Tullow Oil plc · LSE:TLW
Tullow Oil — H1 2004 Earnings Presentation
57 slides from Tullow Oil's earnings presentation, Sep 13, 2004
Slide 1: Tullow Oil plc 2004 Interim Results Presentation
Tullow Oil plc 2004 Interim Results Presentation 13th September 2004
Slide 2: Outline
Outline 1. Overview 2. Organisation Structure 3. Strategy 4. Core Area Overview 5. Interim Results 6. Conclusion 2
Slide 3: Overview
TULLOW Overview
Slide 4: Overview – An Active first half
OVERVIEW Overview – An Active first half Production – Currently >53,000 boepd Development – Active in 7 Countries UK Horne/Wren Project Sanction Congo M’Boundi Production and Reserve Growth Gabon Etame Stepouts EG Northern Block G Development approval Côte d’Ivoire West Espoir Project Sanction N
Slide 5: Overview – An Active first half
OVERVIEW Overview – An Active first half Exploration - Participated in 8 Wells 5 Discoveries Monroe, Lalmai, Bangora, Avouma, MOBIM-1 3 Dry Holes Rasulpur, Topaze-1, Rak-1 Acquisitions Energy Africa UK: Orwell, Blythe, Fizzy Congo: M’Boundi Gabon: Gryphon Marin 4 Licence Awards Côte d’Ivoire:
Slide 6: Overview – Deal Completion
OVERVIEW Overview – Deal Completion Energy Africa Acquired – Offer announced 4 May – Acquisition effective 28 May – 1 Month Revenue Booked in 1H 2P Reserves at 30 June 2004: 171 mmboe Integration of EA Business nearing completion Proven Team in Exploration, Development and Acquisition Thre
Slide 7: Organisation Structure
TULLOW Organisation Structure
Slide 8: Energy Africa Integration
ORGANISATION STRUCTURE Energy Africa Integration Integration of EA Business nearing completion Revised Organisation Structure to drive future Growth – Adrian Nel Appointed to Tullow Board as Exploration Director Sept 2004 – Paul McDade Chief Operating Officer 8
Slide 9: Enlarged Group Management Structure
ORGANISATION STRUCTURE Enlarged Group Management Structure Aidan Heavey CEO Operating Corporate Functions Functions Paul McDade Adrian Nel Matt O’Donoghue Other Finance Legal Corporate Functions COO Exploration Director GM Projects Execution/Management of Operated Development Projects Management of
Slide 10: Strategy
TULLOW Strategy
Slide 11: Growth Strategy
STRATEGY Growth Strategy Tullow remains Focused on Growth Core Areas UK/Northern Europe, Africa, South Asia 4 Principal Growth Drivers – Exploitation and Expansion of Current Reserve Base – Exploration balance of satellite and high impact – Selective Acquisitions within Core Areas – Active Por
Slide 12: Strategy – Build on Group Strengths
STRATEGY Strategy – Build on Group Strengths Build on Proven Skills in Dublin/London Production/ Operating Development Enhancement of existing production/discoveries Commercial skills Proven Skills in Cape Town Mix of Low Risk and High Impact Exploration Exploration Exploration Combine existing team
Slide 13: Targets
STRATEGY Targets • Shareholder Value Maximise Asset Values Portfolio Management • Production Growth Daily Production Value Barrels - Target Favourable Fiscal Regimes • Reserve Growth Additional Reserves Value Per Barrel 13
Slide 14: Core Area Overview
TULLOW Core Area Overview 14
Slide 15: Core Area Overview
CORE AREA OVERVIEW Core Area Overview UK/North West Europe Africa Sth Asia 23,000 boepd 29,000boepd 1,000 boepd 41 mmboe 108 mmboe 21 mmboe Gas Preferred Oil Preferred Oil/Gas Exploitation Exploitation Exploration Developments Developments Development Deals Exploration 2004/05 Programme Deals New Ve
Slide 16: Core Area Overview
CORE AREA OVERVIEW Core Area Overview UK/North West Europe 23,000 boepd 41 mmboe Gas Preferred Exploitation Developments Deals 16
Slide 17: Tullow – SNS Gas Business
CORE AREA OVERVIEW Tullow – SNS Gas Business CMS AREA 10 producing Fields, Equities 9.5% - 100% 1/1/2004 30/8/2004 Production (boepd Net) 20,000 18,000 2P Reserves mmboe 23.5 Developments Underway - Horne/Wren, Monroe Under review – Fizzy, Blythe, Wissey Exploration P4 (Zeta) - In Progress West Boul
Slide 18: UK: Alba, Caledonia
CORE AREA OVERVIEW UK: Alba, Caledonia 0 Kilometres 20 B Alba Field (EA - 8%), Caledonia Field (EA - 10%) L 1/1/2004 30/8/2004 16 / 13b L B Production (bopd) 6,800 6,000 L L L !O L ! B 2P Reserves (mmbo) 17.8 Active Development/Production Management - Programme ongoing CENTRAL NORTH SEA Alba Extreme
Slide 19: Core Area Overview
CORE AREA OVERVIEW Core Area Overview UK/North West Europe Africa Sth Asia 23,000 boepd 29,000boepd 1,000 boepd 41 mmboe 108 mmboe 21 mmboe Gas Preferred Oil Preferred Oil/Gas Exploitation Exploitation Exploration Developments Developments Development Deals Exploration 2004/05 Programme Deals New Ve
Slide 20: Tullow - Africa Core Area
CORE AREA OVERVIEW Tullow - Africa Core Area Production 29,000 boepd MOROCCO EGYPT Reserves 2P Reserves 108 mmboe MAURITANIA 3P Upside 90 mmboe SENEGAL + KUDU Developments IVORY COAST CAMEROON NBG Moho-Bilondo EQUATORIAL GUINEA M’Boundi Etame GABON UGANDA CONGO West Espoir Kudu Exploration – over 20
Slide 21: Gabon – Overview (Including EAGSA 100%)
CORE AREA OVERVIEW Gabon – Overview (Including EAGSA 100%) 6 Producing Fields, Tchatamba, Niungo, Etame c.80% of total 1/1/2004 30/8/2004 Production (Net) 15,000 bopd 16,000 bopd 2P Reserves 22.2 mmboe # Developments/Reserve Enhancement Tchatamba Additional producers Etame ET-5H well on stream, Avou
Slide 22: Equatorial Guinea: Ceiba/Northern Block G
CORE AREA OVERVIEW Equatorial Guinea: Ceiba/Northern Block G Block G – Ceiba Field/Northern Block G Development (Energy Africa 15% WI 14.25%Revenue) 1/1/2004 30/8/2004 Production (Net) 5,000 bopd 6,000 bopd Operator Amerada Hess 2P Reserves 48.5 mmbo # Developments/Reserve Enhancement Ceiba - Water
Slide 23: Congo: M'Boundi / N'Kossa / Moho-Bilondo
CORE AREA OVERVIEW Congo: M’Boundi / N’Kossa / Moho-Bilondo GABON M’Boundi 11% N’Kossa / Moho-Bilondo <5% CONGO 1/1/2004 30/8/2004 Madingo Production (Net) 1,575 bopd 4,200 bopd M’BOUNDI 2P Reserves 17.9 mmboe # Developments/Reserve Enhancement Pointe Noire M’Boundi - 3 Wells drilling, facilities up
Slide 24: Côte d'Ivoire: Espoir, CI-26, CI-107, CI-108
CORE AREA OVERVIEW Côte d’Ivoire: Espoir, CI-26, CI-107, CI-108 Espoir 21.33% CI-26 Area 24% 1/1/2004 30/8/2004 Production (Net) 3,800 bopd 3,700 bopd 2P Reserves 24 mmboe Developments/Reserve Enhancement Espoir Infill Drilling Programme Jan 05 West Espoir Development Sanction received Exploration A
Slide 25: Namibia: Kudu (EA 90%, Operator)
CORE AREA OVERVIEW Namibia: Kudu (EA 90%, Operator) Luderitz Kudu NAMIBIA Originally discovered By Chevron 1974 Wide range of potential reserve estimates: BLOCK 2814A Karasburg ECL best 3.28 Tcf (low 1.38; high 9.92 Tcf) KUDU FIELD Development Status Springbok Joint Development Agreement signe
Slide 26: Other Exploration - Africa
CORE AREA OVERVIEW Other Exploration - Africa Egypt 1 Licence Amethyst-1 Well in progress MOROCCO EGYPT Morocco 2 Licences Cap Draa Well Dry, July 2004 Tiznit Licence MAURITANIA Mauritania 2 Licences SENEGAL Dorade Well spuds September - 150mmbbl+ Block 1 Well scheduled for early 2005 IVORY COAST CA
Slide 27: Core Area Overview
CORE AREA OVERVIEW Core Area Overview UK/North West Europe Africa Sth Asia 23,000 boepd 29,000boepd 1,000 boepd Gas Preferred Oil Preferred Oil/Gas Exploitation Exploitation Exploration Developments Developments Development Deals Exploration 2004/05 Programme Deals New Ventures Portfolio Management
Slide 28: South Asia Core Area
CORE AREA OVERVIEW South Asia Core Area Sara, Suri 38% QUETTA BLOCK 28 Chachar 75% CHACHAR 1/1/2004 30/8/2004 NEW BLOCK “B” PAKISTAN SARA Production (Net) 1,500 boepd 1,000 boepd SURI SARA WEST 2P Reserves 21 mmboe NAWABSHAH INDIA Developments/Reserve Enhancement Sara/Suri Development Drilling CB-ON
Slide 29: Programmes – 2004/05
CORE AREA OVERVIEW Programmes – 2004/05 Active Work Programmes in all core areas 9 confirmed exploration wells for remainder of 2004 Minimum 15 new wells planned for 2005 6 Developments in progress or approved Kudu evaluation ongoing Budget Process for 2005 Capital allocation initiated 2
Slide 30: Programmes - Africa
CORE AREA OVERVIEW Programmes - Africa Activity / Area 2004 2005 Q3/04 Q4/04 Q1/05 Q2/05 MAURITANIA Block 1 Petrel Block 2 Dorade EGYPT Matruh Amethyst 2 CONGO/ANGOLA JDA JDA KX-2 EQ GUINEA Block L - 2 Block G Akom & #43 UGANDA Block 2 Kalso Tonya Block 3 Turaco Block 3A Buhaka GABON Akoum CAMEROON
Slide 31: Programmes – UK/South Asia
CORE AREA OVERVIEW Programmes – UK/South Asia Activity / Area 2004 2005 Q3/04 Q4/04 Q1/05 Q2/05 BANGLADESH Block 9 - Bangora PAKISTAN Block B Nawabshah ROMANIA EPI-3 Cortisa THAMES AREA 53/3a - P4 CMS AREA 43/25a - W. Boulton 44/18b - K3 KEY NON-OPERATED OPERATED FIRM WELLS WELLS NOT YET AFE'd SEISM
Slide 32: Conclusion
CORE AREA OVERVIEW Conclusion EA Deal Completed. Effective integration achieved Three Core Areas – North West Europe – South Asia – Africa African Production up 10% since closure of transaction in May 2004 Enlarged Portfolio already delivering – Gabon, Bangladesh, UK Active New Ventures Fo
Slide 33: Interim Results and Outlook
5 Interim Results and Outlook 33
Slide 34: Interim Results
INTERIM RESULTS AND OUTLOOK Interim Results 1H04 1H03 % £’000 £’000 • Turnover 76,533 65,950 +16% • Operating profit 26,511 17,577 +51% • Net Profit 10,002 6,777 +48% • Cashflow 57,526 46,212 +24% • EPS 2.37p 1.83p +30% • Dividend (p/share) 0.50 Nil Positive Progress in both existing and acquired bu
Slide 35: Production
INTERIM RESULTS AND OUTLOOK Production • H1 Production 25,300 boepd - c.10% reduction in UK production 60.00 • H2 Production 53-54,000 boepd 50.00 – UK 23,000-24,000 40.00 – Africa 28,000-29,000 – Asia 1,000- 1,500 m boepd 30.00 • Major changes to UK production profile towards CMS area and uncontrac
Slide 36: Movement in Turnover 1H 2003 – H 2004
INTERIM RESULTS AND OUTLOOK Movement in Turnover 1H 2003 – 1H 2004 80 £76.5 + £10.0 million million - £1.8 + £7.7 million million - £0.7 70 £65.9 - £4.6 million £ M illion million million 60 50 1H03 UK CDI Exchange Pakistan Energy 1H04 Africa 36
Slide 37: Operating Profitability
INTERIM RESULTS AND OUTLOOK Operating Profitability • Operating Costs declining as UK costs shift towards CMS Area, Hewett Initiatives on track 16.00 • EA Average Cash Operating Cost/Barrel 14.00 c.$5.50/barrel gives blended Group rate for H2 6.78 of £3.80-3.90/barrel 12.00 5.15 10.00 • Cost Saving
Slide 38: Transaction structure
INTERIM RESULTS AND OUTLOOK Transaction structure Transactions structured as follows: Name Holding Value $m Consideration Engen/Petronas 65.22% 326.1 Cash African Investors 25.3% 126.5 Tullow shares Others 9.48% 47.4 80% Shares Gabon JV N/A 70.0 Tullow shares Total Deal Value 570.0 Transactions
Slide 39: Fair Value Exercise
INTERIM RESULTS AND OUTLOOK Fair Value Exercise Composition of DD&A - $/bbl Energy Africa/EAGSA Acquired for $570 Million, as follows $m 12 – Book Value (EA Books) 346 – Mark to Market of Hedges (52) 10 – Net Cash/Debt (82) – Fair Value Adjustment 389 8 Total Acquisition Cost 601 6.11 6.18 Acqui
Slide 40: Effect of EA Hedge Position
APPENDICES Effect of EA Hedge Position EA Hedge position valued at 31 May 2004 – Collars from $24.50 - $29.50/barrel – 2H04 – 13,000 bopd – 2005/09 – 4,000 bopd Mark to Market Included in EA other liabilities No impact on transaction valuation – consistent with Tullow Price deck Effect is to
Slide 41: Exploration Write Offs
APPENDICES Exploration Write Offs • 1H2004 write off of £4.4 million includes 7,000 • Unsuccessful well in Bangladesh 6,000 (£1.7 million) • The uncarried portions of the 5,000 Topaze-1 well in Gabon and Rak-1 well in Morocco (£1.5 million) 4,000 • Various pre-licence and New Venture £'000 costs (£1
Slide 42: Taxation
INTERIM RESULTS AND OUTLOOK Taxation 14,000 • Principal tax exposure of Tullow Group remains in UK business 12,000 • EA has mix of Tax/PSC structures 10,000 • Effective Tax Charge of 47% pre exploration write 8,000 off (2003 – 40%) driven by reduced June EA PSC 6,000 Turnover (c.$8 million) • Shift
Slide 43: Cashflow, Debt and Gearing
INTERIM RESULTS AND OUTLOOK Cashflow, Debt and Gearing • Active Investment Programmes for 2H04 and 2005 – well covered by cashflows and facilities • New $300m Banking Facility put in place for EA Transaction – $250 million drawn at 30th June • UK Sterling Facilities remain in place – £60 million dra
Slide 44: H2 2004 CAPEX Summary
INTERIM RESULTS AND OUTLOOK H2 2004 CAPEX Summary DEVELOPMENT £M EXPLORATION £M TOTAL £M 2.3 2.3 7.4 5.1 23.4 21.2 28.6 47.2 18.6 DEVELOPMENT £M EXPLORATION £M TOTAL H2’2004 £M UK 21.2 2.3 23.4 AFRICA 28.6 18.6 47.2 ASIA 5.1 2.3 7.4 TOTAL 54.9 23.2 78.0 44
Slide 45: 2005 CAPEX Summary
INTERIM RESULTS AND OUTLOOK 2005 CAPEX Summary DEVELOPMENT £M EXPLORATION £M TOTAL £M 3.6 15.2 0.9 2.0 4.5 16.1 72.2 16.2 89.4 DEVELOPMENT £M EXPLORATION £M TOTAL 2005 £M UK 15.2 2.0 17.2 AFRICA 72.2 16.2 88.4 ASIA 3.6 0.9 4.5 TOTAL 91.0 19.0 110.0 45
Slide 46: Commodity Price Hedge Programme
INTERIM RESULTS AND OUTLOOK Commodity Price Hedge Programme •Commodity mix 2H-04 2005 2006 Major increase in oil exposure; significant increase in gas production from mid-2005 Oil Objectives Volume 17,000 11,400 7,500 • Reduce exposure to price volatility hedged (bopd) • Manage downside exposures C
Slide 47: Conclusion
TULLOW Conclusion
Slide 48: Conclusion
CONCLUSION Conclusion EA Deal Completed. Effective integration achieved Three Core Areas – North West Europe – South Asia – Africa African Production up 10% since closure of transaction in May 2004 Enlarged Portfolio already delivering – Gabon, Bangladesh, UK Good Revenue Protection – 2005
Slide 49: Appendices
TULLOW APPENDICES
Slide 50: Summary of 1H 2004: Key Performance Metrics
APPENDICES Summary of 1H 2004: Key Performance Metrics 1 1H 2004 1H 2003 % Increase/ (Decrease) Production (boepd)1 27,857 26,319 5.8 Average price per boe (£)1 15.09 13.76 9.7 Turnover (£ million) 76.5 65.9 16.1 Average production costs per boe (£)1 4.00 4.22 (5.2) Average depletion costs per boe (
Slide 51: Summary of 1H 2004: Key Performance Metrics
APPENDICES Summary of 1H 2004: Key Performance Metrics 2 1H 2004 1H 2003 % Increase/ (Decrease) Production (mmboe) 5,065 4,790 5.8 Production (boepd) 27,857 26,319 5.8 Sales (mmboe) 4,656 4,681 (0.5) Realised Oil Price (£/bbl)1 16.43 14.09 16.6 Operating cost (£/bbl)1 4.36 4.32 0.9 Depletion (£/bbl)
Slide 52: Summary of Results: Profit and Loss Account
APPENDICES Summary of Results: Profit and Loss Account INTERIM 2004 INTERIM 2003 TULLOW EA TOTAL £millions £millions £millions £millions Group Turnover 66.6 9.9 76.5 66.0 Operating costs (20.4) 0.2 (20.2) (20.2) Amortisation (18.0) (3.9) (21.9) (21.1) Gross Profit 28.2 6.2 34.4 24.7 Administration c
Slide 53: Summary of Results: Cashflow
APPENDICES Summary of Results: Cashflow Interim Interim 2004 2003 £m £m Cashflow Net Cashflow from Operations 57.5 46.2 Net Interest (5.0) (2.0) Taxation (6.2) (5.6) Operating Cashflow (after interest and tax) 46.3 38.6 Acquisition (166.4) - Capital Expenditure (28.0) (23.2) Financing 188.7 1.8 Net
Slide 54: Summary of results: Balance Sheet
APPENDICES Summary of results: Balance Sheet Interim Interim 2004 2003 £m £m Oil and Gas Interests Tangible 481.3 156.1 Intangible 121.2 45.6 Investments 0.5 0.4 Net Current Assets 55.2 23.1 Long Term Liabilities (169.3) (63.4) Provisions (107.9) (42.9) Shareholders’ Funds 381.0 118.9 Gearing ratio
Slide 55: Appendix – 2005 CAPEX Summary
APPENDICES Appendix – 2005 CAPEX Summary Project Development Exploration Total £M £M £m NBG 35.7 35.7 Espoir 15.3 15.3 Horne/Wren 13.4 13.4 Ceiba 12.4 1.3 13.7 Uganda 5.8 5.8 Gabon 5.5 5.5 MISC 14.2 6.4 20.6 TOTAL 91 19 110 55
Slide 56: EA Balance Sheet - Summary
APPENDICES EA Balance Sheet - Summary 31-May-04 $m £m Fixed assets 318.6 173.8 Net current liabilities (19.2) (10.4) Loans and Provisions (87.2) (47.6) BALANCE SHEET TOTAL 212.2 115.7 Fixed assets 318.6 173.8 Other corporate assets/(liabilities) (106.4) (58) Fair value adjustment 389 212.1 ACQUISITI
Slide 57: Tullow Oil plc 2004 Interim Results Presentation
Tullow Oil plc 2004 Interim Results Presentation 13th September 2004