Tullow Oil plc ("Tullow" or the "Company")
17 March 2015
Replacement - Annual Report and Accounts and Notice of Annual General Meeting
The following amendment has been made to the 'Annual Report and Accounts and Notice of AGM' announcement released on 17 March 2015 at 14.37 under RNS No 6731H.
The Company's 2015 AGM will be held at Haberdashers' Hall, 18 West Smithfield, London EC1A 9HQ on Thursday 30 April 2015 at 12 noon.
All other details remain unchanged.
The full amended text is shown below.
Following the release on 11 February 2015 of the Company's preliminary full year results announcement for the year ended 31 December 2014 (the "Preliminary Announcement"), the Company announces it has published its Annual Report and Accounts for 2014 (the "Annual Report and Accounts").
The Company's 2015 AGM will be held at Haberdashers' Hall, 18 West Smithfield, London EC1A 9HQ on Thursday 30 April 2015 at 12 noon.
Copies of the Annual Report and Accounts and the Notice of the Annual General Meeting 2014 are available to view on the Company's website: www.tullowoil.com.
In accordance with Disclosure and Transparency Rule 6.3.5(2)(b), additional information is set out in the appendices to this announcement. This information is extracted in full unedited text from the Annual Report and Accounts.
The Preliminary Announcement included a set of condensed financial statements and a fair review of the development and performance of the business and the position of the Company and the group.
In accordance with Listing Rule 9.6.1, a copy of each of the Annual Report and Accounts, the 2015 Notice of Annual General Meeting and the form of proxy in relation to the 2015 Annual General Meeting has been submitted to the Financial Conduct Authority via the National Storage Mechanism and will be available for viewing shortly at www.morningstar.co.uk/uk/nsm. Those documents are also being submitted to the Irish Stock Exchange and the Ghana Stock Exchange.
In addition, all of the above documents will shortly be available for inspection at the Irish Stock Exchange (which is situated at: Irish Stock Exchange, 28 Anglesea Street, Dublin 2, Ireland) and will be available to shareholders located in Ghana by contacting the Company's registrar: Central Securities Depository (Ghana) Limited, 4th Floor, Cedi House, PMB CT 465 Cantonments, Accra, Ghana (Telephone: +233 (0)302 689 3103 or +233 (0)302 689 314).
For further information, please contact:
Tullow Oil plc (London) (+44 20 3249 9000)
· Chris Perry (Investor Relations)
· James Arnold (Investor Relations)
· George Cazenove (Media Relations)
Appendices
Appendix A: Directors' responsibility statement
The following directors' responsibility statement is extracted from the Annual Report and Accounts (page 112).
Directors' responsibility statement required by DTR 4.1.12R
We confirm that to the best of our knowledge:
· The Financial Statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
· The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face; and
· The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
By order of the Board
Aidan Heavey Ian Springett
Chief Executive Officer Chief Financial Officer
10 February 2015 10 February 2015
Appendix B: A description of the principal risks and uncertainties that the Company faces
The following description of the principal risks and uncertainties that the Company faces is extracted from the Annual Report and Accounts (page 43 and pages 73 -77).
2015 to 2019 Short-to-Medium Term Performance Risks
Each year Tullow identifies a number of key risks and uncertainties with regard to the successful delivery of the Group's business plan. These short-to-medium term risks are set out below, and indicate the principal risks associated with the 2015 to 2019 business plan period.
High-margin production cash flow |
· Sustained low oil prices · Performance and uptime of FPSO and onshore gas processing facility impacts Jubilee production · Decline in non-operated West African production through lower investment or operational issues · Delays in start-up of the TEN field |
Exploration & Appraisal |
· Sustained exploration failure · Further reductions in E&A spend · Partners' financial ability to fund exploration programmes · Lack of viable opportunities to grow portfolio
|
Monetisation options & portfolio management |
· Sustained downturn in the market reduces opportunities for asset acquisitions and divestments · Exploration remains out of favour with the wider market, reducing farm-in and farm-out activity |
Selective development |
· Delay in first oil from the TEN field · Further changes to capital allocation which could delay Jubilee FFD · Lack of incremental investment opportunities in West African non-operated assets |
Funding |
· TEN start-up is delayed or budget is exceeded, impacting the balance sheet · Failure to deliver on cost efficiencies, capital allocation and hedging programme |
Organisation |
· Loss of key staff during strategic organisation review and industry downturn · Inability to achieve appropriate cost controls and efficiencies |
Long-Term Performance Risks
We have identified a number of risks to our longer-term performance and strategic delivery, which are in addition to the short-to-medium term risks that are specifically associated with the delivery of our business plan. Each year we review the risks Tullow faces and refresh these to reflect the changes in our business and operational profile. The tables below present the Board and Management view of the most material and important long-term performance risks to Tullow. They do not comprise all the risks and uncertainties we face.
Strategy fails to meet shareholder objectives |
Strategic priority Deliver substantial returns to shareholders. Executive responsibility Aidan Heavey Chief Executive Officer Performance indicator • Long-term TSR Impact Ineffective or poorly executed strategy fails to create shareholder value and to meet shareholder expectations, leading to a loss of investor confidence and a decline in the share price. This in turn reduces the Group's ability to access finance and increases vulnerability to a hostile takeover. |
Policies and systems Exploration-led growth strategy, ongoing portfolio management, five year business plan, active Investor Relations programme, bi-annual investor survey, annual review of strategic objectives and monthly operational and financial reporting. Mitigation process Clear and consistent strategy execution high-impact exploration and appraisal programme, selective development projects, asset monetisation across the value chain, resource growth, portfolio renewal and high-grading, strong balance sheet and financial flexibility and effective communication with all stakeholders based on open and transparent dialogue. |
Risk mitigation activities and outcomes in 2014 • Proactive review, adaptation
and communication of strategy. Shift away from expensive complex exploration wells to focus on lower cost plays onshore and offshore • Exploration success in Kenya • TEN Project on track
and on budget in Ghana • Feedback through meetings with some 300 institutions • Capital Markets Day followed by perception survey |
Cost and capital indiscipline |
Strategic priority Manage financial and business assets to enhance our portfolio, replenish upside potential and support funding needs. Executive responsibility Ian Springett Chief Financial Officer Performance indicator • Cash operating costs per boe • Finding and development costs
per boe • • Capital expenditure and
cost management
targets • Administrative expenses |
Impact Ineffective cost control leads to reduced margins and profitability, reducing operating cash flow and the ability to fund the business. Policies and systems Delegation of Authority (DoA) and budgeting and reporting processes, and project approval process for all significant categories of expenditure. Mitigation process Comprehensive annual budgeting processes covering all expenditure are approved by the Board. Executive management approval is required for major categories of expenditure, and |
investment and divestment opportunities are ranked on a consistent basis, resulting in effective management of capital allocation. Risk mitigation activities and outcomes in 2014 • Capital expenditure for 2014
was $2.0 billion (2013: $1.8
billion) • Finding costs $19.5 per boe (2013: $5.1) after contingent resource bookings deferred to 2015 • Cash operating costs
$18.6 per boe • Monitoring of expenditure integrated with quarterly Business Unit reviews of performance |
Insufficient liquidity, inappropriate financial strategy |
Strategic priority Manage financial and business assets to enhance our portfolio, replenish upside potential and support funding needs. Executive responsibility Ian Springett Chief Financial Officer Performance indicator • Operating cash flow • Debt profile and capacity • Gearing Impact Asset performance and excessive leverage leads to the Group being unable to meet its financial obligations. This scenario, in the extreme, impacts on the Group's ability to continue as a going concern, or causes a breach of bank covenants. |
Policies and systems Financial strategy, cash flow forecasting and management and capital allocation processes. Mitigation process Prudent approach to debt and equity,with a balance maintained through refinancing, cash flow from operations and portfolio management activity. Board review and approval of financial strategy. Short-term and long-term cash forecasts reported on a regular basis to Senior Management and the Board. Strong banking and equity relationships maintained. |
Risk mitigation activities and outcomes in 2014 • Reserves based lending and corporate debt facilities refinanced in 2014 • Second $650 million corporate bond issued, increasing the diversity of the Group's debt financing • Partial sales of Schooner & Ketch UK gas assets and Brage field in Norway and agreement to sell interests in L12/L15 block, Q4 and Q5 blocks in the Netherlands • Decision to retain current
stake in TEN to first oil |
Oil and gas price volatility |
Strategic priority Manage financial and business assets to enhance our portfolio, replenish upside potential and support funding needs. Executive responsibility Ian Springett Chief Financial Officer Performance indicator • Realised commodity
prices |
Impact Volatility in commodity prices impacts the Group's revenue streams, with an adverse effect on liquidity. Policies and systems Hedging strategy. Mitigation process Hedging strategy agreed by the Board, with monthly reporting of hedging activity |
Risk mitigation activities and outcomes in 2014 • Realised oil price $97.5/bbl • Realised gas price 51.7 pence per therm • Secured average floor price for around 60% 2015 entitlement oil volumes at circa $86/bbl |
Sustained exploration failure |
Strategic priority Execute selective high-impact exploration and appraisal programmes. Executive responsibility Angus McCoss Exploration Director Performance indicator • Resources growth • Success ratios commensurate
with E&A programme mix • Portfolio renewal and high
grading • Finding costs |
Impact Failure to sustain exploration success is costly and limits replacement of reserves and resources, which impacts investor confidence in long-term delivery of the Group's exploration-led growth strategy. Policies and systems Clear exploration strategy based on core campaigns, GELT peer challenge, competitive capital allocation process and annual E&A programme. Mitigation process Board approved E&A programme. Monthly reporting to the Board on finding costs per boe and high-grading of Group's portfolio, with a view to measuring success of exploration investment. Application of technical excellence and appropriate technologies in exploration methodologies. |
Risk mitigation activities and outcomes in 2014 • Tullow's multi-basin campaign approach hedges the natural annual variability in exploration results • A re-balancing of Group exploration spend away from high-cost complex drilling toward lower-cost shelf/ onshore exploration with material oil potential • The capital allocation process resulted in a prudent and risk-weighted E&A capex profile with 15% of spend on exploration business development, 20% on frontier drilling, and 65% on core activities. Notable 2014 successes included the Hanssen oil discovery in Norway, and in Kenya, the Amosing oil discovery and South Lokichar Basin appraisal programme support our 600mmbl mean recoverable estimate for the basin to date |
Key operational or development failure |
Strategic priority Safely manage, and cost effectively deliver major projects and production operations on time, while increasing cash flow and commercial reserves. Comprehensively assess, consult with stakeholders, and mitigate any potential environmental and social impacts of activities to maintain positive Company reputation with stakeholders and licence to operate. Executive responsibility Paul McDade Chief Operating Officer Performance indicator • Annual operations targets,
including safety, social
performance and environment indicators • Delivery targets for project
budget estimates and
schedule forecasts • Production forecasts • Maintenance hours and backlogs on preventative
equipment • Well and surface asset
integrity indicators Impact • Project and operational
delivery fails to meet cost and
schedule budgets or
operational objectives, causing
returns to be eroded • • Activities negatively affect the
environment and local
communities, impacting
Company reputation and
licence to operate |
Policies and systems • An Integrated Management
System (IMS) including
Operational, Financial, People
and Safety, Sustainability and
External Affairs (SSEA)
principles, policies, and
standards • Well-defined accountabilities for Development and Operations staff and leadership • Clear Delegation of Authority
(DoA) of financial controls • Code of Business Conduct • Asset delivery risk management including the process for multi- discipline major project reviews/audits at various stage gates from project concept through to execution Mitigation process • Multi-discipline project
review/audit of 'stage gate' process by experienced professional personnel including Technical, Financial/Economic, Safety, Sustainability, Commercial, Operational and Political aspects • Executive and Board approval required for all major projects and for staffing all dedicated project teams • Multi-discipline risk evaluation, mitigation and monitoring are completed on all projects and reported on monthly |
Risk mitigation activities and outcomes in 2014 • Multi-discipline project reviews conducted throughout the year including for activities in Kenya, Uganda, Mauritania, Namibia, Ghana, UK and Norway. Findings documented and reported to Executive; action plans implemented • Major deepwater TEN Project
over 50% complete and on
track to deliver first oil in mid
2016 • Major Uganda front-end engineering work under way including major ESIA work. Target project sanction in late 2016 • Kenya early concept selection work under way including ESIA and water supply impact studies. Target project sanction in late 2016 • East Africa onshore pipeline front end engineering work under way including routing survey and ESIA activities • Group-wide crisis management structure with regular drills • Preventive maintenance programme; well and plant integrity monitoring; business continuity planning; and PDBI insurance programme |
Supply chain failure |
Strategic priority Manage financial and business assets to enhance our portfolio, replenish upside potential and support funding needs. Achieve strong governance across all Tullow activities and continue to build trust and reputation with all stakeholders. Executive responsibility Graham Martin Executive Director & Company Secretary Performance indicator • Timeliness and completion
of deliveries • Contract management
scorecard • Local content expenditure Impact A delay in delivery of products or services results in value erosion and project delivery delays, causing significant financial penalties, increased costs and a loss of reputation with stakeholders. |
Insufficient local content will jeopardise our licence to operate and breach legislation in some countries. Policies and systems • Group contracting and procurement procedures • Market, contract and supplier due diligence • Post-contract award procedures • Logistics standard operating procedures • Local content policy • Transparent governance structure with a hierarchy of contract review boards from the Business Unit level to the Group • Delegation of Authority Mitigation process • Risk assessment and full due diligence of all suppliers carried out prior to award of the contract |
• Risk management embedded in the Group contracting and procurement procedures at all stages of the process • Comprehensive supplier monitoring undertaken to ensure that any issues are identified promptly and rectified Risk mitigation activities and outcomes in 2014 • Independent review of all
suppliers; new contracting and procurement assurance model; new supplier management tool rolled out; ongoing programme to improve contract holder capability in supplier management • Supplier risk assessment and due diligence revised and risk management now embedded for pre- and post-award activities • Supply chain management scorecard rebalanced • Local content reporting |
Adverse environmental impact, safety or security incident |
Strategic priority Ensure safe and secure operations and minimise environmental impacts. Executive responsibility Paul McDade Chief Operating Officer Performance indicator • Environmental, Health and
Safety (EHS) elements of
corporate scorecard, tied to
executive remuneration,
including LTIf and Spills/ million
man hours quantitative targets
and qualitative delivery targets
such as delivery of Transport
Safety Plans in each BU • EHS KPIs in Business Unit
scorecards Impact Major event from exploration, development or production operations may impact staff, contractors, communities or the environment, leading to increased costs, loss of reputation, revenue and/or shareholder value. |
Policies and systems • Board-level EHS Committee • Group EHS Policy • Group-wide EHS standards, as part of Tullow Integrated Management System (IMS) • Adherence to the Voluntary Principles of Security and Human Rights (VPSHR) in operations • Group and Business Unit level assurance processes Mitigation process • Board-level commitment and Active oversight • EHS standards set and monitored across the Group through Business Unit performance reporting and target setting • Clear EHS standards and procedures supported by strong leadership accountability and commitment throughout the organisation • EHS professionals embedded in the business to support delivery of safe and sustainable operations |
Risk mitigation activities and outcomes in 2014 • EHS and External Affairs
teams integrated in late 2013
to enhance non-technical risk
management • Improvements made to better reflect non-technical risks in the corporate scorecard • EHS Standards implemented and conformance assured via independent Group audits • Board EHS Committee made operational |
Political risk |
Strategic priority Nurture long-term relationships with national and local governments and ensure compliance with applicable laws and regulations. Executive responsibility Paul McDade Chief Operating Officer Performance indicator • Unscheduled non-production
time due to work stoppage to
our activities, disturbances or
Force Majeure events • • Degree of conformance
with internationally
recognised conventions
such as VPSHR |
Impact Political factors can lead to necessary re-negotiation of licence and agreement terms, delays in grants of licensees, or approval of agreements, and/or other state action. Policies and systems • Board level oversight of
political risks • Board level oversight of country- specific non-technical risk
(NTR) strategies • Portfolio risk management assessments, including active monitoring of political changes, risks and opportunities |
Mitigation process • Early identification and
ongoing monitoring of political risks and opportunities • Management plans addressing political impacts associated with existing or planned operations • Appropriate levels of resourcing and competency to identify, analyse and advise on political risk management Risk mitigation activities and outcomes in 2014 • Development of a forward
looking quarterly Political Risk
Report for Executive
Committee (ExCom) and the
Board • Development of Board level country strategy papers |
Social risk |
Strategic priority Nurture long-term relationships with communities, Non-Government Organisations (NGOs), Civil Society Organisations (CSOs), multilateral organisations, and other key stakeholders. Executive responsibility Paul McDade Chief Operating Officer Performance indicator • Unscheduled non-production
time due to work stoppage to
our activities, disturbances or
Force Majeure events • Social performance
elements of corporate
scorecard, tied to
executive remuneration • Social performance KPIs in
Business Unit Scorecards |
Impact Erosion of Tullow's social licence to operate leading to reduced value of projects, possible local disruptions, delays in project schedules and increased project costs. Impacts to our external stakeholders include effect on traditional livelihoods, local employment and business opportunities, and land acquisition and resettlement, among others. Policies and systems • Board level oversight of country-specific non technical risk (NTR) strategies • Group Social Performance Standards and tools embedded in the IMS • Group Local Content Guidelines to drive 'shared prosperity' and tools embedded in the IMS • Group Social Investment Standard and tools embedded in the IMS |
Mitigation process • Social investment projects
targeted at managing social risks and at delivering
opportunities to maximise our
business benefits • A risk-based approach to operating in sensitive/protected areas coupled with a World Heritage 'no go' policy • Proactive community engagement, supported by grievance management processes • Proactive land acquisition and relocation procedures Risk mitigation activities and outcomes in 2014 • Doubled discretionary
investment in social projects in Kenya • Strengthened focus on social performance in Group-wide Environmental Social Impact Assessments (ESIAs) • Conducted a Human Rights Assessment in Kenya, to be used to inform Group-wide processes for future development and employment • Recruited additional Community Liaison Officers in
Kenya |
Bribery and corruption |
Strategic priority Ensure adequate procedures to prevent bribery are in place, in line with the UK Ministry of Justice's Guidance, to minimise opportunities for bribery and corruption. Executive responsibility Graham Martin Executive Director & Company Secretary Performance indicator • No active bribery cases and
any known or suspected
cases of passive bribery
investigated and appropriate action taken Impact Corrupt actions or practices in the Group's activities leading to investigations or prosecution which would impact the Group's reputation and lead to loss of shareholder value. |
Policies and systems • Code of Business Conduct and • Safecall whistle blowing
procedures Mitigation process • Consistent ethical standards established and applied through the Code of Business Conduct and associated standards and procedures • Continual awareness programme delivered across the Company using a variety of media • Regular monitoring of compliance across the business, both internal and external assessments of the adequacy of the anti-bribery and corruption programme • Periodic reporting to the
Compliance Committee and the main Board. • Internal and external independent reporting mechanisms (Safecall) embedded and used across the business |
Risk mitigation activities and outcomes in 2014 • Online Code of Conduct
Certification process extended
to all staff; enhancement of
the awareness of mechanisms to report concerns • Additional compliance team resources recruited • Enhanced investigation resources and capability • Bribery and corruption risk management process implemented • Good Corporation compliance review recommendations implemented; further review carried out to assess Tullow as upper quartile • An enhanced anti-corruption due diligence evaluation procedure developed and implemented |
Information and cyber security |
Strategic priority Achieve strong governance across all Tullow activities and continue to build trust and reputation with all stakeholders. Executive responsibility Angus McCoss Exploration Director Performance indicator Prevention of cyber attacks and information security breaches. Impact Loss of sensitive proprietary information, financial fraud, reduction or halt in production. Policies and systems Information security policy and standards. |
Mitigation process • The information security strategy integrates information, personnel and physical security, as it relates to the protection of information assets • A collaborative cross-functional risk group provides governance and ensures technical and non-technical solutions are prioritised, effective and proportionate • An intelligence-led Protect, Monitor, Analyse and Respond cyber methodology recognises the ever- changing threat landscape that drives investment in next generation technologies |
Risk mitigation activities and outcomes in 2014 • Advanced 24/7 Security
Operating Centre established • Information security policy and
standards framework updated with training ongoing • Continued oversight by multi-
functional Information Security Committee of delivery of the
security programme • Active member of Cyber
Information Sharing
Partnership (CISP) and Oil and
Gas Information Security
Forum • Cyber Governance Health
Check completed |
Governance and legal risk |
Strategic priority Achieve strong governance across all Tullow activities and continue to build trust and reputation with all stakeholders. Executive responsibility Graham Martin Executive Director & Company Secretary Performance indicator • No material issues or claims
arising |
Impact Contractual or other liability claims cause unplanned financial, reputational or operational impact on business continuity, ultimately eroding shareholder value. Policies and systems Stakeholder engagement. Ensure timely identification, resourcing and management of potential legal liability claims. |
Mitigation process Experienced legal and commercial teams integrated with business decision making process; comprehensive knowledge of contractual and regulatory regimes. Risk mitigation activities and outcomes in 2014 • Established relationships with experienced local and international external counsel |
Loss of key staff & succession planning |
Strategic priority Build a strong unified team with excellent commercial, technical and financial skills and entrepreneurial flair. Executive responsibility Graham Martin Executive Director & Company Secretary Performance indicator • Staff turnover • Recruitment for key roles • Localisation Impact The loss of key staff and a lack of internal succession planning for key roles within the Group causes short and medium-term business disruption. |
Inability to recruit for key roles hinders performance. Policies and systems • The Tullow Values • HR strategy • Localisation plans • HR policies and standards • Performance management • Training and development Mitigation process Clearly defined people strategy based on culture and engagement, talent development and reward and recognition, together with the continuing success of the Group. |
Risk mitigation activities and outcomes in 2014 • Succession planning
completed for senior people in
critical roles • Training and development capability strengthened • Staff survey carried out annually and scheduled earlier to accommodate following year business planning • Reward policy changes |
Appendix C: Related party transactions
The following related party transactions are extracted from the Annual Report and Accounts (page 151).
The Directors of Tullow Oil plc are considered to be the only key management personnel as defined by IAS 24 - Related party disclosures.
|
2014 $m |
2013 $m |
Short-term employee benefits |
9.5 |
9.9 |
Post employment benefits |
1.2 |
1.1 |
Amounts awarded under long-term incentive schemes |
3.3 |
4.1 |
Share-based payments |
10.4 |
11.2 |
|
24.4 |
26.3 |
Short-term employee benefits
These amounts comprise fees paid to the Directors in respect of salary and benefits earned during the relevant financial year, plus bonuses awarded for the year.
Post-employment benefits
These amounts comprise amounts paid into the pension schemes of the Directors.
Amounts awarded under long-term incentive schemes
These amounts relate to the shares granted under the annual bonus scheme that is deferred for three years under the Deferred Share Bonus Plan (DSBP) and Tullow Incentive Plan (TIP).
Share-based payments
This is the cost to the Group of Directors' participation in share-based payment plans, as measured by the fair value of options and shares granted, accounted for in accordance with IFRS 2 - Share-based Payments.
There are no other related party transactions. Further details regarding transactions with the Directors of Tullow Oil plc are disclosed in the Directors' Remuneration Report on pages 88 to 104.
END
