REG - Tullow Oil PLC - Annual Report & Notice of AGM <Origin Href="QuoteRef">TLW.L</Origin> - Part 1

Tullow OilAnnouncement

15/03/2016 15:00

RNS Number : 1834S
Tullow Oil PLC
15 March 2016
Tuesday 15 March, 2016
Tullow Oil PLC
Annual Report and Notice of AGM
Tullow Oil plc ("Tullow" or the "Company")
Following the release on 10 February 2016 of the Company's preliminary full year results announcement for the year ended 31 December 2015 (the"PreliminaryAnnouncement"), the Company announces it has published its Annual Report and Accounts for this period (the "AnnualReportandAccounts"). 
The Company's 2016 AGM will be held at the Company's registered address at 9Chiswick Park, 566 Chiswick High Road, London, W4 5XT on Thursday 28 April 2016 at 12 noon. 
Copies of the Annual Report and Accounts and the Notice of the Annual General Meeting 2016 are available to view on the Company's website: http://www.tullowoil.com.
In accordance with Disclosure 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 the 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 2016 Notice of Annual General Meeting and the form of proxy in relation to the 2016 Annual General Meeting has 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. Those documents are also being submitted to the Irish Stock Exchange and the Ghana Stock Exchange.
In addition, all of the above documents will shortly be available for inspection at the Irish Stock Exchange (28 Anglesea Street, Dublin 2, Ireland) and will be available to shareholders located in Ghana by contacting the Company's registrar: Central Securities Depository (Ghana) Limited, 4th Floor, Cedi House, PMB CT 465 Cantonments, Accra, Ghana (Telephone: +233 (0)302 689 313 or +233 (0)302 689 314). 
For further information, please contact:
Tullow Oil plc (London) (+44 (0) 20 3249 9000)
 Chris Perry (Investor Relations)
 James Arnold (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 114). 
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 International Financial Reporting Standards as adopted by the EU, 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, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
 
By order of the Board
Aidan Heavey Ian Springett
Chief Executive Officer  Chief Financial Officer
9 February 2016 9 February 2016


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 55 to 63).
Principal Risks
Tullow's principal risks are listed in the following tables. Internally, the Group monitors and mitigates a more substantive list of risks, but those listed are the risks currently considered to be the most important because of their likelihood, the magnitude of their potential impact, frequency on the Executive's agenda, or a combination of these reasons.
Risk and Executive Responsibility
Link to business model
Potential Impact
Mitigation and assurance
2015 outcomes and ongoing actions
STRATEGIC
(1) 
Strategynotfullyachievableinsustained lowoilprices
AidanHeavey,
ChiefExecutiveOfficer
Sustainable long-term valuegrowth
 Tullowmaybeunabletodeliver value growth during a period of sustained low oil price
 Inability to deleverage thebusiness
 Robust planning of strategy and business plan which is reviewed and approved by the Board
 Business plan includes options/alternatives for lower oil prices that underpin the agreed strategy
 Strict capital allocation process in line with agreed business plan
 Rigorous monthly performance management and reporting to track delivery
 Regular investor meetings with Executive to gain feedback and challenge
 Improved Group capital allocation process and reporting
 Continued review of cost structure post MSP
 Test and retain options for increased EBITDA delivery
 Focus on deleveraging options
(2) 
Inabilitytoprogressmajorportfolio managementoptions
Ian Springett,
ChiefFinancialOfficer
Finance& Portfolio
Management
 Inabilitytoexecutestrategicfarm downsordivestnon-coreassets
 Potentialoverconcentration of risk in some areas
 Increased exposure to capex and decommissioning costs
 Write down on acquired assets, over-investment in mature assets for low returns, using capital that could be better invested elsewhere
 Reputationalharm
 Maintain a highly competent transaction capability
 Conduct regular portfolio assessments with the Board as part of the annual strategy review
 Adhere to relevant commercial and investment appraisal standards, and review of all major acquisition or divestment proposals
 Follow approval process with the Executive Directors and the Board for any major decisions and new country entry to ensure a suitable amount of screening, challenge and justification
 Conduct post-transactions reviews, whether completed or aborted
 Initiated bi-annual portfolio reviews with Business Delivery Teams
 Portfolio review is part of the Board's agendas
 Improve quality of portfolio analysis
 Execute current strategic portfolio plan
 Progress and operate current operations efficiently in order to gain maximum value
(3) 
ImpactonTENexpectedvalue duetoborderdisputebetween GhanaandCted'Ivoire
PaulMcDade,
ChiefOperatingOfficer
Development&Production
 LossofsomeofTENreserves/ facilitiesandcontractualrightsif ITLOSdecisionmovesmaritime borderandpartofthefieldisin Cted'Ivoirewaters
 RegularlymonitortheITLOScase,analysingclaimswithexpert counselassistance
 WorkcloselywiththeGovernmentofGhanatofullyunderstand thepotentialimpactsofmovementinborderandencouraging continueddialoguebetweenbothcountries
 Providing technical support and materials as requested
 Identifying other uses for rigs to avoid periods of inactivity
 Caseprogressedinlinewith schedule defined by ITLOS
 Scenario analysis
 Alternative projects for planned rig usage
(4) 
ImpactonTENexpectedvalue duetodelayeddelivery
PaulMcDade,
ChiefOperatingOfficer
Development&Production
 Delayinproductionstartupand revenuebuildupwhichimpacts financialperformanceandreputation
 Effective project management driven by execution plan and competent professional project team
 Assurance plans and stage gated project delivery system in place, including delivery of independent operations readiness and assurance audits
 Regular project meetings with Tullow leadership and major contractors
 Project over 85% complete in February 2016, on track and on budget
 Continued tracking of project plan progress with necessary interventions
 Series of workshops with TEN team and major contractors
 Continually identifying and mitigating new risks if they occur
 Bi-monthly project steering group meetings
 Business transition plan
(5) 
Failuretoadequatelymanage stakeholderrelationships
AidanHeavey,
ChiefExecutiveOfficer
ResponsibleOperations
SharedProsperity
 Restrictionstooperations, leadingtosignificantvariances in financial forecasts
 Contractual or regulatory change could impact the viability of projects
 Portfolio of assets affected by licence withdrawals or expropriation
 Reputational damage and loss of social licence to operate
 Fines, penalties or criminal prosecution
 Non-Technical Risk Standard sets minimum requirements for stakeholder management
 A quarterly political risk driver analysis is completed in partnership with the Business Units
 Country Strategy Papers, alongside stakeholder engagement plans, provide context and a framework
 Skilled, experienced and competent staff are embedded in Business Units and the Corporate Centre provides strategic advice and assurance
 Safety, Sustainability and External Affairs (SSEA) scorecard monitors certain leading and lagging indicators of effectiveness such as work stoppage man hours/total man hours, % closure of grievances
 FullyembeddedNon-TechnicalRisk
Standard
 Develop'landscape level solution' plans that map and articulate integrated solutions for complex risks
 Develop an approach and plan to obtain agreements with communities
 Develop a system to manage Group Regulatory and non-Supply Chain (SC) agreement compliance aligned to the Non-SC Agreement Management Standard
FINANCIAL
(6) 
Insufficientliquidityandfundingcapability
Ian Springett,
ChiefFinancialOfficer
Finance& Portfolio
Management
 Excessive leverage could lead to the Group being unable to meet its financial obligations
 Constrains ability to raise further debt
 Prudent approach to diversified debt and equity, with a balance maintained through business planning and performance management processes
 Finance standard in place to ensure debt funding is optimised for all assets and projects
 The Board reviews and approves the financial strategy, the funding position and policy targets
 Short-term and long-term cash forecasts are reported to Senior Management and to the Board on a regular basis
 Regular monitoring of maturities of facilities, and relationships with lending banks and debt capital investors continually developed
 Significant hedging policy adopted to protect against oil price volatility
 $450 million additional bank commitments secured in 2015
 Strength of assets retained debt capacity despite fall in oil prices
 2015 year end facility headroom and free cash of $1.9 billion; net debt of $4 billion
 Mark-to-market value of hedging instruments $623 million at end 2015
 2016 financing initiatives in progress; discussions under way with commercial banks to consider possible refinancing/ amendments to the RBL and RCF facilities
 Capital allocation process implemented to meet funding targets
(7) 
Failuretomanageoilpricerisk
Ian Springett,
ChiefFinancialOfficer
Finance& Portfolio
Management
Commodityprice volatilitycouldreduce cashflowandassetvaluebyreduced:
 Revenues
 EBITDA
 Debt capacity
 Funding to support investment programme
 Board approved hedge programme to protect against low oil prices
 Programme is monitored monthly and communicated to the Board
 Hedging programme must be executed in accordance with the policy, with approvals sought ahead of execution
 Mark-to-market value of hedges at the end of 2015 was $623 million
 Approximately 52 per cent (64 per cent post-tax) of 2016 entitlement oil production hedged at an average floor price of $75/bbl
 Value of hedges support EBITDA and contribute to debt capacity under the RBL
OPERATIONAL
(8) 
LossofproductionrevenuefromJubilee
PaulMcDade,
ChiefOperatingOfficer
Development&Production
 LossofsomeorallofJubilee productionrevenueforanextended periodoftimeduetothefailureof criticalequipment
 Ongoing Production Loss Reporting and Root Cause Analysis to identify actions and prevent issues reoccurring
 Integrity, operations and competency systems in place, supported by critical spares and strategy and competency certification for all core crew
 External and internal assurance programme
 Appropriate standards and plans in place
 Weekly review of maintenance, fortnightly Asset Integrity Improvement Steering Committee, monthly Asset Integrity Management meetings and analysis by both Business Unit and Group Operations
 2015 gross production averaged 102,600 bopd
 Ongoing analysis of FSPO systems to strive for top quartile reliability
 Jubilee Asset Integrity Audit completed in 2015
 Implementation of Asset Integrity Improvement Plan
 Improvements to Competency Assessments
 Purchase of critical spare equipment as per agreed spares strategy
(9) 
Majoroperationalincident
PaulMcDade,
ChiefOperatingOfficer
Development&Production
Major failureinTullowoperatedasset resultsin:
 multiplefatalitiesorseriousinjuries
 environmental damage or pollution
 asset damage or remediation
 mitigation costs and compensation
 reputational damage
During exploration and appraisal:
 Early well design and planning screening for new exploration opportunities
 Well risk profiles reviewed by Senior Management
 Well design, process and equipment in accordance with Well Design and Operations Standard, Well Control Standard and associated procedures
During development and
production:
 Minimum asset integrity, maintenance and planning requirements mandated through Production Operations Standard and associated procedures
 Use of computer-based maintenance systems and leading corrosion management application system
 Independently verified Safety Case and Cases to Operate procedure
Overall:
 Vigorous assurance processes both internally and externally
 Operations risk insurance coverage
 Jubilee Asset Integrity Project Improvement Steering Committee meets fortnightly
 In case of incident, contingency/containment plans e.g. emergency response procedures, with contracts in place for third-party support
 Jubilee Asset Integrity Audit completed in 2015
 Group-wide Well Delivery Process Audit completed
 Ongoing compilation of Asset Integrity Action Plans
 Competency reviews and regular monitoring of key data and procedures to identify gaps or losses
 Identify and action improvements to Competency Assessments
 Ongoing audit of implementation and effectiveness of mitigation controls and actions
(10) 
Inabilitytoreplenishexplorationportfolio
AngusMcCoss,
ExplorationDirector
Exploration&Appraisal
Failuretoreplenishexplorationacreage orfundnew venturesresultsin:
 poorornoqueueofdrill-ready prospects
 failure to deliver key element of growth strategy
 New opportunities are considered against existing portfolio to maintain diversity of prospects
 Funding is limited and exploration portfolio reviewed annually
 BDTs, in particular New Ventures, tasked with actively seeking and pursuing opportunities
 Exploration and Appraisal Values Controls Standard in place
 Exploration and Development Geosciences Executive team work with BDTs and Commercial team on portfolio planning
 Corporate Centre assurance programme and central store of all exploration data
 Twice-yearly review of exploration prospect inventory and tracking of net prospective risked resources
 New licence granted in Guyana
 Farm-down of licences in Suriname, Norway, Mauritania
 Review of New Ventures strategy
 Geoscientists focused on seismic interpretation to decipher best prospects
 Ongoing farm-downs to reduce Tullow equity earlier in licence cycle to gain carries and reduce costs
(11) 
Majorcyberorinformationsecurity incident
AngusMcCoss,
ExplorationDirector
Governance&Risk
Management
A compromise could leadto:
 disruptiontoorhaltof critical business systems
 loss or theft of confidential information, competitive advantage and intellectual property
 financial and/or reputationalharm
 Advanced Security Operations Centre (ASOC) provides global monitoring, analysis, alerting and incident response
 Bespoke advanced security equipment is used at key operations sites which are continually updated with relevant intelligence
 Active member of Cyber Information Sharing Partnership (CISP) and maintain key government relationships which provide alerts or response to hidden threats
 Third-party specialists analyse potential areas of weakness and provide network assurance activities
 Group-wide awareness training, aligned with Information Security Standard, conducted across Tullow's business and operations
 Ongoing Group-wide awareness training, with additional bespoke training for higher risk areas
 Ongoing improvement of network infrastructure resilience
 Specialist external assurance of TEN and Jubilee industrial control systems
(12) 
Failuretoretainordevelopkey staff
AidanHeavey,
ChiefExecutiveOfficer
Organisation&Culture
 Keyskillsandexperiencearenot availableinternally,impactingdelivery ofthebusinessplan
 Staffturnoverincreasesresulting in recruitment costs and possible buy-inofshort-termcontractors
 Disengagedworkforcenotaligned withcultureofefficiency,performance managementandcostconsciousness
 Localisationandorganisational plansmaynotbedelivered, affectingrelationshipswith nationalgovernments
 CompetitorsrecruitTullowstaff
 Bi-annual performance and development cycle, with functions and BDTs responsible for their employees' development and career progression
 Succession planning, localisation and diversity objectives are set and being actively progressed and key targets monitored
 Nominations Committee focus on diversity plan
 Organisation structure designed for HR Business Partner to report key staff data including resignations through the line to BDT and functional discipline and to the HR function
 Monthly reporting to Executives of HR analytics
 Organisation Strategy & Effectiveness (OSE) VP attends weekly Operations Committee meetings
 Key people data reported to monthly and quarterly performance management meetings
 A staff engagement plan is agreed with HR, Communications and Executives, with key deliverables set each year
 Annual Employee Engagement Survey
 Annual review of reward package
 Revised organisation design with clear accountabilities
 Embedded performance management framework
 Increased focus on staff engagement to embed culture
 Implementation of employee engagement plan
 Re-structured HR Delivery & Reward team to ensure higher level of capability and experience
 Review of total reward for all employees planned in 2016 and one-off Exceptional Share Award made in 2015
 Diversity plan defined with actions in place for 2016
COMPLIANCE
(13) 
Majorbreachofbusinessorethical conduct standards
AidanHeavey,
ChiefExecutiveOfficer
Ian Springett,
ChiefFinancialOfficer
Governance&Risk
Management
 Unethicalbehaviourbreaches anti-corruptionlaws
 Investigationsresultinreputational damage
 Costimpactthroughinvestigation costsandfines
 SeniorOfficers liable underUK BriberyAct
 Implementation of the Tullow Code of Ethical Conduct, with annual certification process carried out with all staff
 Gifts and Hospitality (G&H) Standard adhered to and maintained, with online G&H register available to all staff
 Other relevant Ethics & Compliance standards, policies and procedures in place, adhered to and maintained
 Leadership leading by example and advocating good behaviour
 Dedicated Ethics & Compliance Advisors in Key Business Units
 Appropriate due diligence carried out in relation to service providers, contractors and other counter-parties
 Appropriate anti-bribery and corruption provisions in agreements with service providers, contractors and other counter-parties
 Updated Code of Ethical Conduct
 Established Ethics & Compliance Board sub-committee
 Ongoing development of a monitoring and assurance plan to be used by Business Units
 Planned development of an e-learning solution to continue to promote the Code of Ethical Conduct
 Fraud Risk Awareness provided to 591 staff
 Achieved 100 per cent completion of the self-certification of compliance with the Code of Ethical Conduct


Appendix C: Related party transactions
The following related party transactions are extracted from the Annual Report and Accounts (page 153).
The Directors of Tullow Oil plc are considered to be the only key management personnel as defined by IAS 24 - Related Party Disclosures.

2015 ($m)
2014 ($m)
Short-term employee benefits
10.0
9.5
Post-employment benefits
1.1
1.2
Amounts awarded under long-term incentive schemes
4.2
3.3
Share-based payments
5.7
10.4

21.0
24.4
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 Directors' Remuneration Report on pages 90 to 106.
[END] 

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