Tullow Expands North Sea Position

Orwell, North Sea
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Tullow has entered into an agreement with ChevronTexaco to acquire its 50% equity in the license that contains the Orwell gas field (Block 50/26a). Tullow will, on completion, own a 100% interest in Orwell and its associated export pipeline. Tullow is the current operator of the field.

The Orwell field, situated close to the Anglo-Dutch median line, just 15km from the nearest Dutch pipeline infrastructure, is linked to the Thames platform system. Orwell gas is processed and compressed on the Thames facilities (67% Tullow interest) before being exported to the onshore Bacton terminal (Tullow operated, 39% interest).

The total consideration for the transaction is 14.3 million (9.4 million net of tax benefits derived from the transfer of capital allowances), with an effective date of October 1, 2003. The net consideration payable by Tullow will be adjusted to reflect revenues and costs accruing to the interest since the effective date. The net remaining reserves attributed to the acquired interest at the effective date are estimated at 15.6 bcf of sales gas. Gas associated with this interest is uncontracted.

Completion of the transaction is anticipated to occur during the second quarter of 2004 subject to the necessary governmental and co-venturer approvals.

Tullow has also completed an agreement with ExxonMobil to acquire an additional 35% interest in, and operatorship of, Block 50/26b. This takes Tullow's interest to 100% in the Block, which contains a sizeable gas discovery known as "Fizzy". The discovery, which lies 12km south of the Orwell field, has a high inert gas content, but also about 130 bcf of methane gas. Tullow is currently investigating potential development scenarios for this discovery through the Orwell system and back to the Tullow operated Bacton onshore terminal.

Tullow also acquired 100% of Block 48/22a and the 20% of Block 48/23a not already owned by Tullow. These Blocks contain the "Blythe" Gas discovery and are located adjacent to the Tullow operated Hewett infrastructure which is linked to the Tullow operated Bacton plant. Possible tie-back development options are currently under review.

The consideration for the deals comprises an initial payment of 10,000, the assumption of all licence obligations, and the award of an overriding royalty to ExxonMobil on potential future production from Blythe in excess of 80 bcf of reserves.

Commenting on the transactions, Aidan Heavey, Tullow Chief Executive stated:

"These two deals further consolidate Tullow's position in our SNS Core Area gas assets at a time when the depletion of UK gas reserves is placing upward pressure on prices and increasing the strategic value of gas infrastructure. This move allows Tullow to actively manage production, development, exploration and commercial activities throughout our SNS Core Area acreage. The value added by Tullow since acquiring the assets in 2001 shows the benefits of an independent focus in a mature area and we are hopeful that the ultimate development of Blythe and Fizzy will provide further evidence of this."

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