Realising our vision
Tullow has a clear vision, a consistent strategy and a flexible but highly-integrated business model that continuously adapts to the prevailing external environment.
2009 is likely to be a difficult year for the sector:
- The management of oil price volatility will be of particular significance, given its impact on revenues, funding, investment levels and supply-side costs;
- The impact that short-term views on oil price have on funding places an emphasis on exploration and appraisal programmes that target near-term production and commercial reserves;
- A time lag remains between historic supply-side inflation and lower oil prices; and
- Significant industry consolidation is likely, creating both acquisition and disposal opportunities.
In response, Tullow has already undertaken a strict capital allocation programme for 2009. Capital expenditure for the year is currently budgeted at approximately £600 million, split 70% on production and development and the remainder on exploration and appraisal. Africa will account for circa 85% of the total. In the current environment, it makes good business sense for the Group to focus its major spend on first production in Ghana in 2010 and to commercialise its investment in Uganda.
Capital expenditure
This is the budgeted capital expenditure for 2009, up 25% on 2008.
P&D
70%
E&A
30%
In parallel, Tullow will safeguard mature production as well as retain key future exploration prospects.
Early in 2009, Tullow strengthened its balance sheet with a successful equity placing and major debt financing enhancing the Group’s financial capacity and flexibility.
Combined, these factors will help ensure Tullow remains flexible during the year, particularly if low oil prices persist. This will allow the Group to take advantage of opportunities that may present themselves.
