2008 was a year of extreme volatility in both the equity and commodity markets. During the latter half of the year, the problems with the banking sector led to a reduction in available capital which had dramatic knock-on consequences for all major economies.

The impact of this deterioration in economic prospects was evidenced by the rapid reduction in commodity prices, including Brent Crude, which fell from a high of over US$140/bbl in July 2008 to US$36/bbl in December 2008. Furthermore, there have been significant movements in the major foreign exchange rates, with the Sterling/US Dollar rate moving from £/US$2.03 in February 2008 to its current rate of approximately £/US$1.40. In addition, interest rates have reduced significantly in an attempt to stimulate demand.

Oil and gas prices

For Tullow, oil and gas revenues are being impacted and the current downturn in the global economy presents new challenges as we manage the business for the longer term.

While in the short term we are carefully managing investment and capital allocation, we recognise that significant value-enhancing opportunities are likely to arise as companies struggle in the current environment.

Looking ahead, Tullow will take a prudent but entrepreneurial approach to its growth strategy. Our portfolio of existing assets and new production coming on stream positions the Group strongly to benefit from a recovery in oil prices.