14th Sep 2005 07:01
Tullow Oil PLC14 September 2005 2005 Interim Results Tullow Oil plc announces record Interim Results 14 September 2005 - Tullow Oil plc (Ticker: TLW), the independent oil and gas,exploration and production Group, today announces its interim results for thesix months ended 30 June 2005. These interim results are prepared underInternational Financial Reporting Standards (IFRS) including the prospectiveadoption of IAS 39 from 1 January 2005. All comparisons are based on an IFRSrestatement of 2004 UK GAAP financial information, which was announced on 12August 2005, and is available on the Group's website at www.tullowoil.com. Interim Results Analysis The exceptionally strong oil and gas pricing environment, the benefit of theinclusion of Energy Africa for a full six months, a three month contributionfrom Schooner and Ketch, combined with steady growth in Group productionresulted in a record performance for Tullow in the first half of 2005. Financial Highlights H1 2005 H1 2004 £'000 £'000Revenue increased £124.9 million, up 163% 201,434 76,533Operating profit before exploration activities increased £82.5 million, up 318% 108,404 25,887Exploration Costs Written Off (4,019) (4,430)Net Interest (7,416) (4,122)Profit before Tax increased £74.0 million, up 427% 91,377 17,335Taxation (28,291) (8,998)Profit for the period increased £54.7 million, up 660% 63,086 8,337 Pence PenceBasic earnings per share 9.82 1.98Operating cash flow before working capital per share 18.11 7.74Dividend per share 1.0 0.5 Operational Highlights • In 2004 the Group successfully completed the full integration of Energy Africa, which doubled the size of Tullow. The new management and organisation structures are working well, resulting in a strong first half performance. • During the period, material development programmes included two projects in the UK Southern North Sea (SNS) and over 30 wells in West Africa, delivering steady organic production and reserve growth. • In March Tullow completed the acquisition of the Schooner and Ketch fields and a redevelopment programme is currently ahead of schedule. • Tullow's net UK gas production reached an all time high of 180 mmscfd in the first half and first gas was achieved from the Horne & Wren development. • Weighted average working interest production was 57,350 boepd, more than double that of the same period last year and is forecast to average 60,000 boepd in the second half of the year. • Group reserve replacement was 97%, led by Gabon, which now accounts for 30% of the Group's total production. • A successful exploration programme in the SNS and Gabon led to three discoveries close to Tullow infrastructure • Good progress was made in relation to the commercialisation of the giant Kudu gas field offshore Namibia with the completion of the FEED study, preparation for invitations to bid for construction are getting underway and progressive approvals in regulatory arrangements. • As part of ongoing portfolio management, the disposal of the non-core Alba and Caledonia assets was completed in June, with a profit on disposal of £33.2 million. The Congo (Brazzaville) offshore asset disposal was completed in August. Total proceeds from these disposals amounted to $184 million. 2005 Outlook 2005 continues to be another exciting year for Tullow and the industry. Oil andgas prices are exceptionally strong and are forecast to remain so in the currentsupply environment. In the first half the Group has successfully integrated themajor acquisitions of the last 12 months and has begun adding significant valueto those assets through sound management and technical and developmentexcellence. Performance throughout the Group is encouraging, with materialupside potential for Tullow in Kudu, Schooner and Ketch redevelopment and theimminent high impact exploration wells in Uganda and Mauritania. Commenting today, Aidan Heavey, Chief Executive, Tullow Oil plc, said: "The record first half performance announced today demonstrates the continuingprogress of our business. The deals completed in recent years have beensuccessfully integrated, our assets are showing strong organic growth and wehave developed an exploration portfolio which combines lower risk "snuggle"projects with exciting high impact opportunities. I believe that theseattributes will continue to deliver long term growth and superior performancefor the Group." Webcast and Conference Calls In conjunction with the Group's Interim Results presentation for the financialcommunity in London there will be a simultaneous conference call and webcast. Inaddition there will be a conference call in the afternoon. Replay and archivefacilities will be available for all events later today via our website,www.tullowoil.com. All events are hosted by Aidan Heavey, Chief Executive andother participating senior management are Tom Hickey, Chief Financial Officer,Paul McDade, Chief Operating Officer and Adrian Nel, Exploration Director. 9.30 am (BST): Conference Call - In the UK/Europe please call +44(0)20 7365 1843and in Ireland please call +353(0)1 659 8311. A replay facility will beavailable from one hour after the conference call for seven days. To access thereplay facility in the UK/Europe please call +44(0)20 7784 1024 and in Irelandplease call +353 (0)1 659 8321. The passcode is 6691834#. 9.30 am (BST): Webcast - Please visit the Results Centre on our website atwww.tullowoil.com to access the webcast. An archive of the Webcast will beavailable from this afternoon. 2.30 pm (BST): Conference Call - In the US please call +1 913 981 5571 and inthe UK please call +44(0) 20 7984 7756. A replay facility will be available onehour after the conference call for seven days. To access the replay facility,please call + 1 719 457 0820 or +44(0)20 7984 7568. The passcode is 4479007. About Tullow Oil plc Tullow is a leading independent oil and gas, exploration and production group,quoted on the London and Irish Stock Exchanges (symbol: TLW) and is aconstituent of the FTSE 250 Index. The Group has interests in over 90 productionand exploration licences in 15 countries and focuses on three core areas: NWEurope, West Africa and South Asia. For further information please refer to our website at www.tullowoil.com. 2005 Interim Statement Results for the six months ended 30 June 2005 Finance Review Tullow Oil had a very good first half of 2005, achieving record results. Thisperformance was underpinned by focused execution across all aspects of thebusiness and exceptionally strong oil and gas pricing. Operating Performance Working interest production averaged 57,350 boepd, while sales volumes averaged54,200 boepd. These production figures are 106% above the corresponding periodin 2004. This increase was driven by a full period contribution from the EnergyAfrica assets (acquired May 2004) supplemented by a three month contributionfrom Schooner and Ketch (acquisition completed 31 March 2005). Average prices realised during the period were $41.7/bbl (post hedging) (1H2004: $34.2/bbl) for oil and 28.8p/therm for UK gas (1H 2004: 23.0p/therm).Tullow's oil production sold at an average discount of 12% to Brent during theperiod. The combination of the positive price and volume influences meant thatrevenue amounted to £201.4 million (2004: £76.5 million), an increase of 163%over the corresponding period in 2004. First Half Revenue by Core Area (£m) Oil Gas Total % of TotalNW Europe (UK) 17.6 66.7 84.3 42%West Africa 116.6 - 116.6 57%South Asia - 0.5 0.5 1%Total 134.2 67.2 201.4% of Total 67% 33% Operating profit before exploration activities amounted to £108.4 million (1H2004: £25.9 million), an increase of 318%, reflecting the strong growth in Groupproduction and pricing as set out above. While underlying cash operating costswithin the portfolio amounted to £45.5 million (£4.38/boe) and are expected toremain steady over the remainder of 2005, reported cost of sales beforedepreciation, depletion and amortisation (operating costs) for the period of£64.9 million (1H 2004: £20.3 million) are distorted by the inclusion at marketvalue of £14.0 million associated with overlifted volumes at 30 June and £5.5million of overlift associated with the disposal of Alba and Caledonia. Underand overlift positions arise when partners elect not to share all field liftingsin proportion; they have no impact on the economics of the business. Depreciation, depletion and amortisation for the period amounted to £60.4million (£5.82/boe). This amount includes £3.9 million (£0.37/boe) associatedwith the provision of deferred tax in relation to the fair values of the assetsacquired through the Energy Africa acquisition as required by IAS 12; thisamount is offset in full by a related tax credit within the Group's tax charge.Depreciation also includes a total of £4.5 million of impairment costsassociated with Tullow's producing interests in Pakistan (£2.4 m) and offshoreCongo interest held for resale (£2.1 m) at 30 June. Other Income and Expenditure At 30 June Tullow's portfolio of hedges and derivatives had a negative mark tomarket value of £141.3 million. While the bulk of these arrangements qualify forhedge accounting and will consequently be largely reflected in the IncomeStatement as the related contracts mature, IAS 39 (adopted 1 January 2005) alsorequires the establishment of a high degree of effective correlation between thevaluation of the hedge instrument and the underlying physical commodity beinghedged, with any hedge ineffectiveness being reflected as a charge to incomeduring the period. Realised oil prices from Tullow's portfolio are predominantlypriced off Brent; however, the variations in crude oil discounts and gasnomination patterns for Tullow have led to a degree of hedge ineffectiveness andaccordingly a charge of £5.6 million has been recognised in the Income Statementfor the period. Exploration costs written off were £4.0 million (1H 2004: £4.4 million), inaccordance with the Group's "successful efforts" accounting policy whichrequires that all costs associated with unsuccessful exploration are written offto the Income Statement. In June, in keeping with its strategy of active management of its portfolio ofassets, the Group completed the disposal of Alba and Caledonia offshore assets,which were non-core to the longer term development of Tullow. The profit ondisposal amounted to £33.2 million, which includes some £5.5 million of overliftoutlined above. Additional income of £5.6 million has also been recognised inrelation to incremental consideration receivable based on reserves andperformance of the Horne and Wren fields, which commenced production in June.During the period the Group also agreed terms for the disposal of its offshoreCongo interests, with this transaction completing in August. These assets havethus been classified as "held for resale" under IFRS 5 and the anticipated losson disposal of £2.1 million recognised as an impairment charge as set outabove. The net interest charge for the half year was £7.4 million (1H 2004: £4.1million). The increase reflects higher levels of net debt arising fromacquisitions and the increased working capital requirements of the enlargedGroup. Taxation The tax charge of £28.3 million (1H 2004: £9.0 million) is associated with theGroup's North Sea and Gabonese activities. After adjusting for explorationcosts and non-recurring items associated with overlift and profit on assetdisposals, the Group's overall effective tax rate for the period is 38%. Dividend Financial and operating performance in the first half has been exceptionallystrong. The Group's capital expenditure programmes are comfortably funded fromoperating cash flow and gearing is comparatively modest. Against this backgroundthe Board has recommended an interim dividend of 1p per share (1H 2004: 0.5p).The dividend will be paid on 9 November to shareholders on the register at 7October. Schooner and Ketch Acquisition During the period Tullow completed the acquisition of the Schooner and Ketchassets for a net cash payment on completion of £189.3 million. A purchase priceallocation exercise has been undertaken on these assets incorporating the fairvalue of all reserves, costs and contractual arrangements acquired, resulting ina total acquisition cost of £218.0 million. A creditor of £31.3 million inrespect of the gas contracts which were out of the money as at 31 March 2005 hasalso been recognised. Based on proven and probable reserves at the date ofacquisition, this has resulted in a depreciation charge for Schooner and Ketchof £6.89/boe. Cash Flow and Financing Activities The strong pricing environment, allied to increasing production and effectivecontrol of underlying operating costs, led to record operating cash flow beforeworking capital movements of £116.4 million, over 130% ahead of 1H 2004. Tullow invested a total of £73.4 million in exploration and developmentactivities over the period. Of this total, over 80% was associated with ongoingdevelopment and production enhancement projects in the UK, Gabon, Congo,Equatorial Guinea and Cote d'Ivoire. The current oil price environment hasresulted in a number of incremental infill and development projects beingsanctioned during the year, along with the extension of existing programmes inGabon and Equatorial Guinea. Accordingly, Tullow now anticipates total capitalexpenditure of the order of £175 million for the full year. Over the last five years Tullow has undertaken a range of acquisitions and fielddevelopments, all of which have been wholly or partly debt financed. During 2005the Group has undertaken a refinancing exercise to consolidate existingborrowings into a single facility to create a more efficient Group financingstructure, reduce cash collateralisation obligations and create flexibility forfuture growth both in the UK and internationally. This $850 million refinancingis now substantially complete with the syndication process significantlyoversubscribed. IFRS In common with all fully listed companies, Tullow has adopted IFRS with effectfrom 1 January 2004, with the exception of IAS 39, which has been adoptedeffective 1 January 2005. While IFRS has no impact on the commercial substanceor cash flows of the business, it does amend UK GAAP accounting treatment anddisclosures in a number of important respects. Tullow has accounted for its oiland gas interests under the successful efforts method for many years andconsequently the adoption of IFRS 6 has had no impact on reported results. First Half Summary Impact of IFRS Adoption on Interim Results, as compared to the UK GAAP AccountingPolicies applied by Tullow in 2004(1) Income Statement Net Assets £ million £ millionIAS 2: Share Based Payments (0.2) 0.4IAS 3: Deferred Tax on Business Combinations - -IAS 12: Income Taxes 0.2 (4.3)IAS 16: Depreciation 0.2 (8.1)IAS 17: Leases (0.1) (0.3)IAS 39: Financial Instruments (4.8) (115.3)Total (4.7) (127.6) (1) Information relating to the impact of IFRS adoption on Interim Results doesnot form part of Deloitte and Touche LLP's Review Report. The IFRS Restatementof 2004 UK GAAP Financial Statements, together with Deloitte and Touche LLP'srelated Audit and Review Reports are available the Group's website,www.tullowoil.com. Operations Review Tullow has activities in 15 countries and interests in over 90 licences. TheGroup's core areas of operation are NW Europe, Africa and South Asia with abalanced portfolio of oil and gas, and exploration and production assets. NW Europe - Leading producer and operator in the UK gas market During 2005 a number of successful development projects and the acquisition ofSchooner and Ketch have led to net UK gas production reaching an all time highof 180 mmscfd. The UK gas supply/demand characteristics have led to a continuedimprovement in gas pricing during the period and the forward curve is currentlyat record levels. Since 2001, Tullow has built a strategic position in the UK SNS, accumulating anoutstanding portfolio of acreage and infrastructure, which continues to provideproduction growth and significant development and exploration opportunities.Over the next 12 months Tullow plans to drill a minimum of 10 exploration,appraisal and development wells to enhance production and further extend theGroup's exposure to uncontracted gas over the years ahead. Thames/Hewett Area First gas from the Horne & Wren fields, Tullow's first operated development inthe UK, was achieved on 9 June, less than 12 months after project sanction. Thefields, developed from a minimal facilities platform, have a combined productionof 90 mmscfd through two horizontal wells with gas being exported through theTullow owned Thames and Bacton infrastrucure. The third party field, Arthur, was also brought on stream via the Thames andBacton infrastructure in early January with a second well coming onstream in midJuly. The Arthur field is exporting over 130 mmscfd contributing to cost sharingand adding significant tariff income at both Thames and Bacton. The overallincrease in throughput at Thames, up from 50 mmscfd to over 200 mmscfd, hassignificantly reduced the unit operating costs of this infrastructure therebyfurther extending its economic life. The original Hewett, Thames and Orwellfields all continue to produce above expectation. The Oval prospect in Block 54/1a was spudded in mid-July but was plugged andabandoned having encountered water-bearing sands in the target interval. CMS Area Following the completion of the Schooner and Ketch acquisition in March 2005,Tullow has been working to enhance production from these fields through aconcentrated campaign of facilities maintenance and well optimisation. The workhas already resulted in an increase in average gross production, currently 50 to60 mmscfd, and a material improvement in the performance and reliability of thefacilities. Additionally, Tullow has secured the ENSCO 101 rig for a period of18 months to actively pursue a series of development drilling and workoveropportunities on both fields. Drilling is scheduled to commence at thebeginning of November with the Schooner-10 development well. This will befollowed by a programme of up to eight workovers and at least three new wells,one of which will target the undrilled NW Schooner Area. Rig modifications willallow the Group to simultaneously progress a programme of well interventions onexisting producers on both fields, with the aim of further increasing productioncapacity in the short term. An independent review of reserves on Schooner andKetch has been completed, with a total of 330 bcf of acquisition reservesconfirmed, of which 246 bcf have been classified as Proven and Probable Reservesat 30 June. First production from the Munro field commenced on 22 August 2005 with thecapacity to deliver at up to 80 mmscfd. This project was completed six weeksahead of schedule and 16 months after field discovery. The development well istied back to the Tullow-owned CMS III and CMS infrastructure via a minimumfacilities platform and a 5km sub sea pipeline. The McAdam infill development well, an extension of the CMS III project, reachedits target depth in late August with sand quality proving to be aboveexpectations. The well will now be completed as a producer and is expected tocommence production in October adding gross incremental production ofapproximately 40 mmscfd. The Opal exploration well in Block 43/25a, close to the Tullow-owned CMSinfrastructure, successfully encountered gas bearing reservoir sands. The wellwas suspended on 9 June 2005 and the extent of the accumulation is currentlybeing evaluated. The K3 exploration well, currently being evaluated, hasprovided a second exploration success in the CMS area. This important discoverysignificantly upgrades a number of regional prospects which are expected to bedrilled in 2006. On 6th September, Tullow was awarded all 6 blocks for which it made applicationsin the UK 23rd Licensing Round. Blocks 44/28a and 49/3 (part) were awarded toTullow 100%, with both development and exploration opportunities beingidentified on these blocks. Blocks 43/30b, 48/5 (part) and 49/1 (part) will beoperated by GDF Britain, with Tullow holding a 33.33% interest. Tullow has alsobeen awarded a 50% interest in a promote licence, Block 43/23b, operated byEndeavour UK. All the blocks awarded are in the area surrounding the Schoonerand Ketch Fields. Africa - A diversified pan-African oil and gas business In Africa, Tullow has production and development interests in Gabon, Coted'Ivoire, Congo (Brazzaville), Equatorial Guinea and Namibia and explorationinterests in Morocco, Mauritania, Senegal, Cameroon, Uganda, Equatorial Guineaand Cote d'Ivoire. Tullow is also in negotiations to participate in additionalmaterial development and exploration projects in West Africa. Gabon Production in Gabon continues to be enhanced through a combination of appraisaland development drilling, workovers and upgrades to existing facilities. Workinginterest production has averaged over 18,000 bopd during the period contributingover 30% of the Group's total production. A further upward revision incommercial reserves of 6.8 mmbo has been booked at mid year bringing the totalreserves revisions in Gabon since acquisition to 16.3 mmbo, a replacement ratioof 250%. On the Niungo field, eight appraisal and development wells have been drilledthis year of which 6 are already on stream, maintaining gross production ratesat close to 15,000 bopd, with a plateau of 16,000 bopd expected by year end.While these wells successfully tested and appraised the northern limits of thefield, an exploration well was drilled in a separate fault block and hasestablished a northern extension of the field. The current phase of drillinghas ended and the partners are now considering a programme of up to 12 furtherinfill and appraisal wells during 2006. The Tchatamba field has been maintained at a gross rate of approximately 33,000bopd, through a successful programme of well and facilities optimisation. In the Etame licence area, the Etame field production has increased to 22,000bopd following the successful completion of the Etame 6 well. In addition, theGovernment has approved the development of the Avouma/North Tchibala discovery,and work is ongoing to achieve first oil in the second half of 2006. Through itsback-in rights in this licence, Tullow is entitled to obtain a 7.5% interest inthe field from the commencement of production. A three-well exploration drilling programme in the Tullow-operated Akoum andKiarsseny licences is expected to begin in mid-November. Two wells in Akoum aretargeting prospects in the vicinity of the existing Tchatamba field while thewell in Kiarsseny will evaluate the undeveloped Equata discovery with a view tofuture development. Congo (Brazzaville) The four rig development drilling programme on the M'Boundi field is continuingwith 14 successful wells drilled since January. These wells have extended thefield limits and, in the northeast, intersected a higher productivity reservoir.A new seismic survey, to evaluate further extensions of the field, has beencompleted and is currently being interpreted. Average gross field production hasincreased from 35,000 bopd in January to the current rate of 44,000 bopd, with30 producing wells on production. Engineering work is in progress at the exportterminal to facilitate the blending and export of M'Boundi crude with the higherquality N'Kossa blend, this is expected to significantly reduce the M'Boundicrude discount to Brent by year-end. The upgrade of the production facilties to60,000 bopd has been completed and a further expansion to 90,000 bopd has beenapproved by partners. Equatorial Guinea Production from the Ceiba field continued to increase as a result of an ongoinginfill drilling programme and active reservoir management. During the period,two infill production wells, a work-over and two injection wells weresuccessfully completed. Average gross field production has increased fromapproximately 38,000 bopd in January to around 44,000 bopd at present. Aminimum of one further production well is planned before year end and the infilldrilling programme will continue throughout 2006. The Okume Complex development, which comprises the Okume, Oveng, Ebano and Elonfields, remains on budget and on schedule for first oil in late December 2006.Two deep water Tension Leg Platforms are being constructed in Korea and theshallow water Central Processing Facility is being constructed on the US GulfCoast. The construction of these facilities has not been materially impacted inthe aftermath of Hurricane Katrina. The development drilling will commence inQ2 2006 following the installation of these facilities. Cote d'Ivoire Two new infill production wells have been completed on the East Espoir field,increasing production from 18,500 boepd to the current rate of 25,000 boepd.This programme is ongoing, with two further wells planned. The West Espoirdevelopment is progressing well and the project is on target for theinstallation of the jacket, well head tower and pipeline hook-up in the finalquarter of 2005 leading to first oil, on schedule, in Q2 2006. Namibia Good progress has been made in relation to the commercialisation of the giantKudu gas field offshore Namibia via a gas-to-power generation project. The FEEDstudy for a four well subsea development and onshore gas conditioning plant hasbeen completed and invitations to bid for the various construction contracts arebeing prepared and are expected to be issued in early 2006. In addition totechnical preparations, advances have been made on the commercial and regulatoryarrangements, the Gas Sales Agreement negotiations are underway, in parallelwith Power Purchase Agreement negotiations between Nampower and Eskom. TheEnvironmental Impact Assessment study for the upstream development has also beenapproved by the Ministry of Mines and Energy. While the Kudu power generation project remains the key area of focus, Tullow isalso committed to proving and commercialising the potentially significantreserves upside within the Kudu Field. To facilitate this, Tullow has initiatedthe planning for two appraisal wells on Kudu which are expected to be drilledduring 2006. South Asia - Refocused and targeting high impact prospects In South Asia, following the strategic review in late 2004, significant progresshas been made in both targeting exploration licences with high impactprospectivity and creating value from existing discoveries. Pakistan The development of the Chachar gas field has been approved and detailed designand procurement work is underway to produce first gas by Q2 2006. The disposalof Tullow's interest in the Sara West discovery is currently awaiting Governmentapproval. Average production for the Sara and Suri fields for the periodamounted to 3 mmscfd net to Tullow. Bangladesh Significant progress was made during the first half in relation to the appraisalplan for the Bangora and Lalmai discoveries. Over the coming 12 months, Tullowwill acquire 310km2 3D seismic and drill up to three appraisal wells along the40km anticline connecting the discoveries to determine the ultimate reservepotential of the structure. Tullow has also received Government and partnerapproval to initiate production from Bangora under a long term test arrangement.This will supply much needed gas into the Block 9 market and provide valuableadditional reservoir and geological data. First Gas from Bangora is targeted forearly 2006 at an initial rate of upto 50 mmscfd. Exploration Exploration Strategy While exploration activity in the first half of the year has been limited to 4wells in the Southern North Sea and Gabon of which three have been discoveries,an exciting programme is planned for the next 12 months. In addition, Tullowhas undertaken a major review of its exploration activities with a view todefining a high-impact exploration portfolio for 2006 and beyond. This projecthas been focused on increasing the Group's exposure to high potentialopportunities in regions where Tullow has specialised knowledge or competitiveadvantage and accelerating work over existing acreage wherever possible.Pakistan and Cote d'Ivoire were identified as two such regions, with prospectiveacreage available on attractive terms. Since June 2004, the Group has added 6licences in these two countries, and further opportunities remain under review. Exploration Programme Over the next 12 months Tullow expects to participate in up to 15 explorationwells, of which 3 will be operated by Tullow. Six of these wells are "snuggleexploration prospects" which will target reserves close to existinginfrastructure, whilst the wells in Mauritania, Uganda, Equatorial Guinea andRomania, have the potential to add very significant reserves. Major 3-D seismicacquisition programmes are also planned in Bangladesh, Cameroon and Coted'Ivoire with 2-D programs in Pakistan and India. In November it is planned to spud a well to test the Faucon prospect inMauritania Block 1. Tullow's share of potential reserves from this high riskprospect are material and success in proving a working petroleum system wouldhave very positive implications for further exploration, not only for Block 1but also for Block 2 and the St Louis Block in Senegal. In Uganda, following the disappointing discovery of high CO2 gas in the Turaco-3well in Block 3, geochemical studies have indicated that the CO2 risk is limitedto the southern portion of the Albertine Graben. Additional seismic surveys inBlocks 2 and 3A have defined structures with potential for large oil reservesand a two well drilling programme on the shores of Lake Albert in Block 2 isplanned later in 2005. As in Mauritania, any demonstration of a workingpetroleum system would have very positive implications for further exploration. In Pakistan, a seismic programme was completed on the Nawabshah Block in thefirst half. A prospect, Shahpur, has been identified on trend with a discoveryin the adjacent block and this well will be drilled in the final quarter of2005. Tullow was recently awarded two exploration blocks (Kohat and Bannu West)in the Potwar-Kohat Basin adjacent to the exciting MOL oil and gas discoveries.Cross assignments have been made between these blocks and blocks held by OGDCLand Mari Gas in the Sulaiman Fold Belt, Kohlu and Kalchas areas, thereby furtherincreasing the Group's acreage in these high potential regions. Seismicacquisition will start in the Kohat Block before year end. In Romania Tullow operates the EPI-3 Brates concession where an explorationwell, Costisa-1, was spudded in February 2005. This 4,100 metre well willevaluate a significant structural closure at Sarmatian, Badenian and Cretaceouslevels, all of which are productive in offset wells. This geologically complexwell is progressing steadily and is expected to penetrate the primary objectivesduring September. In the event of success, the Costisa location is close to welldeveloped infrastructure and there is a ready market for gas or liquids inRomania. 2005 Second Half Exploration ActivityCountry Licence Prospect Interest Spud DateMauritania Block 1 Faucon -1 20% November 2005Gabon Kiarsseny Equata -1 47.5% November 2005Pakistan Nawabshah Shahpur -1 30% November 2005Gabon Akoum Akoum West -1 100% December 2005Uganda Block 2 M'Puta -1 50% December 2005 In Bangladesh, a new seismic survey is scheduled in the highly prospectiveBlocks 17/18 in the Bay of Bengal. Work will initially focus on oil prospectswithin the blocks, however recent discoveries in adjacent acreage enhance thegas prospectivity of several sizeable structures previously identified. Tullowis in advanced discussions with a view to farming out a portion of its equity inthis licence to a major international oil company. Looking ahead, 2006 will see further wells drilled on acreage awarded to Tullowin the UK's 20th and 21st licensing rounds and this is likely to include atleast 3 wells in the CMS Area. Material progress has also been made in theevaluation of the CB-ON-1 Block in India, where recently reprocessed 2D seismicindicates potentially significant structures similar to those containingdiscoveries in adjacent acreage. These will be subject to further seismic overthe coming months with a view to potentially undertaking a multi-well drillingprogramme during 2006. 2005 Outlook 2005 continues to be another exciting year for Tullow Oil and the industry. Oiland gas prices are exceptionally strong and are forecast to remain so in thecurrent supply environment. In the first half the Group has successfullyintegrated the major acquisitions of the last 12 months and has begun addingsignificant value to those assets through sound management and technical anddevelopment excellence. Performance throughout the Group is encouraging, withmaterial upside potential for Tullow in Kudu, Schooner and Ketch redevelopmentand the imminent high impact exploration wells in Uganda and Mauritania. Ends Disclaimer This announcement contains certain operational and financial information inrelation to 2005, which is subject to final review and has not been audited.Furthermore, it contains certain forward-looking statements that are subject tothe usual risk factors and uncertainties associated with the oil & gasexploration and production business. Whilst the Group believes the expectationsreflected herein to be reasonable, the actual outcome may be materiallydifferent owing to factors either within or beyond the Group's control andaccordingly no reliance may be placed on the figures contained in such forwardlooking statements. Independent Review Report To the Shareholders of Tullow Oil plc We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 which comprises the Group income statement,the Group statement of changes in equity, the Group balance sheet, the Groupcash flow statement and the related notes numbered 1 to 4. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in Note 1, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards asadopted for use in the EU. The interim report has been prepared in accordancewith the recognition and measurement criteria of IFRS and the disclosurerequirements of the Listing Rules. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. Deloitte & Touche LLPChartered Accountants13 September 2005 Group Income StatementSix months ended 30 June 2005 Six months Six months Year ended ended 30 ended 30 31 December June 2005 June 2004 2004 Unaudited Unaudited Audited £'000 £'000 £'000 Revenue 201,434 76,533 225,256 Cost of Sales (125,425) (46,912) (141,228) Gross Profit 76,009 29,621 84,028 Administrative Expenses (6,798) (3,516) (10,926) Profit on Sale of Oil and Gas Assets 39,571 - 2,292 Exploration Costs Written Off (4,019) (4,430) (17,961) Other Expenses (378) (218) (647) Operating Profit 104,385 21,457 56,786 Loss on Hedging Instruments (5,592) - - Interest Receivable 2,046 1,407 3,458 Finance Costs (9,462) (5,529) (13,449) Profit before Tax 91,377 17,335 46,795 Income Tax Expense (28,291) (8,998) (15,460) Profit for the Period 63,086 8,337 31,335 Earnings per Ordinary Share Stg p Stg p Stg p Basic 9.82 1.98 5.88 Diluted 9.69 1.95 5.81 Group Statement of Changes in EquitySix Months ended 30 June 2005 Six months Six months Year ended ended 30 ended 30 31 December June 2005 June 2004 2004 Unaudited Unaudited Audited £'000 £'000 £'000 Opening Equity 375,467 113,363 113,363 IAS 39 Adjustment (29,256) - -Revised Opening Equity 346,211 113,363 113,363 Currency Translation Differences 17,314 303 (19,338)Hedge Movement (81,246) - -Total Expense recognised directly in Equity (63,932) 303 (19,338) Profit for the Period 63,086 8,337 31,335Total recognised Income for the Period 63,086 8,337 31,335 Total recognised Income and Expense for the (846) 8,640 11,997Period New Shares issued for Cash - 254,268 253,547New Shares issued in respect of employee share 847 471 2,999optionsShare Based Payment Charges 370 278 556Dividend paid - - (6,995) Closing Equity attributable to Company's 346,582 377,020 375, 467Equity Holders Group Balance SheetAs at 30 June 2005 Six months Six months Year ended ended 30 ended 30 31 December June 2005 June 2004 2004 Unaudited Unaudited Audited £'000 £'000 £'000AssetsNon-Current AssetsProperty, Plant and Equipment 693,749 542,538 545,527Other Intangibles 136,806 121,871 103,944Investments 496 496 496 831,051 664,905 649,967 Current AssetsInventories 2,445 1,453 3,392Trade Receivables 39,145 21,637 37,156Other Current Assets 24,072 34,818 17,051Assets Held for Resale 42,804 - -Cash and Cash Equivalents 122,913 113,431 85,070 231,379 171,339 142,669 Total Assets 1,062,430 836,244 792,636 LiabilitiesNon-Current LiabilitiesTrade and Other Payables 23,245 14,932 13,014Long-term Borrowings 298,587 169,296 143,398Deferred Tax 27,236 76,188 68,803Long-term Provisions 82,450 80,442 70,679Derivative Financial Instruments 83,915 - - 515,433 340,858 295,894 Current LiabilitiesTrade and Other Payables 90,883 77,224 102,614Current Portion of Long-term Borrowings 23,140 25,589 5,302Current Tax Payable 23,183 15,553 13,359Liabilities held for Resale 6,476 - -Derivative Financial Instruments 56,733 - - 200,415 118,366 121,275 Total Liabilities 715,848 459,224 417,169 Net Assets 346,582 377,020 375,467 EquityEquity attributable to Equity Holders ofParentShare Capital 64,654 64,156 64,537Share Premium 122,385 120,230 121,656Other Reserves 55,774 168,232 148,591Retained Earnings 103,769 24,402 40,683Total Equity 346,582 377,020 375,467 Group Cash Flow Statementfor the 6 Months Ended 30 June 2005 Six months Six months Year ended ended 30 ended 30 31 December June 2005 June 2004 2004 Unaudited Unaudited Audited £'000 £'000 £'000Cash Flows From Operating ActivitiesProfit before Taxation 91,377 17,335 46,795Adjustments for:Depletion, Depreciation and Amortisation 60,811 28,216 81,098Foreign Exchange Loss (242) (248) (3,489)Exploration Costs 4,019 4,430 17,961Profit on Disposal of Oil and Gas Assets (39,571) - (2,292)Operating cashflow prior to working capital 116,394 49,733 140,073(Increase)/Decrease in Trade & Other (32,798) 2,425 (34,215)ReceivablesDecrease/(Increase) in Inventories 947 (1,591) (1,721)Increase in Trade Payables 17,147 2,837 40,179Hedge Ineffectiveness 5,592 - -Interest Receivable (2,046) (1,407) (3,458)Finance Costs Payable 9,462 5,529 13,449Cash Generated from Operations 114,698 57,526 154,307Income Tax Paid (25,381) (6,206) (14,497)Net Cash from Operating Activities 89,317 51,320 139,810 Cash Flows from Investing ActivitiesAcquisition of Subsidiary - Energy Africa(1) - (166,384) (166,055)Disposal of Subsidiary 58,487 - 4,730Purchase of Property, Plant and Equipment (267,417) (27,966) (95,105)Interest Received 2,081 1,407 3,436Net Cash used in Investing Activities (206,849) (192,943) (252,994) Cash Flows from Financing ActivitiesNet Proceeds from Issue of Share Capital 847 116,661 120,913Debt Arrangement Fees (2,095) (2,864) (3,050)Repayment of Existing Loans (26,750) (33,313) (33,437)Drawdown of Bank Loan 191,476 145,327 98,620Repayment of Bank Loans Acquired - (32,922) (33,824)Interest Paid (8,649) (3,283) (9,494)Dividends Paid - - (6,995)Net Cash used in Financing Activities 154,829 189,606 132,733 Net Increase in Cash and Cash Equivalents 37,297 47,983 19,549Cash and Cash Equivalents at the 85,070 65,631 65,631 Beginning of the PeriodTranslation Difference 546 (183) (110)Cash and Cash Equivalents at the End 122,913 113,431 85,070of the Period(2) (1) Net of Cash Acquired (2) Includes restricted amounts at 30 June 2005 of £43.9 million (30 June 2004- £36.9 million) in respect of decommissioning reserves on fixed term depositsand £10.0 million (30 June 2004 - £10.6 million) held on deposit in connectionwith expected future payments under the Borrowing Base facility. Notes to the Interim Financial Statements 1. Accounting Policies and Presentation of Financial Information These June 2005 interim consolidated financial statements are for the six monthsended 30 June 2005. The information for the year ended 31 December 2004 does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. A copy of the statutory accounts for that year, which were prepared underUK Generally Accepted Accounting Policies (GAAP), has been delivered to theRegistrar of Companies. The auditor's report on those accounts was unqualified. The reconciliations of equity at 1 January 2004 (date of transition to IFRS) andat 31 December 2004 (date of last UK GAAP financial statements) and thereconciliation of profit for 2004, as required by IFRS 1, including thesignificant accounting policies to 31 December 2004, have been published on thecompany's website, www.tullowoil.com, on 23 August 2005. The reconciliation of equity at 30 June 2004 and the reconciliation of profitfor the six months ended 30 June 2004 have been included on the company'swebsite to enable a comparison of the 2005 interim figures with those publishedin the corresponding period of the previous financial year. The accounting policies set out below have been adopted to prepare the interim2005 financial information under International Financial Reporting Standards(IFRS). These will be the principal accounting policies used for Tullow's futurefinancial statements. (a) Basis of Accounting The financial information has been prepared under the historical cost conventionand using accounting policies consistent with IFRS. (b) Basis of Consolidation The consolidated financial statements consist of the financial statements of theCompany and all its subsidiary undertakings. All intra-group transactions,balances, income and expenses are eliminated on consolidation. Turnover and results of subsidiary undertakings are consolidated in the GroupIncome Statement from the dates on which control over the operating andfinancial decisions is obtained. Acquisitions On an acquisition that qualifies as a business combination, the assets andliabilities of a subsidiary are measured at their fair value as at the date ofacquisition. Any excess of the cost of acquisition over the fair values of theidentifiable net assets acquired is recognised as goodwill. Any deficiency ofthe cost of acquisition below the fair values of the identifiable net assetsacquired is credited to the Income Statement in the period of acquisition. Joint Ventures The Group is engaged in oil and gas exploration, development and productionthrough unincorporated joint ventures. The Group accounts for its share of theresults and net assets of these joint ventures as jointly controlled assets. Inaddition, where Tullow acts as operator to the joint venture, the grossliabilities and receivables (including amounts due to or from non-operatingpartners) of the joint venture are included in the Group consolidated BalanceSheet. (c) Revenue Revenue represents the sales value, net of VAT and overriding royalties, of theGroup's share of production in the period together with tariff income. Revenues received under take-or-pay sales contracts in respect of undeliveredvolumes are accounted for as deferred income. Revenue is recognised when goodsare delivered and title has passed. (d) Over/Underlift Lifting or offtake arrangements for oil and gas produced in certain of theGroup's jointly owned operations are such that each participant may not receiveand sell its precise share of the overall production in each period. Theresulting imbalance between cumulative entitlement and cumulative productionless stock is 'underlift' or 'overlift'. Underlift and overlift are valued atmarket value and included within debtors and creditors respectively. Movementsduring an accounting period are adjusted through Cost of Sales such that GrossProfit is recognised on an entitlements basis. The Group's share of any physicalstock is accounted for at the lower of cost and net realisable value. (e) Foreign Currencies The Pound Sterling is the presentation and functional currency of the Group.Financial statements of foreign currency denominated subsidiaries are translatedinto Sterling whereby the results of the overseas operations are generallytranslated at the average rate of exchange for the period and their balancesheets at rates of exchange ruling at the Balance Sheet date. Currencytranslation adjustments arising on the restatement of opening net assets offoreign subsidiaries, together with differences between the subsidiaries'results translated at average rates versus closing rates, are taken directly toreserves. All resulting exchange differences are classified as equity untildisposal of the subsidiary. On disposal the cumulative amounts of the exchangedifferences are recognised as income or expense. Transactions in foreign currencies are recorded at the rates of exchange rulingat the transaction dates. Monetary assets and liabilities are translated intoSterling at the exchange rate ruling at the Balance Sheet date, with acorresponding charge or credit to the Income Statement. However, exchange gainsand losses arising on long-term foreign currency borrowings, which are a hedgeagainst the Group's overseas investments, are dealt with in reserves. (f) Exploration, Evaluation and Production Assets The Group adopts the successful efforts method of accounting for exploration andappraisal costs. All licence acquisition, exploration and evaluation costs areinitially capitalised in cost centres by well, field or exploration area, asappropriate. Directly attributable administration costs and interest payable arecapitalised insofar as they relate to specific exploration and developmentactivities. Pre-licence costs are expensed in the period they are incurred. These costs are then written off unless commercial reserves have beenestablished or the determination process has not been completed and there are noindications of impairment. All field development costs are capitalised as property, plant and equipment.Property, plant and equipment related to production activities are amortised inaccordance with the Group's Depletion and Amortisation accounting policy. (g) Commercial Reserves Commercial reserves are proven and probable oil and gas reserves, which aredefined as the estimated quantities of crude oil, natural gas and natural gasliquids which geological, geophysical and engineering data demonstrate with aspecified degree of certainty to be recoverable in future years from knownreservoirs and which are considered commercially producible. There should be a50 per cent statistical probability that the actual quantity of recoverablereserves will be more than the amount estimated as a proven and probablereserves and a 50 per cent statistical probability that it will be less. (h) Depletion and Amortisation - Discovery Fields All expenditure carried within each field is amortised from the commencement ofproduction, on a unit of production basis, which is the ratio of oil and gasproduction in the period to the estimated quantities of commercial reserves atthe end of the period plus the production in the period, on a field-by-fieldbasis. Costs used in the unit of production calculation comprise the net bookvalue of capitalised costs plus the estimated future field development costs.Changes in the estimates of commercial reserves or future field developmentcosts are dealt with prospectively. Where there has been a change in economic conditions that indicates a possibleimpairment in a discovery field, the recoverability of the net book valuerelating to that field is assessed by comparison with the estimated discountedfuture cash flows based on management's expectations of future oil and gasprices and future costs. Any impairment identified is charged to the IncomeStatement as additional depreciation, depletion and amortisation. Whereconditions giving rise to impairment subsequently reverse, the effect of theimpairment charge is also reversed as a credit to the Income Statement, net ofany depreciation that would have been charged since the impairment. (i) Decommissioning Provision for decommissioning is recognised in full when the related facilitiesare installed. A corresponding amount equivalent to the provision is alsorecognised as part of the cost of the related property, plant and equipment. Theamount recognised is the estimated cost of decommissioning, discounted to itsnet present value and is reassessed each year in accordance with localconditions and requirements. Changes in the estimated timing of decommissioningor decommissioning cost estimates are dealt with prospectively by recording anadjustment to the provision, and a corresponding adjustment to property, plantand equipment. The unwinding of the discount on the decommissioning provision isincluded as an interest expense. (j) Property, Plant and Equipment Property, plant and equipment is stated in the Balance Sheet at cost lessaccumulated depreciation. Depreciation on property, plant and equipment otherthan exploration and production assets, is provided at rates calculated to writeoff the cost less estimated residual value of each asset on a straight linebasis over its expected useful economic life of between three and five years. (k) Finance Costs and Debt Borrowing costs directly attributable to the acquisition, construction orproduction of qualifying assets, which are assets that necessarily take asubstantial period of time to get ready for their intended use or sale, areadded to the cost of those assets, until such time as the assets aresubstantially ready for their intended use or sale. Finance costs of debt are allocated to periods over the term of the related debtat a constant rate on the carrying amount. Arrangement fees and issue costs arededucted from the debt proceeds and are amortised and charged to the IncomeStatement as finance costs over the term of the debt. (l) Share Issue Expenses and Share Premium Account Costs of share issues are written off against the premium arising on the issuesof share capital. (m) Taxation Current and deferred tax, including UK corporation tax and overseas corporationtax, are provided at amounts expected to be paid using the tax rates and lawsthat have been enacted or substantially enacted by the Balance Sheet date. Deferred corporation taxation is recognised on all temporary differences thathave originated but not reversed at the Balance Sheet date where transactions orevents that result in an obligation to pay more, or right to pay less tax in thefuture have occurred at balance sheet date. Deferred tax assets are recognisedonly to the extent that it is considered more likely than not that there will besuitable taxable profits from which the underlying temporary differences can bededucted. Deferred tax is measured on a non-discounted basis. Deferred tax is provided on temporary differences arising on acquisitions thatare categorised as Business Combinations. Deferred tax is recognised atacquisition as part of the assessment of the fair value of assets andliabilities acquired. Any deferred tax is charged or credited in the incomestatement as the underlying temporary difference is reversed. Petroleum Revenue Tax (PRT) is treated as an income tax and deferred PRT isaccounted for under the temporary difference method. Current UK PRT is chargedas a tax expense on chargeable field profits included in the Income Statementand is deductible for UK corporation tax. (n) Pensions Contributions to the Group's defined contribution pension schemes are charged tooperating profit on an accruals basis. (o) Derivative Financial Instruments The Group uses derivative financial instruments to manage its exposure tofluctuations in foreign exchange rates, interest rates and movements in oil andgas prices. Derivative financial instruments are stated at fair value. The purpose for which a derivative is used is established at inception. Toqualify for hedge accounting, the derivative must be highly effective inachieving its objective and this effectiveness must be documented at inceptionand throughout the period of the instrument. For the purpose of hedge accounting, hedges are classified as either fair valuehedges, when they hedge the exposure to changes in the fair value of arecognised asset or liability, or cash flow hedges, where they hedge exposure tovariability in cash floes that is either attributable to a particular riskassociated with a recognised asset or liability or forecasted transaction. In relation to fair value hedges which meet the conditions for hedge accounting,any gain or loss from re-measuring the derivative and the hedged item at fairvalue is recognised immediately in the income statement. Any gain or loss on thehedged item attributable to the hedged risk is adjusted against the carryingamount of the hedged item and recognised in the income statement. For cash flow hedges, the portion of the gains and losses on the hedginginstrument that is determined to be an effective hedge is taken to equity andthe ineffective portion is recognised in the income statement. The gains andlosses taken to equity are subsequently transferred to the income statementduring the period in which the hedged transaction affects the income statementor if the hedge is subsequently deemed to be ineffective. Gains or losses on derivatives that do not qualify for hedge accountingtreatment (either from inception or during the life of the instrument) are takendirectly to the income statement in the period. (p) Leases Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases and are charged to the IncomeStatement on a straight-line basis over the term of the lease. Assets held under finance leases are recognised as assets of the group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability tothe lessor is included in the Balance Sheet as a finance lease obligation. Leasepayments are apportioned between finance charges and reduction of the leaseobligation so as to achieve a constant rate of interest on the remaining balanceof the liability. Finance charges are charged directly against income, unlessthey are directly attributable to qualifying assets, in which case they arecapitalised in accordance with the group's general policy on borrowing costs. (q) Share Based Payments The Group has applied the requirements of IFRS 2 Share-based Payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1January 2004. The Group issues equity-settled and cash-settled share-based payments to certainemployees. Equity-settled share-based payments are measured at fair value at thedate of grant. The fair value determined at the grant date of the equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the group's estimate of shares that will eventually vest. Fair value is measured by use of an actuarial binomial model. The expected lifeused in the model has been adjusted, on the basis of management's best estimate,for the effects of non-transferability, exercise restrictions, and behaviouralconsiderations. For cash-settled share-based payments, a liability is recognised based on thecurrent fair value determined at each Balance Sheet date and that portion of theemployees' services to which the payment relates that has been received by theBalance Sheet date. 2. Earnings per Ordinary Share The Calculation of basic earnings per ordinary share is based on the profit forthe period after taxation of £63,086,455 (first half 2004 - £8,337,436) and aweighted average number of shares in issue of 642,685,021 (first half 2004 -422,516,777). The calculation of diluted earnings per share is based on the profit for theperiod after taxation as for basic earnings per share. The number of shares isadjusted to show the potential dilution if employee and other share options areconverted into ordinary shares. The weighted average number of shares in issueis increased to 651,235,398 (first half 2004 - 427,087,202). 3. Assets held for Resale The sale of the Congo (Brazzaville) offshore assets was completed on 18 August2005. As the net assets carrying amount was recovered through a sale transactionand at 30 June 2005 the sale was highly probable, the assets meet the criteriaincluded in IFRS 5 - non-current assets held for sale and discontinued assets.Accordingly the assets and liabilities are disclosed as an asset held for resaleand included within current assets and current liabilities. IFRS 5 requires that an impairment loss is recognised if the carrying value ofthe asset is lower than the sale proceeds, and consequently a charge of £2.1mhas been recorded within depreciation in the income statement. 4. Dividends The Company's shareholders approved a dividend payment of 1.25p per share at theAnnual General Meeting on 29 June 2005. This amount was paid on 8 July 2005 toshareholders on the register of members of the Company on 3 June 2005. The board have recommended an interim dividend of 1.0p per share in the halfyear to 30 June 2005 to be paid on 9 November 2005 to shareholders on theregister of members of the Company on 7 October 2005 (2004 - 0.5p per share). 5. Approval of accounts These interim accounts (unaudited) were approved by the Board of Directors on 13September 2005. 6. Proven and Probable Reserves Summary on a Working Interest Basis(1) NW Europe West Africa South Asia Total Commercial Oil Gas Oil Gas Oil Gas Oil Gas Petroleum mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf MmboeAt 01.01.2005 14.60 131.95 116.07 28.00 - 96.20 130.67 256.15 173.36Revisions - 3.24 8.79 - - - 8.79 3.24 9.33Acquisitions/ Disposals (net) (13.81) 250.74 - - - - (13.81) 250.74 27.98Production (0.79) (20.52) (6.08) (0.18) - (0.54) (6.87) (21.24) (10.41)At 30.06.2005 - 365.41 118.78 27.82 - 95.66 118.78 488.89 200.26 Contingent Oil Gas Oil Gas Oil Gas Oil Gas Petroleum mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf MmboeAt 30.06.2005 - 208.30 - 781.20 - 16.20 - 1,005.70 167.62 Total Oil Gas Oil Gas Oil Gas Oil Gas Petroleum mmbbl bcf mmbbl bcf mmbbl bcf mmbbl bcf MmboeAt 30.06.2005 - 573.71 118.78 809.02 - 111.86 118.78 1,494.59 367.88 (1) Not reviewed by the Auditors Proven and probable commercial reserves are based on a Group reserves reportproduced by an independent engineer. Proven and probable contingent reservesare based on both Tullow's estimates and the Group reserves report produced byan independent engineer. The Group provides for depletion and amortisation of oil and gas assets withinplant, property and equipment on a net entitlements basis, which reflects theterms of the Production Sharing Contracts related to each field. Total netentitlement reserves were 169.01 mmboe at 30 June 2005 (149.99 mmboe - 31December 2004). Contingent reserves relate to reserves in respect of which development plans arein the course of preparation or further evaluation is underway with a view todevelopment within the foreseeable future. 7. Reconciliation of IFRS to UK GAAP Group Income Statement(1) For the six months ended 30 June 2005 IFRS UK GAAP IFRS 5 IAS 12 IAS 39 Other Six months Six months ended 30 June ended 30 June 2005 2005 (Unaudited) (Unaudited) £'000 £'000 £'000 £'000 £'000 £'000Revenue 201,434 201,434Cost of Sales (125,425) 3,860 (512) (122,077) Gross Profit 76,009 - 3,860 - (512) 79,357 Administrative Expenses (6,798) 370 (6,428)Profit on Sale of Subsidiaries 39,571 39,571Exploration Cost Written Off (4,019) (4,019)Other Expenses (378) (378) Operating Profit 104,385 - 3,860 - (142) 108,103 Loss on Hedging Instruments (5,592) 5,592 -Interest Receivable 2,046 2,046Finance Costs (9,462) 216 (9,246) Profit before Tax 91,377 - 3,860 5,592 74 100,903 Income Tax Expense (28,291) (4,098) (743) 1 (33,131) Profit for the Period 63,086 - (238) 4,849 75 67,772 Stg p Stg p Stg p Stg p Stg p Stg pEarnings per Ordinary ShareBasic 9.82 - (0.04) 0.75 0.01 10.55Diluted 9.69 - (0.04) 0.74 0.01 10.41 (1) Not reviewed by Auditors 7. Reconciliation of IFRS to UK GAAP (contd) Group Balance Sheet(1) As at 30 June 2005 IFRS UK GAAP IFRS 5 IAS 12 IAS 39 Other Six months Six months ended 30 ended 30 June 2005 June 2005 (Unaudited) (Unaudited) £'000 £'000 £'000 £'000 £'000 £'000AssetsNon-Current AssetsProperty, Plant and Equipment 693,749 40,149 (44,768) 70 689,200Other Intangibles 136,806 2,547 (632) 138,721Investments 496 496 831,051 42,696 (45,400) - 70 828,417Current AssetsInventories 2,445 108 2,553Trade Receivables 39,145 39,145Other Current Assets 24,072 24,072Assets Held for Resale 42,804 (42,804) -Cash and Cash Equivalents 122,913 122,913 231,379 (42,696) - - - 188,683 Total Assets 1,062,430 - (45,400) - 70 1,017,100 LiabilitiesNon-Current LiabilitiesTrade and Other Payables 23,245 23,245Long-term Borrowings 298,587 298,587Deferred Tax 27,236 (49,723) 18,296 5,781 1,590Long-term Provisions 82,450 1,185 83,635Derivative Financial Instruments 83,915 (83,915) - 515,433 1,185 (49,723) (65,619) 5,781 407,057Current LiabilitiesTrade and Other Payables 90,883 5,291 (13,628) 82,546Current Portion of Long Term 23,140 23,140BorrowingsCurrent Tax Payable 23,183 23,183Liabilities held for Resale 6,476 (6,476) -Derivative Financial Instruments 56,733 (49,731) 7,002 200,415 (1,185) - (49,731) (13,628) 135,871 Total Liabilities 715,848 - (49,723) (115,350) (7,847) 542,928Net Assets 346,582 - 4,323 115,350 7,917 474,172 EquityEquity Attributable to EquityHolders of ParentShare Capital 64,654 64,654Share Premium 122,385 122,385Other Reserves 55,774 110,501 166,275Retained Earnings 103,769 4,323 4,849 7,917 120,858Total Equity 346,582 - 4,323 115,350 7,917 474,172 (1) Not reviewed by Auditors This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tullow Oil