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RNS Number : 9034H
Tullow Oil PLC
27 March 2020
27 March 2020
Tullow Oil plc
Annual Report and Accounts and Notice of Annual General
Meeting
Tullow Oil plc ("Tullow" or the "Company")
Following the release on 12 March 2020 of the Company's
preliminary full year results announcement for the year ended 31
December 2019 (the "Preliminary Announcement"), the Company
announces it has published its Annual Report and Accounts for this
period (the "Annual Report and Accounts").
The Company's 2020 Annual General Meeting ("AGM") will be held
at the Company's registered address at 9 Chiswick Park, 566
Chiswick High Road, London W4 5XT on Thursday 23 April 2020 at 12
noon.
A copy of the Annual Reports and Accounts and the Notice of 2020
AGM are available to view on the Company's website:
www.tullowoil.com
In accordance with Disclosure Guidance 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 position of the Company and its
group.
In accordance with Listing Rule 9.6.1, a copy of each of the
Annual Report and Accounts, the Notice of 2020 AGM and the Form of
Proxy in relation to the 2020 AGM have been submitted to the
Financial Conduct Authority via the National Storage Mechanism and
will be available for viewing shortly at
http://www.morningstar.co.uk/uk/nsm.
In addition, all of the above documents have been submitted to
Euronext Dublin and the Ghana Stock Exchange, and therefore will
shortly be available for inspection at Euronext Dublin (Exchange
Buildings, Foster Place, Dublin 2) and will be available to
shareholders located in Ghana by contacting the Company's
registrar: Central Securities Depository (GH) Limited, 4(th) Floor,
Cedi House, PMB CT 465 Cantonments, Accra, Ghana (Telephone: +233
(0)302 906 576).
For further information, please contact:
Tullow Oil plc (London) (+44 (0)20 3249 9000)
-- Chris Perry (Investor Relations)
-- Nicola Rogers (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 85).
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 the
relevant financial reporting framework, 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,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
By order of the Board
Dorothy Thompson Les Wood
Executive Chair Chief Financial Officer
11 March 2020 11 March 2020
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 (pages 33 to 36).
Risk appetite
The Board sets Tullow's risk appetite and acceptable risk
tolerance levels for each of the eight principal risk categories
and has reviewed the strategies devised by the Management Team to
mitigate them. In considering Tullow's risk appetite, the Board has
reviewed the risk process, the assessment of enterprise-level risks
and the existing controls and mitigating actions that drive towards
residual risk. During this process, the Board articulated which
risks Tullow should not tolerate, which should be managed to an
acceptable level and which should be accepted in order to deliver
our business strategy.
The risk appetites are embedded into the Tullow IMS to ensure
they are available to the whole organisation and can be used in
development of all IMS policies and standards and in business
decision making. Risks continue to be managed or monitored by
senior management, with oversight by the Management Team. The risk
appetite is reviewed at least annually by the Board to ensure that
it reflects the current external and market conditions.
Integrated assurance planning
Coordinated assurance activities are planned on an annual basis
between Internal Audit, Heads of functions and Business leadership
to align with key risks and to ensure the right level of assurance
across Tullow. Heads of functions coordinate the assurance
requirements for their respective functions, based on their key
risks, internal/external changes, control failures and historical
issues.
Responsibility for assurance activities are clearly articulated
for each of the three lines of defence illustrated opposite.
Business leadership act as the first line of defence and are
responsible for ensuring their key risks are being managed
effectively and that adequate controls are in place to manage those
risks. This is done primarily through self-assessment reviews and
focused assurance.
Heads of functions act as a second line of defence and as well
as setting functional standards are responsible for ensuring
compliance with them. They obtain assurance through periodic
reporting and focused assurance reviews. They are also responsible
for identifying and managing risks that fall under their remit.
Internal Audit acts as the third line of defence and is
responsible for providing independent assurance through its
risk-based internal audit programme.
Tullow's risk management and assurance processes provide the
Board and the Management Team with reasonable, but not absolute,
assurance that our assets and reputation are protected.
Link to KPI/scorecard - Pursuing
our vision, growing our business
Strategy risk and business delivery
----------------------------------------------------------- -----------------------------------------------------------
Risk of inability to make new significant
oil discoveries and replenish exploration
and subsurface portfolio Risk owner: Mark MacFarlane
----------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
----------------------------------------------------------- -----------------------------------------------------------
* Tullow owns exploration prospects and seeks to * High grading of our exploration portfolio.
replenish its exploration portfolio in Africa and
South America.
* Disciplined capital allocation model and financial
risk sharing with our Joint Venture Partners.
* Factors that influence access to new acreage and
successful exploration include obtaining accurate
drilling and seismic data, maturity of the oil * Focus on exploration prospects with clear and
industry in the countries in which it wishes to short-term routes to commercialisation.
invest, and developing good relationships with key
stakeholders.
* The Jethro-1 and Joe-1 Guyana wells were executed
within budget, however are not commercial
* Failure to make new significant oil discoveries and discoveries.
replenish our exploration and subsurface portfolio
will reduce our ability to grow the business and
could ultimately result in significant exploration * Geophysical operations were conducted on time and to
and capital write-offs. budget in Africa and South America.
* Risk sharing was actioned in Suriname and Côte
d'Ivoire.
* New acreage was added in Peru, Argentina and Namibia.
* Exits were actioned in Zambia, Mauritania, Jamaica
and Uruguay.
----------------------------------------------------------- -----------------------------------------------------------
Risk of failure to deliver commercially
attractive and timely development
projects Risk owner: Mark MacFarlane
----------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
----------------------------------------------------------- -----------------------------------------------------------
Kenya
* Tullow has progressed the Kenya project into the * EOPS has de-risked reservoir performance and has
Define stage, which precedes the Final Investment demonstrated the ability of Kenya to export oil with
Decision (FID). The work done so far through the the first oil cargo sold in 2019.
Early Oil Pilot Scheme (EOPS) and the earlier
appraisal programme has significantly reduced the
risk to the project. * Focused community, national and county government
engagement.
* Factors that influence the successful delivery of the
Kenya project and reaching FID by end of 2020 are * Midstream ESIA submitted in Q4 2019, Upstream ESIA to
dependent on government support to deliver access to be submitted in Q1 2020.
land, water and the offloading berth currently being
built at Lamu Port and successful EPC tenders for the
upstream facilities and pipeline. Failure to achieve * Heads of Terms that define the Commercial Framework
this may result in higher than anticipated costs signed by the Government in Q3 2019.
leading to the project not being economically viable
at current oil prices.
* Long Form Agreements submitted to the Government in
Q4 2019.
* Failure of the Ugandan Sale and Purchase Agreement to
Total and CNOOC to close due to unacceptable tax
interpretation from the Government has delayed a * Land acquisition process started by the Government in
farm-down of the Uganda asset. Q4 2019.
* Equity sell down process started in Q4 2019.
* Ongoing discussions with key stakeholders to align on
key FID milestones and prerequisites.
Uganda
* The farm-down in Uganda to Total and CNOOC lapsed in
August 2019 following the expiry of the SPA due to
unacceptable tax interpretation from the Government.
* Alternative sales process to commence in 2020.
* Renewed engagements with Joint Venture Partners to
commercially and legally de-risk the project before
further significant capex is spent.
----------------------------------------------------------- -----------------------------------------------------------
Link to KPI/scorecard - Growing our
business, business delivery and shared
Stakeholder risk prosperity
---------------------------------------------------------- ----------------------------------------------------------
Risk of disruption to business due
to political/regulatory influence
in Ghana Risk owner: Mark MacFarlane
---------------------------------------------------------- ----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
---------------------------------------------------------- ----------------------------------------------------------
* Tullow has invested material amounts of capital in * Stabilisation clauses in all our Petroleum
Jubilee and TEN assets in Ghana and continues to Agreements.
invest in the ongoing operations and new growth.
* Non-technical risk standard sets minimum stakeholder
* However, the value of our investments may be eroded management requirements.
by factors such as the regular fiscal demands from
governments which contradict the existing tax
legislation and/or Petroleum Agreements. * Tax advice taken and regular engagement with key
senior Government personnel (e.g. HE The President,
Minister of Energy, Minister of Finance) and
institutions (Petroleum Commission, GNPC) to align o
n
business and shared prosperity outcomes.
* Ongoing engagement with newly formed Upstream
Petroleum Chamber and Government to understand
changes to oil industry regulations.
---------------------------------------------------------- ----------------------------------------------------------
Link to KPI/scorecard - Pursuing
Climate change risk our vision and sustainability
--------------------------------------------------------- -----------------------------------------------------------
Risk of failure to manage impact
of climate change arising from evolving
policy, regulation and carbon taxes Risk owner: Dorothy Thompson
--------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
--------------------------------------------------------- -----------------------------------------------------------
* Failure to manage the impact of climate change * Cross-functional team established to address
arising from evolving policies and increased recommendations of TCFD and identify opportunities to
volatility and downside risk in oil prices could reduce carbon emissions across our operations and/or
affect the commerciality of our portfolio, lead to investment in nature-based carbon sinks to offset
loss of licence to operate and result in limited emissions impact.
access to/increased cost of capital.
* Enhanced climate disclosure in our Annual Report.
* Factors that will help to address climate change
risks may include changes to strategy to align with
the energy transition and changes to policies to * Alignment with and support for host government's
accommodate global shift in demand for renewable Nationally Determined Contributions.
sources of energy.
* Regular stress testing on portfolio to ensure
* Risk mitigation could include a more aggressive and resilience to IEA's Sustainable Development Scenario
dynamic approach to hedging oil price risk. (see Chief Financial Officer's statement page 17).
* Target top-quartile ESG performance vs peer group.
--------------------------------------------------------- -----------------------------------------------------------
Link to KPI/scorecard - Business
EHS or security risk delivery
----------------------------------------------------------- -----------------------------------------------------------
Risk of major process safety, EHS
incident or production failure on
KNK (Jubilee and TEN FPSOs) Risk owner: Mark MacFarlane
----------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
----------------------------------------------------------- -----------------------------------------------------------
* Due to the nature of our operations, there is always * Independently verified safety cases to demonstrate
the risk of a major incident resulting in fatalities, risks reduced to As Low As Reasonably Practicable and
and/or extensive damage to facilities, the to ensure Tullow maintains an excellent EHS track
environment or communities. record.
* Factors that contribute to such risks arise from poor * Asset and well integrity maintenance with regular
maintenance of safety-critical equipment on board our assurance over FPSO systems and asset integrity.
Jubilee/TEN FPSOs, ineffective EHS procedures,
competence of personnel and/or lack of training.
* Comprehensive all-risk insurance in place.
* Jubilee safety case re-issued.
* TEN FPSO shut down for maintenance and inspections.
* Jubilee asset integrity programme Phase 1 completed.
* Comprehensive assurance over computerised maintenance
management system project initiated.
* Re-aligned responsibilities and accountabilities over
FPSO operatorship with MODEC.
----------------------------------------------------------- -----------------------------------------------------------
Link to KPI/scorecard - Business
Financial risk delivery
----------------------------------------------------------- -----------------------------------------------------------
Risk of insufficient liquidity and
funding capacity Risk owner: Les Wood
------------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
------------------------------------------------------------- -----------------------------------------------------------
* Tullow remains exposed to erosion of its balance * Operations reset to be viable in a low oil price
sheet and revenues due to oil price volatility, environment.
unexpected costs arising from operational incidents,
failure to complete portfolio options or inability to
refinance (refer to Going Concern disclosure on page * Board approved two-year oil hedge programme with
20 and Viability Statement disclosure on pages downside protection and access to upside.
36-37).
* Range of high-quality assets that could be sold as
part of portfolio management to unlock capital and
pay down debt.
* Comprehensive insurance programme in place.
* Leverage targets and minimum headroom policy approved
by the Board.
* 2019 year-end undrawn facility headroom and free cash
of $1.2 billion; net debt of $2.8 billion; and net
debt/EBITDAX of 2.0 times.
* c.60 per cent of 2020 oil entitlement hedged at an
average floor price of $57/bbl (refer to viability
statement disclosure).
* Consideration of Going Concern and Viability
Statement provided on pages 20, 36-37 respectively.
------------------------------------------------------------- -----------------------------------------------------------
Link to KPI/scorecard - Business
Organisation risk delivery and progressive organisation
---------------------------------------------------------- -----------------------------------------------------------
Risk that the organisational model,
people strategy and culture do not
support strategy Risk owner: Ian Cloke
---------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
---------------------------------------------------------- -----------------------------------------------------------
* Tullow's success depends on the quality of talent it * Regular review of organisational model to support
can attract and retain, a strong ethically minded an delivery of strategic objectives. A review of the
d business is currently ongoing.
performance-focused culture and a clear
fit-for-purpose organisational model, which enables
the delivery of Tullow's strategy. * Smart working rolled out and embedded.
* Tullow may be unable to maintain or improve * Enhanced talent identification process through people
operational performance and pursue growth if the forum process.
Company is unable to maintain, evolve and sustain it
s
organisational capabilities, particularly at a time * Diversity targets introduced and being monitored.
of significant organisational change.
* Total compensation benchmarking review considering
gender and equal pay.
---------------------------------------------------------- -----------------------------------------------------------
Link to KPI/scorecard - Business
Conduct risk delivery
---------------------------------------------------------- -----------------------------------------------------------
Risk of major breach of business
conduct standards Risk owner: Les Wood
---------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
---------------------------------------------------------- -----------------------------------------------------------
* Tullow operates in high-risk geographies defined by * Annual employee eLearning and code certification
the Transparency International Corruption Index map process.
and is required to comply with applicable regulation
and legislation across a range of jurisdictions.
Tullow maintains high ethical standards across its * Due diligence standard and processes in place.
business, without which the Company could be exposed
to increased risk of non-compliance with bribery and
corruption legislation along with other applicable * Misconduct and loss reporting standard and associated
business conduct legislation and regulation and procedures reviewed and updated.
associated prosecutions and fines.
* Developed a positive approach to GDPR investigations
in alignment with the DPO.
* Recorded and investigated 87 concerns raised, of
which 76 cases are closed. Appropriate actions have
been taken including employee dismissal (for serious
breaches).
---------------------------------------------------------- -----------------------------------------------------------
Link to KPI/scorecard - Business
Cyber risk delivery
----------------------------------------------------------- -----------------------------------------------------------
Risk of major cyber or information
security incident Risk owner: Ian Cloke
----------------------------------------------------------- -----------------------------------------------------------
Risk details Risk mitigation and 2019 outcomes
----------------------------------------------------------- -----------------------------------------------------------
* External cyber-attacks resulting in network * Advanced security operations centre in place
compromise, network or industrial control system providing 24/7 network and device monitoring.
disruption and/or internal theft/loss of confidential
information is an ongoing risk and continuously
evolving. * Security awareness programme in place.
* Joint Tullow/MODEC industrial control system security
programme in place and progressing.
* Corporate security programme in place and
progressing.
* Annual mandatory security and GDPR awareness
training.
* Staff susceptibility to phishing regularly tested.
----------------------------------------------------------- -----------------------------------------------------------
Appendix C: Related party transactions
The following related party transactions are extracted from the
Annual Report and Accounts (page 132).
The Directors of Tullow Oil plc are considered to be the only
key management personnel as defined by IAS 24 Related Party
Disclosures.
2019 2018
$m $m
--------------------------------- ----- -----
Short-term employee benefits 3.1 5.7
Post-employment benefits 0.5 0.5
Amounts awarded under long-term
incentive schemes - 3.0
Share-based payments 3.2 2.2
--------------------------------- ----- -----
6.8 11.4
--------------------------------- ----- -----
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 Remuneration Report on pages 58 to 79.
[END]
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