Board Committees

The Board has established the following principal Committees, each of which has written terms of reference (approved by the Board) setting out its authority and duties. Copies of the terms of reference which were reviewed and updated where necessary during the year, can be viewed on the Investor Relations section of the Company’s website: www.tullowoil.com. Hard copies can also be obtained from the Company Secretary.

David Williams, who is Chairman of the Committee, is a Chartered Accountant and until his retirement in 2006 was Finance Director of Bunzl plc. Currently, he also chairs the audit committees of Meggitt PLC, Mondi plc and DP World Limited and is a member of the audit committee of Taylor Wimpey plc. For the purposes of the Combined Code, David Williams is considered by the Board to have recent and relevant financial experience. In addition, the other members of the Committee have a range of financial, commercial and other relevant experience.

The Group’s external auditors are Deloitte LLP and the Committee closely monitors the level of audit and non-audit services they provide to the Group. Non-audit services are normally limited to assignments that are closely related to the annual audit or where the work is of such a nature that a detailed understanding of the Group is necessary. A policy for the engagement of external auditors to supply non-audit services was implemented during the year formalising these arrangements. A breakdown of the fees paid to the external auditors in respect of audit and non-audit work is included in note 3 to the Financial Statements. In addition to processes put in place to ensure segregation of audit and non-audit roles, Deloitte LLP are required as part of the assurance process in relation to the audit, to confirm to the Committee that they have both the appropriate independence and objectivity to allow them to continue to serve the members of the Company. This confirmation was given and no matters of concern in relation to the above were identified by the Committee.

The Chief Financial Officer, the Group Internal Audit Manager, the Group Finance Manager and representatives of the external auditors normally attend meetings of the Audit Committee at the invitation of the Committee. The Chairman of the Board also attends meetings of the Committee by invitation. The external auditors have unrestricted access to the Committee Chairman. During the 2008 audit process, the Audit Committee Chairman met with Deloitte’s Audit Engagement Partner without the presence of management.

In 2008, the Audit Committee met on four occasions. The key work undertaken by the Committee was as follows:

• Consideration and review of annual and interim financial statements

  The Committee met with the external auditors as a part of the interim and final accounts approval process.

  During this exercise the Committee considered the most appropriate treatment and disclosure of any new or judgemental matters identified during the audit, as well as any recommendations or observations made by the external auditors.

• Audit planning and update on relevant accounting developments

  Following the Group’s adoption of IFRS in 2004/05, there were limited further regulatory or financial accounting changes during 2008. These changes are described in the accounting policies note (PDF 67KB).

• Consideration and approval of the risk management framework, annual Internal Audit Plan and periodic reports from Internal Audit

  The Group Internal Audit Manager has direct access and responsibility to the Audit Committee. His main responsibilities include: evaluating and developing the Group’s overall control environment, operating efficiency and risk identification and management at operating, regional and corporate levels. In fulfilling his role, the Group Internal Audit Manager has direct access to the Committee without reference to executive management. During 2008, the Audit Committee Chairman met with the Group Internal Audit Manager without the presence of management. The Committee approved the programme of 2008 internal audit work aimed at addressing both financial and overall risk management objectives identified within the Group. A number of internal audit reviews were undertaken during 2008 covering a range of financial and business processes in the Group’s three main business units in London, Dublin and Cape Town. Detailed results from these reviews were reported to management and in summary to the Audit Committee during the year. Recommendations made as a result of the work of Internal Audit are tracked for timely implementation and reported to the Audit Committee periodically. No significant weaknesses were identified as a result of risk management and internal controls reviews undertaken by Internal Audit during 2008. The Group also undertook regular audits of non-operated joint ventures under the supervision of business unit management and the Group Internal Audit Manager.

  Updated whistle-blowing procedures for the Group were implemented during the year. The Committee considers the whistle-blowing procedures to be appropriate for the size and scale of the Group.

• Review of the effectiveness of the Audit Committee

  During the year, the Audit Committee completed a review of the effectiveness of external audit, internal audit and of the Audit Committee itself through a series of questionnaires answered by key stakeholders. Internal Audit co-ordinated the review with results presented to the members of the Audit Committee. The Committee was considered to be operating effectively and in accordance with the guidance recommended by the Smith Committee included in the Combined Code. A number of enhancements to current processes were implemented during 2008 that have improved the effectiveness of the Committee further. The internal audit and external audit processes were also considered to be operating effectively.

The Committee comprises all the non-executive Directors and the Chief Executive and meets as required. The Committee met three times in 2008, primarily to review Board and Board Committee composition and succession matters.

The Committee reported in the 2007 Annual Report that it was in the process of interviewing a shortlist of candidates for the role of an additional non-executive Director. The Committee subsequently recommended to the Board that Ann Grant be appointed. The appointment was confirmed unanimously by the Board and announced at the 2008 AGM to take effect on 15 May 2008.

On 30 April 2008, Tom Hickey, Chief Financial Officer, announced that he would be stepping down as a member of the Board. The Committee then embarked on a selection process for a new Chief Financial Officer. It was assisted in this search by Spencer Stuart who drew up a list of potential internal and external candidates, from which two were shortlisted to meet all members of the Board. The Board was unanimous in its decision to appoint Ian Springett as Chief Financial Officer and as a Director of the Company; the appointment being announced on 27 August 2008 to take effect on 1 September 2008.

The Directors’ remuneration report contains further details of the role and activities of the Remuneration Committee.

In addition to the three principal Committees, the Board has established a Corporate Social Responsibility Committee. This Committee is responsible for managing Tullow’s social investments. This includes sponsorships, charitable donations and ‘Working with Communities’ initiatives.

Tullow’s CSR strategy aligns social investment with key areas and countries for business development. Tullow’s CSR funding is a combination of licence commitments and discretionary spending. The focus of these projects is on improving education and health standards, developing local enterprises and fulfilling basic human needs, such as potable water.

Projects considered will be mainly recurring, long-term investments where Tullow has established oil and/or gas production or is a key country for development. One-off investments are also undertaken to ensure Tullow generates immediate community development benefits. Overall, Tullow’s objective is to make a tangible, positive difference and to foster and support longer-term developments and self-sustaining communities.