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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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