Tullow Oil plc Annual Report 2011 - The Group

More documents

Recommendations

Info

Risk management continuedResponding to changing riskWe operate in a dynamic environment where respondingeffectively to changing risks is key to our continued success.During 2011 we addressed emerging risks in the following ways: Our crisis management processes were upgraded to meetthe challenges of our growing portfolioof assets, including:– Dedicated crisis management facilitiesin the Group’s new London head office; and– Recruitment of a new Group Asset Protection Managerand a Group Information Security Manager. In 2012, the Group is rolling out a new security standard thatwill apply to all Tullow sites and activities. Our compliance processes were enhanced with theestablishment of an experienced Compliance team and theimplementation of a range of initiatives to support ourregulatory compliance programme and to ensure we haveeffective procedures to address the requirements of the UKBribery Act enacted during the year. This has included:– Implementation of a revised Code of Business Conductsupported by an ongoing programme of training andeducation endorsed by the Chief Executive Officer andthe Board; and– Enhanced procedures covering our gifts and hospitalitypolicy and declaration of conflict of interests. Tullow Safety Rules were implemented during the year toreinforce our existing safety standards for managing highrisk operational activities. These rules comprise a set ofrequirements designed to manage day-to-day risksassociated with our operations that have the potential toadversely affect employees, contractors, the environmentand surrounding communities. These rules were developedusing industry best practices, guidelines and standards toreinforce existing Tullow and host government regulatorycommitments. The Safety Rules are being embeddedthrough a range of activities including:– Training of staff throughout the organisation;– Working with our contractors to enable them toimplement the rules when engaged in operationson Tullow’s behalf; and– Dedicated Intranet site and Safety Rules bookletdistributed to employees to support the education process. Tullow’s Integrated Management System (IMS) wasupgraded during the year to reflect the continuous growthin the business and increased complexity of our portfolio.The IMS sets the minimum business standards to be usedthroughout Tullow Oil’s activities through a framework formanaging all business activity throughout the organisationand provides a high level of business assurance by:– A systematic approach to critical business activities;– High standards in business and EHS performance;– Legislative compliance throughout all operations;– Sound risk management, planning and decision making;– Efficient and cost effective planning and conductof operations;– Clear assignment of responsibilities; and– Continuous improvement in all areas of the business.The IMS is supported by an online tool and is subject toperiodic audit.2012 principal risks and uncertaintiesAs part of our 2012 to 2014 business plan we identified thefollowing key risks and uncertainties in relation to the Group’sfinancial and operational performance for the period: Completion of the Ugandan farm-down (achieved February2012), followed by delivery of a basin development plan andtimely approvals for this from the Ugandan authorities; E&A campaign associated risks (approximately20 high-impact wells are planned in 2012); Timely remediation of Jubilee production (2012/2013)and delivery of Group production targets; Government relations/stakeholder engagement withparticular reference to the 2012 Board objective tosignificantly improve political and economic riskinformation and country risk profiling; Achieve the appropriate balance between cash flow fromoperations, equity/debt market opportunities and portfoliomanagement activities; and Manage shareholder expectations, particularly withregard to the Group’s long-term strategy, productionprofile and funding.42Tullow Oil plc 2011 Annual Report and Accounts
LONG-TERMPERFORMANCE RISKSWe group our risks into strategic, financial, operational and external risks, which we believecould potentially adversely impact our employees, operations, performance and assets.More informationPageSpecial feature: Clear vision 13Key Performance Indicators 31Board of Directors 811BUSINESS REVIEWThroughout the year we have critically reviewed and evaluatedthe risks the Group faces. This list is not exhaustive and it islikely to change as some risks assume greater importancethan others during the course of the year.Our business risk systems combined with the Board’sownership of strategic risks ensure that risk managementis embedded in the business, aligned with our businessmodel and is directly linked to strategic delivery.Our assessment of the most significant risks and uncertaintieswhich could impact the Group’s long-term performance isoutlined in this section of the report. These risks are not setout in any order or priority and they do not comprise all therisks and uncertainties we face.STRATEGIC RISKStrategy fails to meet shareholder expectationsPerformanceindicatorTSR performanceExecutiveresponsibilityAidan HeaveyChief Executive OfficerImpactIneffective or poorly-executed strategy failsto create shareholder value and to meetshareholder expectations, leading to a loss ofinvestor confidence and a reduction in the shareprice. This in turn reduces the Group’s ability toaccess finance and increases vulnerability to ahostile takeover.Policies and systemsAnnual business plan, RBM responsibilitysupported by corporate functional teams, monthlyreporting, annual strategy review, IR programme.Mitigation processStrategy focused on delivering Ghana and Uganda developmentsand selective high-impact exploration programme. Effectivecommunication with all stakeholders, based on open andtransparent dialogue.Progress in 2011Ghana: Since production start-up in 2010 over 30 million barrelsof oil have been produced. Jubilee Phase 1 development wascompleted in October. Phase 1A development received Governmentapproval in January 2012. Good progress was also made inappraising the TEN discoveries.Uganda: Government approvals and the related farm-down transactionswere completed in February 2012. Development planning for the basinhas progressed through integrated teams with CNOOC and Total.Loss of key staff and succession planningPerformanceindicatorStaff turnoverExecutiveresponsibilityGraham MartinGeneral Counsel& Company SecretaryImpactThe loss of key staff and a lack of internalsuccession planning for key roles within theGroup causes short- and medium-termdisruption to the business.Policies and systemsLiving our values, HR function and policies,training and development.Mitigation processClearly defined people strategy based on cultureand engagement, talent development and rewardand recognition, together with the continuingsuccess of the Group.Progress in 2011Total workforce increased by 26% to support continued businessgrowth. An employee survey was completed and the results willbe used to develop targeted improvements in people managementas required. Tailored training programmes were also implementedwith a focus on developing coaching and mentoring skills, includingthe commencement of a bespoke leadership programme open toTullow managers.43www.tullowoil.com
Page 4 and 5: Production operators in the central
Page 6: 2011 highlightsRECORD RESULTSIndust
Page 11 and 12: In Ghana, we have experienced techn
Page 13 and 14: More informationPageStrong organisa
Page 15 and 16: CLEARVISIONSPECIAL FEATURETO BE THE
Page 17 and 18: 1Exploration& appraisal7Sharedprosp
Page 19 and 20: EXPLORATION& APPRAISALStrategic pri
Page 21 and 22: DELIVERING MATERIALPRODUCTIONGROWTH
Page 23 and 24: 21www.tullowoil.com
Page 25: RISKMANAGEMENTStrategic priority: E
Page 28 and 29: MAINTAINING OURENTREPRENEURIALCHARA
Page 30 and 31: SHAREDPROSPERITYStrategic priority:
Page 32 and 33: DELIVERINGSUBSTANTIAL RETURNSOur st
Page 34 and 35: Key Performance Indicators continue
Page 36 and 37: Financial reviewFUNDING FUTURE GROW
Page 38 and 39: Financial review continued2011 Grou
Page 40 and 41: Financial review continuedDividendT
Page 43: Regional business management unitsI
Page 47 and 48: 1Operational risk continuedKey deve
Page 49 and 50: 482011 operations overviewOverall,
Page 51 and 52: 2OPERATIONS REVIEWEurope,South Amer
Page 53 and 54: DEVELOPMENT & OPERATIONSA new scale
Page 55 and 56: Senior DrillingSupervisor withtrain
Page 57 and 58: Mauritania & SenegalProduction from
Page 59 and 60: periods for Kasamene, Wahrindi, Kig
Page 61 and 62: 2West African and South American ex
Page 63 and 64: 62Creating shared prosperityCreatin
Page 65 and 66: More informationPageSpecial feature
Page 67 and 68: Social performance standardsWe are
Page 69 and 70: 3The effect of Uncontrolled Release
Page 71 and 72: 3Future talent poolIn October 2011,
Page 73 and 74: 3LOCAL CONTENTCreating real opportu
Page 75 and 76: 3Key corporate responsibility polic
Page 77 and 78: 76Chairman’s introductionAt Board
Page 79 and 80: 4In order to provide the human and
Page 81 and 82: I am delighted to have taken on the
Page 83 and 84: Board of DirectorsEXPERIENCED LEADE
Page 85 and 86: 4CORPORATE GOVERNANCEAnn GrantNon-e
Page 87 and 88: Audit planning and update on releva
Page 89 and 90: Directors in their place. On 12 May
Page 91: CONTENTS89 Introduction89 Remunerat
Page 94 and 95:
Directors’ remuneration report co
Page 96 and 97:
Page 98 and 99:
Page 100 and 101:
Page 102 and 103:
Corporate governanceThe UK Corporat
Page 104 and 105:
Corporate governance continuedThe f
Page 106 and 107:
Corporate governance continuedAccou
Page 108 and 109:
Other statutory informationResults
Page 111 and 112:
All employees are helped and encour
Page 113 and 114:
As part of our Code of Business Con
Page 115 and 116:
Independent Auditor’s Reportto th
Page 117 and 118:
Group balance sheetAs at 31 Decembe
Page 119 and 120:
Group cash flow statementYear ended
Page 121 and 122:
The principal accounting policies a
Page 123 and 124:
5Finance costs of debt are allocate
Page 125 and 126:
5Commercial reserves estimates (not
Page 127 and 128:
5Note 2. Business combinationsOn 24
Page 129 and 130:
5Europe,South Americaand Asia$mWest
Page 131 and 132:
5Non-current assets by originGhana
Page 133 and 134:
5Note 6. Staff costsThe average mon
Page 135 and 136:
5The Group’s profit before taxati
Page 137 and 138:
5Note 12. Property, plant and equip
Page 139 and 140:
5Note 13. Investments2011$m2010$m20
Page 141 and 142:
5Note 18. Trade and other payablesC
Page 143 and 144:
5The $3.5 billion Reserves Based Le
Page 145 and 146:
5Note 20. Financial instrumentsFina
Page 147 and 148:
5Oil and gas pricesThe Group uses a
Page 149 and 150:
5Financial derivativesThe Group int
Page 151 and 152:
5Deferred tax assets are recognised
Page 153 and 154:
5Note 27. Share-based payments2005
Page 155 and 156:
5UK & Irish Share Incentive Plans (
Page 157 and 158:
Independent Auditor’s Reportto th
Page 159 and 160:
Company balance sheetAs at 31 Decem
Page 161 and 162:
Notes to the Company financial stat
Page 163 and 164:
5Note 6. Bank loansCurrentShort-ter
Page 165 and 166:
5Note 9. Shareholders’ fundsShare
Page 167 and 168:
2010 Share Option Plan (2010 SOP) a
Page 169 and 170:
5Note 13. Subsequent eventsSince th
Page 171 and 172:
Commercial reserves and contingent
Page 173 and 174:
Area TullowLicenceFieldssq km inter
Page 175 and 176:
Licence / BlocksFieldsAreasq kmTull
Page 177 and 178:
ContactsSecretary & registered offi
Page 179 and 180:
KKenya 6, 7, 57Key financial metric
Page 181 and 182:
MmmbblmmboemmscfdMoUMTMMillion barr
Page 183 and 184:
This report is printed on Heaven 42
show all

Tullow Oil plc Annual Report 2011 - The Group

Create successful ePaper yourself

Delete template?

Save as template?