfolio. 

2010 marked a busy year of operational activity in the CMS Area. The Boulton B5 infill well was drilled and brought on stream; successful well interventions took place on the Kelvin field; and a development concept and export route was agreed for the Harrison development in block 44/19b with gas production anticipated to commence in the second half of 2012. In addition, the Ketch-8z well was brought on production ahead of schedule in August 2010 and the Ketch-10 well is now planned for 2011. Following a farm-in agreement with ConocoPhillips in January 2011, Tullow increased its equity in the Cameron prospect located south of the Harrison discovery in 44/19b. The exploration well will be operated by Tullow and is expected to commence drilling in April 2011. 

In the Thames Area, in December 2010, Tullow acquired a 100% interest in Block 49/29d and in February 2011 agreed a deal for a further 65% in 49/30b and 49/29e. These blocks are considered to have material gas prospectivity. Tullow intends to drill a well in the first half of 2011 and in the event of a success, the well will be tied back to Thames, deferring field abandonment and generating additional revenues. 


Building on the successful exploitation of the Carboniferous play in the UK CMS Area, Tullow has been building an extensive operated position in the adjacent underexplored Carboniferous province of the Dutch offshore sector and now has interests in 10 blocks. In early 2010, Tullow and its partners participated in two major 3D seismic reprocessing programs and the results led to the acquisition of a significant 1,600 sq km high specification 3D seismic survey during the summer. The data will be used in 2011 to mature the prospect inventory for a potential drilling campaign in 2012 and 2013. 

Tullow participated with 4.3% working interest in the drilling of the non-operated Muscovite prospect, which extends into Block E13b and sits immediately south of the Tullow operated acreage in the E blocks. The purpose of participating was to calibrate geological risk factors in the area at a low cost to Tullow. The well found only residual gas and was plugged and abandoned. Valuable insights from this well will now be applied to Tullow's Carboniferous exploration acreage in the Netherlands. 


Following the completion of work program commitments in the frontier, deep-water Alentejo Basin and a detailed evaluation of the full subsurface dataset, Tullow took the decision not to pursue this opportunity any further and its operated interest in the acreage was transferred to other parties within the Joint Venture. 

South Asia

The demand for energy in Asian economies remains strong. This region offers Tullow excellent growth potential through exploration, particularly in Pakistan, where the Group has a significant non-operated position. 


Production from the Bangora field in 2010 was marginally ahead of expectations averaging 5,650 boepd (2009: 5,050 boepd). In March, the installation of a Hydrocarbon Dew Point unit to improve the gas sales specification was completed, increasing condensate yield from 140 to 400 barrels per day whilst delivering on-spec gas at a maximum permissible rate of 120 mmscfd. 

Tullow has also undertaken reprocessing and reinterpretation work on the southerly extension of the Bangora structure where there is significant potential for satellite traps which could be tied into the Bangora facilities. The viability of exploration drilling and life-of-field optimization programs will be considered during 2011. 

The offshore exploration block SS-08-05 is due to be awarded to Tullow following competitive bidding. However, the award is being delayed until a maritime border dispute between India and Bangladesh is resolved. 


In July 2010, the Shekhan-1 exploration well penetrated a total net gas pay of 45 meters in sandstone reservoirs over a gross interval of 93 meters. A pipeline and gas processing and production facilities were then installed so that an extended well test could be performed with gas sold into the Pakistan gas grid. This was achieved in record time allowing sales of around 15 mmscfd of gas plus 100 barrels per day of condensate to commence in December 2010. The test will continue into 2011 and will assist in deciding upon forward programs for the Shekhan area. 

In the first half of 2011, a second exploration well, Jabbi-1, will be drilled 20 km to the west, along the same geological structural trend as Shekhan. If successful, Jabbi-1 gas could be quickly tied-in to the Shekhan production facilities. Tullow has equity in several other high-impact exploration blocks in Pakistan and is working with the local authorities to enable activity in these blocks to recommence as soon as local security conditions permit. 

The Sara-Suri field continued producing gas at very low levels until the fourth quarter of 2010 when it was shut-in pending approval from the Government for the sale of the asset. 

South America

Tullow has deep water interests in the Guyane Martime, Block 47 and Georgetown licenses in French Guiana, Suriname and Guyana respectively. The Guyana Basin of South America has long been recognized as the potential twin to the West Africa Basins where Tullow has had significant exploration success over the past three years. 

French Guiana

Seismic acquisition on the Eastern Slope part of the Guyane Maritime permit in French Guiana, which started in September 2009, was completed in early 2010 with a total of 2,500 sqkm 3D and 180 km 2D seismic acquired. Interpretation of this data during 2010 confirmed the presence of the major Late Cretaceous turbidite system previously identified on the existing regional 2D seismic in 2008. A portfolio of high risk but high-impact deepwater prospects analogous to the Jubilee field in Ghana, have been interpreted and the first well on the Zaedyus prospect commenced drilling with the ENSCO 8503 in early March 2011. The well has the potential to open up a major new oil province in French Guiana with a significant number of further prospects and leads already identified. Tullow is operator with 27.5% equity in the license. 


Tullow has a 30% interest in the Georgetown Block in Guyana where, following analysis of a 3D seismic survey acquired and processed during 2008-2009, a number of prospects were identified in 2010. Jaguar, a Late Cretaceous turbidite fan prospect, will be the first well to be drilled in the license. The Atwood Beacon jack-up rig has been contracted and the well is expected to commence drilling in the third quarter of 2011. 


In September 2010, Tullow signed a Production Sharing Contract for the deepwater Block 47. While previous industry focus in this area had been on an Early Cretaceous tilted fault block play, Tullow's focus is on the Cretaceous turbidite fan play analogous to Tullow's West African discoveries. Planning for a large 3D seismic program (2,000 sq km) is currently ongoing with an anticipated commencement date of late 2011/early 2012. Onshore activity in Suriname is focused on continued preparation for the five well Coronie and two well Uitkijk drilling programs in 2011. 

Finance review

Our financial strategy is to ensure we have a strong balance sheet and the flexibility to support the Group's significant exploration-led growth strategy. In 2011 we expect to spend some $1.5 billion on high-impact exploration, further significant appraisal and development programs in Ghana and Uganda and the remainder will be allocated across the rest of the business. 

In 2010, Tullow strengthened its balance sheet with $0.9 billion of additional debt facilities and $1.45 billion raised from an equity placing in January. This finance, the expected Uganda farm-down proceeds and the revenues from Jubilee production, will ensure we have a very secure funding base for the next phase of our growth.


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