Tullow has delivered record results for 2008 driven by a strong operational performance, higher oil and gas pricing, and profitable portfolio management offset by exploration write offs and impairments. Whilst production decreased as anticipated by 9% to 66,600 boepd, average price realizations increased, by 17% for oil and by 40% for gas. Basic earnings increased to 30.9 pence per share.
On Track for Jubilee First Oil in 2010
Phase 1 of the Jubilee field development in Ghana is on track for first oil in 2010, just three years after the initial discovery well in 2007. Tullow, as unit operator, has selected all major contractors and development drilling and facilities construction are under way. The Jubilee partners have all sanctioned Phase 1 development and final government approval is pending resolution of the gas development plan. The Jubilee field has resource potential of up to 1.8 billion barrels of oil and the rest of the Group's Ghanaian acreage offers substantial upside, including the recently announced Tweneboa discovery, which adds material new resource potential of up to 1.4 billion barrels of oil equivalent.
Commercial Threshold Exceeded in Uganda
Investment in two substantial drilling campaigns in Uganda has resulted in material discoveries including the world-class Buffalo-Giraffe and Kingfisher fields, which have discovered gross resources of circa 600 million barrels of oil. We have now exceeded the volume threshold required for full scale development to commence in the Lake Albert Rift Basin and a dedicated team will now define the optimal method to commercialize these resources.
Best Ever EHS Performance
An excellent health and safety performance during 2008 is a particular highlight of the year. A Lost Time Incident Frequency Rate of 0.5 per million hours worked was achieved against the current OGP average of 0.66. This is the Group's best EHS performance to date, despite operations taking place in increasingly challenging environments. These results reflect Tullow's unwavering commitment to ensure the safety of our staff, contractors, partners and local communities and our determination to continuously improve our performance in this area.
Major Resource Potential
Exceptional exploration and appraisal success with 17 discoveries from 22 wells led to a 274 million barrel increase in our reserves and resources. This resulted in a revised total of 825 million barrels of reserves and resources at year-end. Our reserves replacement ratio was 582%, averaging over 200% per annum for the last three years. Through our exploration and appraisal strategy we are realizing the true potential of our portfolio and as we continue to execute successful drilling campaigns, we expect to further enhance and replenish our reserves and resources base over the coming years.
Our balance sheet is strong and well funded. We secured a US $2 billion (£1.4 billion) bank facility in March 2009 following a successful share placing in January 2009 which raised gross proceeds of £402 million and increased Tullow’s existing share capital by 9.1%. The ability to achieve our funding requirements reflect strong banking and investor confidence in our business, particularly in the context of the current climate.
Major Investment in People
We continue to invest in the Tullow team and increase the capability of our organization. As the scale and complexity of our portfolio increases we are ensuring that we are fully prepared for the next phase of growth. At the start of 2008 we employed 370 people and now have a team of 540, an increase of 46%.
Given the current economic climate these will be challenging times for the oil and gas sector but Tullow is well positioned following an outstanding year in 2008. For 2009, the Group is focused on progressing Phase 1 of the Jubilee project in Ghana, fast tracking the commercialization of Ugandan reserves and executing selective high-impact exploration and appraisal campaigns. The Group is in a very strong position, from an operational and financial perspective, to deliver these exciting and transformational projects as we move into our next phase of growth.
Commenting today, Aidan Heavey, Chief Executive, said, "We have had our best year ever in 2008, when unprecedented success with the drill bit was matched by material progress towards the development of two major new oil provinces. We have delivered record results and significantly increased our resource base. Looking ahead, Tullow has the right people and funding in place to continue to develop our world-class assets and deliver strong and sustainable returns for shareholders. We've made a strong start in 2009 and it promises to be an exciting and challenging year. Overall we're in excellent shape to deliver the Group's next phase of growth."
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