Tullow Oil is issuing a combined Trading Statement in respect of its financial year to December 31, 2004 and Operational Update. The Group has interests in over 90 production and exploration licenses in 16 countries and is currently focusing on three core areas: the UK North Sea, West Africa and South Asia.
The Trading Statement is in advance of the Group's Full Year Results, which are scheduled for release on April 12, 2005. The information contained herein has not been audited and is subject to further review. The Operational Update summarizes key activities in Production, Development, Exploration and Appraisal assets for the period from October 2004 to January 2005.
2004 was a very exciting year for Tullow. Over one billion dollars was spent on acquisitions and investments during the year and the Group also benefited from the ongoing strength of global resource pricing.
Energy Africa, acquired at a cost of US$570 million, has been successfully integrated and consolidated with effect from 1 st June 2004. There will be a one-off charge in 2004 of approximately £2 million for post acquisition reorganization costs.
The acquisition of the Schooner and Ketch producing assets and surrounding acreage for £200 million was announced on 20 th December 2004. A development team is now in place and the transaction is on schedule to complete at the end of the first quarter, 2005.
Production and Reserves
Weighted average daily production for 2004 was 40,600 boepd, 62% ahead of 2003 levels.
In the 2nd half of 2004, Group working interest production increased to 51,800 boepd and continues to increase, averaging approximately 56,000 boepd in January 2005.
ERC Ltd will perform an independent reserves audit on Tullow's entire portfolio as at December 31, 2004. The results of this will be disclosed with the 2004 Full Year Results.
In the UK, development drilling at Horne and Wren has been successfully completed with both wells suspended for future production. The results are in line with pre-drill expectations and the project is on budget and on schedule for first gas in the second quarter, 2005.
Tullow has issued an invitation to tender for the FEED study for the development of the Kudu field in Namibia to a selected list of pre-qualified contractors and expects to award the contract at the end of February 2005.
There has been significant development activity in the UK and West Africa over the last four months with over 20 successful development and infill wells drilled.
Exploration and Appraisal
In Bangladesh the Bangora-1 exploration well tested gas at an aggregate rate of 120 mmscfd gross. Tullow, as operator, has proposed an appraisal program for 2005, which will include the tie-in of the discovery well into existing infrastructure on a long-term production test.
A successful exploration well was drilled into the Akom North oil prospect in Equatorial Guinea. The well was suspended for potential future production as a satellite to the Okume complex (formerly known as Northern Block G).
Based on current estimates the exploration write-off arising, along with pre-license and new venture costs, is anticipated to be in the order of £18 million for 2004.
Group production in 2005 will be enhanced by the addition of further production in the UK from the Horne and Wren project, the Munro development and the Schooner and Ketch acquisition. Some temporary reductions are expected as a result of the current infill drilling program on the Espoir Field in Côte d'Ivoire.
During 2005 Tullow will actively participate in development activity in the UK, Congo, Equatorial Guinea, Gabon, Namibia, Côte d'Ivoire and Pakistan. Planned expenditure is budgeted at approximately £75 million, with the primary focus on the UK and West Africa.
In addition, Tullow has approved a total exploration budget of approximately £40 million for 2005 with the objective of drilling at least 15 wells. Of those wells, a number remain subject to further technical review and partner approval.