2005 Analyst Day UK Business Unit - Investis CMSfiles.investis.com/tullowoil/pdfs/analyst1005_new.pdf · 2005 Analyst Day – Bacton Gas Terminal Tullow Growth Strategy Exploitation

2005 Analyst DayUK Business Unit

Building a balanced portfolio of Exploration and Production Assets

2005 Analyst Day – Bacton Gas Terminal

Introduction – Paul McDade


The Tullow footprint

NW Europe

□Leading Gas Producer

□Mature basin Operator

□Growth through exploration, development and acquisition

Africa

□Pan-African E&P business

□High impact exploration

□Growth through exploration, development and acquisition

Asia

□Materiality through organic growth

□High impact exploration

□Growth through exploration and development


Tullow Growth Strategy

Exploitation and expansion of Tullow’s current reserve base

1H Reserve Replacement 97% before acquisitions

Ongoing development progress in Africa, UK and Asia

2005/6: Organic growth to over 70,000 boepd by end 2006

Broad portfolio with proven skills, knowledge and database

H1 – Two successes from 3 wells in SNS, 1 success in Gabon on Niungo

Next – High impact programme due to start including Mauritania and Uganda.

2006 onwards - continuing to build a high impact portfolio

Selective acquisitions within core areas

2001: £200 million of Southern North Sea assets acquired from BP

2004: $570 million acquisition of Energy Africa

2005: £200 million acquisition of Schooner and Ketch in the S. North Sea

Active Portfolio Management

Focus on assets where we can add value and upside potential exists

Build positions where we have a material influence

2005: Sale of UK oil and Congo (Brazzaville) offshore assets for total of $184 million

PRODUCTION &DEVELOPMENT

EXPLORATION

ACQUISITIONS

PORTFOLIOMANAGEMENT


Southern North Sea – Focussed Approach

2001 acquisition of infrastructure, fields &acreage delivered two focus areas:

□CMS Area

- Non-operated position

- Established operator with no exit plan

- Significant development and exploration upside

- Infrastructure operating close to capacity

□ Thames/Hewett/Bacton Corridor

- Non-operated with minor operated position

- No dominant operator

- Significant development upside

- Limited exploration potential

- Infrastructure operating at ~30% of capacity

- Unit operating costs becoming a key issue

CMS Area

Hewett/Thames Area


SNS Introduction – Alan Linn

□ Management Team

□ Business Framework

□ Safety and Responsibility

□ Business and Edge

□ Agenda


Business UnitManager – UK

Alan Linn

Business UnitManager – UK

Alan Linn

Technical/TeamAssistant

Cathy Edgington

Technical/TeamAssistant

Cathy Edgington

Regional Asset MgrAlan Marshall

Operated Assets Bacton/Hewett

Orwell/Horne & Wren

Regional Asset MgrAlan Marshall

Operated Assets Bacton/Hewett

Orwell/Horne & Wren

Commercial MgrMike SimpsonJV Assets & BusDevelopment

Commercial MgrMike SimpsonJV Assets & BusDevelopment

UK Finance Manager

Rob White

UK Finance Manager

Rob White

BUSINESS UNIT SUPPORT FUNCTIONSBUSINESS UNIT SUPPORT FUNCTIONS

EngineeringEngineering Data/ITTechnology

Data/ITTechnology

Contracts &ProcurementContracts &

ProcurementDrillingDrilling EH&SEH&SCommercialCommercial FinanceFinanceGeoscientistsGeoscientists LegalLegal Bus DevBus Dev

UK Business Unit – Organising for Growth

Asset ManagerSchooner & Ketch

Peter Evans

Asset ManagerSchooner & Ketch

Peter Evans

ExplorationAssets

Chris Flavell

ExplorationAssets

Chris Flavell

UK Development & Engineering

ManagerMark Allen

UK Development & Engineering

ManagerMark Allen

UK DrillingManager

Charlie Taylor

UK DrillingManager

Charlie Taylor


Tullow Integrated Management System (IMS)

Tullow IMS

Framework

Tullow Corporate Guidelines

Local Compliance Document

Operational/Local Procedures

□ Tullow Corporate IMS sets 18 standards and guidelines to support operations

□ Assets meet defined standards through local compliance documents.

□ Internal and External audits for compliance provide assurance at corporate level.


Environment , Health and Safety (EH&S)

□ Our EH&S policy sets the standard for performance

□ Add value by investing & empowering our people and those we work alongside.

□ In practice, this means:

- Implementing safe systems of work

- Horne and Wren development and Bacton, Hewett, Schooner and Ketch transitions

- Certification of our Environmental Management System to ISO14001 in UK

- Relationship building through UKOOA and other industry forums

- Building strong working relationships with Partners and Contractors


Corporate Social Responsibility (CSR)

□ Proactive commitment to conduct our business with high standards of integrity.

□ Corporate CSR report in 2006 to publicly report our 2005 performance.

□ Provide support for Tullow personnel and external sponsorship for projects which benefit local communities

Bacton :

Environmental Liaison Committee –forum where Local Council Members, Police and Environmental Agency can participate and actively consult on terminal activity.


SNS Business Background

DTI – maximise indigenous supply from mature basin

□ Fallow fields initiatives

□ Annual licensing rounds to churn acreage

□ Promote licences to attract “small players”

□ Low Cost mature basin approach – initiative to attract GoM players

□ Stewardship drive to maximise reserves recovery

HSE - Recognition of changing environment

□ Cost reduction does not have to compromise safety or the environment

□ Openness to discuss “new concepts”

Exit of Majors

□ Mature basin - assets not material for the Majors and not attracting investment

□ Acquisitions from BP, Shell, ExxonMobil, ENI, ConocoPhillips, ChevronTexaco


Gas Supply

□ Transition from self-sufficiency to importation

□ Increasing importance of indigenous gas

SNS – Gas Pricing Background

Forward Curve Comparison

0

10

20

30

40

50

60

70

80

Apr01

Oct01

Apr02

Oct02

Apr03

Oct03

Apr04

Oct04

Apr05

Oct05

Apr06

Oct06

Apr07

Oct07

Apr08

p/t

her

m

Arco Schooner / Ketch 30/09/2005


Southern North Sea – Focussed Approach

2001 acquisition of infrastructure, fields &acreage delivered two focus areas:

□CMS Area

- Non-operated position

- Established operator with no exit plan

- Significant development and exploration upside

- Infrastructure operating close to capacity

□ Thames/Hewett/Bacton Corridor

- Non-operated with minor operated position

- No dominant operator

- Significant development upside

- Limited exploration potential

- Infrastructure operating at ~30% of capacity

- Unit operating costs becoming a key issue

CMS Area

Hewett/Thames Area


SNS Business Edge

Explore Appraise Develop Produce Abandon

Divest Acquire

Tullow Oil is a full-cycle E&P Business

Risk/Equity ProfileRisk/Equity Profile Fast Track DevelopmentsFast Track Developments Field Life ExtensionField Life Extension

Infra-Structure LeverageInfra-Structure Leverage Low Cost OperationLow Cost Operation

Portfolio ManagementPortfolio Management Alternate UseAlternate Use


SNS Position in Tullow Portfolio

□ 30% group commercial reserves and 20% of group contingent reserves

□ Schooner and Ketch acquisition reserves confirmed at 330 bcf

- Re-development moving ahead at pace

- Material “early gains” from production stability

□ SNS Gas production of 112mmscfd ytd 40% of group 2005 production (with Alba)

□ Horne & Wren development completed in June and production exceeding expectation (110mmscfd gross/ 55 mscfd nett)

□ Significant exploration potential in CMS area

□ Working to further extend Hewett/Bacton economic life


Summary – Strategy Implementation

□ Tullow has built a significant platform for growth in the UK SNS

□ Successfully pursuing Tullow’s four “value adding routes”

- P&D, Exploration, Acquisitions & Portfolio management

□ Continuing to leverage the team’s commercial, technical and operating skills

□ Material activities in both SNS core areas in 2005 and beyond

□ Opportunities to maximise benefits of favourable gas market

□ Pursuing suitable opportunities to build a third core area (Dutch Sector?)

The SNS is a key component of Tullow’s future


Agenda

Thames/Hewett Area - Cost Control and Consolidation (Alan Marshall)

CMS Area - Preparing for Further Growth (Mike Simpson)

Schooner and Ketch - Re-development Programme (Peter Evans)

Exploration - Maximising Near Field Potential (Chris Flavell)

UK Gas Market - Marketing and Hedging (Brian Williams)

Q&A


Thames/Hewett Area – Alan Marshall


Thames/Hewett Corridor 2005

21

0 Kilometres

Tullow non-operated Tullow operated

□ Thames-Hewett-Bacton infrastructure position purchased from BP – 2000/01

□ Series of Bolt-On Acquisitions and operatorships added

□ Development, operatorships, and third party opportunities continue to be pursued

Licensedacreage Openacreage

10

Laps/BactonPipeline

Thames/BactonPipeline

Hewett/Bacton Pipeline


Hewett/Bacton Case Study

Hewett/Bacton

□ Hewett Complex feeding into the Bacton terminal

□ Terminal processes gas from the Hewett, Thames and LAPS complexes

Tullow Progress

□ 2000 – 20% non operated stake acquired from BP

□ 2003 – Additional 19% acquired from ConocoPhillips

□ 2003 - Operatorship transferred to Tullow - strategic importance

- Establish Operator capabilities and credentials

- Build foundations for other operated activities

- Controlling influence in Hewett field direction

- Influence on Thames infrastructure through Bacton initiatives

□ 2004 – Delivered 25% cost reduction target

Hewett Growth Opportunities

□ Focus on extending field life

- Continued pursuit of cost reductions

- Maximise in-field reserves recovery

- Marginal field developments

□ Gas storage opportunity


Hewett Field Cost Challenge

Complex Infrastructure

□ 3 platform central facility

□ 3 normally unmanned installations

□ 9 subsea wells

Cost challenge

□ 2004 – 25% cost reduction achieved


Hewett-Bacton Management Responsibilities

Tullow OilTullow Oil PetrofacPetrofac

□ Business Support:

□ JV Operator

□ DTI Interface

□ Subsurface Management

□ Drilling

□ Well Operations

□ Field Development/Economics

□ Legal and Commercial

□ Finance

□ Public Relations

□ Facilities Management :

□ HSEQ (Duty/COMAH holder)

□ Emergency Response

□ Production Services

□ Maintenance and Inspection

□ Ops & Maintenance Organisation

□ Facilities Engineering

□ Project Management

□ Information Management

□ Cost Control

□ Planning and Co-ordination

□ Supply Chain

□ Logistics


Hewett Field Cost Challenge

Complex Infrastructure

□ 3 platform central facility

□ 3 normally unmanned installations

□ 9 subsea wells

Cost challenge

□ 2004 – 25% cost reduction achieved

□ 2005-2006 offshore

- Simplification

- Reliability improvements

- De-manning

□ Operational model applicable in other assets

□ Bacton cost challenge


□ Late life reserves recovery – low pressure operation

□ Production efficiency – compression optimisation

□ Third Party Business – Blythe, sour gas

□ Zechstein velocity string campaign

Hewett Area Opportunities

0 10Kilometres

20b 1625a 25b 21

30

1a1b

4b4a

5a5b

B1028b

3b2

19e 19d

22a

23a

28a27

23c

24a

29

23b

18c18d

18b 19b24b22b

17

1

26

16b21b

17

22F2

26 27

F1

F2

494852 53

England

Bacton

Blythe

DawnDeborah

Delilah

Big Dotty

HewettLittle Dotty

Della Leman

Tullow non-operated

Tullow operated

Licensed acreage

Open acreage

Ongoingdevelopmentevaluation

Delilah work overand sidetrack □ Delilah workover /

sidetrack 1Q 2006

Zechsteinkalkopportunities


Hewett– Extending Field Life

0

5

10

15

20

25

30

35

40

45

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Product

ion R

ate

mm

scfd

Zechstein Velocity Strings

2005 Forecast

Post OCC2 Min Econ Rate

Delilah workover

Economic cut-off date whenTullow assumed operatorship


Thames Facilities Case Study

Thames Facilites

□ Central processing hub for five field groups, pipeline to Tullow’s Bacton terminal

□ Operated by ExxonMobil, supported by Tullow subsurface and commercial expertise

Timeline

□ 2000 – various interests acquired from BP

□ 2003 – Agip’s interest in Thames acquired

□ 2004 – ChevTex interest in Orwell acquired

□ Jan 2005 – First gas from Arthur field

□ June 2005 – First gas from Horne and Wren

□ July 2005 – 2nd Arthur dev well on line

Forward Plan

□ Maintain facilities at capacity

- Progress marginal developments

- Attract further third party gas

Thames Facilities Throughput

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006

Thro

ughput

(mm

scfd

)


Horne and Wren Case Study

Horne and Wren Development

□ Marginal fields development with 2 wells and a minimum facilities not normally manned installation

□ Tullow’s first UK operated development –delivered on time and within budget

Timeline

□ 2000 – 8% acquired from BP

□ 2003 – Additional 38% acquired from BP

□ 2004 – Remaining 54% and operatorship acquired from Shell and 50% sold to Centrica.

□ Mid 2004 – Project sanction

□ 2005 – First gas flowed in June

Forward Plan

□ Maximise reserves recovery over 3-4 year field life.

□ Seek re-use opportunities for platform facilities


Thames Fields

Producing Fields:□ BGT Contract

- Thames, Bure, Bure West, Yare, Wensum- Considering benefits of accelerated

production through blowdown profile

First gas 1986□ Production to 30/6/2005 401.5 Bscf (plus 16.4

Bscf from Deben)

Tullow proposed Infill Opportunities:□ Thurne (49/28-14 “L” discovery)□ Bure East

□ Bure North

Tullow 66.66%ExxonMobil (op) 23.33%Centrica 10.0%

EQUITY :

Bure

DebenThames

Wensum

YareLeman

Thames NW

Q

Latimer

Chalfont

Amersham

Chesham

Bushey

S Updip

Thurne


Thames Area Third Party Potential

□ Potential developments have been identified and are under review using Thames Infrastructure as an evacuation option.

□ These are:–Tristan–Wissey–Fizzy–Camelot –Dutch sector

□ Further exploration potential also exists

Tullow non-operated Tullow operated

Licensedacreage Openacreage

21

0 Kilometres 10


Thames/Hewett Growth Potential – 2005 and beyond

□ Establish a dominant and controlling position in existing Assets and in the area

- Influence strategic direction of Assets

□ Further consolidate Operatorship in the region

- Extract additional cost savings through operational efficiencies and synergies

□ Achieve 250 mmscfd throughput through the Thames facilities

- Further Arthur area gas and production from Horne and Wren

- Progress developments of marginal fields in the area

□ Extend field life of Hewett infrastructure

- Deliver Hewett OCC Phase 1&2 and additional in-field reserves.

□ Gas storage potential in Hewett

- Meeting with interested parties. Business development options currently being studied


CMS Area – Mike Simpson


CMS area – Focus on growth

Tullow’s game plan for CMS□ Acquire producing assets and strong infrastructure position

□ Recognised under explored and exploited area

□ Build a material position in operated exploration and production

□ Work with established and committed Operator

Success to date□ Rapid development of CMS III, Munro

□ Acquired significant op/non-operated exploration acreage

□ Acquisition of Schooner & Ketch

□ Commercial successes (gas contract, blend issues, third party gas)

□ Prospectivity confirmed

Still to do…□ Redevelopment of Schooner & Ketch

□ Accelerate pace of exploration and development

□ Expand and further align interests


Greater CMS Area - 2001

25a21a

22b

22a

149 10

15

43

48 49

44

Boulton

Murdoch

0 10Kilometres0 10Kilometres8

12

18

711

17a16

13a

6

Tullow non-operated

Tullow operated

Licensed acreage

Open acreage

□ BP asset acquisition-Infrastructure and assets purchased from BP 2000/01

□ All assets non-operated

□ Significant potential-Field development (CMS III DTI approval)

-Exploration upside-Third party gas-Bolt-on acquisitions


Greater CMS Area – 2002/3

25a21a

22b

22a

23b

149

18b19b

11 12

16

1015

43

48 49

44

McAdam

Boulton

Boulton H

B1 Watt

Murdoch


12

18

711

17a16

13a6

Hawksley

Tullow non-operated

Tullow operated

Licensed acreage

Open acreage

□ Development - CMS III

-Five unitised fields-Subsea development-Export via CMS facilities-First gas Aug ’02

□ Exploration

-Portfolio enhanced through the 20th and 21st Licensing rounds

□ Commercial

- Murdoch/Boulton depletion contracts terminated


Greater CMS Area – 2004/5

□ Development - Munro-Discovered Feb 04-First gas Oct 05

□ Schooner & Ketch-Completed end March 05-Uptime improved-Redevelopment planning underway

□ Exploration- Operated success in 22nd Licensing Round

- 3 wells in 200528b27a26a

26b

25a21a

21c

22b

22a

23b

149

18b19b

17b

11 12

2928

23a22b

27b

16

1015

43

48

44

Ketch

Schooner

Boulton

Boulton H

B1 Watt

Murdoch


12

18

711

17a16

13a6

Hawksley

Garnet

Marjan

Munro

Tullow non-operated

Tullow operated

Licensed acreage

Open acreage

Caister28a

2a

2b

49

3(N)49/03-3

23b

30b

05 1b

McAdam

Topaz


Greater CMS Area - 2005 +

□ Development

-Numerous development opportunities

-Coordinated/integrated programme – CMS IV?

-Reservoir infill opportunities

□ Schooner & Ketch-Drilling campaign to deliver significant production and reserve upside

□ ExplorationNew prospectivity identifiedUp to 4 expl wells planned for 2006

28b27a26a

26b

25a21a

21c

22b

22a

23b

149

18b19b

17b

11 12

2928

23a22b

27b

16

1015

43

48

44

Ketch

Schooner

Boulton

Boulton H

B1 Watt

Murdoch


12

18

711

17a16

13a6

Hawksley

Garnet

Marjan

Munro

Tullow non-operated

Tullow operated

Licensed acreage

Open acreage

Caister28a

2a

2b

49

3(N)

23b

30b

05 1b

Cygnus Complex

Humphrey

McAdam

Arroll

Brunel

Prospects & Leads

Yawl

Opal

K3

K4

Harrison

Cameron

49/03 3Topaz


Greater CMS Area

□ BP CMS area acquisition – August 2000

Tullow Equity (CMS area)

0

50

100

150

200

250

300

350

MM

cfd

BoultonMurdoch

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15


Greater CMS Area

□ CMS III development – August 2002


0

50

100

150

200

250

300

350

MM

cfd CMS3

BoultonMurdoch

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15


Greater CMS Area

□ Munro development – October 2005


0

50

100

150

200

250

300

350

MM

cfd

MunroCMS3BoultonMurdoch

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15


Greater CMS Area

□ Schooner / Ketch acquisition – March 2005 (do nothing profile)


0

50

100

150

200

250

300

350

MM

cfd

S&K BaseMunroCMS3BoultonMurdoch

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15


Greater CMS Area

□ Schooner / Ketch - May 2005 (Tullow base plan)


0

50

100

150

200

250

300

350

MM

cfd

S&K FirmS&K BaseMunroCMS3BoultonMurdoch

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15


Greater CMS Area

□ Schooner / Ketch redevelopment plan 2006+


0

50

100

150

200

250

300

350

MM

cfd

S&K UpsideS&K ContingentS&K FirmS&K BaseMunroCMS3BoultonMurdoch

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15


Greater CMS Area

□ Potentially commercial developments / exploration upside - unoptimised, unrisked


0

50

100

150

200

250

300

350

MM

cfd

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15

K3 areaExploration upside

S&K UpsideS&K ContingentS&K FirmS&K BaseMunroCMS3BoultonMurdoch


Greater CMS Area

□ Tullow as an infrastructure owner : CMS current & potential tariff business (unoptimised, unrisked)

CMS area throughput (Gross Pipeline)

0

100

200

300

MM

cfd

400

500

600

700

800

July00

July01

July02

July03

July04

July05

July06

July07

July08

July09

July10

July11

July12

July13

July14

July15

Further exploration

success predicted

Cameron

K3 areaExploration upside

S&K UpsideS&K ContingentS&K FirmS&K BaseMunroCMS3

Boulton

Murdoch

CavendishHunter

Notional pipeline capacity

Caister


Greater CMS Area - Summary

□ Aligned infrastructure and field equity partnerships

□ Significant growth in Tullow equity gas developments

□ Tullow’s CMS portfolio all at UK market price and produced at high load factor

□ Substantial tariff income potential (Tullow 17% ownership)

□ Blending limits may constrain capacity but;

-New blend management system optimises throughput

-Relaxation of Wobbe limits negotiated at

Theddlethorpe


Schooner and Ketch – Peter Evans


Schooner and Ketch Acquisition

Development plan□ Signed SPA Dec 04□ Completed deal March 05□ Redevelopment plan Mid 05□ Rig Mobilisation Oct 05

Operational & Commercial opportunities□ Improve facilities uptime□ OPEX synergies□ Well recompletions and infill drilling □ Schooner Exploration well□ Topaz development & tariff□ Other 3rd party business

Rationale□ Gas in place of 1,500bcf□ c. 350bcf (23%) recovered to date□ Potential to double rate and recovery


Schooner & Ketch – Facility Infrastructure/Organisation

□ Tullow Equities : Schooner 90.35% Ketch 100%

□ S&K Facilities Consist of Two Normally Unmanned Installations (NUI) tied back to the Murdoch Platform and CMS infrastructure by a 22 and 26 km sub-sea pipelines.

□ Tullow Operates S&K and ConocoPhilips operates Murdoch and CMS


Schooner & Ketch – Integration and Early Opportunities

□ Asset Integration

- Recruitment process commenced ahead of acquisition- Early integration into existing Bacton operations management structure- Rapid access to experienced operations team- Focussed facility integrity inspections during hand over- Detailed reviews of well and operational histories- Well failure modes understood and re-medial programmes developed- Work programme potential understood early

□ “Quick Wins”

- Production up from between 22-44 mmscfd, to 50-75 mmscfd- Facility uptime increased from low of 28% to steady +95%- Offshore data capture and analysis accelerated to help maintain

redevelopment schedule- Redevelopment team in place early generating opportunities- Specialist drilling and work-over team recruited- Committed to Ensco 101


Schooner & Ketch – Re-development

□ Redevelopment

- New wells are a blend of experience and technology- Sand connectivity issues recognised and wells designed to maximise

recoveries - Ensco 101 secured for 18 months with firm programme- Balanced work programme is a combination of work-over and new wells- 2006 production >100mscfd- Plans in place to manage drilling and completion challenges- Significant upside potential identified

□ Success from blend of experience, fresh ideas, pace and the application of technology


Schooner & Ketch : Early Success

□ Uptime for Schooner from 28% (the 6 weeks before operatorship) to 95%

□ Well deliverability improvement – further gains when rig arrives

0

10

20

30

40

50

60

70

80

Jan’05 Feb’05 Mar’05 Apr’05 May’05 Jun’05 Jul’05 Aug’05 Sep’05

Thro

ughp

ut

Ketch Schooner

PlannedCMS

shutdown

PlannedCMS

shutdown

Took overoperatorshipTook over

operatorship


Schooner & Ketch : Well Optimisation Project

□ Schooner

-Velocity strings and straddles on Schooner 1, 3, 4, 5, 6, 8 and 9

-Water shut-off and perforations (possible stimulations) Schooner 8

-Perforation and stimulation Schooner 4, tubing wash Schooner 9

□ Ketch

-Velocity string Ketch 5 and straddles Ketch – 1 and 3

-Re-perforation and additional perforations Ketch 1 and 3

- Tubing wash Ketch - 6

0

5

10

15

20

25

30

Jul05

Jan06

Jul06

Jan07

Jul07

Jan08

Jul08

Jan09

Jul09

Jan10

Jul10

Gas

pro

duct

ion m

msc

fd-1

00%

Ketch workovers and stimulation

Schooner workovers and stimulation


□ Schooner - 10- 60 degree deviated development well - 23 BCF incremental reserves- £ 15.9 MM Capex- Production peak 41 mmscfd- Declines to 20 mmscfd after 1 year- Up-dip attic well in main field (650 ft sand)

Schooner & Ketch: Schooner-10

Schooner - 10

0

10

20

30

40

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

Gas

pro

duct

ion m

msc

fd


Schooner & Ketch : Ketch – 7, 4st & 8

□ Ketch - 7- Horizontal development well in Carboniferous

- 23 BCF incremental reserves

- Production peak 30 mmscfd

- Declines to 15 mmscfd after 1 year

□ Ketch - 8- Four legged multi-lateral




- Contingent on KA-7 horizontal drilling success

00021

12100

00121

00121

00121

12100

12100

00121

00121

00121

12200

12200

12200

0022

1

12200

0022

1

00221

00221

12200

12300

00321

00321

0032

1

0032

1

00321

00321

00421

12400

0042

1

00421

0042

1

00421

00521

12500

0052

1

00521

00521

00521

00521

12500

12500

12600

00621

12600

12600

00621

00621

12600

00621

00721

0072

1

0072

1

00721

00721

00721

00721

0072

1

00821

0082

1

0082

1

00 8 21

00821

12800

0082

1

0921

0092

1

12900

00921

0

0013

1

00231

13300

13300

00331

13400

13400

13400

0053

1

13500

00531

00631

13600

44280112379

44280211939

4428K111959

4428K212182

4428K4z12349

4428K512253

4428K6y12543

4428K6z12536

yrotcejarT70AK

yrotcejarTts40AK

yrot

cejar

T80

AK

52821

5282

1

52821

12825

12825

5282

1

□ Ketch – 4st- Replacement well for KA04





Schooner & Ketch : Re-Development Work Programme Phase 1

□ Development potential recognised - Early rig commitment and 12 months infill drilling campaign firm- Increase wellbore utility with re-perforation and stimulation programmes- Mechanical interventions to accelerate production- New field potential attractive – NW Schooner

Base – further activityConcurrent well optimisation workContingent resourcesRig moveUpside

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2005 2006

Schooner SA10 (attic)

Schooner – perforations, stimulation

Schooner (5 workovers – vel/strad)

Ketch KA07 (three stage horizontal)

Ketch – perforations, stimulation

Ketch (3 workovers)

Ketch KA04 (horizontal sidetrack

Ketch KA08 (4 leg vert multi-lateral)

Jan Feb Mar Apr

2007 2008

Schooner NW appraisal (SB-1 location

Schooner SA-07 sidetrack

Schooner SA2 workover

Schooner SA-11 development well

Schooner NW development well 2

Schooner Ketch follow-up well

Yawl/SW Ketch exploration

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec


Schooner & Ketch : Schooner NW Appraisal

□ NW Schooner Appraisal

- 140 BCF Gas In Place (success)

- New location

- Drill Q4 2006

- High production rates

- Three legged multi-lateral

GWC


0

20

40

60

80

100

120

140

160

180

200

Oct-05

Apr-06

Oct-06

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Gas

Pro

du

ctio

n

mm

scfd

UpsideContingentBase - further activityBase - no further activity

````````````````````````

Schooner & Ketch : Success Case Production Profile

□ Base further activity is 15 months drilling activity – 5 wells, 9 workovers and well stimulation

□ Total Drilling and Optimisation Capex £88 MM for the 2005 - 2006 firm programme

□ Facilities capacity upgrades and metering


Schooner & Ketch : New Exploration Acreage

□ Arrol 44/26a to NE of Ketch (100% Tullow)

□ Ketex 49/3 south of Ketch – good material prospect west of Ketex discovery (100% Tullow)

□ Stephanian Play – West of Schooner (GdF operate exploration phase, Tullow 33.33%)

43/23bEndeavour 50%Tullow 50%

43/30b, 48/5(p) & 49/1(p)GDF 33%Tullow 33%Endeavour 33%

Ketex

Arrol

44/28a & 49/3(p)Tullow 100%


Exploration – Chris Flavell


Ingredients for Exploration Success

□ Existing infrastructure position

□ Pragmatic operators of nearby infrastructure

□ High quality and experienced team

□ Good database

□ Acreage position

- Growth of UKCS portfolio

- Focus on CMS exploration


Thames & Hewett Regional MapAcreage post BP acquisition

EnglandBacton

4a

5a

23a

29 30 29c

29d

28 26a

21

30b

26b

1a

4b4c

3c

48

5352

49 50

54

Orwell

Bure

DebenYare

Thames

Wensum

Gawain

Welland

Wissey

Horne

Wren

Little DottyDella

Delilah

DeborahBig Dotty

Dawn

Hewett

0 10Kilometres

Blythe

Fizzy

4a3d

Tullow non-operated Tullow operated Licensedacreage Openacreage


Thames & Hewett Regional MapCurrent acreage position

EnglandBacton

4a

5a

22a

23a

29 30 28 26a

21

30b

26b

1a

4b

3a

3c

48

5352

49 50

54

0 10Kilometres

Arthur4a

4a

3b

Tullow non-operated Tullow operated Licensedacreage Openacreage

Clear move to Operatorship

Ongoing development evaluation

Hewett – Significant reduction in operating costs in 2004 & 2005

Zechsteinkalk infill opportunities

Thurne-development opportunity

Ongoingdevelopment

evaluation

Chesham-exploration opportunity

Horne and Wren development1st gas June 2005

Delilah developmentwell late 2005

Ongoingdevelopment

evaluation

Orwell

Bure

DebenYare

Thames

Wensum

Gawain

Welland

Wissey

Horne

Wren

Little DottyDella

Delilah

DeborahBig Dotty

Dawn

Hewett

Blythe

Fizzy


25a21a

22b

22a

149 10

15

43

48 49

44

Boulton

Murdoch


12

18

711

17a16

13a

6

Tullow non-operated

Tullow operated

Licensed acreage

Open acreage

CMS Regional MapAcreage post BP acquisition

□ 4 blocks


CMS Regional MapCurrent acreage position

28b27a26a

26b

25a21a

21c

22b

22a

23b

149

18b19b

17b

11 12

2928

23a22b

27b

16

1015

43

48

44

McAdam

Ketch

Schooner

Boulton

Boulton H

B1 Watt

Murdoch


12

18

711

17a16

13a6

Hawksley

Topaz

Garnet

Marjan

Munro

Tullow non-operated

Tullow operated

Licensed acreage

Open acreage

Caister28a

2a

2b

49

3(N)49/03-3

23b

30b

05 1b

□ 29 blocks

Opal exploration success 2005

Munro exploration success 2004

K3 exploration success 2005

Schooner/Ketch acquisition 2005

23rd Round Awards 2005

23rd RoundAwards 2005

23rd RoundAwards 2005

44/19b explorationwell 2006

44/12 appraisalwell 2006

44/23b explorationwell 2006

49/3a explorationwell 2006 ?

44/16 explorationwell 2006


CMS Exploration Focus

□ Play types

□ Identifying the Lower Ketch play

□ Portfolio summary

□ Potential future activity levels


CMS Exploration Focus – Play Types

□ Structural fault blocks- Principal target Westphalian B Murdoch sands- Murdoch, Caister, McAdam, Boulton H- Good productivity- Easier to recognise, therefore more mature play

□ Deep Carboniferous structure- Principal target Namurian sands- Cavendish, Kepler, Trent- Difficult to map reservoir on seismic data- Moderate/good productivity, despite age and depth

□ Combined structural/stratigrahic play- Principal target Lower Ketch Westphalian C/D sands- K3, Munro, Opal, Boulton B, Schooner & Ketch- Excellent productivity- Dificult to locate, under-explored


Top Rotliegendes

BPU

Silverpit – must seal

Carboniferous Isopachs

Seismic Marker

Base Murdoch

Reliable seismic picks at Top Rotliegendes and Base Murdoch.

Lower Ketch 2 Reservoir(similar to Munro, K3, Hawksley, Murdoch K & Boulton B)

KEY:

BPU

CMS Area – Play Concept – Westphalian C/D


□ Reservoir interval seismically opaque

□ Top Seal horizon only sporadically imaged

□ Reliance on substantial well data to build interval isopachs

□ Note Plattendolomite‘hole’

CMS Area – Play Concepts – Westphalian C/D


K3 DiscoveryN S

Zechstein

WpA WpA

B B’

Silverpit

Greater CMS Area – Impact of K3 Success


-12600-12420

K3 K444/23-844/18-3N S

44/18-3 44/23-8

-12420-12600

13 km

Hard kick

Depth Converted Seismic & Geological Model


SNS exploration still ‘alive and kicking’

□ Technical

- Carboniferous is still under-explored

- Multiple plays in Carboniferous (Namurian, Westphalian B)

- Technological advancements still to be made, esp seismic

□ Commercial

- Infrastructure access improving

- High gas prices are rendering smaller prospects commercial

- Smaller Independents influencing activity levels

- Future activity levels probably linked to Majors’ exit strategy

Tullow is well positioned to take advantage

Summary and Conclusion


UK Gas Market & Hedging

□UK Gas Market- Overview- Pricing - UK Supply/Demand

□Tullow UK Gas Portfolio

□Hedging/IAS39


UK Gas Market

□Overview


Markets Overview

□ Oil and gas prices recently at record highs

□ Oil market supply/demand tight

□ UK believed to be short of peak winter gas; UK indigenous decline

□ Eon acquisition of Caledonia; security of supply


UK Gas Market Liberalisation

□ Gas & Power liberalisation (& utility un-bundling) on EU agenda

□ Drive towards competitive gas markets

- 1996: BG demerges into Transco & Centrica

- 1998: Entire gas supply market open to competition

□ Growth of liberalised UK spot market (most competitive in Europe) and hubs (Bacton)

Liberalised UK market doesn’t equal low price environment…


UK Gas Market Observations

□ The UK government, in its 2003 White Paper, identified major challenges facing UK Energy including

- Decline of UK’s indigenous energy supplies- Modernisation / update of energy infrastructure is required

□ Indigenous UK gas supply /demand gap is now a reality

□ UK NBP pricing now reflecting shortfall fears

□ UK import infrastructure (pipe and LNG) builds to fill indigenous supply shortfall; consider offtake flexibility to arbitrage markets

□ Future Questions- Linkage between markets and gas on oil pricing?- Continued oil indexation dominating European pricing; UK/Europe convergence? - Globalisation of gas due to increasing role of LNG; Europe/USA convergence?


UK Gas Market

□Pricing


Gas Supply

□ Transition from self-sufficiency to importation

□ Increasing importance of indigenous gas

Gas Pricing Background

Forward Curve Comparison

0

10

20

30

40

50

60

70

80

Apr01

Oct01

Apr02

Oct02

Apr03

Oct03

Apr04

Oct04

Apr05

Oct05

Apr06

Oct06

Apr07

Oct07

Apr08

p/t

her

m

Arco Schooner / Ketch 30/09/2005


UK Gas NBP Historical Prices, Calendar 2006 and Calendar 2007 Swaps

Calendar 2006

Calendar 2007

Spot History

UK Gas NBP: Spot History and SwapsG

B P

en

ce/

therm

10

20

30

40

50

60

70

80

90

100

110

120

Jan Apr Jul Oct Jan Apr Jul Oct2004 2005

Past performance is not indicative of future performance.

Source: trading history as at 6 Oct05




Dated Brent Historical Prices, Calendar 2006 and Calendar 2007 Swaps

Dated Brent: Spot History and SwapsU

SD

/b

arr

el

20

25

30

35

40

45

50

55

60

65

70

Jan Apr Jul Oct Jan Apr Jul Oct2004

Calendar 2007

Calendar 2006

Spot History

2005




NBP Calendar 2006

Dated Brent Calendar 2006 relative to UK Gas NBP Calendar 2006

UK Gas NBP and Dated Brent Comparison

2.6

2.8

2.4

2.2

2.0

1.8

1.6

1.4

1.2

1.0

0.8

Jan Apr Jul Oct Jan Apr Jul Oct2004 2005

Dated Brent Calendar 2006


Spot, Quarterly and Winter 04 Averages

Spot

0

10

20

30

40

50

60

70

80

90

100

110

120

Oct Jan Apr Jul Oct Jan Apr Jul2003 2004 2005

1st August 2003 3rd August 2005NBP Win05 vs History

Quarter average Win04 average=33 pence/therm


Note: Pricing as of Close of Business 05 October 2005. Source: Goldman Sachs International “Gasunie” is based on our understanding of what the current lagged gasoil and fuel-oil linked formula is

Natural Gas: Current Annual Forward Prices p/therm

35

40

45

50

55

60

65

2006 2007 2008 2009 2010 2011 2012

NBP

Zeebrugge

US NG

"Gasunie"


UK Gas Market

□UK Supply/Demand


Transco View of Implied Import Requirement


Transco View of Supply/Demand Balance


New UK Infrastructure: Pipeline & LNG


UK/Europe

HUELVA CARTAGENA

ALGERIAN GAS

ALGERIAN GAS


Globalisation: LNG

Major LNG Supply Routes


Tullow UK Gas Portfolio


Tullow UK Gas Portfolio: Contracted Gas

□ Diversified SNS portfolio (~15 producing fields)

□ Gas landed at Bacton (~35%) & Theddlethorpe (65%)

□ Significant migration from Contracted to Uncontracted gas since 2000

- Then ~60% contracted

- Murdoch and Boulton contracts terminated

- 2006 ~15% contracted

□ Remaining contracted gas:

- Thames: Field dedicated depletion contracts (~39p/therm)

- RWE: Schooner/Ketch supply contract (19p/therm)

- Eon: Supply contract (~28p/therm; )


Tullow UK Gas Portfolio: Uncontracted Gas

□ Originally uncontracted gas marketed via Beach aggregator (Amerada); then acquired by TXU!

□ Physical now marketed via Tullow gas marketing group (based in Newcastle)

□ Physical currently sold at Beach via good credit quality counterparties (remember Enron, TXU!)

□ Will move to shipping soon with better liquidity

□ Gas sold at benchmarks including D-1 and M-1 indices

□ Hedging via financial products (up to 3 years forward)


NBPNBPNTS

Beach Trading

Traditional swing contract Delivery Point

Retro Trading

Offshore

NBP Trading

LDZ End UsersStorage

Cash out

OfgemDTI

FlangeGas

ProcessingFacility

Gas Processing

Facility

CVSLEntry Capacity

TranscoEntry

Facility

TranscoEntry

Facility

Offshore to NBP


Hedging/IAS39


Hedging: Objectives

□ Improved security of cash flow and liquidity (banking lines)

□ Reduce exposure to price volatility

□ Manage downside price risk

□ Improved ability to fund investments (incl. discretionary capex)

□ Match underlying physical commodity offtake (note IAS39)

□ Build revenue predictibility (Budgets, bank price decks, market benchmarks)


Hedging: Commodity Hedge Parameters

□ Minimum Hedge Levels

-Target 30% of all Oil and Uncontracted Gas entitlements from producing interests in any 12 month period

□ Maximum Hedge Levels – Delivery Risk

-70% cap on hedging volumes in any calendar year – no intention to reach this level

□ Term

-Previously credit challenges; now liquidity through at least 2008

□ Volumes/Frequency

-Tend to hedge regularly in relatively small volumes

□ IAS39

-Hedge instruments should be compliant to retain hedge accounting

…no price levels specified although hedging in excess of bank price deck creates debt liquidity


Hedging: How & Who With

□ How:

- Swaps downside protection; no exposure to upside

- Put Options downside protection; retains exposure to upside

- Zero Cost Collars downside protection; retain market pricing within collar, no exposure to upside above collar

- Participations downside protection; some exposure to upside

- Physical Forwards as in Swap but Shortfall exposure

□ Who With:

- Participants in Refinance Facility Syndicate

- US Investment Banks

- Trading Houses


Hedging: Recent Hedge Trades

□ Gas:

- Put Option Oct 2005: Strike 33p/therm, Premium 1p/therm

- Swap Nov 2005: Strike ~ 46p/therm

- Swap Summer 2007: Strike ~ 44p/therm

- Swap Q1 2008: Strike ~ 62p/therm

□ Oil:

- Put Options - Calendar Year 2006: Strike $50/bbl, Premium $1.50/bbl

- Collar - Calendar Year 2006: Put $50/bbl, Call $80/bbl, Nil Net Premium


Hedging: Volumes & Prices

59.543.934.9Current hedged p/therm

45.1

35.0

8,231

2006

6.357.1Volume hedged (mmcfd)

GAS

33.036.3Current price hedge ($/bbl)

7,7319,946Volume hedged (bopd)

OIL

2007H2 2005

□Commodity mix – significant oil exposure, increase in gas H205

□EA hedges – 4,000 bopd until end 09

□Oil Hedging - Modified profile following disposals- Zero cost collars still very attractive - Development projects limit scope further out

□Gas hedging- Continued strong forward curve - S&K, H&W now available- Capitalising on strong 2006


Key issues

□ No cash impact, other than normal flows associated with hedge settlement

□ 3 main categories of financial instruments- EA Barclays hedges: Call $29/bbl, Put $24.5/bbl, 4000 bopd to 2009- LT Gas contracts – Thames, Powergen, Schooner/Ketch- Others: swaps, collars etc

□ Treatment as follows- EA Barclays hedge - Negative MTM 1/1/05 £21.0 million, 30/6/05 £81.5 million

□Designated as cashflow hedges□ Ineffective element of £4.0 million to income statement

- LT Gas contracts□All classed as ‘own use’□No impact under IFRS

- Others□Designated as cashflow hedges□ Ineffective element of £1.6 million to income statement

□ Higher volatility of future earnings until longer dated hedges mature

IAS 39: Financial Derivatives


Summary – Alan Linn


SNS Position in Tullow Portfolio

□ 30% group commercial reserves and 20% of group contingent reserves

□ Schooner and Ketch acquisition reserves confirmed at 330 bcf

- Re-development moving ahead at pace

- Material “early gains” from production stability

□ SNS Gas production of 112mmscfd ytd 40% of group 2005 production (with Alba)

□ Horne & Wren development completed in June and production exceeding expectation (110mmscfd gross/ 55 mscfd nett)

□ Significant exploration potential in CMS area

□ Working to further extend Hewett/Bacton economic life


Summary – Strategy Implementation

□ Tullow has built a significant platform for growth in the UK SNS

□ Successfully pursuing Tullow’s four “value adding routes”

- P&D, Exploration, Acquisitions & Portfolio management

□ Continuing to leverage the team’s commercial, technical and operating skills

□ Material activities in both SNS core areas in 2005 and beyond

□ Opportunities to maximise benefits of favourable gas market

□ Pursuing suitable opportunities to build a third core area (Dutch Sector?)

The SNS is a key component of Tullow’s future


Tullow Oil plc3rd floorBuilding 11Chiswick Park566 Chiswick High RoadLondonW4 5YSEmail: [email protected]

A leading independent oil and gas exploration and production group

www.tullowoil.com

Documents

2005 Analyst Day UK Business Unit - Investis CMSfiles.investis.com/tullowoil/pdfs/analyst1005_new.pdf · 2005 Analyst Day – Bacton Gas Terminal Tullow Growth Strategy Exploitation