Tullow Oil plc Trading Statement and Operational Update

Tullow Oil plc Trading Statement and Operational Update

    Business Editors/Energy Writers

    LONDON--(BUSINESS WIRE)--Feb. 10, 2005--Tullow Oil plc ("Tullow"), the independent oil and gas exploration, development and production company, issues this combined Trading Statement in respect of its financial year to December 31, 2004 and Operational Update. Tullow is a leading independent oil and gas, exploration and production group, quoted on the London and Irish Stock Exchanges (symbol: TLW) and is a member of the FTSE 250. The Group has interests in over 90 production and exploration licences in 16 countries and is currently focusing on three core areas: the UK North Sea, West Africa and South Asia.
    The Trading Statement is in advance of the Group's Full Year Results, which are scheduled for release on April 12, 2005. The information contained herein has not been audited and is subject to further review. The Operational Update summarizes key activities in Production, Development, Exploration and Appraisal assets for the period from October 2004 to January 2005.

    HIGHLIGHTS

    2004 was a very exciting year for Tullow. Over one billion dollars was spent on acquisitions and investments during the year and the Group also benefited from the ongoing strength of global resource pricing.

    Acquisitions

--	Energy Africa, acquired at a cost of US$570 million, has been successfully integrated and consolidated with effect from June 1, 2004. There will be a one-off charge in 2004 of approximately GBP 2 million for post acquisition reorganization costs.
--	The acquisition of the Schooner and Ketch producing assets and surrounding acreage for GBP 200 million was announced on December 20, 2004. A development team is now in place and the transaction is on schedule to complete at the end of the first quarter 2005

    Production and Reserves

    -- Weighted average daily production for 2004 was 40,600 boepd,
    62% ahead of 2003 levels.

    -- In the 2nd half of 2004, Group working interest production
    increased to 51,800 boepd and continues to increase, averaging
    approximately 56,000 boepd in January 2005.

    -- ERC Ltd will perform an independent reserves audit on Tullow's
    entire portfolio as at December 31, 2004. The results of this
    will be disclosed with the 2004 Full Year Results.

    Development

    -- In the UK, development drilling at Horne and Wren has been
    successfully completed with both wells suspended for future
    production. The results are in line with pre-drill
    expectations and the project is on budget and on schedule for
    first gas in the second quarter, 2005.

    -- Tullow has issued an invitation to tender for the FEED study
    for the development of the Kudu field in Namibia to a selected
    list of pre-qualified contractors and expects to award the
    contract at the end of February 2005.

    -- There has been significant development activity in the UK and
    West Africa over the last four months with over 20 successful
    development and infill wells drilled.

    Exploration and Appraisal

    -- In Bangladesh the Bangora-1 exploration well tested gas at an
    aggregate rate of 120 mmscfd gross. Tullow, as operator, has
    proposed an appraisal program for 2005, which will include the
    tie-in of the discovery well into existing infrastructure on a
    long-term production test.

    -- A successful exploration well was drilled into the Akom North
    oil prospect in Equatorial Guinea. The well was suspended for
    potential future production as a satellite to the Okume
    complex (formerly known as Northern Block G).

    -- Based on current estimates the exploration write-off arising,
    along with pre-licence and new venture costs, is anticipated
    to be in the order of GBP 18 million for 2004.

    Operational Outlook

    -- Group production in 2005 will be enhanced by the addition of
    further production in the UK from the Horne and Wren project,
    the Munro development and the Schooner and Ketch acquisition.
    Some temporary reductions are expected as a result of the
    current infill drilling program on the Espoir Field in Cote
    d'Ivoire.

    -- During 2005 Tullow will actively participate in development
    activity in the UK, Congo, Equatorial Guinea, Gabon, Namibia,
    Cote d'Ivoire and Pakistan. Planned expenditure is budgeted at
    approximately GBP 75 million, with the primary focus on the UK
    and West Africa.

    -- In addition, Tullow has approved a total exploration budget of
    approximately GBP 40 million for 2005 with the objective of
    drilling at least 15 wells. Of those wells, a number remain
    subject to further technical review and partner approval.

    Conference Call

    There will be a conference call for North American investors and analysts at 11:00 AM (EST) today, hosted by Aidan Heavey, Chief Executive and Tom Hickey, Chief Financial Officer of Tullow Oil plc:
    Please call +1 210 839 8603 and request to be connected to the Tullow Oil teleconference.
    A replay facility will be available from one hour after the conference call until 6:00 PM (EST) on Wednesday, February 16. Please call +1 203 369 0178.

    Commenting today, Aidan Heavey, Chief Executive of Tullow said:

    "In the past year Tullow has experienced a step change in the scale of its activities which has seen average production for the Group rise to a current level of approximately 56,000 boepd.
    "The Schooner and Ketch acquisition, which is on schedule to complete in the first quarter this year, will consolidate this position further. This acquisition, the Energy Africa transaction, good progress in other areas of our operations and favorable resource pricing combine to underpin an exciting year for the Group.
    "Tullow enters 2005 a more focused organization, with a balanced portfolio of production and exploration interests and a solid cash flow. We look forward with confidence and anticipate another year of growth and success."

    TRADING STATEMENT

    This trading statement is provided for the year ended December 31, 2004 in advance of the Group's 2004 Full Year Results, which are scheduled for release on April 12, 2005. The statement is part of the ongoing Investor Relations program and is produced in order to provide greater disclosure to investors and potential investors. The information contained herein has not been audited and is subject to further review.

    Energy Africa Acquisition

    The results of Energy Africa have been consolidated with effect from June 1, 2004. Pro-forma average production for 2004, assuming a full 12 month contribution from Energy Africa, would have been approximately 51,300 boepd. Tullow will record a one-off charge of approximately GBP 2 million in 2004 in connection with the termination of certain contracts and arrangements as a result of post-acquisition reorganization.

    Production and Development Activities

    Group working interest production for the 2nd half of 2004, including a full contribution from the Energy Africa, averaged 51,800 boepd. The weighted average daily production for the year was 40,600 boepd, some 62% ahead of 2003 levels. Current working interest production amounts to approximately 55,700 boepd, reflecting successful and ongoing development activities. A further breakdown of these figures is provided in the Operational Update under each core area. Production figures remain subject to final reconciliation and do not equate to sales volumes. This is due to variations in lifting schedules and because a portion of the production is delivered to host governments under terms of Production Sharing Contracts.

    Overlift position

    At December 31, 2004, Tullow was in a net overlift position amounting to an estimated 69,000 barrels. This principally comprised overlifted volumes in respect of the Alba field in the UK and Nkossa in the Republic of Congo, offset by underlifted volumes in respect of the Tchatamba field in Gabon. Under UK GAAP, such overlift positions are valued at market value for the relevant crude and adjusted through cost of sales. Under normal circumstances an overlift position would result in a debit to cost of sales, however due to the different sales prices realized from the over and under lifted volumes (most notably Alba which trades at a significant discount to Brent) a net credit of approximately GBP 1.7 million will be made to cost of sales in respect of the overlifted position.

    Capital Expenditure and Net Debt

    During 2004 Tullow invested a total of GBP 71 million in development and exploration activities. Planned capital investment during 2005 is in the order of GBP 115 million, of which approximately 65% will be spent on development activities in the UK, Congo, Cote d'Ivoire and Equatorial Guinea, with the balance focused on exploration activities.
    Net Debt at year end was GBP 67.7 million inclusive of all cash balances, or some GBP 103.8 million excluding cash balances held in support of potential decommissioning obligations.

    Exploration Write-Off

    Tullow operates a "successful efforts" accounting policy in relation to its exploration and development activities. Under this policy, all costs relating to unsuccessful exploration activities are written off in full in the period during which drilling activities were initiated.
    During 2004, Tullow participated in successful exploration wells in the UK North Sea, Gabon, Congo, Equatorial Guinea and Bangladesh. However a number of other wells, in the UK, Egypt, Mauritania, Uganda, Cote d'Ivoire and Bangladesh were not successful. Based on current estimates, Tullow's exploration write-off arising from these unsuccessful activities, along with pre-licence and New Venture costs, is expected to be in the order of GBP 18 million
    This figure is subject to final reconciliation and does not include any assumption in relation to the West Boulton well, currently in progress in the Southern North Sea.

    Operational Outlook

    Group production in 2005 will be further enhanced by the addition of production from the Horne/Wren and Munro developments in the Southern North Sea and the anticipated completion of the Schooner/Ketch acquisition, currently scheduled for the end of the first quarter. Some temporary reductions to Cote d'Ivoire production are expected as a result of the current infill drilling program at the Espoir Field.
    Tullow expects to drill at least 15 exploration wells in 2005. Of these, a number remain subject to further technical reviews and partner approval. Wells currently approved for the first half of 2005 are summarized in the following table. In addition to these, further exploration in 2005 is likely to include wells in the UK, Gabon (Kiarsseny, Gryphon Marin and Akoum), Uganda and Pakistan (Nawabshah).

Summary of Planned First Half 2005 Exploration Activity

---------------------------------------------------------------------- Country License Prospect Interest Spud Date ---------------------------------------------------------------------- UK 43/25a West Boulton 30% In progress ---------------------------------------------------------------------- Romania EPI-3 Costisa-1 43% In progress ---------------------------------------------------------------------- Mauritania Block 1 Petrel-1 20% Q2 2005 ---------------------------------------------------------------------- UK 44/23b K3 22.5% Q2/Q3 2005 ----------------------------------------------------------------------

    OPERATIONAL UPDATE

    This Operational Update summarizes key activities in Production (P), Development (D), Exploration (E) and Appraisal (A) assets of Tullow Oil plc for the period beginning October 2004 and ending January 2005.

    UK CORE AREA

    In the North Sea, Tullow's principal interests are in the Caister-Murdoch System (CMS), the Thames/Hewett group of licenses and the Bacton onshore gas-processing terminal on the Norfolk coast, which the Group operates.

---------------------------------------------------------------------- Current working interest 2004 Average boepd January 05 Rate boepd production ---------------------------------------------------------------------- UK Southern North Sea (1) 17,264 16,465 ---------------------------------------------------------------------- UK Oil (2) 3,259 5,440 ---------------------------------------------------------------------- UK Total 20,523 21,905 ---------------------------------------------------------------------- (1) Includes all condensate and Gas sales (2) Based on a seven month contribution from June 2004

    Alba (P/D) (Tullow 8%)

    Alba gross production averaged 64,000 bopd in January 2005. Current production is approximately 70,000 bopd and further increases are expected with the addition of a new well in early April.

    Munro (D) (Tullow 15%)

    Sanction for the development of the Munro field was received from all partners in November 2004 and platform and pipeline construction has commenced. The project is on schedule for first gas in October 2005.

    West Boulton 43/25a-2 (E) (Tullow 30%)

    The West Boulton exploration well was spudded on December 3, 2004. Drilling problems encountered during the 16" hole section have necessitated a mechanical sidetrack. The well is now expected to reach the reservoir target in early March.

    Horne and Wren project (D) (Tullow 50%)

    Development drilling has been completed, with both wells, 53/3c-8 and 9, successfully drilled and suspended in the reservoir interval. The Noble Ronald Hoope rig spudded the 53/3c-8 (Wren) well on October 23 and completed operations on the 53/3c-9 (Horne) well on January 29. The project remains on schedule to deliver first gas in the second quarter, 2005.

    Thames (P) (Tullow 67%)

    The Thames third party field, Arthur, came onstream via the Thames Pipeline System at the beginning of January. Current production is approximately 90 mmscfd and is expected to increase to 110 mmscfd during the year. Based on these rates, Tullow anticipates net incremental tariff revenues of the order of GBP 6 million during 2005.

    WEST AFRICA CORE AREA

    In Africa, Tullow has production and development interests in Gabon, Cote d'Ivoire, Congo (Brazzaville), Equatorial Guinea and Namibia. Tullow also has exploration interests in Morocco, Mauritania, Senegal, Cameroon, Uganda and Egypt.

---------------------------------------------------------------------- Current working interest 2004 Average boepd January 05 Rate boepd production ---------------------------------------------------------------------- Congo Oil (2) 2,314 5,674 ---------------------------------------------------------------------- Cote d'Ivoire 4,268 3,600 ---------------------------------------------------------------------- Equatorial Guinea (2) 3,203 5,355 ---------------------------------------------------------------------- Gabon (2) 9,374 18,923 ---------------------------------------------------------------------- West Africa Total 19,159 33,552 ---------------------------------------------------------------------- (2) Based on a seven month contribution from June 2004

    Republic of Congo

    N'Kossa (P/D) (Tullow 4%)

    In December, the first of three extended-reach wells targeting the southern extension of the Nkossa field was completed and tied in and workover and sidetrack operations have continued on existing wells. The second extended reach well is currently drilling and is expected to be completed during the second quarter. Since October 2004, average gross production has increased from 35,000 boepd to 46,000 boepd in January.

    M'Boundi Field (P/D) (Tullow 11%)

    The development drilling program is continuing on the M'Boundi field with nine successful producing wells drilled since October, eight of which have been tied in. Average gross field production has increased from 26,000 bopd to an average in January of 35,000 bopd and is currently producing at 37,300 bopd. Three rigs are currently active on the field, with a minimum of 15 development wells planned for 2005. Should a fourth rig become available, a further 8 development wells are planned.

    Gabon

    Tchatamba South (P/D) (Tullow 25%)

    Two production wells have been successfully drilled and completed since October increasing production by some 8,000 bopd gross. Average production in January was approximately 39,000 bopd gross.

    Turnix (P/D) (Tullow 27.5%)

    The TUM-B3 development well has been successfully drilled and completed proving a western extension of the field. The well was spudded on November 28 and reached the reservoir target on December 20. The well was tied into the production network and brought on stream on January 29 2005. It currently produces in excess of 4,000 bopd gross, while total field production is in the order of 8,000 bopd.

    Niungo (P/D) (Tullow 40%)

    Four development wells (NIU-16 to 19) were drilled successfully on time and on budget over the last three months increasing gross production to a January average of approximately 12,000 bopd. The final well of the program spudded on January 16 and is due to complete this month. Up to four additional wells to develop the northern extension of the field have been approved and will immediately follow the current program.

    Equatorial Guinea

    Ceiba Field (P/D) (Tullow 14.25%)

    Two infill production wells have been drilled successfully. C-24 has been tied into production and C-25 is expected on stream in February. A further five to six wells are planned for 2005, two of which will be water injectors. Average gross field production in January was approximately 38,000 bopd.

    Okume Complex (D) (Tullow 14.25%)

    The Okume Complex comprises the Okume, Oveng, Ebano and Elon fields and was formerly known as Northern Block G. The development remains on budget and on schedule for first oil in Q4 2006. In November, a successful exploration well into the Akom North prospect was drilled and suspended for potential future production as a satellite to the Okume complex.

    Cote d'Ivoire

    Espoir Field (P/D) (Tullow 21.3%)

    Current Espoir Production is approximately 18,000 boepd gross. A rig arrived on site on January 16 to drill four new infill production wells with the intention of significantly increasing daily production during the second half of 2005. For the first half of 2005, Espoir production will be disrupted by the drilling program and average production will be reduced to approximately 14,000 boepd.

    CI-26 (E) (Tullow 24%)

    The Acajou-2X (Acajou North) exploration well commenced drilling on November 23 2004 and encountered residual oil in the top Albian sands. The well was then sidetracked to appraise the central fault block but encountered the Albian sands below the oil-water contact. The well was therefore plugged and abandoned at the end of December.
    Tullow is now working with its partners to assess the potential development options in respect of the main Acajou discovery, with the most likely scheme being a tie-back to the existing East Espoir facilities.

    Namibia

    Kudu (D) (Tullow 90%)

    Considerable progress has been made in recent months in relation to both the technical definition and financing of the first phase of the Kudu field development for a gas-to-power project. A pre-FEED concept selection study has been completed and two development options have been selected - a direct subsea tie-back to shore and a subsea tie-back to a floating production facility. An invitation to tender for the FEED study has been issued to a selected list of pre-qualified contractors and a contract is expected to be awarded at the end of February. A preliminary study in relation to the financing options for the project has recently been completed by N M Rothschild, which will form the basis for progressing critical commercial and financial agreements required to achieve financial close in the next 12 months, in accordance with the project timetable.

    Egypt

    Matruh Onshore/Offshore (E) (Tullow 20%)

    The Amethyst-1X exploration well intersected gas bearing sands in the Zahra interval. However, the well failed to flow on test and was plugged and abandoned in early December.

    Mauritania

    Block 2 (E) (Tullow 20%)

    The Dorade-1 exploration well was plugged and abandoned in October. The next phase of the Licence has now been entered and partners are currently considering future plans.

    Block 1 (E) (Tullow 20%)

    The exploration well into the potentially large Block 1 prospect, Petrel-1, is now planned for Q2 2005.

    Uganda

    Block 3, Turaco-3 Well (E) (Tullow 50%)

    The Turaco-3 well reached a total depth of 2,850m on November 5, 2004 having intersected two potentially hydrocarbon bearing zones totalling 324 m of gross pay (84m net pay). However, on testing, the upper zone of the well showed very high concentrations of CO2. As a consequence the well is unlikely to be commercially viable. Tullow, in conjunction with its partners, is currently finalizing plans for further exploration in Uganda during 2005. This is likely to include at least one further exploration well.

    SOUTH ASIA CORE AREA

    In South Asia, Tullow has production and exploration interests in Pakistan and exploration activities in India and Bangladesh.

---------------------------------------------------------------------- Current working interest 2004 Average boepd January 05 Rate boepd production ---------------------------------------------------------------------- Pakistan 884 567 ---------------------------------------------------------------------- South Asia Total 884 567 ----------------------------------------------------------------------

    Bangladesh

    Block 9, Bangora-1 (E/A) (Tullow 30%)

    In November, the Bangora-1 exploration well tested gas at an aggregate rate of 120 mmscfd gross from two zones. A further three shallower zones will be tested during appraisal drilling. Tullow, as operator, has proposed an appraisal program for 2005, comprising both 2D and 3D seismic, the tie-in of the Bangora discovery well to existing infrastructure for a long term production test and two appraisal wells.

    Pakistan

    Chachar (D) (Tullow 75%)

    Approval has been received from the Government of Pakistan for the development of the Chachar Field and Tullow plans to commence operations later this year.

    Sara and Suri (P) (Tullow 38.18%)

    Options for further drilling on the Sara and Suri gas fields are being considered

    Nawabshah (E) (Tullow 30%)

    A 2D and 3D seismic acquisition program is nearing completion on the Nawabshah exploration block.

Glossary

bopd - barrels of oil per day boepd - barrels of oil equivalent per day (a measure of oil plus gas production) FEED - Front End Engineering Design mmscfd - million standard cubic feet per day

    Disclaimer

    This announcement contains certain operational and financial information in relation to 2004, which is subject to final review and has not been audited. Furthermore it contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil & gas exploration and production business. Whilst the Group believes the expectations reflected herein to be reasonable, the actual outcome may be materially different owing to factors either within or beyond the Group's control, and accordingly no reliance may be placed on the figures contained in such forward looking statements.

    For further information on the Group see www.tullowoil.com

--30--NR/ny*

CONTACT: Tullow Oil plc Tom Hickey, + 44-20-7333-6800 or Taylor Rafferty Brian J. Rafferty, 212-889-4350

KEYWORD: UNITED KINGDOM INTERNATIONAL EUROPE AFRICA/MIDDLE EAST INDUSTRY KEYWORD: OIL/GAS ENERGY MERGERS/ACQ CONFERENCE CALLS SOURCE: Tullow Oil plc

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