2011 Annual Report PDF - Tullow Oil plc

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Commercial reserves estimates (note 12);
Proven and probable reserves are estimated using standard
recognised evaluation techniques. The estimate is reviewed at
least twice annually and is regularly reviewed by independent
consultants. Future development costs are estimated taking
into account the level of development required to produce the
reserves by reference to operators, where applicable, and
internal engineers.
Presumption of going concern (note 19);
The Group closely monitors and manages its liquidity risk.
Cash forecasts are regularly produced and sensitivities run
for different scenarios including, but not limited to, changes in
commodity prices, different production rates from the Group’s
portfolio of producing fields and delays in development
projects. In addition to the Group’s operating cash flows,
portfolio management opportunities are reviewed to
potentially enhance the financial capacity and flexibility of the
Group. The Group’s forecasts, taking into account reasonably
possible changes as described above, show that the Group will
be able to operate within its current debt facilities and have
significant financial headroom for the 12 months from the date
of approval of the 2011 Annual Report and Accounts.
Decommissioning costs (note 22);
The costs of decommissioning are reviewed twice annually
and are estimated by reference to operators, where
applicable, and internal engineers.
A review of all decommissioning cost estimates was
undertaken by an independent specialist in 2010 which has
been assessed and updated internally for the purposes of the
2011 financial statements.
Provision for environmental clean-up and remediation costs is
based on current legal and constructive requirements,
technology and price levels.
Recoverability of deferred tax assets (note 22); and
Deferred tax assets are recognised for used tax losses to
the extent that it is probable that future taxable profits will be
available against which the losses can be utilised. Judgement
is required to determine the value of the deferred tax asset,
based upon the timing and level of future taxable profits.
Other tax provisions.
The Group operates in a number of jurisdictions in which the
tax legislation is open to interpretation. Tax provisions, which
are made based on the Group’s best estimate of the amount
expected to be paid, may change as agreement is reached
with the relevant taxation authority.
FINANCIAL STATEMENTS
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