2011 Annual Report PDF - Tullow Oil plc

Notes to the Group financial statements continued
Year ended 31 December 2011
Note 12. Property, plant and equipment continued
The 2011 additions did not include capitalised interest (2010: $47.4 million, 2009: $22.8 million).
The carrying amount of the Group’s oil and gas assets includes an amount of $nil million (2010: $346.7 million, 2009:
$13.5 million) in respect of assets held under finance leases.
Other fixed assets include leasehold improvements, motor vehicles and office equipment.
The 2011 impairment loss relates to the M’Boundi field in Congo (2010: Chinguetti field in Mauritania, 2009: Chinguetti field in
Mauritania). The recoverable amount was determined by estimating its value in use. In calculating this impairment, management
used a production profile based on proven and probable reserves estimates and a range of assumptions, including an oil price
assumption equal to the forward curve in 2012 and 2013 and $80 per barrel (2010: $80 per barrel) thereafter and a post-tax discount
rate assumption of 10% (the M’Boundi field operates in a Production Sharing Contract regime under which “tax” is deducted at
source and included within the Governments share of profit oil) (2010: Chinguetti, 15% pre-tax). In 2011 an impairment reversal
of $17.4 million has been recorded in respect of the Chinguetti field in Mauritania as a result of increased proven and probable
reserves estimates arising from improved field performance.
Depletion and amortisation for oil and gas properties is calculated on a unit-of-production basis, using the ratio of oil and gas
production in the period to the estimated quantities of commercial reserves at the end of the period plus production in the period,
generally on a field-by-field basis. Commercial reserves estimates are based on a number of underlying assumptions including
oil and gas prices, future costs, oil and gas in place and reservoir performance, which are inherently uncertain. Commercial
reserves estimates are based on a Group reserves report produced by an independent engineer. However, the amount of
reserves that will ultimately be recovered from any field cannot be known with certainty until the end of the field’s life.
On 25 July 2011, Tullow completed the acquisition of the Ghanaian interests of EO Group Limited (EO) for a combined cash and
share consideration of $305 million and $9.9 million of working capital adjustments to acquire an additional 3.5% share in the
West Cape Three Points licence and 1.75% in the Jubilee field. The consideration was allocated between oil and gas assets
($282.9 million) and intangible exploration and evaluation assets ($32.0 million).
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Tullow Oil plc 2011 Annual Report and Accounts