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Building a better future
through responsible oil
and gas development
Tullow Oil plc 2021 Annual Report and Accounts
Tullow’s purpose is to build
a better future through
responsible oil and gas
development
Who we are
Tullow Oil is an independent oil and gas exploration
andproduction company. We have producing assets
inWest Africa, with material positions in discovered
resources in Kenya and emerging basins in Latin America.
We are headquartered in London and our shares are
listed on the London, Irish and Ghana stock exchanges.
Tullow also pursues near-field exploration opportunities
in and around its producing and development assets.
Key:
Exploration Development
Production Decommissioning
Kenya
Ghana
Argentina
Côte d’Ivoire
Mauritania
Guyana
UK
Gabon
Our purpose
1Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
2021 key metrics
Strategic report
2021 key metrics 1
What we do 2
Our stakeholders 3
Our investment case 3
Our strategy 4
Chair’s statement 6
Chief Executive Officer’s statement 8
Business model 10
Markets 12
A balanced scorecard 14
Operations review 16
Chief Financial Officer’s statement 21
Finance review 24
Sustainability 28
Governance and risk management 36
Section 172(1) statement 43
Viability statement 48
Non-financial reporting 50
Corporate governance
Directors’ report 52
Board of Directors 58
Stakeholder engagement 60
Audit Committee report 61
Nominations Committee report 67
Safety and Sustainability
Committeereport 69
Remuneration report 71
Other statutory information 88
Financial Statements
Statement of Directors’
responsibilities 92
Independent auditor’s report
to the members of Tullow Oil plc 93
Group Financial Statements 105
Company Financial Statements 152
Supplementary information
Alternative performance measures 161
Shareholder information 163
Commercial reserves and contingent
resources summary (unaudited)
working interest basis 164
Group working interest production
59,200 boepd
2020: 74,900 boepd
Operating cash flow
$711m
2020: $598m
Adjusted EBITDAX
$1.0bn
2020: $0.8bn
Loss after tax
$(81)m
2020: $(1,222)m
Capital investment
$263m
2020: $288m
Free cash flow
$245m
2020: $432m
Net debt
$2.1bn
2020: $2.4bn
Gearing
2.2 times
2020: 3.0 times
Tullow Oil plc 2021 Annual Report and Accounts2
What we do
Tullow is an exploration and production (E&P) company focused on Africa and SouthAmerica.
We are a full cycle upstream oil and gas company, operating assets through the lifecycle of
exploration andappraisal, through to the development andproduction phase to decommissioning
atthe end of life. Our business is focused onfinding, or acquiring assets to extract, oil and gas
which is then sold in the global commodity market.
By doing the above, Tullow is able to unlock and maximise value from the hydrocarbon resources of its host nations. We are
committed to doing this efficiently and safely, while minimising our environmental impact. Through our work, we also deliver
shared prosperity and value for our investors, host nations and people.
Tullow’s activities
Development
3 years +
Exploration is the process of identifying
potential hydrocarbons and involves
acquiring seismic and drilling prospects.
This may be followed by appraisal wells
to better understand the size and
quality of a geological play.
Tullow’s activities:
In addition to selective exploration in
emerging basins, we are focused on
leveraging our geoscience expertise
toenhance the value of our core
assets.This is largely done through
‘Infrastructure-led exploration’, which
involves identifying new resources near
existing infrastructure.
Developments require host Government
approval and need to be commercially,
technically, environmentally and socially
viable. Developments are capital
intensive, requiring spend on new
infrastructure as well as investment in
local jobs andsuppliers.
Tullow’s activities:
Our development activities are
focusedon preparing capital efficient
development plans that enable the
production of discovered resources. For
Tullow, this primarily relates to Project
Oil Kenya and further developments of
our existing producing fields such as
the Jubilee South East Development.
The extraction and sale of hydrocarbons
can last decades, bringing material
value to host nations through tax and
royalties while providing revenue to the
participating oil and gas companies.
When production ceases, facilities
are decommissioned, and the site is
fully remediated.
Tullow’s activities:
We have a goal to become a leading
West African operator and we are
striving for top quartile operating
performance in terms of safety,
emissions, reliability and costs.
Weoperate both the Jubilee and
TENfields in Ghana and work in
partnership with the operators of
ournon-operated assets.
Identify Develop
Exploration and appraisal
2–5 years
Identify Explore
Production
25 years +
Identify Produce
Upstream
STRATEGIC REPORT
3Tullow Oil plc 2021 Annual Report and Accounts
Our stakeholders
Our investors:
Delivering sustainable
returns on capital
Our host nations:
Creating shared prosperity
Our people:
Providing a great place to
work
O
U
R
P
E
O
P
L
E
O
U
R
I
N
V
E
S
T
O
R
S
O
U
R
H
O
S
T
N
A
T
I
O
N
S
Our investment case
Responsible, safe and reliable
operations
Generate material free
cashflow from production
Engineering and subsurface
technical expertise
Plan to reach gearing of 1.5x
net debt: EBITDAX by 2025 at
$65/bbl
Prudent financial strategy with
revenues protected by hedging
Significantly reduce carbon
emissions from our operations
Cost focus and capital
discipline
West African
production base
Over 3 billion bbls of oil in place
with <50% produced to date
Unlocking upside value
Realise value from discovered
resources in Kenya, positions in
emerging exploration basins
and M&A
Deliver tangible social and
economic benefits to our
hostnations
Commitment to Net Zero by
2030 (Scope 1 & 2 net equity
emissions)
Create value for our investors,
hostnations and people
Managing our risks
Commercial
Stakeholder
Climate
EHS or security
Financial
People
Ethics & Conduct
Cyber
See more on page 38&39 See more on pages 38, 39 & 40
See more on page 39 See more on page 40
See more on page 40 See more on page 41
See more on page 39 See more on page 41
Tullow Oil plc 2021 Annual Report and Accounts4
Our purpose is
to build a better
future through
en
e responsibl oil and
gas developm t
1
2
7
3
4
5
6
Focus on
oil and gas
Achieve
operational
excellence
Be a trusted
partner
Create a
collaborative and
supportive
workplace
Maintain our
licence to
operate
Grow our
business
Focus on
costs
S
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f
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o
p
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a
t
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n
s
S
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u
a
l
i
t
y
a
n
d
t
r
a
n
s
p
a
r
e
n
c
y
Our strategy
A strategy to fulfil our purpose
Over the past year, Tullow has refined its strategy in light of growing
climatepressures, and we believe the oil and gas industry can, and should
be,an engine of development for developing economies, particularly in Africa.
As long as global hydrocarbon demand exists, it is imperative that Africa’s oil
and gas assets are managed responsibly, efficiently and transparently and that
oil and gas production in developing economies creates long-lasting economic
and social benefits. Tullow has a long and strong history in Africa and is well
positioned to continue as a leader in the continent’s oil and gas industry.
5Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
We intend to fulfil our purpose through the following strategy:
1
To produce and develop oil and gas resources in Africa
We believe that reliable and adequate energy supplies are critical for world economic and political stability and that
fossil fuels will remain an integral part of the energy mix for some time. Therefore, oil and gas resources need to be
developed and produced responsibly. Africa continues to suffer from extreme energy poverty and there is a strong
case for a fair transition where African economies have the opportunity (like much of the world until now) to benefit
from the responsible development of their resources.
2
To grow our business through the development of discovered resources, nearfieldexploration and M&A
The Jubilee and TEN fields in Ghana provide a set of highly profitable investment opportunities through a combination
of infill drilling, facilities expansion, production from currently undeveloped parts of the fields and near field exploration.
Tullow’s non-operated production in Gabon and Côte d’Ivoire also provides infrastructure-led (ILX) exploration
opportunities and a number of diverse low-risk investment projects. Tullow will also seek to realise upside through
its discovered resources in Kenya and unlock value from its exploration assets. As many companies allocate capital
away from the upstream business and divest assets, Tullow also has potential to grow its business through acquisitions.
3
To continue to focus on cost management and capital efficiency to deliver a robust balance sheet
We continue to carefully manage our costs and believe that every barrel matters and every dollar counts.
Theissuance of $1.8 billion of Senior Secured Notes with a $500 million revolving credit facility in May 2021 has
putTullow on a much firmer financial footing and the Group now has a pathway to invest in its assets to maximise
their value.
4
To be a competitive operator, renowned for operational excellence, strong safety standards and leading
geoscienceexpertise
We must achieve low cost and capital efficient operations to produce barrels competitively while ensuring the safety
and wellbeing of our people and minimising our environmental impact. Delivering reliable asset performance is critical
to this, carrying out timely maintenance and having the right processes and people in place to maximise uptime.
5
To be a trusted partner, supporting the economic development of emerging, oil-exporting economies
Tullow’s assets generate material revenues for governments through the production and sale of oil and gas. Our
assets also have the potential to allow us to partner with governments to contribute towards domestic energy needs
and help alleviate energy poverty in Africa. This must be achieved with high standards of compliance, zero tolerance
for corruption and continuous tax transparency to maintain and develop quality relationships with our host
governments.
6
To maintain our social license to operate and ensure continued access to capital through environmental
stewardship and our commitment to shared prosperity
Tullow is committed to developing local content and investing in social projects to improve the everyday life of the
people in our host nations. With a target to achieve Net Zero by 2030 on Scope 1 and 2 net equity emissions and
anemphasis on responsible operations, Tullow will ensure that the oil and gas resources of host countries are
developed efficiently and safely while minimising the environmental impact. Through our work, we will deliver
sharedprosperity and create value for our investors, staff, host nations and communities.
7
To create a collaborative, supportive and transparent work environment where our people have a breadth
ofopportunities to grow and develop
We are fostering an open team culture, with good engagement from our people. Equality and transparency
arecentral to the way we operate and to helping us earn the trust of all those with whom we interact. Tullow
isbecoming more performance focused, empowering our people to deliver and be valued for their contribution.
Wealso have a renewed focus on diversity and inclusion, recognising that collectively leveraging our individually
diverse backgrounds and experiences will make us a more successful organisation.
Tullow Oil plc 2021 Annual Report and Accounts6
Chair’s statement
Positioned to build a
positive and sustainable
future in Africa
Phuthuma Nhleko joined Tullow in October 2021 as a non-executive Director and became
Chairof the Group in January 2022. Phuthuma brings extensive emerging markets experience
to Tullow having worked successfully across Africa over the past three decades. He discusses
his initial reflections and ambitions for Tullow.
“ 2021 has been a transformational
year for the Company and I am
excited to join at this important
stage in its development. With
astable balance sheet and a
clearstrategy underpinned by
acommitment to Net Zero by
2030 and to responsible and
safeoperations, Tullow is
wellpositioned to re-establish
itself as a leader in Africa.”
Phuthuma Nhleko
Chair
It is an honour to serve as Chair of your Company and Ibelieve
that Tullow has an important and significant role to play in
Africa in developing and producing host nations’ hydrocarbon
resources. I have followed Tullow with much interest since its
inception and I have been particularly impressed with the
successful operational turnaround and transformational
refinancing achieved in 2021. Your Company is now well
positioned for a positive and sustainable future, building on
itsstrong position and reputation in the African oil and gas
sector. I am privileged to succeed Dorothy Thompson who
ablysteered Tullow through some difficult and turbulent
timesand Dorothy leaves Tullow with our best wishes and
thanks for a job well done.
A new direction and delivery in 2021
At the Capital Markets Day held in November 2020, Rahul and
the team set out a new direction for Tullow. The long-term
Business Plan focuses our capital principally on the large
resources that underpin our producing assets, while also
seeking to unlock value from our material positions in Kenya
and emerging basins. With a singular focus on costs, the team
is working to deliver high margins and cash flows to fund our
investments and reduce debt. A disciplined approach to
capital allocation is ensuring high returns and rapid paybacks.
Our strong geoscience and subsurface skills are enabling us
to maximise recovery and add additional resources to provide
further value from our producing base.
I am pleased to report that in 2021 the team have made
demonstrable progress in delivering the Corporate Business
Plan. Nearly $1 billion in self-help was delivered through cost
savings and the successful sale of non-core assets. This,
along with the early evidence of operational improvements,
positioned us for a transformational $1.8 billion bond issuance
in May which has provided a pathway for the Company to
invest in its assets to maximise their value. A relentless focus
on operations is delivering strong performance at both FPSOs
in Ghana and successful drilling campaigns in Ghana and Gabon.
Notable production growth came from Jubilee in Ghana and
Simba in Gabon, but production was lower than expected from
TEN and Espoir. At the same time, oil prices have recovered
from historical lows in April 2020, to over $120 per barrel
today. All together, the Group is on a far stronger financial and
operational footing.
7Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Financial discipline
I have been struck by the team’s commitment to cost
management and capital discipline. There has been a lot of
enthusiasm around Rahul’s encouragement to our staff to
treat every dollar of spend as if it was their own. I am very
supportive of this approach given that Tullow’s debt remains
elevated. Achieving an optimum and sustainable capital
structure and making the balance sheet more robust remains
one of the Board’s top priorities. Furthermore, the now
evident inflationary pressures in the oil services sector
underline the importance of tight cost control.
Les Wood
As previously announced, Les Wood, Chief Financial Officer, will
step down from the Board and leave Tullow on 31 March 2022,
having been Chief Financial Officer since 2017. Les’s leadership
of the finance team culminated in last year’s comprehensive
debt refinancing. We thank Les for his significant contribution
to Tullow and wish him the best in his future endeavours.
Asat the date of this Report, Tullow’s recruitment of a new
CFO and Executive Director to replace Les is ongoing and
theprocess is expected to conclude shortly. The Nominations
Committee has approved the appointment of Richard Miller,
Group Financial Controller, as interim CFO with effect from
1April 2022. Richard is a chartered accountant and has
worked in a number of senior roles within Finance since
hejoined Tullow in 2011.
Tullow – a leader in Africa
Notwithstanding the ongoing focus on reducing the use of
fossil fuels, the world will consume more energy going
forward and fossil fuels will remain an integral part of the
energy mix for the foreseeable future. There is a need for oil
and gas resources to be developed and produced, but this
hasto be done responsibly and with minimal environmental
impact. To this end at Tullow, we have a responsibility to
reduce and, in time, eliminate the emissions under our
control. Our Net Zero commitment underscores the
seriousness of our intent.
Through my extensive experience of heading the MTN
Executive team as we established telecommunication
infrastructure across many African countries, I have
witnessed the positive impact of the oil and gas industry on
economic development. At the same time, Africa continues
tosuffer from extreme energy poverty, with a minimal
contribution to global emissions. So, I believe there is a strong
case for an energy transition where African economies have
the opportunity to benefit from the responsible development
of their resources. This was aptly highlighted by HE Nana
Akufo-Addo, the President of Ghana, in his speech at COP26
in Glasgow, when he said: “We believe that a balance must
bestruck and maintained between our social, economic
andenvironmental imperatives”.
Today, Tullow is uniquely placed to be a leader in Africa
anddeliver the balance that was highlighted by President
Akufo-Addo. As many companies look to exit or reduce their
exposure to Africa, we have renewed our commitment to the
continent and are seeking to grow. Through the safe and
efficient delivery of our business plan, we will bring shared
prosperity to our host nations and communities, while
reducing our environmental impact.
I look forward to bringing my experience from doing business
in Africa to Tullow and to building relationships with our key
stakeholders across our countries of operation. One of my
keyareas of focus will be Ghana, where I hope to positively
contribute to the delivery of the ‘Ghana Value Maximisation
Plan’ and delivering shared prosperity to our host nation.
Iamalso pleased to note the constructive relationship
between Tullow and the Government of Ghana, even where
wehave material differences of opinion in certain areas, and
continued strengthening of our partnership will be one of my
key areas of focus going forward.
Conclusion and outlook
2021 has been a transformational year for your Company and
I am excited to have joined Tullow at this important stage in its
development. With a stable balance sheet and a clear strategy
underpinned by a commitment to Net Zero by 2030 and to
responsible and safe operations, Tullow is well positioned to
re-establish itself as a leader in Africa. I look forward to
working with Rahul and his team as they grow the business,
deliver Shared Prosperity and create value for our investors,
staff, host nations and communities.
Phuthuma Nhleko
Chair
8 March 2022
Tullow Oil plc 2021 Annual Report and Accounts8
Chief Executive Officer’s statement
A year of progress,
delivery and operational
improvement
In 2021, Tullow underwent further transformation under the lead of Rahul Dhir,
ChiefExecutive Officer. Rahul outlines the progress Tullow has made and how the Group
iswell positioned to reach its full potential.
“ We believe that oil and gas
production can, and should
be,adriver of long-lasting
economic and social change
indeveloping economies.”
Rahul Dhir
Chief Executive Officer
I am delighted to welcome Phuthuma Nhleko as our new
Chairman. Phuthuma is a widely acclaimed business leader
with a deep understanding of doing business in Africa, having
contributed to building a successful and truly pan-African
business. He also brings experience from listed companies
across international markets, including the UK and Africa.
As at the date of this Report, our recruitment process of a
newCFO and Executive Director is ongoing and the process
isexpected to conclude shortly.
I look forward to working closely with both Phuthuma and our
new CFO when appointed as we re-establish Tullow as the
leading oil and gas company inAfrica.
Our performance in 2021
As ever, my first priority is the health and safety of our staff and
everyone who is associated with our operations. There has been
a marked improvement in our EHS performance relative to
last year, despite increased activity levels. This has been achieved
through the implementation of a safety improvement plan,
active leadership interventions and a good reporting culture.
Unsurprisingly, COVID-19 mitigation remained top of mind
across our entire business. We experienced a small number
of positive COVID-19 cases offshore and took rapid and
decisive action, including temporarily reducing manning.
Consequently, there was no impact on safe production
operations and the potential for contagion was contained.
100% of our core crew in Ghana are now vaccinated.
The successful refinancing of our debt was the highlight of the
first half of the year. Substantial self-help in the form of cost
reductions and asset sales, strong operational performance,
and improved market conditions allowed us to address our
near-term debt maturities. The longer maturities of our
current debt provide the financial headroom and afford us
time to invest in our assets and deliver production and value.
This was a transformational transaction. I am indebted to all
those in the Company who worked on the project and our
external advisers for successfully executing this transaction.
Our improved financial situation has been further enhanced by
our operational performance and I am very pleased to report
thatTullow performed well in 2021 with improvements in
FPSOuptime, gas offtake and water injection. This strong
operational performance was also reflected in our drilling
programme that saw Tullow successfully drill and complete
four wells (three at Jubilee; one at TEN) in 2021 and allowed
us to achieve notable production growth at Jubilee where
This has been a year of profound change and transformation
for Tullow. I am very proud of the progress achieved in the
midst of existential challenges facing our industry and the
COVID-19 pandemic. We began the year in refinancing talks
with our lending banks and bond holders and had reached a
firm financial footing by year end. The delivery of our long-term
Business Plan is progressing well, and our performance is at
the upper end of expectations with significant improvements
in safety, operating efficiency and drilling performance.
Board changes
Tullow’s transformation owes much to two colleagues who
are leaving Tullow. Dorothy Thompson, who very ably led
Tullow through the end of 2019 as non-Executive Chair and
until 8 September 2020 as Executive Chair, stepped down
from the Board on 31 December 2021. Les Wood, our
ChiefFinancial Officer, who has delivered Tullow’s financial
strategy during this critical time, will step down on
31March 2022. I am deeply grateful to both Dorothy and
Lesfor their tremendous contribution to Tullow and for
their support to me in my first 18 months as CEO. Please
join me in wishing them well for the future.
9Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
average daily production grew from c.70,000 bopd at the
beginning of 2021 to c.90,000 bopd by the end of the year.
Thisproduction growth was partially offset by lower than
expected production at TEN following higher production
decline rates than expected at some wells.
The drilling programme in Ghana is at the core of our strategy
and underpins the Ghana Value Maximisation Plan. The early
success of this plan validates our thesis that we can deliver
production growth and value through a well-crafted capital
investment programme. Because of this success, we are
engaging with our partners in Ghana and considering whether
to hire a second rig for use in Ghana in early 2023. Weare also
in the process of increasing our equity interests inboth the
Jubilee and TEN fields following the exercise of our right of
pre-emption related to the sale of Occidental Petroleum’s
interests in Ghana to Kosmos Energy. These initiatives align
well with our evolving drilling plans for 2022–25 which are
focused on the eastern flank of the Jubilee field and the
Greater Ntomme and Tweneboa areas at TEN.
In Gabon, we continue to deliver stable production.
Ouroperational and subsurface teams have worked closely
with our partners to identify surrounding near-field prospects
that can sustain and increase production. The Simba expansion
project was accelerated into 2021 and the Sim-03 well was
completed in September. Consequently, production from
Simba is expected to be 40% higher year-on-year.
We reoriented our exploration effort to enhance value in
ourcore areas. Consequently, there was much focus on the
Tano Basin across Ghana and Côte d’Ivoire, maturing some
interesting opportunities in the vicinity of the TEN FPSO.
InGabon, the team has matured several prospects around
theSimba and the Tchatamba Southlicences.
We exited 11 blocks in 2021 which we assessed to be
insufficiently attractive to justify further investment. Tullow
retains material positions in emerging basins in Guyana and
Argentina and continues to seek strategic partners, to reduce
its capital exposure in these areas. To date, we have been
unable to secure new partners resulting in expected
exploration capex in 2022 of c.$45 million.
Another area with very significant change in 2021 has been
inKenya where our team, in close consultation with our Joint
Venture Partners, reworked the development plan. The new
plan targets more resources, delivers higher production and
significantly cuts the project costs. This plan has restructured
a commercially difficult project into an investible opportunity
and we have good engagement with the Government of Kenya.
Accordingly, we are now working with potential strategic
partners to reduce our stake in the project to be more in line
with a company of our size and I expect to see our work in
Kenya progress materially in 2022.
Stakeholder engagement
I have been greatly encouraged by the supportive and open
engagement with all our major stakeholders. As travel
restrictions eased, I have been able to meet many of our key
stakeholders in person. In Ghana, HE Nana Akufo-Addo, the
President of Ghana, as well as the Minister for Energy, Hon.
Dr. Prempeh, Finance Minister, Ken Ofori-Atta and other
senior officials have been very supportive of our investment
inthe Ghana Value Maximisation Plan. This support also lends
itself to constructive discussions on some of our more
challenging issues, for example in respect of our dispute with
the Government of Ghana over branch profit remittance tax
where, after consultation with the Government of Ghana, the
matter was referred to international arbitration (full details on
page 119). It was recognised that it is not uncommon to utilise
the dispute resolution process in Petroleum Agreements to
resolve such disagreements. I commend the Government of
Ghana for not letting this ongoing dispute distract from our
core business of developing and producing Ghana’s oil & gas
and I am confident this will continue to be the case going
forward. In Kenya, Cabinet Secretary for Energy, Hon. John
Munyes, and Permanent Secretary Andrew Kamau and their
teams have monitored andchallenged our thinking as we
developed the revised FieldDevelopment Plan. The Ivorian
Energy Minister, Hon.Thomas Camara, and his team have
engaged as we have refined the prospectivity in CI 524 and
developed our plans for further investment in Côte d’Ivoire.
Colleagues across our Partners and at our key suppliers
haveworked closely with us as we have developed and
implemented our Business Plan and improved operational
performance. In May 2021, we appointed a Ghana Advisory
Board of Phyllis Christian, Elly Ohene-Adu and Alex Hutton-Mills
to provide strategic guidance and advice on our operations in
Ghana and the delivery of our business plan. I am already
benefitting enormously from their counsel on managing key
relationships and delivering shared prosperity in Ghana.
Climate and Shared Prosperity
I reflected in last year’s Annual Report on why I joined
Tullowand why the Company’s commitment to climate risk
management and shared prosperity is so important. Thisyear,
as part of this commitment, we have taken two important
steps with regard to our wider responsibilities to society and
the countries in which we work. In March 2021, wecommitted
to being Net Zero on our Scope 1 and 2 net equity emissions
by 2030, supporting the goal of limiting global temperature
rise to well below 2
o
C as per Article 2 of the Paris Agreement.
We will achieve this through decarbonising our production and
offsetting hard to abate emissions through nature-based
solutions. In September 2021, we laid out our purpose –
affirming our belief that oil & gas production can and should
be a driver of long-lasting economic and social change in
developing economies as long as those resources are
developed efficiently, safely and responsibly. This supports a
fair energy transition for African countries and aligns with the
outcomes of COP26 which recognises the need to “strengthen
climate action in the context of sustainable development and
efforts to eradicate poverty”. For more details about how we
manage our impact and deliver shared prosperity, I would ask
shareholders to read our Sustainability Report which you can
also find at tullowoil.com.
Outlook
Our successful transformation in 2021 has been driven by the
hard work of the entire Tullow team. We are fortunate to have
dedicated and committed colleagues who deserve the credit
for Tullow’s vastly improved performance and balance sheet.
They are well aware, as I am, that we remain a company in
transition and that the job is not complete. However, there
should be no doubt that we have the assets, the plan, the
capital structure and financial discipline to reach the full
potential of this company. I would like to thank all our host
governments and communities, Joint Venture Partners, staff
and our investors for their continued support and I look
forward to another year of delivery in 2022.
Rahul Dhir
Chief Executive Officer
8 March 2022
Tullow Oil plc 2021 Annual Report and Accounts10
Funding
Self-funded business through cash from operations
Business priorities
Safe, reliable operations and production
performance
Unlock value from discovered resources and
exploration acreage
Cost and capital discipline
Utilise geoscience expertise in engineering,
subsurface and exploration
Deliver tangible social and economic benefits to
our host nations
Strengthen the balance sheet
Investment decisions
Balance investment for both near and longer-term
cash flow
How our business creates value
Tullow’s business model is to monetise oil and gas from our portfolio of assets
and in doing so, fulfil our purpose of building a better future. Tullow’s focus
haschanged in recent years from an exploration-led business to a company
focused on unlocking value from its producing assets. This is reflected in our
decision to allocate in excess of 90% of our capital expenditure to our
producingassets.
Business model
Inputs
Our investors:
Tullow has both equity and debt
investors. We regularly meet
with our investors to update
them on our business and listen
to their feedback.
1.4bn issued shares
Our host nations:
Tullow requires the support of
host governments to operate in
their licences and/or to gain
approval to develop their
resources.
8 countries of operation
Over
30 licences
Our people:
Our highly experienced and
committed professionals
workhard to deliver Tullow’s
business plan while upholding
our values.
353 employees
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11Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Capital allocation
>90% allocated to maximising value from our
producing assets, including near field exploration
Limit capital at risk from exploration
High levels of scrutiny across G&A costs
Appropriate investment in our Net Zero and
sustainability strategies
Use of cash
Reinvest and grow our business
Service and repay debt
Shareholder returns
Cash generation
Generate material cash flow
Delivering improved operating performance to maximise value from our
producing assets is a key focus, alongside steps taken to reduce our cost base
and simplify our capital structure. Together, these building blocks deliver a
highly cash generative business plan that seeks to generate material cash flow
tofund investment, grow our business and reduce debt, while providing
multiple benefits to our host nations. We have a number of stakeholders but
consider our investors, our host nations and our peopleto be the primary
participants for our business.
Value creation
Our investors:
Our platform for growth
and path to lower debt is
expected to deliver a tangible
increase in equity value. Our
commodity hedging portfolio
provides significant oil price
downside protection for
ourrevenues.
$711m
2021 operating cash flow
Our host nations:
The sale of oil and gas
generates material revenue
for host nations in terms of
taxes paid. We also invest in
local suppliers to help run
our operations.
$234m
Payments to Governments
Our people:
We provide appropriate
reward and recognition
through compensation and
benefits. We are building a
culture of empowerment
with a commitment to invest
in development.
760
Recognitions shared through
our ‘Celebration Hub’
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STRATEGIC REPORT
Tullow Oil plc 2021 Annual Report and Accounts12
2021 was a year that saw a volatile and uneven recovery
fromthe pandemic, with the oil and refining markets each
responding differently. Brent crude traded inside a $50–86/bbl
range and an average of $71/bbl. Prices rose firmly in January
amid the prospect of tighter crude supply and a declining
trend in global oil stocks, before surging more than 15% in
February, reaching the highest monthly average ($62/bbl)
since January 2020. March marked the fifth consecutive
month of rising crude prices, supported by positive
fundamentals including projections of a stronger economic
rebound in 2H21, and an acceleration in the vaccination
roll-out, mainly in the OECD region. The second half of
A recovering market amidst
an ongoing global pandemic
2021 brought hope for global economic growth following 2020’s downturn. Energy prices
have seen a strong recovery while the pathway to Net Zero has been brought into even
sharper focus.
Markets
1
Geopolitics
The ongoing COVID-19 pandemic remained
the key global political and economic risk
in 2021
2
Oil price
2021 saw a strong recovery in the oil
markets with prices topping $80/bbl and
upward pressure driven by the gas market,
although COVID-19 remained a concern
through year-end
In 2021, COVID-19 continued to dominate the political agenda
as the world moved away from the strict enforcement of
major non-pharmaceutical interventions and towards
controlling the pandemic through vaccines, anti-viral
treatments and testing.
Towards the end of 2021, the pandemic took an unexpected
turn with the Omicron variant, which was first sequenced in
South Africa, spreading rapidly in every continent but with very
different and milder outcomes to previous waves for those
affected and especially for those with prior immunity either
through previous exposure to the virus or vaccination.
The global economy was surprisingly robust in 2021 as
economies rebounded to close to pre-pandemic levels.
Consumers took advantage of savings made during periods
oflockdown and of low interest rates which, in turn, lead to
significant increases in inflation. This spike in inflation will
likely be controlled by interest rate rises through 2022 albeit
from historically low levels.
The oil price recovered strongly in 2021 as international travel
re-started and as governments, particularly state and national
government in the US, indicated that they were not inclined to
deal with future virus waves through lockdowns and long-lasting
travel restrictions. The oil price also benefitted from a
disciplined approach in OPEC+ which has very effectively
pushed prices up and pushed oil in storage down. The lack
ofinvestment in oil and gas developments since the oil price
crash of 2014 has also had, and will continue to have, a
significant effect on the oil price.
Other commodities also increased in price as economies
rebounded, supply chains became stretched and worker
shortages intensified. In the UK and Europe, natural gas
prices rose by as much as 900% on the previous year reaching
a high of 452p/therm on 21 December as President Putin of
Russia demonstrated his control of gas supplies into a highly
gas-constrained EU.
In Africa, the pandemic has had a sporadic effect with significant
monitoring of COVID-19 limited to only a few African countries
and it continues to be difficult to be entirely certain about how
far the virus has spread in Africa. Vaccine take-up in Africa
has also been limited both by low levels of supply from
developed countries and the UN’s COVAX programme and
bylack of demand due to distrust of government.
Either way, Africa did not recover as quickly as developed
economies and that slower rate of growth is forecast to
continue into 2022 with a number of countries having to
consider painful debt re-structuring. African leaders were
both present and vocal at COP26 in Glasgow with a number
ofsenior leaders pointing out the need for a just energy
transition for Africa that reflected the continent’s minuscule
impact on global warming and low levels of current and
historic carbon emissions. Some African Heads of Government,
including President Akufo-Addo of Ghana, went further and
stressed their determination that African countries be allowed
to develop their natural resources, including hydrocarbons,
aspart of a just energy transition.
Looking ahead, there are local and national elections in
Kenyatowards the end of 2022 and the outcome, at this
point,remains uncertain.
13Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
3
Climate Change Policy
and energy transition
COP26, hosted by the UK Government in
Glasgow, was the clear highlight for
Climate Policy in 2021
Marchsaw financial investors liquidating part of their bullish
positions as the market began to soften. April then saw the
first crude price fall in six months amid a resurgence of
COVID-19 in a number of countries, stoking fears around
reduced near-term demand. This was reversed by strong
gains in May as prices rose 6% m-o-m, with APAC and
European refiners showing buying interest in advance of the
summer driving season and expectations of further demand
recovery, while the accelerated vaccination programmes and
easing of mobility restrictions in Western countries eclipsed
the worsening situation in several Asian countries. The
decision of OPEC to gradually adjust production from May to
July also supported market confidence. This continued firmly
throughout June and into July amid a volatile futures market
and strong physical market fundamentals. However, financial
investors reduced their long positions in July given concerns
around the new Delta variant of COVID-19 and expectations
ofincreasing global supply. Prices in August reflected such
concerns, falling due to concerns around short-term demand
outlook in Asia, higher global supply, and mixed economic
data. However, this was reversed somewhat in the last week
of the month as concerns around demand eased, and the
rebound continued firmly in September (c. 5% m-o-m) with an
improved COVID-19 situation in Asia and supply disruptions in
the Gulf of Mexico after Hurricane Ida. Concerns around the
risk of natural gas and coal shortages in Asia and Europe
further boosted oil demand as a substitution fuel source.
October saw a price surge of more than 12% with prices
surpassing $80/bbl, driven largely by concerns over supply
issues in Asia and Europe’s power sector ahead of the winter
period, with soaring gas and coal prices. The end of the year
saw a decline in prices amid fears surrounding the COVID-19
Omicron variant and an increase in cases in Europe and
elsewhere, as well as concerns around strategic reserve
releases, while gas prices moved lower, with a December
average oil price of $75/bbl.
Prior to COP26, the United Nations’ Environment Programme
(UNEP) issued a report stating that current commitments to
cut greenhouse gas emissions put the planet on track for a
rise of 2.7°C temperature this century which is some way
short of the 2 / 1.5°C target adopted in 2015 as part of the
Paris Agreement. Their October 2021 report stated that new
and updated Nationally Determined Contributions would
onlytake off 7.5% of predicted 2030 emissions while 55%
isneeded to meet the 1.5°C target. This followed a report
bytheIntergovernmental Panel on Climate Change (IPCC)
inAugust 2021 that stated global warming was dangerously
close to spiralling out of control. During the Northern
Hemisphere summer, a number of weather-related events
also served to focus the minds of global leaders in the run up
to COP26, including record-breaking summer temperatures
in the Pacific North West and devastating flooding in Germany
and Belgium in July 2021.
Despite these events, COP26 delegates met with low
expectations about what might be achieved and, while COP26
did not meet some of the loftier targets that were set, the
main outcomes at least suggested that good progress had
been made and that further progress is possible.
Key outcomes included the launch of the Glasgow
FinancialAlliance for Net Zero (GFANZ) which saw more
than$130 trillion of private capital committed to transforming
the global economy towards the Paris climate goal of 1.5°C,
acommitment by major banks to ending all international
public financing of new unabated coal power by the end of
2021, an agreement by more than 100 countries to decrease
their methane emissions by 30% by 2030 compared with
2020levels and the establishment of a new International
Sustainability Standards Board (ISSB) to increase the global
focus on climate risk disclosure and reporting.
On the debit side, the failure to, as the UK Government had
wanted, “consign coal to history” led the headlines at the end
of the conference and the commitment to secure $100billion
of climate finance, originally agreed at COP15 in2009
inCopenhagen, was pushed to 2023.
Looking at COP26 from a Tullow perspective, the focus on
coal meant that oil and gas were barely mentioned while
COP27, which is taking place in Cairo in November 2022,
seems likely, given its location, to place far greater emphasis
on Africa and on developing economies.
Elsewhere, progress towards an EU Taxonomy, which the
UKwill likely mirror, continued. The EU Taxonomy is a green
classification system that translates the EU’s climate and
environmental objectives into criteria for specific economic
activities for investment purposes. The Taxonomy is a
transparency tool that will introduce mandatory disclosure
obligations on some companies and investors, requiring them
to disclose their share of Taxonomy-aligned activities. This
disclosure of the proportion of Taxonomy-aligned activities
will allow for the comparison of companies and, critically,
investment portfolios and will guide market participants in
their investment decisions.
Climate Change and Energy Transition continue to be topics
ofconsiderable national and international debate but in the
last quarter of 2021 the dynamics of this debate changed.
First, leaders from Africa and other developing countries
made it clear through their contributions at COP26 that their
voices would be heard and that an unfair energy transition
that failed to recognise which countries had made the biggest
contributions to global emissions would not be acceptable.
Second, very high gas prices in Europe driven both by
geopolitics and reliance on gas imports suggested that
Western Europe needed to think again about how it would
meet the energy demands and price expectations of
itspeople.
Tullow Oil plc 2021 Annual Report and Accounts14
A balanced scorecard
Measuring our performance
Our scorecard aligns both executive pay and employees’ performance-related pay
to Key Performance Indicators (KPIs) measuring our performance across a range
of operational, financial and non-financial measures.
2021 Scorecard
1. Safety 9.8/9.8%
2. Financial Performance 7.0/9.8%
3. Production 9.9/13%
4. Business Plan Implementation 5.5/9.8%
5. Capital Structure 9.1/9.8%
6. Sustainability 4.7/6.5%
7. Leadership Effectiveness 5.2/6.5%
8. Total Shareholder Return 0/35%
Remuneration Report pages 71 to 87
The safe and responsible operation of our assets is always our first priority and through the
implementation of safety improvement plans, contractor engagement, active leadership
interventions and a strong reporting culture we have improved our EHS performance
resulting in top quartile 2021 performance versus our industry peers. There were two
recordable injuries in 2021 (versus 8 in 2020) and no incidents for Loss of Primary
Containment (LOPC). The same operational improvements were evident in our production
efficiency with both TEN and Jubilee achieving over 97%. For Jubilee this was a significant
improvement on previous years. This helped actual production exceed the Budget and even
after normalising for one-off benefits we were close to matching our Scorecard target.
Actual Operating Cash Flow of $711 million was significantly higher than Budget thanks
to the higher oil prices in 2021 but for the Scorecard KPI we normalised back to our Budget
price assumption. This means the KPI focused on cost and working capital management.
As a result, our normalised OCF was $499 million resulting in a 7.0% score.
The Business Plan Implementation KPI tracks our delivery of the capital investment in the
Budget (what percentage of the work programme have we delivered) and have we delivered it
on cost (have we adhered to the Budget costs). We delivered 94% of the Budget work
programme for a spend of $229 million. An additional $35 million of capital spend was for
KPI Performance
1. Safety
2TRIrecorded in 2021(TRIR 0.43), maximum score achieved
0number of LOPC at either Tier 1 or Tier 2, maximum score achieved
Normalised Operating Cash Flow (OCF) at $499 million
Group Oil normalised production at 58.3 kbopd
Jubilee production efficiency at 98%; TEN production efficiency at 97%
94%of the 2021 capex work programme completed at spend totalling$229 million
Transformational debt refinancinghas put Tullow on a firm footing to deliver our Business Plan and unlock value
in the future
We renewed our commitment to sustainability with a particular focus on climate change risk management and
shared prosperity. In March 2021, we committed to being Net Zero on our Scope 1 and 2 net equity emissions by
2030
The strength and cohesiveness of the leadership team worked with an engaged workforce resulted in successful
delivery of the business activities and improve performance in 2021. Together with the strong support and
collaboration of the Board, the leadership team worked in 2021 to position the organisation for sustainable success
TSR position is bottom quartile
2. Financial Performance
3. Production
4. Business Plan Implementation
5. Capital Structure
6. Sustainability
7. Leadership Effectiveness
8. Total Shareholder Return
1
additional projects approved post the Budget e.g. the extra wells drilled on Jubilee because
we were ahead of schedule.
The refinancing of our debt in the first half of 2021 was a significant achievement for the
Company. The Board gave a 9.1% score out of maximum score of 9.8% due to the increased
ongoing financing costs resulting from the refinancing.
The Sustainability KPI was measured against a series of milestones which tracked our
delivery against several key themes, shared prosperity, local content, employee engagement,
corporate governance, and progress of our Net Zero plans.
Finally, the Board made a judgement on the effectiveness of the Senior Leadership Team over the
year. They considered several factors, including the strength and cohesiveness of the leadership
team, a clear strategy being set and understood across the organisation, the engagement of the
workforce, and the successful delivery of business activities in 2021. They concluded the improved
performance in 2021 has been driven by the hard work and unrelenting dedication of the entire
Tullow team and with the strong support and collaboration of our Board, resulting in a 5.2% score.
1 TSR is only applicable to CEO and CFO Remuneration. Remuneration for the wider
workforce is based on all other KPIs.
0/35%
9.8/9.8%
5.5/9.8%
7.0/9.8%
9.9/13%
9.1/9.8%
4.7/6.5%
5.2/6.5%
15Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
2022 Scorecard
1. Safety 7.5%
2. Financial Performance 5.0%
3. Production 10.0%
4. Business Plan Implementation 7.5%
5. Sustainability 5.0%
6. Unlocking Value 10.0%
7. Leadership Effectiveness 5.0%
8. Total Shareholder Return 50.0%
Remuneration Report pages 71 to 87
The 2022 scorecardremains largely the same as the 2021 scorecard as it reflectsa focus on
performance with clear output KPIs at the Group level balanced with a series of input targets
across all other levels of the business. Itensures safety is prioritised alongside operational
targets, and balances short-term production targets with longer-term business value,
Business Plan implementation and leadership to stabilise and then grow our business, whilst
delivering a robust response to sustainability.
With input from the Extended Leadership Team, the Remuneration Committee have identified
a number of critical actions for 2022 that have the potential to unlock value. These include
completing the pre-emption of the sale by Occidental Petroleum to Kosmos of its interests
inthe Jubilee and TEN fields in Ghana, making progress on a farm down in Kenya, a
successful takeover of operatorship of the Jubilee FPSO, progressing the commercialisation
of gas in Ghana, resolving ongoing tax disputes and further optimisation of our portfolio to
maximise value.
1 TSR is only applicable to CEO and CFO Remuneration. Remuneration for the wider
workforce is based on all other KPIs.
KPI Performance Strategic objective
1. Safety
Total Recordable Incident Rate (TRIR) of between 0.78 and 0.51;
Loss of Primary Containment (LOPC) Tier 1 and 2 as per IOGP definition of 1
orless at Tier 2 and 0 at Tier 1
Group underlying Operating Cash Flow (OCF) of $513 million to $627 million at
a Brent price of $60/bbl
55–61 kobpd produced; Jubilee production efficiency of 96–98%; TEN
production efficiency of 97–99%
Achieve 100% agreed work programme for $452 million agreedbudget
Achieve 90 to 100% of ESG key deliverable milestones
Having completed the refinancing in 2021, focus is now on unlocking value
through a number of critical actions discussed below
Organisation is positioned for sustainable success
Creating shareholder value
2. Financial Performance
3. Production
4. Business Plan Implementation
5. Sustainability
6. Unlocking Value
7. Leadership Effectiveness
8. Total Shareholder Return
1
4
1 3
2
65
1
2
1
7
1
5
2
6
3
7
4
50%
7.5%
5.0%
10%
7.5%
10%
5%
5%
Tullow Oil plc 2021 Annual Report and Accounts16
Operations review
A review of our operations
The Group’s audited 2C resources decreased from 640 mmboe
to 623 mmboe. The reduction was driven primarily by the
saleof assets in Equatorial Guinea and Gabon, the maturation
of selected TEN projects from 2C to 2P and poorer than
expected field performance at TEN. However, these reductions
were largely offset by a positive revision from Tullow’s
auditorsof the Kenyan assets, to align with the updated
FieldDevelopment Plan.
Ghana
Jubilee
The Jubilee field averaged 74.9 kbopd gross (net 26.6 kbopd)
in 2021, ahead of guidance at the start of the year. Average
daily production grew from c.70 kbopd at the beginning of the
year to exceed 90 kbopd by year-end, as new wells were
brought onstream and operational performance remained
high with FPSO uptime averaging c.98%, gas offtake rates
averaging c.85 mmscfd and water injection rates averaging
over 200 kbwpd. The annual gas offtake rate was impacted by
overrunning maintenance and subsequent reduced capacity
atthe Ghana National Gas Company (GNGC) onshore gas
processing plant during the fourth quarter of the year. Tullow
continues to work closely with GNGC to help improve offtake
reliability. Gas offtake has now returned to regular rates of
over 100 mmscfd and Tullow and its JV Partners are still
targeting average offtake of c.135 mmscfd in 2022.
The drilling programme, which commenced in April, delivered
two producers (J56-P online in July, J57-P online in December),
one water injector (J55-WI online in September) and a work
over (J12-WI online early in January 2022). Strong drilling
performance was achieved during the year with wells costing
approximately 20% less than wells drilled from 2018 to 2020,
ahead of the assumptions included in the Business Plan.
The field continues to perform well, and average 2022
production is expected to increase to between c.80 to 84 kbopd
gross (net: 28 to 30 kbopd). This forecast includes a planned
shutdown in the second quarter of 2022 for approximately two
weeks. Three new wells are planned to be drilled at Jubilee in
2022, focused on delivering reliable in-year production: a
water injector, which will provide pressure support to existing
producers, is due onstream in the first quarter; this will be
followed by a producer and a second water injector.
Production, reserves and resources
In 2021, Group working interest production averaged 59.2 kboepd,
in line with guidance, with notable production growth from the
Jubilee field in Ghana and Simba field in Gabon, but lower
production than expected from the TEN fields in Ghana and the
Espoir field in Côte d’Ivoire.
In 2022, Group working interest production guidance is 55 to
61kboepd. This forecast is based on Tullow’s existing equity
interests in Jubilee (35.48%) and TEN (47.175%) and will be
adjusted following completion of the pre-emption of the sale of
Occidental Petroleum’s interest in Ghana to Kosmos Energy.
Theestimated full year impact of the completed pre-emption
would be an addition of c.5 kboepd (net) to the Group’s 2022
production forecast, subject to adjustment for completion timing.
Group average working interest production
FY 2021
(kboped)
FY 2022
guidance
(kboped)
Ghana 42.1 39–42
Jubilee 26.6 28–30
TEN 15.5 11–12
Non-operated portfolio 17.2 16–19
Total production 59.2 55–61
1 Ghana production represented before impact of pre-emption on Deep Water
Tano (DWT) Block
2 2021 figure includes partial production from assets in Equatorial Guinea and
the Dussafu Marin Permit in Gabon, ahead of divestment during the year. 2022
production guidance does not include any production from these assets.
The Group’s audited 2P reserves decreased from 260 mmboe
at the end of 2020 to 231 mmboe at the end of 2021. About
half of this reduction was the result of the sale of assets in
Equatorial Guinea and the Dussafu Marin Permit in Gabon
(15mmboe). Reserve additions and positive revisions included
a 13 mmboe increase at Jubilee following improved field
performance and acceleration of new projects and a
11mmboe increase in the non-operated portfolio due to
better field performance and maturation of new projects.
These gains were offset by a 16 mmboe decrease at TEN
reflecting poorer than expected Ntomme field performance
and re-categorisation of certain reserves at Enyenra. Overall,
with the Group producing 22 mmboe during 2021, the organic
reserves replacement ratio was approximately 36%.
17Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
The core developed area of the Jubilee field has c.1.5 billion
barrels gross oil initially in place (STOIIP), with an estimated
ultimate recovery (EUR) approaching 40%. To date, around
half of the expected reserves have been produced. Outside of
the core area, the development of the Jubilee North East
(JNE) and Jubilee South East (JSE) areas marks a step
change that targets relatively untapped areas of the field,
containing over 500 mmbbls gross oil in place. These areas
combined gross EUR is over 170 mmbbls gross oil, of which
less than 10% has been produced. The 2022 work programme
is focused on investment in infrastructure for the JSE and
JNE projects that will access the undeveloped resources and
lead to meaningful production growth in subsequent years.
TEN
The TEN fields averaged 32.8 kbopd gross (net: 15.5 kbopd)
in2021, below guidance given at the start of the year. This was
primarily due to higher production decline rates than expected
on particular wells. A gas injector at the Ntomme field
(Nt06-GI), was brought onstream in the fourth quarter to
provide pressure support to existing production wells. Nt06-GI
also encountered oil at the base of the well, de-risking the
development potential of areas further to the north of Ntomme.
In 2021, uptime on the TEN FPSO was c.97%, water injection
was c.65 kbwpd and gas injection was c.135 mmscfd. In 2022,
TEN is expected to produce between 22 to 26 kbopd gross
(net: 11–12kbopd).
Within the core developed areas of Ntomme and Enyenra,
which contain c.750 mmbbls gross oil initially in place
(STOIIP), around half of the expected reserves have been
produced to date. However, production decline within this core
area has been faster than expected and while material
reserves remain, the overall view of ultimate recovery from
these fields has reduced. As a consequence, Tullow and its
Joint Venture (JV) Partners have improved their understanding
of the broader TEN area and the significant remaining
potential. The addition of undeveloped reservoirs in the
Tweneboa area, accessible from the Ntomme riser base area,
and the extension of the Enyenra field development to the
north and south of the core developed area, introduce a
similar volume of undeveloped STOIIP as the core areas.
Tullow and its JV Partners will start to target these new areas
in 2022, with two development wells planned in the Ntomme
riser base area. Investment in infrastructure will allow these
to be brought on stream from 2023. Furthermore, an
additional production well is planned in the undeveloped
Enyenra North area in the fourth quarter of the year.
Operational Transformation Plan
The operational transformation that Tullow embarked on in
2020 has delivered strong performance across safety, reliability
and costs. A singular focus on personal and process safety
across the organisation and visible leadership have provided
afoundation for a strong safety culture. The production
potential is being maximised by optimising performance of
every element of production from the reservoir to the surface
facilities. High levels of facility uptime have been achieved at
both FPSOs by addressing long-standing equipment defects
and sustaining this by implementing systemised monitoring
and mitigating of equipment risk. In addition, Tullow is
building an equipment systems maintenance management
infrastructure to help sustain the reliability improvements.
Allthis has been achieved by taking more direct control of
day-to-day operations on the Jubilee and TEN FPSOs.
In order to build on these improvements and to achieve the
ambition to be a top quartile operator in terms of safety,
reliability and costs, Tullow, supported by its JV Partners
andthe Government of Ghana, has taken the decision to
self-operate the Jubilee FPSO. Accordingly, Tullow will take
over all operations and maintenance (O&M) from MODEC on
the Jubilee field when the current O&M contract comes to a
scheduled end in 2022. This will allow greater control and
integration over the core areas of safety, efficiency, emissions,
reliability and local content, in turn presenting an opportunity
to further reduce costs.
Progress towards elimination of routine flaring in Ghana
As part of Tullow’s commitment to becoming a Net Zero
Company by 2030 on its Scope 1 and 2 emissions, work to
increase gas processing capacity at the Jubilee FSPO is
planned during a scheduled shutdown in the second quarter
of 2022, which together with compressor upgrades and other
facility de-bottlenecking activities through 2022 and early 2023
will increase gas handling capacity and contribute towards the
target of eliminating routine flaring in Ghana by 2025. Other
activities planned during the shutdown will focus on maintenance,
integrity, and reliability of the FPSO for the long-term.
Tullow Oil plc 2021 Annual Report and Accounts18
Ghana gas commercialisation
Associated gas from Jubilee and non-associated gas from the
TEN fields has the potential to be a significant value driver for
Tullow and for Ghana. In 2009, Tullow and its JV Partners
pledged to provide 200 bcf of rich/wet associated gas (Foundation
gas) from the Jubilee field free of charge to the Government of
Ghana. The Group currently expects to complete the provision
of this Foundation gas, which Tullow estimates has delivered
over c. $2.4 billion of value to Ghana including the onshore
extraction of liquids yields, by the end of 2022. Based on
Tullow’s calculations, gas from the Jubilee field currently fuels
c.30% of thermal power generation in Ghana and continued
offtake of associated gas from the Jubilee field is vital to
maintaining oil production, increasing power generation
inGhana and the production of Liquid Petroleum Gas for
Ghana’s domestic market. Tullow is currently in commercial
negotiations with the Government of Ghana to finalise the
Post Foundation Volume Gas Sales Agreement which would
deliver 500 bcf of natural gas and would add c.6 kboepd to
Group production. The Group’s investment in upstream gas
handling infrastructure on the Jubilee FPSO and the ability to
supply comingled Jubilee & TEN gas gives Tullow confidence
that it can meet growing domestic demand and be the most
competitive supplier of gas into the Ghanaian market.
Tullow is also in positive discussions with JV partners and
theGovernment of Ghana on the development of incremental
gas volumes present at the TEN fields where c.1 tcf of gas is
estimated to be in place. Because of the upstream infrastructure
in place, including a gas pipeline to shore, TEN gas is well-placed
to be a stable and reliable source of gas at potential rates of
6kboepd for Ghana and, as the power sector in West Africa
develops further, the wider region. With such substantial
volumes in place, this resource has the potential to drive
significant industrial transformation in Ghana across the
mining and petrochemical sectors among others and be a
reliable and low-cost provider of wet gas at a time when the
benefit of having significant domestic gas supplies is so clear.
Pre-emption of Deep Water Tano component of Kosmos
Energy/Occidental Petroleum Ghana transaction
In November 2021, Tullow exercised its right of pre-emption
related to the sale of Occidental Petroleum’s interests in the
Jubilee and TEN fields in Ghana to Kosmos Energy. As a
result, Tullow’s equity interests are expected to increase to
38.9% in the Jubilee field and 54.8% in the TEN fields upon
completion of the transaction. The transaction documents are
now in agreed form between Tullow and Kosmos. On this
basis, Tullow and Kosmos have jointly requested consent from
the Government of Ghana and discussions with the
Government are progressing positively.
Non-operated portfolio
Production from Tullow’s non-operated portfolio averaged
17.2kboepd in 2021, including contributions from Tullow’s
continuing interests in Gabon, Côte d’Ivoire and partial
contribution from divested assets. 2022 net production is
expected to average between 16 to 19 kboepd.
In February 2021, Tullow announced an agreement to sell its
entire interests in Equatorial Guinea and the Dussafu Marin
Permit in Gabon to Panoro Energy ASA. The deals were
completed in March 2021 and June 2021, respectively, for
$180 million including contingent cash payments of up to
$40million which are linked to asset performance and oil price.
In Gabon, the Simba expansion project made good progress in
2021, and an infill well was brought onstream in September
2021. A new 10-inch pipeline, allowing increased oil offtake
from the field, became operational in December 2021. After
initial operational issues post start-up, the well is now
performing as expected and consequently, net production for
the Simba field in 2022 is expected to average c.6kbopd, 40%
higher than in 2021. Also in Gabon, two infrastructure-led
exploration wells were drilled in the year near the Tchatamba
field. One well was unsuccessful and the other resulted in the
Wamba (TCTS-B14) discovery in the second half of 2021.
Wamba is adjacent to the Tchatamba South oil field and
extended production tests are planned in 2022.
In Côte d’Ivoire, the Espoir field was shut down for approximately
four weeks in the first half of the year following a major incident
onboard the FPSO in January 2021. A further shutdown of
approximately eight weeks was conducted in the second
halfof the year to carry out remediation work identified by
BWOffshore, the FPSO operator. The field is now back
onstream and Tullow continues to engage with the operator
(CNR International) on further remediation plans for the
FPSOand on identifying development drilling opportunities.
Operations review continued
19Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Decommissioning
In the UK, post-decommissioning surveys have been completed
and submitted as part of the operated decommissioning
programme approval process, with formal approval expected in
2022. The Group’s non-operated decommissioning activities are
ongoing and are expected to continue through to 2026.
In Mauritania, the Group’s operated decommissioning
programme of the Banda and Tiof fields is expected to
commence in the fourth quarter of 2022. Planning is well
advanced, with major service providers secured. Non-operated
decommissioning of the Chinguetti field is ongoing and seabed
infrastructure clearance is expected to complete this year.
The expected remaining UK and Mauritania decommissioning
exposure over 2022-26 is c.$180 million, with over half of this
forecast spend in 2022. The final exposure may vary depending
on the final required scope and work programmes agreed
across the various projects. Provisioning for decommissioning
of producing assets in Ghana and parts of the non-operated
portfolio has commenced this year at c.$30 million per annum.
Kenya
In 2021 Tullow and its JV Partners (Africa Oil and Total Energies)
completed the redesign of the Kenya development project
(Blocks 10BB and 13T licences) to ensure it is a technically,
commercially and environmentally robust project. The key
changes to the development concept have been driven by
incorporating the production data from the Early Oil Pilot
Scheme (EOPS), optimising the number of wells to be drilled and
changing the producer to injector ratio, adding the Ekales field
into the first phase of production and increasing the Central
Processing Facility capacity to 130,00 bopd and the pipeline size
from 18” to 20” to handle the increased flow rates.
These changes have increased total gross capital expenditure
(capex), which covers both the upstream and the pipeline to
First Oil, to c.$3.4 billion and delivers a 30% increase in
resources whilst lowering the unit cost to $22/bbl (previously
c.$31/bbl). A higher production plateau of 120 kbopd is now
planned, with expected gross oil recovery of 585 mmbo over
the full life of the field. This resource position is supported by
a Competent Persons Report completed by external
international auditors Gaffney Cline Associates (GCA).
Simultaneous to the development, an exploration and
appraisal (E&A) plan will be implemented to ensure the
remaining five discoveries are developed efficiently. This will
extend and sustain initial plateau rates while keeping costs
low by using the rigs used for development drilling. The E&A
plan also focuses on additional exploration potential within
the Blocks 10BB and 13T licences and exploring the wider
Blocks 10BA and 12B licence acreage.
Tullow and its JV Partners have taken the opportunity of this
review to improve the environmental and social aspects of the
project. Carbon emissions will be limited through a combination
of heat conservation, use of associated gas for power and
reinjection of excess gas into the reservoir. Further, there are
opportunities to use the Kenyan national grid that is
substantially powered by renewables and options to offset
remaining emissions. As per the previous development plan,
the 825 kilometres long pipeline that will transport the crude
oil from Turkana to the port of Lamu will be heated and buried
to avoid long-term disruption. The project will also require
water for reservoir pressure which will be abstracted through
a pipeline from the Turkwell Dam and will also be used to
provide water to local communities. This project would also
beKenya’s first oil and gas development and would represent
a stable, long-term source of income for the Government
ofKenya.
In line with licence extension requirements, Tullow and its
JVPartners submitted a final FDP to the Government of
Kenya in December 2021, incorporating their feedback
onthedraft FDP submitted earlier in the year.
Submission of the FDP for the 10BB/13T licences will allow
Tullow and its JV Partners to secure the Production Licences
for blocks and the continuation of the exploration licences on
the 10BA and 12B blocks through the commitments made in
the E&A plan. The JV is now working closely with the Ministry
of Petroleum and Mines to secure FDP approval which needs
to be ratified by the Kenyan parliament. The FDP is conditional
on a number of critical work streams for both the Government
of Kenya and the JV Partners, including, but not limited to, the
successful introduction of a new strategic partner. Constructive
discussions with interested parties are progressing as Tullow
and the JV Partners look to secure a strategic partner for
theproject.
“ Through the redesign of the
Kenya development concept
Tullow and its JV partners have
created a commercially and
environmentally robust project.”
Tullow Oil plc 2021 Annual Report and Accounts20
Exploration
In Tullow’s core area of West Africa, the exploration team is
focused on maturing near-field and infrastructure-led (ILX)
exploration opportunities around existing producing fields, to
unlock additional value from the Group’s asset base.
In Gabon, focus in on strengthening the prospective resource
base within the Simba licence and several low-risk and
compelling investment options adjacent to infrastructure have
been identified which will be considered for future drilling
programmes.
In Côte d’Ivoire, Tullow has a 90% interest in offshore Block
CI-524 which is a continuation of the proven Cretaceous
turbidite plays that are producing at the adjacent TEN and
Jubilee fields. This block presents a unique opportunity due to
Tullow’s deep understanding of the area and its proximity to
the Group’s producing fields that could realise cost and
operational synergies in the event of discoveries. Focus has
been on maturing opportunities through 3D seismic
reprocessing which has identified additional prospective
resources in several stacked reservoirs that are being
matured as future drilling candidates. Tullow, together with its
JV Partner PetroCi, has proceeded into the second exploration
phase in CI-524, which includes a commitment well to be
drilled before August 2024.
In Ghana, focus is on opportunities around the Jubilee and
TEN fields to unlock additional value from the Group’s asset
base, with potential reserves additions from ILX opportunities.
Tullow also continues to focus on unlocking value from the
substantial prospective resource base in the emerging basins
of Guyana and Argentina, while seeking to mitigate capital
exposure from historical work commitments. In 2022,
commitments include the Beebei-Potaro exploration well in
the Kanuku Block in Guyana, which will target the Cretaceous
light oil play of the Guyana-Suriname Basin, as well as
seismic acquisition over Block MLO 122 in Argentina.
In 2021, Tullow drilled the unsuccessful Goliathberg-Voltzberg
North exploration well, on Block 47, offshore Suriname. The
well encountered good quality reservoir but only minor oil
shows. In Argentina, a multi-client 3D seismic acquisition was
completed on Tullow-operated licences MLO114 and MLO119.
In Côte d’Ivoire, Tullow has now exited all onshore blocks but
retains its 90% interest in the offshore Block CI-524, adjacent
to the TEN fields.
The Group continued to rationalise its portfolio during the year
and exited 11 exploration blocks in 2021, including all of its
licences in Suriname and Peru, reorienting its exploration
effort towards near-field and infrastructure-led exploration
activities to enhance value in core areas. In January 2022,
Tullow also exited the PEL 90 licence in Namibia.
Operations review continued
“ The exploration team is focused
on maturing near-field and
infrastructure-led exploration
opportunities around existing
producing fields, to unlock
additional value from the
Group’sasset base.”
21Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Chief Financial Officer’s statement
Creating a pathway
for future growth
2021 was a transition year for Tullow as the Group began to execute and deliver on the
10-yearBusiness Plan we presented at our Capital Markets Day at the end of November 2020,
and I am pleased to report on the good progress we made during the year.
Transformational refinancing delivered
The comprehensive refinancing of Tullow’s debt was a
significant event for Tullow in 2021, to simplify our capital
structure, increase our financial resilience and give us the
foundation to deliver our Business Plan. This was completed
in May 2021, with the issuance of $1.8 billion of Senior
Secured Notes (maturing in 2026), and the placement of a
$500 million revolving credit facility with nine of our lending
banks previously in the Reserves Based Lending (RBL) facility.
The new notes, along with cash on balance sheet, allowed
usto repay and redeem existing bonds that were due in 2021
and 2022 and repay and cancel our RBL facility. Tullow’s next
material maturity is now its $800 million of Senior Notes
duein 2025, creating a clear pathway for Tullow to invest
initsassets to maximise their value and deliverour cash
generative plan.
Continued prudent financial strategy
Tullow’s Business Plan supports deleveraging, with cashflows
expected to reduce our leverage to 1.5x net debt to EBITDAX
by 2025 (at $65/bbl), and at higher oil prices we would expect
to achieve this earlier. Key to achieving this target is strict
capital allocation, a focus on costs and prudent financial
riskmanagement.
Rigorous capital allocation is now embedded at Tullow as
wefocus on high return and fast payback investments in our
production assets. Capital expenditure was $263 million
in2021, with over 80% of spend allocated to our producing
assets, compared with c.70% on average over2016–20.
Commodity hedging remains a key component of our financial
risk management. In 2021, as required under the terms of the
refinancing, we built up a portfolio which protects 75% of our
production entitlements for a period of 24 months from
completing our debt refinancing in May 2021, and 50% of our
production entitlements for another 12 months beyond that.
Our hedge portfolio from 2022 to May 2024 has weighted
average collars of c.$53–76/bbl, giving us robust downside
protection as well as good access to upside. Higher oil prices
in the second half of 2021 did mean we lost out on some
higher oil price upside, resulting ina $153 million loss on
therealisation of commodity hedges for the year. While this
outflow may seem disappointing, I remain firmly of the view
that downside protection is incredibly important to protect the
Company against oil price volatility, asevidenced during the
two most recent downturns when over $1 billion of revenue
was generated through hedging downside protection.
Continued focus on costs
In 2021, we continued to deliver cost savings across the
business with net G&A down to $64 million (2020: $87million).
Our net operating costs were also reduced to $269 million
(2020: $332 million), primarily due to savings of c.$50 million
in Ghana due to facilities O&M costs and the result of asset
disposals. While our culture is becoming ever more performance
focused, where every barrel matters and every dollar counts,
we faced some cost pressures in 2021. Despite lower net
operating costs unit operating costs increased to $12.4/bbl
(2020:$12.1/bbl). However, this was primarily due to lower
production and increased costs related to extended COVID-19
operating procedures. A normalised unit operating cost
was$12.1/bbl.
“ I leave Tullow confident that it
hasa great team of people who
are working with much improved
processes, re-focused capital
discipline and the platform
tothrive.”
Les Wood
Chief Financial Officer
Tullow Oil plc 2021 Annual Report and Accounts22
Chief Financial Officer’s statement continued
Continued focus on costs continued
Financing costs also remain high relative to cash flow
generation at $356 million in 2021 (2020: $314 million),
however, this includes one-off refinancing fees of $18 million.
Looking ahead to 2022 and beyond, financing costs are set to
steadily reduce as we pay down debt. Tullow continues to
haveexposure to legacy legal issues such as the ongoing tax
dispute with the Ghana Revenue Authority (as detailed on
page 119), and while we endeavour to settle these issues,
there are occasions where arbitration is the only way to bring
these matters to a close. In February 2022, we announced the
result of an Arbitration with HiTec Vision (HiTec) regarding
payments related to the purchase of Spring Energy in 2013.
The panel delivered an award in favour of HiTec and ruled
thatTullow should pay $76 million. While the verdict was
disappointing, Tullow accepts the outcome and paid the
amount from existing cash balances. On a more positive note,
also in February, a Final Investment Decision for the Tilenga
project was taken in Uganda, triggering a contingent
consideration of $75 million in relation to the sale of our
Uganda assets to Total in 2020.
Further refinement of our portfolio
Following the sale of Tullow’s interests in Uganda in 2020,
Tullow’s portfolio management activities continued in 2021
with the sale of our Equatorial Guinea assets and the Dussafu
Marin permit in Gabon. These value accretive transactions
raised $133 million, delivering important cash flow for the
Group tofurther strengthen the balance sheet. Together with
the significant cost savings generated, these actions delivered
around $1 billion of ‘self-help’, a critical component that
underpinned the refinancing.
We have also substantially simplified our exploration portfolio,
exiting non-core areas including Peru and Suriname and
onshore licences in Côte d’Ivoire. We also looked to farm down
and reduce our stake in licences in Guyana and Argentina,
which have near-term work commitments, with good interest
from potential buyers. However, these efforts are yet to result
in new partners, primarily due to a challenging external
backdrop during 2021, resulting in higher than planned
exploration spend in 2022.
In November 2021, Tullow exercised its right of pre-emption
related to the sale of Occidental Petroleum’s interests in the
Jubilee and TEN fields in Ghana to Kosmos Energy. As a
result, Tullow’s equity interests are expected to increase to
38.9% in the Jubilee field and 54.8% in the TEN fields upon
completion of the transaction. The transaction documents are
now in agreed form between Tullow and Kosmos. On this
basis, Tullow and Kosmos have jointly requested consent from
the Government of Ghana and discussions with the
Government are progressively positively.
In Kenya, the submission of a revised Field Development
Planwas a key focus, and Tullow and its JV Partners
submitted the plan in December 2021, as per the licence
extension requirements provided by the Government of Kenya
inSeptember 2020. The JV Partners also continue to seek
astrategic partner for this project and constructive
discussions are progressing with interested parties.
Key 2021 financial results
Our financial strategy, comprehensive refinancing and
focuson cost discipline have led to positive results. Tullow
generated $1.3 billion revenue (2020: $1.4 billion), resulting
in$711 million of operating cash flow (2020: $598 million).
However, the Company made a loss after tax of $81 million,
primarily driven by impairments and restructuring costs and
other provisions. Post financing costs, Tullow generated $245
million of free cash flow (2020: $432 million), allowing us to
reduce net debt to $2.1 billion (2020: $2.4 billion) with year-end
gearing of 2.2times net debt to EBITDAX (2020:3.0 times). We
closed theyear with strong liquidity headroom consisting of
free cashand undrawn facilities of$876 million.
Following an independent reserves audit of our producing
assets we have reported pre-tax impairments of $54 million.
These were primarily driven by a decrease in TEN 2P reserves
and an increase in future capex partially offset by a higher
long-term oil price assumption of $65/bbl.
Reflections on a challenging but rewarding tenure
In September 2021, Tullow announced that I would step down
as Chief Financial Officer (CFO) and leave the business at the
end of March 2022. The decision to move on comes after eight
years with the Company, with my last five years spent as CFO.
Following our comprehensive refinancing earlier this year,
which was the culmination of a number of steps to strengthen
the Group’s balance sheet, it is the right time for me to
leaveTullow.
While my tenure has been hugely challenging as we guided
Tullow through some of the most difficult times in its history,
Iam very proud to have led the team responsible for Tullow’s
financial turnaround and to input into the Group’s future
strategy. I leave Tullow confident that it has a great team of
people in place, who are working in a company with much
improved processes, re-focused capital discipline and the
platform to thrive. I have built excellent relationships that
Iknow will endure and I look forward to watching Rahul and
his talented team execute our ambitious strategy over the
years to come.
Les Wood
Chief Financial Officer
8 March 2022
23Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
All text to be supplied
Insights from the Task Force on Climate-related
Financial Disclosures (TCFD) scenario analysis
In 2021 Tullow continued to test the resilience of its portfolio against a range of scenarios including those of the International
Energy Agency (IEA), a commonly accepted source for the global energy sector. The four IEA scenarios, theNet Zero
Emissions by 2050 Scenario, Announced Pledges Scenario, Stated Policies Scenario and the Sustainable Development
Scenario, assess the impact of the energy transition on a wide range of industries with different regional impacts, including
the impact on energy demand and energy mix in different markets. However, as a predominantly oil producing company with
no downstream assets, the key material risk for our business remains oil price and to a lesser extent carbon price.
Our assessment reflects the impact of each scenario on the Group’s Operating Cash Flow (OCF) over 1, 5, and 10 years. The
choice of OCF instead of NetPresent Value (NPV), which was used last year, has been made to reflect our Group Scorecard
and the guidance given toinvestors about our future financial performance in our Trading Statements. The OCF KPI reflects
our ability as a company to generate the cash we need to invest in the business and to finance the activities of the business.
Whilst the discounting of cash flows in the NPV calculation implicitly captured the different impacts of the scenarios over
time, we have chosen to make the changing impacts over time more explicit.
Refer to Note 26 for assessment of climate change risk on the Group’s Financial Statements.
OCF impact 1 Year 5 Year 10 Year
STEPS Stated Policies Scenario
APS Announced Pledges Scenario
SDS Sustainable Development Scenario
NZE Net Zero Emissions by 2050 Scenario
IEA scenarios
(Real Terms 2020 $/bbl) 2022 2023 2024 2025 2026 2027 2028 2029 2030 2035 2040 2045 2050
STEPS Stated Policies Scenario 66 68 69 70 72 73 74 76 77 80 83 85 88
APS Announced Pledges Scenario 65 65 66 66 66 66 67 67 67 66 65 65 64
SDS Sustainable Development Scenario 64 63 62 61 60 59 58 57 56 55 53 52 50
NZE Net Zero Emissions by 2050 scenario 62 59 55 52 49 46 42 39 36 33 30 27 24
Tullow Planning Assumption ($65/bbl
flat nominal)
62 61 60 59 58 57 55 54 53 48 44 40 36
TCFD disclosures
Governance Describe the Board’s oversight of climate-related risks and opportunities. Page 56–57
Describe the Management’s role in assessing and managing climate-related risks and opportunities Page 57
Strategy Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term. Risks – Page 38
Opportunities – Page 4–5
Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning. Page 23
Page 146 (Note 26)
Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios,
including a 2°C or lower scenario.
Page 23
Page 146 (Note 26)
Risk
management
Describe the organisation’s processes for identifying and assessing climate-related risks. Page 36–38, 40
Describe the organisation’s processes for managing climate-related risks. Page 36–38, 40
Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s
overall risk management.
Page 36–38, 40
Metrics and
Targets
Disclose the metrics used by the organisation to assess climate-related risks and opportunities, in line with its strategy and
risk management process.
OCF – Page 23
Emissions –Page 31–32
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. Page 31–32
Describe the targets used by the organisation to manage climate-related risks, opportunities, and performances against targets. Page 14–15, 76, 82
Positive impact
Loss of 0–10%
Loss > 10%
Tullow complies with the TCFD disclosure recommendations fully within this Report and more comprehensively in our Climate
Risk and Resilience Report, see table below for information regarding these disclosures. Our Climate Risk and Resilience report
can be found at www.tullowoil.com/sustainability.
Tullow Oil plc 2021 Annual Report and Accounts24
Finance review
2021 2020
Profit and Loss
Revenue ($m) 1,273 1,396
Underlift/ Overlift income/
(expense) ($m) 20 (161)
Balance Sheet
Underlift ($m) 27 20
Overlift ($m) (1) (4)
Underlying cash operating costs, depreciation, impairments,
write-offs and administrative expenses
Underlying cash operating costs amounted to $269 million;
$12.4/boe (2020: $332 million; $12.1/boe). The reduction in
operating costs is mainly driven by the disposal of Equatorial
Guinea in 2021 ($23 million) and decrease in Facilities O&M
costs in Ghana ($47 million), offset by an increase in Gabon
mainly due to the costs relating to the Simba well which came
onstream in 2021 ($12 million).
Cash operating costs excluding COVID-19 operating
procedures and shuttle tanker operations in Ghana were
$12.1/boe (2020: $11.8/boe).
Depreciation, depletion and amortisation (DD&A) charges
onproduction and development assets amounted to
$361million; $16.7/boe (2020: $446 million; $16.3/boe).
Thisincrease in DD&A per barrel is mainly attributable
toadownward revision of TEN 2P reserves.
Administrative expenses of $64 million (2020: $87 million) have
decreased against the comparative period. In February 2020,
Tullow concluded its Business Review, which included a review
of the Group’s organisation structure and resources and
resulted in a significant headcount reduction. Furthermore,
the Group has focused on reducing non-payroll G&A costs
including outsourced information systems expenses,
professional fees and office rent. However, this is partially
offset by the adverse GBP:USD FX variance in 2021. During
2021, Tullow met its $125 million cost savings target by
delivering $127 million in cash savings and is expected to
deliver in excess of this in 2022 and beyond.
The Group recognised a net impairment charge on producing
assets of $54 million in respect of 2021 (2020: $251 million).
Impairments primarily related to the TEN fields following
reduced 2P reserves and higher capital expenditure offset
byhigher price assumptions and lower expected future
decommissioning costs. The TEN fields’ impairment was
offset by impairment reversals on the non-operated fields
associated with increased 2P reserves and higher
priceassumptions.
Financial summary 2021 2020
Working interest production volume
(boepd)
1
59,200 74,900
Sales volume (boepd) 55,450 74,600
Realised oil price ($/bbl) 62.7 50.9
Total revenue ($m) 1,273 1,396
Gross profit ($m) 634 403
Underlying cash operating costs
perboe ($/boe)
1
12.4 12.1
Exploration costs written off ($m) 60 987
Impairment of property, plant and
equipment, net ($m) 54 251
Operating profit/(loss)($m) 515 (1,018)
Profit/(Loss) before tax ($m) 203 (1,273)
Loss after tax ($m) (81) (1,222)
Basic loss per share (cents) (5.7) (86.6)
Capital investment ($m)
1
263 288
Adjusted EBITDAX ($m)
1
961 804
Net debt ($m)
1
2,131 2,376
Gearing (times)
1
2.2 3.0
Free cash flow ($m)
1
245 432
Underlying operating cash flow ($m)
1
711 598
Pre-financing cash flow ($m)
1
529 625
1. Alternative performance measures are explained and reconciled on pages
161 to 162.
Production and commodity prices
Group working interest production averaged 59,200 boepd,
adecrease of 21% for the year (2020: 74,900 boepd). The
decrease in production primarily resulted from the sale of
Tullow’s interests in Equatorial Guinea and the Dussafu Marin
Permit in Gabon in 1H21, and lower than expected production
from the TEN fields.
The Group’s realised oil price after hedging for the period
was$62.7/bbl and before hedging $70.3/bbl. (2020: $50.9/bbl
and $42.9/bbl respectively). There has been a strong recovery
in oilmarkets which has led to higher realised prices partially
offset by hedge losses, decreasing total revenue by
$153million (2020: increased revenue by $219 million).
2021 financial results
25Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Impairment of property, plant
andequipment (PP&E)
2021 2020
Pre-tax impairment of PP&E,
net($m) 54 251
Associated deferred tax credit ($m) (21) (68)
Post-tax impairment of PP&E,
net($m) 33 183
The total exploration cost written off for the year ended
31December 2021 was $60 million (2020: $987 million),
predominantly driven by the write-off of the GVN-1 well
costsand licence costs of Blocks 47 and 54 in Suriname. The
remaining write-offs comprise of licence level costs associated
with Peru, Comoros, Côte d’Ivoire and Namibia due to no
planned activity and licence exits. This is partially offset by a
release of an indirect tax provision following settlement in
Uganda relating to its disposal in 2020.
Exploration costs written off 2021 2020
Exploration cost written off ($m) 60 987
Asset disposals
In March 2021, the Group completed the sale of its assets
inEquatorial Guinea with a cash consideration received of
$88.9 million. This transaction included contingent future
payments of up to $16.0 million which are linked to asset
performance and oil price. As per the SPA, a further $5.0 million
of additional consideration was also received on completion
ofthe sale of the Dussafu Marin Permit in Gabon.
In June 2021, the Group completed the asset sale of the
Dussafu Marin Permit in Gabon with a cash consideration
received of $39.0 million. This transaction included contingent
future payments of up to $24.0 million which are linked to
asset performance and oil price.
Tullow received $75 million (net of $7 million indemnity
provision relating to tax audits) from Total following a Final
Investment Decision (FID) for the Lake Albert Development
inUganda on 16 February 2022.
Derivative financial instruments
Tullow continues to undertake hedging activities as part of the
ongoing management of its business risk to protect against
commodity price volatility and to ensure the availability of
cash flow for re-investment in capital programmes that are
driving business delivery.
At 31 December 2021, Tullow’s hedge portfolio provides
downside protection for 75% of forecast production entitlements
through to May 2023 and 50% for a further 12 months to May 2024.
Since completion of the comprehensive debt refinancing in May
where increased hedges for May 2021 to May 2024 (75%, 75%,
50%) were a requirement, new hedges have been placed with
$55/bbl floors and weighted average sold calls of c.$76/bbl for
the period January 2022 to May 2024. The strong recovery in oil
prices allowed the Group to secure sold calls above $95/bbl by
the end of the hedging programme implementation.
All of the Group’s derivatives are Level 2 (2020: Level 2). There
were no transfers between fair value levels during the year.
At 31 December 2021, the Group’s derivative instruments had
a net negative fair value of $180 million (2020: net positive
$2million).
2021 hedge position bopd
Bought
put (floor) Sold call
Bought
call
Collars 39,000 $48.12 $66.47 —
Three-way collars
(callspread) 1,000 $50.00 $72.80 $82.80
Total/weighted average 40,000 $48.17 $66.63 $82.80
Hedge position
at31December 2021
2022 2023 2024
Hedged volume (kbopd) 42,500 33,100 11,300
Weighted average bough put
(floor) ($/bbl) $51/bbl $55/bbl $55/bbl
Weighted average sold call
($/bbl) $78/bbl $75/bbl $75/bbl
Net financing costs
Net financing costs for the year were $312 million (2020:
$255million). The increase in financing costs during the
period is mainly driven by finance fees, such as legal and
advisor fees related to the assessment of alternative
refinancing options of the extinguished RBL Facility directly
expensed to the income statement ($18 million), as well as
increased average cost of debt following completion of the
refinancing transactions in May 2021, partly offset by the
netgain on early settlement and derecognition of the RBL
Facility and the 2022 Notes ($8 million credit).
Net financing costs include interest incurred on the Group’s
debt facilities, foreign exchange gains/losses, the unwinding
of discount on decommissioning provisions, and the net
financing costs associated with lease assets. These costs are
offset by interest earned on cash deposits. A reconciliation
ofnet financing costs is included in Note 5.
Taxation
The net tax expense of $283 million (2020: credit of
$52million) primarily relates to tax charges in respect of
theGroup’s production activities in West Africa, as well as
UKdecommissioning assets, reduced by deferred tax credits
associated with exploration write-offs, impairments and
provisions for onerous service contracts.
Based on a profit before tax for the period of $203 million
(2020: loss of $1,273 million), the effective tax rate is 139.8%
(2020: 4.1%). After adjusting for non-recurring amounts related
to restructuring costs, exploration write-offs, disposals,
impairments, provisions for onerous service contracts and
their associated deferred tax benefit, the Group’s adjusted
effective tax rate is 117.0% (2020: 35.6%). The adjusted effective
tax rate has increased primarily due to there being no UK tax
benefit from net interest and hedging expenses of $417 million,
compared to net profits of $16million arising on hedging gain
and net interest in 2020. Non-deductible expenditure in Ghana,
the change in mix of taxable and non-taxable profits in Gabon,
prior year adjustments and taxes on uncertain tax treatments
are additional contributing factors.
Tullow Oil plc 2021 Annual Report and Accounts26
Tullow will continue to maintain capital discipline primarily
directing investment towards maximising value from the Group’s
producing assets. The Group’s 2022 capital expenditure is
expected to total c.$350 million and comprises Ghana
capexof c.$270 million, West Africa non-operated capex
ofc.$30 million, Kenya capex of c.$5 million, and exploration
spend of c. $45 million.
Borrowings
On 17 May 2021, the Group completed a comprehensive
refinancing of its debt with the issuance of five-year $1.8billion
Senior Secured Notes (2026 Notes) and a new undrawn
$500million Super Senior Revolving Credit Facility (SSRCF)
which will be primarily used for working capital purposes.
The 2026 Notes have been used to (i) repay all amounts
outstanding under, and cancel all commitments made
available pursuant to, the Group’s RBL Facility, (ii) redeem in
full the Group’s senior notes due 2022, (iii) repay in full and
cancel the Group’s convertible bonds and (iv) pay fees and
expenses incurred in connection with the transactions.
The 2026 Notes, maturing in May 2026, require an annual
prepayment of $100 million of the outstanding principal
amount plus accrued and unpaid interest with the balance
due on maturity.
The Senior Notes due 2025 is payable in a single payment in
March 2025.
The Revolving Credit Facility, maturing in December 2024,
comprises (i) a $500 million revolving credit facility and (ii)
a$100 million letter of credit facility.
The 2026 Notes and the SSRCF are senior secured obligations
of Tullow Oil Plc and are guaranteed by certain of the
Group’ssubsidiaries.
Credit ratings
Tullow maintains corporate credit ratings with Standard & Poor’s
(S&P’s) and Moody’s Investors Service (Moody’s).
On 5February 2021, S&P’s placed Tullow’s CCC+ corporate
credit rating and CCC+ ratings for bonds maturing in 2022
and2025 on negative credit watch to reflect the uncertainty
associated with ongoing debt refinancing discussions at the
time. On 18 May 2021, S&P’s upgraded Tullow’s corporate
credit rating to B-, removed the rating from negative credit
watch and revised the outlook to stable. At the same time
S&P’s assigned a B- rating to the $1.8 billion 2026 Notes
andconfirmed the CCC+ rating of the $800 million Senior
Notesmaturing in 2025.
On 29 April 2021, Moody’s assigned and placed under review
for upgrade a B3 rating to the $1.8 billion 2026 Notes, and at
the same time placed Tullow’s Caa1 corporate credit rating
under review for upgrade. Moody’s confirmed their Caa2
ratings of the Senior Notes maturing in 2022 and 2025.
On20October 2021, Moody’s upgraded Tullow’s corporate
credit rating to B3 with stable outlook from Caa1 under review
for upgrade, and at the same time upgraded its rating of the
$1.8 billion Senior Secured Notes to B2 with stable outlook
from B3 under review for upgrade. Moody’s also affirmed their
Caa2 rating of the Senior Notes maturing in 2025.
Taxation continued
The Group’s future statutory effective tax rate is sensitive to
the geographic mix in which pre-tax profits and exploration
costs written off arise. Unsuccessful exploration is often
incurred in jurisdictions where the Group has no taxable
profits such that no related tax benefit results. Consequently,
the Group’s tax charge will continue to vary according to the
jurisdictions in which pre-tax profits and exploration costs
write-offs occur.
Analysis of effective taxrate
($m)
Profit/
(loss)
before tax
Tax
(expense)/
credit
Effective tax
rate
Ghana FY 2021 450.9 (163.3) 36.2%
FY 2020 0.4 0.6 (139.2)%
Gabon FY 2021 178.3 (88.5) 49.6%
FY 2020 46.1 (34.6) 75.2%
Equatorial Guinea FY 2021 15.5 (5.4) 35.0%
FY 2020 18.6 0.8 (4.1)%
Corporate FY 2021 (386.0) (41.8) (10.8)%
FY 2020 (25.8) 8.1 31.3%
Other non-operated
and exploration FY 2021 (0.4) (3.6) (1,033.9)%
FY 2020 (20.1) 4.0 (20.0)%
Total FY 2021 258.4 (302.7) 117.1%
FY 2020 59.4 (21.1) 35.6%
Loss after tax from continuing activities and loss per share
The loss for the year from continuing activities amounted to
$81 million (2020: $1,222 million loss). Basic loss per share
was 5.7 cents (2020: 86.6 cents loss per share).
Reconciliation of net debt $m
Year end 2020 net debt 2,375.6
Sales revenue (1,273.2)
Operating costs 268.7
Other operating and administrative expenses 109.2
Cash flow from operations (895.3)
Movement in working capital 52.3
Tax paid 56.1
Purchases of intangible exploration and evaluation
assets and property, plant and equipment 236.5
Other investing activities (134.8)
Other financing activities 447.4
Foreign exchange loss on cash (6.9)
Year end 2021 net debt 2,130.9
Capital investment
Capital expenditure amounted to $263 million (2020: $288 million)
with $205 million invested in production and development
activities and $58 million invested in exploration and
appraisalactivities.
Finance review continued
STRATEGIC REPORT
27Tullow Oil plc 2021 Annual Report and Accounts
Liquidity risk management and going concern
Assessment period and assumptions
The Directors consider the going concern assessment period
to be up to 31 March 2023. The Group closely monitors and
manages its liquidity headroom. Cash forecasts are regularly
produced and sensitivities run for different scenarios including,
but not limited to, changes in commodity prices, different
production rates from the Group’s producing assets and
different outcomes on ongoing disputes or litigation.
Management has applied the following oil price assumptions
for the going concern assessment:
- Base Case: $76/bbl for 2022, $71/bbl for 2023.
- Low Case: $60/bbl for 2022, $60/bbl for 2023.
- The Low Case includes, in addtion to lower oil price
assumptions, a 5% production decrease and 12% increased
opex compared to the Base Case as well as increased
outflows associated with an ongoing disputes.
On 17 May 2021, the Group announced the completion of its
offering of $1.8 billion 2026 Notes. The net proceeds, together
with cash on balance sheet, have been used to (i) repay all
amounts outstanding under, and cancel all commitments
made available pursuant to, the Company’s RBL Facility,
(ii)redeem in full the Company’s senior notes due 2022, (iii) at
maturity, repay in full and cancel the Company’s convertible
bonds due 2021 and (iv) pay fees and expenses incurred in
connection with the transactions. The Group also entered into
a $500 million Super Senior Revolving Credit Facility (SSRCF)
which is undrawn and will be primarily used for working
capital purposes. The 2026 Senior Notes and the SSRCF do
not have any maintenance covenants (disclosure of key
covenants and the determination of availability under the
SSRCF are provided in note 18). Following completion of these
transactions the Directors have concluded that the material
uncertainties noted in the 2020 Annual Report and Accounts,
associated with implementing a Refinancing Proposal and
obtaining amendments or waivers in respect of covenant
breaches or, in the event a Refinancing Proposal is
implemented, the revised covenants are subsequently
breached, no longer exist.
The Group had $0.9 billion liquidity headroom of unutilised
debt capacity and non restrictive cash as at 31 December 2021.
The Group’s forecasts show that the Group will be able to
operate within its current debt facilities and have sufficient
financial headroom for the going concern assessment period
under itsBase Case and Low Case. These forecasts show full
availability of the $500 million SSRCF, which under the
BaseCase remains undrawn. Furthermore management
hasperformed a reverse stress test and the average oil price
throughout the going concern period required to reduce
headroom to zero during the assessment period is $39/bbl.
Based on the analysis above, the Directors have a reasonable
expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Thus, they have adopted the going concern basis of
accounting in preparing the year end results.
Events since 31 December 2021
Adjusting events
On 15 February 2022 a panel of arbitrators, working under
thejurisdiction of Norwegian law, delivered an award in favour
of HiTec Vision (HiTec) in relation to its dispute with Tullow
(Award). The panel had been asked to adjudicate as to
whether discoveries made in the PL-537 Licence (Offshore
Norway) between 2013 and 2016 had triggered a further
payment under the SPA between Tullow and HiTec regarding
the purchase of Spring Energy in 2013. With the Award, the
panel has decided by way of split decision that conditions for
afurther payment outlined in the SPA were met. The Tribunal
ruled that Tullow should pay $76 million. This amount also
includes interest and costs. This has been recognised inthe
balance sheet as a liability as at 31 December 2021.
Non-adjusting events
FID for the Tilenga Project in Uganda and the East African
CrudeOil Pipeline (EACOP) as reported by Total Energies Ltd on
1 February 2022 triggered a contingent consideration payment of
$75 million (net of $7 million indemnity provision relating to tax
audits) in relation to Tullow’s sale of its assets in Uganda to Total
in 2020 which was received on 16 February 2022. This was
recognised as a current receivable as at 31 December 2021.
There have not been any other events since 31 December 2021
that have resulted in a material impact on the year end results.
Tullow Oil plc 2021 Annual Report and Accounts28
Sustainability
Tullow’s purpose is to build a better future through
responsible oil and gas development. Through our activities,
we help address global energy demand in a safe, cost-efficient
and environmentally and socially responsible way. We form
close relationships and partnerships in our host countries in
Africa and South America and our activities generate significant
economic and social value, advancing national development
priorities, creating local business and investment opportunities
and helping to build local skills and capabilities.
Sustainability is embedded across the business through the
implementation of our strategy, management standards,
governance and audits. Our approach considers the
expectations of our key stakeholder groups, including our host
governments and communities, colleagues, shareholders and
the financial markets and suppliers, as well as important
topics for the sector defined by the International Petroleum
Industry Environmental Conservation Association (IPIECA)
andat a global level by the UN in the form of the Sustainable
Development Goals (SDGs). Our sustainability framework
comprises of four pillars which combine the inputs and
expectations of all these groups. The material topics
whichreflect our most important social and environmental
impacts were reviewed and approved by our Senior
Leadership Team in 2021.
Sustainability as a key
to a better future
Safe Operations Shared Prosperity Environmental
Stewardship
Equality and
Transparency
Material topics
- Employee health
and safety
- Process safety
- Emergency response
Material topics
- Local content
and capacity
- Community development
- Social investment
Material topics
- Climate change
- Biodiversity
- Spills
- Waste
Material topics
- Compliance
- Anti-corruption
- Human rights
- Inclusion and diversity
- Tax transparency
Read more: 29 Read more: 30 Read more: 31 and 32 Read more: 33,34,and 35
Tullow supports the following standards and partnerships:
29Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Safe Operations
2021 highlights
- 75% reduction in total recordable injuries compared
to2020
- 55% reduction in High Potential Incidents compared
to2020
- Zero Tier 1 and zero Tier 2 Loss of Primary Containment
(LOPC) releases
- Three years of operations without a Lost Time Injury
atour Jubilee FPSO Kwame Nkrumah
- All operational workforce trained in Process Safety
Fundamentals
- Seven wellness programme events attended per
employee, on average
Tullow is committed to the highest standards of health and
safety and we strive every day to maintain a positive safety
culture across our business. We work hand in hand with our
contractors to ensure compliance with laws and regulations
governing safeworking.
Occupational health and safety
In 2021, we stepped up our safety training programmes to
reinforce our culture of safe working and further embed safe
working practices in line with our safety management system
and International Association of Oil and Gas Producers (IOGP)
Life Saving Rules implementation. Our focus was on renewed
safety leadership across all parts of the business with the
personal involvement of Tullow leaders, including site visits to
our operations in Ghana by our CEO, Rahul Dhir. Overall, we
saw a marked improvement in safety performance in 2021,
reversing a concerning dip in performance in 2020.
Safety performance 2021 2020 2019
Lost Time Injuries
Frequency (LTIF)
0.21 0.32 0.09
Total Recordable Injuries
Frequency (TRIF)
0.43 1.27 0.56
High Potential Incident
Frequency (HiPoF)
1.06 1.74 1.39
Workforce fatalities 0 0 0
Process safety
In 2021, we maintained a strong level of Process Safety
performance with zero Tier 1 and zero Tier 2 Process
SafetyEvents (PSE) related to Loss of Primary Containment
(LOPC) releases.
Process safety events (PSE) 2021 2020 2019
Tier 1 0 0 1
Tier 2 0 4 3
Total 0 4 4
In 2021, we commenced a Process Safety Fundamentals (PSF)
programme, based on the IOGP PSF framework, throughout
the organisation. We trained all our operational workforce,
including our direct employees and contractors, on the PSFs.
To support the roll-out, we nominated PSF champions at our
sites and held monthly events for deep dives on each of the
PSFs, sharing best practice, discussing further integration
into daily ways of working and ensuring the same high level
ofunderstanding and engagement for all our workforce
atalllocations.
Asset protection and emergency response
We are committed to maintaining and enhancing our ability
torespond rapidly to unforeseen events in order to maintain
business continuity and minimise negative impacts on people,
the environment, our physical and intellectual assets, and our
reputation. In 2021, we maintained emergency response
training and exercises involving credible emergency
scenarios. Extensive well capping, containment and oil spill
response training was conducted and followed by a major
exercise to test all parts of our response capability.
COVID-19 response and wellness programme
During 2021, we continued to operate in accordance with
relevant regulations and guidance relating to COVID-19 safety
measures to keep our colleagues, contractors and visitors
safe. Office-based colleagues worked from home during
intermittent closures, and we provided support to help them
deal with the challenges and higher stress levels that
characterised this period. We also assisted colleagues and
contractors who were away from home for extended periods
of time due to travel restrictions and quarantining rules.
Wesupported access to COVID-19 vaccines and strongly
encouraged our teams to be vaccinated. Additionally, our
wellness programme continued throughout 2021, offering
arange of talks and activities with expert speakers and
instructors, placing emphasis on assisting colleagues
navigate the challenges of the COVID-19 pandemic. We held
our annual global Wellness Fortnight in November 2021,
bringing the entire company together to participate in multiple
health and wellness activities. The 2021 wellness programme
attendee count was more than 2,500 throughout the year
which is on average seven different activities per employee.
Tullow Oil plc 2021 Annual Report and Accounts30
Shared Prosperity
2021 highlights
- $207 million local supplier spend in 2021, bringing total
five-year local spend to $1.2 billion
- Launch of Flat Confidence, first 100% Ghanaian owned,
crewed and flagged vessel contracted to support
offshore operations in Ghana
- Over 700 loans worth $267,000 granted to Ghanaian
fishing sector businesses alongside business training
and development support
- Over 700 local suppliers trained on Industry best practice
with the Petroleum Commission/ Tullow Business
Academy in Ghana
- Over 7,800 students across Ghana, Kenya, Guyana and
Suriname benefitted from our range of initiatives
supporting access to educational programmes and
schooling facilities
Shared Prosperity is a core pillar of our Sustainability
Framework. Tullow is committed to investing in (1) local
content and creating conditions to enable local companies
toparticipate inour supply chain; (2) education and skills
development to enhance employability; (3) enterprise
development including supporting agricultural livelihoods
toincrease local entrepreneurship; and (4) mitigating
environmental and social impacts. We engage thoughtfully
and consistently to understand how our operations contribute
to broader governmental aims and affect local communities
wherever we operate. In 2021, for example, Tullow consulted
with 115 communities around our Jubilee and TEN operations,
including over 5,000 beneficiaries of our social investment
activities to review impact mitigation initiatives and social
investment programmes. In Kenya, weengaged with the
National Environmental Management Authority to reach an
agreement on waste management consolidation and started
new project disclosure and consultations on the Midstream,
Upstream and Water pipeline Environmental and Social
Impact Assessment.
Education and skills development
In 2021, Tullow advanced continuing and new initiatives to
encourage more young people to gain education in STEM
andbroaden their career options. In Ghana, we completed
construction of accommodation blocks at three schools for
more than 1,100 pupils which will improve access to education
and attendance, as part of our five-year $10 million commitment
to senior high school infrastructure. In partnership with Youth
Bridge Foundation, the Tullow STEM Radio School continued
to broadcast STEM lessons to over 1,300 high school pupils
across Ghana. Additionally, with Tullow’s support, Youth
Bridge helped prepare over 1,400 final year juniorhigh school
pupils for the 2021 Basic Education Certificate Examination.
In Guyana, we continued to support STEM Guyana, to launch
aVirtual Academy programme, rolling out 20 learning pods
toenable continuity of education during the pandemic for
vulnerable children, reaching 500 pupils with almost 80% of
them gaining positive results in national assessments and
advancing to the country’s leading secondaryschools to
continue their studies.
Contributing to enterprise development
The Fishermen’s Anchor Project is a micro credit scheme
funded by Tullow Ghana and JV Partners and administered
byOpportunities Industrialization Center International.
TheProject aims to provide critical financial support to
existing and new businesses in the fishing sector toboost
economic activity in coastal districts over a five-year period.
Todate over 700 loans to a value of $267,000 have been
granted to fish processing and fishing/agriculture businesses;
over 90% of these businesses are owned by women. In addition
over 380 individuals received training and 280 individuals
received business development support.
Optimising local content
As a large operator in our host countries, we leverage our
spending power to benefit local businesses and their
participation in regional and national economies. Tullow
Ghana’s local supplier spend in 2021 was $204 million,
whichconstitutes 99% of Tullow’s overall local supplier spend.
This year, we adopted a refreshed strategy with the principal
goal of increasing contract awards and spend with indigenous
Ghanaian companies. We made progress through supporting
the Ghana Petroleum Commission to launch the Business
Academy Partnership to help meet the training and
development needs of local suppliers. During 2021, the
Academy delivered five training workshops to more than
700local suppliers and other participants. Additionally,
Tullowsupported finance training and mentoring programmes
through Invest in Africa and Accenture in Ghana which
benefitted hundreds of current and potential suppliers.
Also in 2021, Tullow took delivery of the Flat Confidence
vessel, the first Ghanaian-owned, Ghanaian-flagged and
Ghanaian-crewed marine vessel to support offshore activities
inthe oil and gas industry in Ghana. The Flat Confidence
wasacquired by Flat C Marine Offshore Limited following a
long-term contract awarded by Tullow Ghana. This enabled
Flat C Marine Offshore Limited to raise financing to procure
the vessel which is now active in the Jubilee and TEN fields.
The completion of the Flat Confidence vessel reflects Tullow’s
commitment to investing in capability growth in the Ghanaian
marine sectors. Inlate 2021, Tullow Ghana awarded a second
contract to another supplier to deliver a similar vessel in
thenext 12-18months.
Sustainability continued
31Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Environmental Stewardship
2021 highlights
- In March 2021 Tullow set its goal to achieve Net Zero by
2030 (Scope 1 & 2 net equity emissions)
- Discussions with Ghana Forestry Commission and Terra
Global to identify offset projects that support Ghana’s
Reduced Emissions from Deforestation and forest
Degradation (REDD+) strategy and support delivery of
Tullow’s Net Zero commitment
- Over 65% reduction in emissions from non-routine flaring
associated with unplanned outages
- 88% reduction in water consumption per tonne of
hydrocarbon produced
- 74% reduction in hazardous waste generation in our
Ghana operations
- 82% reduction in Scope 2 emissions over the last four years
- Appointment of Terra Global to support carbon
offsettingwork
Tullow supports the goals of the Paris Agreement of 2015 to
hold the increase in the global average temperature to well
below 2°C and pursue efforts to limit the temperature
increase to 1.5°C above pre-industrial levels. Tullow has
committed to becoming a Net Zero Company by 2030 on our
Scope 1 and 2 GHG emissions on a net equity basis through a
combination of decarbonising our operated and non-operated
assets and identifying nature-based solutions to offset our
hard to abate emissions. Additionally, we are prioritising
decarbonisation of our operations with a target to reduce
emissions across our portfolio by at least 40% by 2025 on
anet equity basis against a 2020 baseline. In creating our
pathway to Net Zero, the primary focus will be on our
operations in Ghana, where we have the greatest ability
toinfluence the decarbonisation efforts.
Tullow’s Net Zero pathway
Supported by our internal Net Zero Task Force and approved
by our Board of Directors and Senior Leadership Team, we
have defined a clear pathway to achieving our Net Zero target.
2030 Net Zero Pathway (Scope 1 & 2)
This comprises two main initiatives, in addition to ongoing
carbon efficiency projects throughout our operations,
asfollows:
- Decarbonisation initiatives: through the elimination of
routine flaring of gas from our Jubilee and TEN fields
by2025, wewill reduce GHG emissions by at least 40%
froma2020 baseline. The majority of spend linked to these
decarbonisation initiatives will be expended before 2025.
- Nature-based carbon offsets: by investing in verified
nature-based carbon offset projects initially in Ghana,
wewill offset hard to abate GHG emissions. Partnering
withTerra Global allows Tullow to mitigate exposure to
medium to long-term changes in offset costs.
Decarbonisation initiatives
Our effort to progress towards our goal of eliminating routine
flaring by 2025 is on course to be delivered. Implementation of
the changes necessary to eliminate routine flaring for our Ghana
assets requires the shutdown of operations at each site to
allow for switching out core equipment and other upgrades.
Routine flaring elimination and flare reduction rates on the
Jubilee FPSO will be achieved through re-motoring and
re-wheeling of high-pressure compressors alongside an
expansion of gas compression and processing capacity, and
higher produced water treatment capacity. Thecompressor
upgrade and capacity expansion are scheduled to be
completed during 2023. On the TEN FPSO, routine flaring
elimination willbe achieved through gas flow modification to
allow low-pressure gas to be processed without the need for
flaring. Work on this initiative will start in early 2022 and will
be completed during a planned maintenance shutdown in
2023. We are also working with the operators of our non-
operated assets to identify decarbonisation initiatives and
have already reduced routine flaring on some assets in our
Gabon portfolio. In 2022 we have budgeted a study to re-route
gas from Simba to Tchatamba for power generation and if
sanctioned this will allow to reduce flaring at the Simba field.
Nature-based carbon offsets
We plan to address our residual, hard to abate emissions
through the implementation of a diversified portfolio of
nature-based carbon offset projects, initially in Ghana. This
year we appointed Terra Global, a global leader in sustainable
forest and agriculture programme development, to advise on
the selection of suitable projects for financing and implementation
that will be independently verified and assured under leading
third-party carbon standards. Terra Global will assist with the
identification of potential initiatives that support Ghana’s
REDD+ strategy, other natural resource management and
rural development policies. Through discussions with Terra
Global and the Ghana Forestry Commission we target to
deliver, by 2030, a portfolio of projects that will generate
credits to offset emissions of 600,000 tCO
2
e annually.
Climate risk and resilience reporting
Our detailed plans for achieving Net Zero and managing
climate risks for our business are laid out in our second
annual Climate Risk and Resilience Report, prepared inline
with theTask Force on Climate-Related Financial Disclosures
(TCFD) recommendations, which can be found at
www.tullowoil.com/sustainability.
Operated
(c.75%)
1
Non-operated
(c.25%)
Nature-based
offsets to
mitigate
residual
emissions
NPV+
decarbonisation
projects
Jubilee and TEN
decarbonisation
initiatives
Non-operated
emission
abatement
projects
20302025
1. Net equity basis.
Environmental Stewardship
continued
Carbon efficiencies in 2021
We continue to drive carbon efficiencies through our
operations, resulting in a reduction in Scope 2 greenhouse
gas emissions over the past four years (530 tCO
2
e in 2021,
compared to 2,996 tCO
2
e in 2018). Our main office in the UK
utilises 100% renewable wind energy, which has eliminated
our Scope 2 emissions in the UK. Further reductions in total
Scope 1 and 2 emissions will be realised with the
implementation of our pathway to Net Zero by 2030 as
described on page 31. However, as a result of our continued
need to flare, our emissions intensity relative to production
grew from 29 kg CO
2
e/boe in 2020 to 35 kg CO
2
e/boe this year.
We are committed to transparent disclosures of our emissions
on both an operated and net equity basis, and are continuing
toreport Scope 3 emissions from our non-operated portfolio.
Werecognise that Scope 3 emissions often represent a large
component of an organisation’s GHG emissions, and are
continuously working to better understand the emissions within
our value chain and expand our disclosure accordingly.
Total air emissions:
thousand tCO
2
e 2021 2020 2019 2018 2017
Group Scope 1 2,234 2,040 1,072 1,046 1,424
Group Scope 2 0.5 1.28 1.69 3.00 2.93
Total Group 2,235 2,041 1,074 1,049 1,427
Group emissions
intensity kg CO
2
e/boe 35 29 – – –
Group energy use
(GWh)
2,968 2,682 2,862 2,707 2,232
UK air emissions:
thousand tCO
2
e 2021 2020 2019 2018 2017
UK Scope 1 0.11 0.27 0.24 – –
UK Scope 2 0 0.57 0.71 – –
UK energy use (GWh) 1.7 3.6 4.0 – –
1. GHG Data is from controlled operations and the calculation methodology
can be found in the Basis of Reporting and GHG Calculation Methodology
documents at www.tullowoil.com/sustainability.
2. Integrated Reporting & Assurance Services (IRAS) has provided independent
assurance over Scope 1 and 2 emissions.
Details of our Scope 1, 2 and 3 greenhouse gas emissions
forthe years 2017–2021 on both an operated and net equity
basis can be found in our Sustainability Performance
Dataworkbook at www.tullowoil.com/sustainability.
Water efficiency and waste management
Over the past year, we have reduced our total water consumption
by 88% on a per tonne of hydrocarbon produced basis, due to
continuous efficiency measures in our operations. More than
68% of our water withdrawal is seawater and we withdraw
zero water from fresh water sources. Overall, our waste
generation on a per tonne basis has remained stable at
modest levels over the past five years. More than 83% of
ourwaste is recycled, reused or treated and less than 11%
islandfilled.
Biodiversity
Tullow strives to minimise negative impacts on biodiversity at
the planning, exploration, development and decommissioning
phases of our activities. In 2021, we continued to progress
decommissioning activities in Mauritania following cessation
of activity in non-operated areas in 2014, and in the United
Kingdom, following cessation of production in 2018.
We also make efforts to protect biodiversity through
restoration initiatives. In 2021, Tullow began a collaboration
with the National Agricultural Research and Extension
Institute (NAREI) in Guyana to support the restoration of
mangroves which are endangered by human activities.
Mangroves play an important role in carbon sequestration
while supporting coastline safety for Guyana’s coastal
communities. Tullow’s collaboration supports the planting
ofspartina grass sprouts to rehabilitate the area and the
planting of locally grown black mangrove seedlings.
Thefirstphase of this mangrove restoration programme
wascompleted in 2021 along 0.5 km of coastline and the
second phase will progress in 2022.
Tullow Oil plc 2021 Annual Report and Accounts32
Sustainability continued
33Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Equality and Transparency
2021 highlights
- $445 million total socio-economic contribution in our host
countries, bringing total five-year socio-economic
contribution to $2.9 billion
- $234 million paid to host countries in taxes
- 13 ‘Speak Up’ cases, of which 3 substantiated or partially
substantiated
- 29% women colleagues overall, with Senior Management
roles held by 10% women (compared to 30% and 18%
respectively in 2020)
- Senior Management roles held by 10% African (compared
to 9% in 2020)
- Localisation in Ghana at 75% with target to achieve 90%
Socio-economic contribution
Our annual Payments to Governments Report provides details
of all mandatory and voluntary payments. Our payments to
governments, including payments in kind, amounted to
$234million in 2021 (2020: $375 million). Total payments to all
major stakeholder groups including suppliers and communities,
as well as governments, brought our total socio-economic
contribution to $445 million (2020: $542 million). In addition
topayments to governments, this included $207 million
spentwith local suppliers, and $4 million in discretionary
spend on social projects. Our total payments made to the
Ghanaian Government in 2021 amounted to $172 million
(2020: $180million).
Ethical conduct, compliance and human rights
Our Code of Ethical Conduct governs the way we work and
reflects our zero tolerance for bribery, corruption and other
forms of financial crime as well as our position and controls
with regards to human rights, lobbying and advocacy,
prevention of the facilitation of tax evasion, anti-slavery and
data privacy. All individuals and organisations involved in
Tullow’s extended supply chain and operations are
contractually required to meet the standards of our Code of
Ethical Conduct, and we conduct risk-based third-party due
diligence to assess related risks. In 2021, we revised our Code
of Ethical Conduct to include Tullow’s refreshed purpose and
values, and developed a new online e-learning training course
for all Tullow colleagues. 100% of Tullow colleagues completed
the required annual Code of Ethical Conduct e-learning, and
signed an acknowledgment, a declaration ofhow they have
upheld the Code of Ethical Conduct through the year.
We urge our colleagues to ‘Speak Up’ if they observe
misconduct or behaviour that they believe is not in alignment
with our Code of Ethical Conduct. Our independent, external
integrity reporting mechanism (Safecall) is available 24/7 in
several languages. All reported cases are reviewed and
investigated by our Ethics & Compliance Team (E&C), with
regular summary updates provided to the Audit Committee
and the Board of Directors.

Speaking up cases
Fraud 1
Corruption 2
Supply chain 8
H.R./Workplace Conduct 2
13 speaking up cases
Tullow’s human rights policy is aligned with leading
international human rights instruments such as the Universal
Declaration of Human Rights, the UN Guiding Principles on
Business and Human Rights, the Voluntary Principles on
Security and Human Rights (VPSHR) and the ILO Declaration
on Fundamental Principles and Rights at Work and related
ILO conventions. For more information about our
implementation of human rights, please see our Modern
Slavery Act Transparency Statements.
Transparency and disclosure of payments
Transparency regarding payments to governments is an
important way to promote honesty in our industry, mitigate
corruption and support inclusive development. Tullow has
been a corporate supporter/member of the Extractive
Industries Transparency Initiative (EITI) since 2011.
Tullow Oil plc 2021 Annual Report and Accounts34
Equality and Transparency
continued
Our people
We ended the year 2021 with 353 colleagues, 62% fewer than
five years ago.
2017 2018 2019 2020 2021
Tullow employees 2017–2021
922
893
879
410
353
Right-sizing our organisation to support our new business
strategy has been difficult, both for those who left the
organisation and for those who stayed through our
transformation. In all decisions, we took a considered and
equitable approach to restructuring the workforce, focusing
on retention of skills needed to support ongoing value
creation for all stakeholders, while considering our linked
objectives of diversity and localisation. For those who left
Tullow, we provided enhanced redundancy terms including
extended notice periods wherever possible and supported
colleagues with assistance packages to help them through
the transition.
In 2021, as part of our restructuring processes, we adjusted
our compensation packages to ensure they were market
competitive and introduced a continuous performance
management process to enable the differentiation of
performance and allocation of bonus pay in line with overall
company results. We introduced a new cash Health Plan
which UK colleagues can join and allows them to claim money
back towards the cost of managing and maintaining everyday
health and wellbeing. In 2021, we also updated our company-
wide Smart Working policy to enable greater flexibility for
working from home, managing work hours andworking a
flexible week.
Employee engagement
Benefits
Healthcare
Pensions
Professional
development
Career development
Work environment
Challenge
Performance Standards
Culture
Our reputation
Leadership
Communication
Recognition
Compensation
Salary
Bonus
Share Schemes
Employee Value
Proposition
Flexibility
Performance
Management
Holiday
Allowances
and Benefits
Our Values / beliefs
During 2021, we enhanced our offerings and processes to
support our Employee Value Proposition (EVP), launched in
2020. We conducted two surveys amongst permanent employees
and an improvement in average positive scores reflected a
clearer understanding of our purpose and strategy, a greater
sense of stability and an appreciation of initial EVP initiatives.
Actions are being implemented to improve the lower scoring
areas as well as to continue to drive the increased positivity.
Summary Results from our Employee Value Proposition Survey in August 2021
EVP Category
Positive
responses*
Change from
March 2021
Culture and Values 64% +10%
Professional development 69% +2%
Working environment 68%
+9%
Visible leadership 61%
-4%
Total survey 66% +4%
* Responses were evaluated for positive, neutral and negative responses.
Sustainability continued
STRATEGIC REPORT
Tullow Oil plc 2021 Annual Report and Accounts 35
Leadership, performance and professional development
In 2021, we embarked upon an organizational capability
reviewprocess for the 24 senior leaders across our business.
The review will assist us in reinforcing our leadership team
asa key enabler of Tullow’s ability to deliver on our purpose
and strategy in the coming years. Additionally, across the
organisation, we placed a specific focus on reinforcing our
culture of continuous improvement and introduced Continuous
Performance Management (CPM), a performance review
process in which 100% of Tullow colleagues participated in
2021. To support development,we relaunched our mentoring
programme withafirst cohort of 25 colleagues paired with
senior leaders to supportleadership and other skills.
Culture, values, inclusion and diversity
We maintain a culture of respect, equality and inclusion
andstrive to be a company where everyone feels they belong.
Tullow maintains zero tolerance for all forms of prejudice
anddiscrimination in the workplace and we actively foster an
environment in which speaking up is encouraged. At Tullow,
ameaningful commitment to Inclusion and Diversity (I&D)
means addressing all dimensions of diversity both through
our organisational practices and continuous education and
awareness initiatives. In 2021, we held several education and
awareness events that were well attended by Tullow colleagues.
The key themes included: race and equity, unconscious bias,
psychological safety and the meaning of belonging.
Localisation
In 2021, we revised our strategy to help us accelerate
localisation in order to reach a new goal of 90% localisation
inGhana. Our new localisation strategy includes appointing
local nationals into more senior roles and hiring highly skilled
Ghanaian professionals from other sectors with transferable
skills, rather than focusing our search on those from our
sector. In 2021, we made three appointments of Tullow
colleagues into senior roles and hired an experienced
Ghanaian from another sector.
2017 2018 2019 2020 2021
% of local nationals employed in Ghana
(includes Tullow colleagues and contractors)
75%
81%
79%
76%
75%
Tullow Oil plc 2021 Annual Report and Accounts36
Risk oversight and governance
A risk focused culture and consistent risk management
framework is embedded across all levels at Tullow and is
driven by the Board. The Board is responsible for overseeing
the risk identification, assessment and mitigation process.
Tothis end, the Board undertakes a bi-annual assessment of
the risks facing the Company, including those risks that could
threaten our business strategy, operating model, performance,
solvency and liquidity. Emerging risks are discussed by the
Board and the Senior Leadership Team periodically throughout
the year.
The Board is responsible for ensuring Tullow maintains an
effective risk management and internal control system and
works closely with Tullow’s Senior Leadership Team to ensure
this is in place. The Senior Leadership Team is collectively
responsible and accountable for the risk management process
in place across the organisation, with individual members
taking ownership for risks that fall in their business area.
Tullow recognises that risk cannot be fully eliminated and that
there are certain risks the Board and/or the Senior Leadership
Team accept when pursuing strategic business opportunities.
Acceptance of risk is made at an appropriate authority level
andwithin Tullow’s defined risk appetite and tolerance levels.
Tullow’s risk governance framework is illustrated below:
We proactively manage risks
At Tullow, we recognise that effectively managing risks and opportunities is essential
to our long-term success. Our ability to identify, assess and successfully manage
current and emerging risks is critical in ensuring we achieve our strategic objectives
and protect shareholder value.
Governance and risk management
Board
- Oversees identification, assessment and
response to principal risks
- Sets risk appetite
- Monitors effectiveness of the risk
management process
Senior Leadership Team (SLT)
- Sets the tone for an effective risk
management culture
- Identifies and assesses principal and
enterprise-wide risks
- Monitors effectiveness of risk
management actions for those risks and
decides the focus of effort
- Decides which risks require periodic
Board review
Business functions
- Identifies business delivery risks and
raises these to the leadership team
- Identifies and assesses respective
project risks
- Ensures effective risk mitigation actions
are planned and implemented
Extended Leadership Team (ELT)
- Identifies and assesses their respective
business delivery risks
- Ensures effective risk mitigation actions
are planned
- Monitors effectiveness of risk mitigation
and response plans
Principal
risks
Business
delivery risks
Project
risks
Enterprise risks
Every layer of the organisation is responsible for identifying key risks and
managing them in line with our risk appetite (as set by the Board)
Top-down/Bottom-up risk management
37Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Risk management process
Our risk management framework takes a ‘top-down, bottom-up’
approach. It is a rigorous method that ensures ownership and
responsibility for identification, assessment and management of
key risks and opportunities, and is embedded throughout the
business. The Board sets the context for risk management
through defining the strategic direction and risk appetite for
the organisation.
Risks identification and assessment
Each Business Head and Head of function is responsible, and
accountable, for managing risk and risk mitigation within their
remit. The Extended Leadership Team (ELT) reviews and
reassesses risk on at least a quarterly basis to evaluate the
strength of existing controls and determine whether additional
risk reduction actions are needed to ensure the risk level is
within therisk appetite set by the Board.
Consolidation of business risks
To facilitate assessment of the main risks facing the business,
Tullow’s leadership undertakes a bottom-up review of the key
risks faced by the business. The key risks in each area are
identified by the Business Heads and Heads of Functions,
including mitigating actions and any emerging risks. These
are consolidated upwards into the Business Unit risk registers
and assessed according to their likelihood of occurring, and
the potential consequences to Tullow in terms of safety,
reputational, financial, legal and regulatory impact.
From this, the Senior Leadership Team identifies the principal
and enterprise-wide risks which can be either a single risk, or
a set of aggregated risks which, taken together, are significant
for Tullow. Members of the Senior Leadership Team have
ownership and accountability for stewardship of each of the
principal and enterprise-wide risks. As a collective, the Senior
Leadership Team reviews and discusses the risks to understand
whether mitigations are being effectively executed within the
agreed timeframe.
On a bi-annual basis the principal risks and mitigants are
discussed by the Board to provide ‘top-down’ challenge and
support. The result of this review is communicated back down
to the Business Units to facilitate risk awareness and effective
decision making throughout the organisation.
Risk appetite
The Board sets Tullow’s risk appetite and acceptable risk
tolerance levels for each of the principal risk categories.
Inconsidering Tullow’s risk appetite, the Board reviews the
risk identification process, the assessment of enterprise level
risks, theexisting controls and mitigating actions and the
residual risks. During this process, the Board articulates
which risks Tullow should not tolerate, which should be
managed toan acceptable level and which should be accepted
in order to deliver our business strategy.
The risk appetite is reviewed at least annually by the Board
toensure that it reflects the current external and market
conditions. A revised risk appetite was last reviewed by the
Board in December 2021.
Evolution of Tullow’s management of risk
During 2021, Tullow’s risk framework has been simplified and
realigned to reflect the revised business structure and reporting
lines. Senior risk owners have been working to ensure a
greater culture of risk awareness and challenge is instilled
throughout the business with an increased focus on mitigating
actions. Further consistency in risk identification, measurement
and reporting has been embedded across the organisation.
Risk management framework
Principal risks 2021
Ghana business
risks
Non-operated
business risks
Kenya business
risks
Exploration
business risks
Finance risks
Legal and
compliance
risks
People and
sustainability
risks
Project risk registers feed into the Enterprise Risk
Management process
ELT led review and oversight
Board led scrutiny of Principal risks
SLT led Principal and Enterprise-wide risk review
and oversight
Tullow Oil plc 2021 Annual Report and Accounts38
Governance and risk management continued
Categories of principal risks
Commercial
Stakeholder
Cyber
Ethics and
conduct
Climate
Financial
EHS or
security
People
Principal risk
categories
Failure to deliver production targets (Commercial & Financial risk)
Risk details Risk mitigations
Tullow’s Business Plan is anchored on production from the Jubilee
and TEN fields in Ghana and non-operated fields in Côte d’Ivoire and
Gabon. A decline, or problems with the performance, of wells or
facilities could result in not meeting planned production levels which
in turn would lead to a reduction in revenue and cash flow ultimately
impairing our ability to reduce leverage.
- Robust control over Operations & Maintenance (O&M) contractor
as well as ongoing O&M transformation project
- Cross discipline integrated performance management including
clear KPIs and forums
- Maintenance and integrity management plans covering all
equipment classes
- Management and oversight of JV Partners to ensure maintenance
and integrity plans are implemented effectively
A failure to grow the business via targeted investment in existing
fields and/or investment in new fields could ultimately impact our
ability to meet longer-term production targets.
- Jubilee Expansion project, Jubilee South East, North East and TEN
Enhancement Projects
- Exploration strategy focused on acreage close to existing
infrastructure, to enable discoveries to be converted to
productionquickly
- Continued investment in non-operated portfolio, including
accelerating projects where possible
- Mergers & Acquisitions (M&A), inorganic growth with a focus
onproducing assets
Inability to secure associated gas offtake in Ghana could limit our
ability to produce oil and impact revenue and value.
- Working with the Government of Ghana to secure temporary
flaringpermit
- Working to secure a long-term gas offtake commercialisation
contract in Ghana as agreed in principle by the Board
- Managing production processes to minimise production of gas
which needs to be exported from the fields
Tullow’s risk profile
The Company risk profile has been closely monitored
throughout the year, with consideration given to the risks to
delivering the revised Business Plan, as well as whether
external factors such as the COVID-19 pandemic and oil price
volatility have resulted in any new risks or changes to existing
risks. The impact of these factors has been considered and
managed across all principal risks. The following table
represents the Company’s current principal risks.
39Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Risk of a Major EHS incident (EHS or security risk)
Risk details Risk mitigations
A major incident could potentially result in asset integrity failures
and/or extensive damage to facilities. This may in turn lead to a loss
of life, environmental damage and potential for loss of production
(and therefore revenue), increased costs and reputational damage.
- Risk management processes embedded at all levels of
theorganisation
- Asset and well integrity and maintenance programmes are in
place, including regular self-verification and external certification,
audit and assurance of integrity plans
- Root cause failure analysis processes in place for production
losses and EHS incidents to prevent recurrence and ensure
lessons are learned
- Emergency Response Plans and Incident Management
Framework to aid in escalation when incidents do occur
A failure of our colleagues or contractors to meet safety standards
or adhere to procedural requirements could result in operation of
equipment outside safe operating limits leading to a major EHS or
operation incident.
- Tiered assurance activities ensuring all critical processes are
adhered to
- Robust EHS aspects are included at all stages of contract
management (from specification/pre-qualification through to
contract closure)
- Active contractor engagement on safety throughout life of contract
including EHS forums to enable direct participation
Failure to unlock value (Stakeholder, Commercial & Financial risk)
Risk details Risk mitigations
Significant non-associated gas resource has been identified on
current licences and failure to secure gas market share could delay
development of these resources.
- A workstream has been established to assess commercialisation
opportunities in Ghana and the region that will enable
development of the identified resources while playing an
important role for the industrial development of Ghana
Delay in approval of a revised Field Development Plan (FDP) by the
Government of Kenya could impact a final investment decision.
- A revised FDP has been submitted to the Government of Kenya
forapproval in line with the licence extension conditions
- Continued engagement with the Government of Kenya and
regulators to ensure timely approval of the revised FDP
Failure to secure a strategic partner would impact our ability
toprogress the Kenya project to final investment decision and
unlock value.
- The Kenya JV Partners via an ongoing farm-down process are
actively seeking a strategic partner to fund the next stage of
development and unlock value. Discussions are under way with
potential bidders around a range of commercial arrangements
The inability to successfully explore and add accretive upside value
to Tullow's assets through addition of reserves and resources
around producing assets could limit the return on the licences.
- Close collaboration focused on fully leveraging geoscience
expertise to identify and mature reserves and resources which
have the potential to rapidly unlock value for producing assets
- This is reinforced by an Infrastructure-led exploration (ILX)
strategy to strengthen the portfolio, by focusing on opportunities
near producing assets, and create value through integration of
assets, expertise and regional knowledge
The inability to limit our capital exposure to historic exploration
commitments in selective emerging basins of Guyana and Argentina
may result in having to divert capital from producing assets.
- A number of farm-down processes are under way to limit capital
exposure on selective emerging basins by aiming to reduce our
equity share. This will ensure Tullow can participate at an equity
consistent with our capital allocation guidance
Tullow Oil plc 2021 Annual Report and Accounts40
Failure to manage geopolitical risks (Stakeholder & Financial risk)
Risk details Risk mitigations
Political instability in the West Africa region, where our producing
assets are concentrated, could delay and impact decision making
byhost governments and local partners and may also impact
security arrangements.
- An extensive relationship management plan is in place, to actively
manage senior relationships with host governments, including an
Advisory Board in Ghana
- We ensure alignment of our business plans with national priorities
and have developed a communication plan to educate
stakeholders on the positive impact of our activities on host
nations and communities
Unreasonable fiscal or regulatory demands by host governments
could obstruct efficient operations, delay implementation of our
growth plans and cause increased costs and financial loss.
- We have robust stabilisation clauses in all our Petroleum
Agreements and Production Sharing Contracts to protect us
against unreasonable demands
Failure to manage climate change risks (Climate risk)
Risk details Risk mitigations
Tullow recognises climate change as a material risk for
ourbusiness.
There is a potential for climate related risks, including regulatory
constraints, carbon pricing mechanisms, low oil price or conditional
access to capital, to affect Tullow’s ability to implement our strategy.
Challenges to our business strategy and failure to align with broader
energy transition goals could result in reduced or conditional access
to capital or shareholder/investor reluctance to invest.
Failure to deliver on our commitment to eliminate routine flaring by
2025 and thereby mitigate the carbon intensity of Tullow’s business
may lead to stakeholder confidence erosion and impact our ability to
attract and retain talent.
- There is recognition and support from the Board that
decarbonisation requires investment. We are implementing our
plan to achieve Net Zero by 2030 (Scope 1 and 2 net equity),
through reducing our emissions from routine flaring and offsetting
hard to abate emissions
- We stress test our portfolio to ensure core assets are resilient in
different oil and carbon price environments
- There is ongoing engagement with host countries to understand
and align with their long-term energy transition strategies,
including Paris Nationally Determined Contributions
Risk of insufficient liquidity and funding capacity to sustain and grow the business / failure to deliver a highly cash generative business
(Financial risk)
Risk details Risk mitigations
Tullow remains exposed to erosion of its balance sheet and revenues
due to oil price volatility, unexpected operational incidents, ongoing
costs associated with the COVID-19 pandemic and failure to deliver
targeted farm downs of exploration assets and Kenya.
Failure to deliver our Business Plan could have a material negative
impact on cash flow and our ability to reduce debt and strengthen
the balance sheet, which may affect our ability to meet our financial
obligations when they fall due.
- Business plan in place to deliver strong cash flow
anddeleveraging
- Capital structure provides liquidity headroom through to
December 2024 even in a low oil price environment
- Disciplined capital allocation prioritising high return and short
payback investments, and a strong focus on cost control
- Material commodity hedging programme protects against the
impact ofasustained low oil price environment
Failure to develop, retain and attract capability (People risk)
Risk details Risk mitigations
There is a risk that critical staff leave the organisation resulting
indifficulty to deliver against our business plan.
We operate a lean and agile structure and are dependent on
asmallnumber of key and critical roles. Loss of staff would
increasepressure on remaining colleagues and could lead to
deterioration in the wellbeing of our colleagues, a poor working
environment and, potentially, further attrition.
- A new Employee Value Proposition (EVP) was rolled out in 2021,
covering culture, working environment, remuneration, learning
and development and performance management
- Employee engagement initiatives are in place, including an
employee advisory panel, Tullow Townhalls, coffee mornings
andemployee engagement surveys
- We have refreshed our Inclusion and Diversity (I&D) policy and
hosted a number of speakers during the year, to increase
awareness and reaffirm our focus on I&D
- Succession plans are in place for critical roles. We have
undertaken a leadership capability review of the extended
leadership team, to ensure a focus on development and ensuring
the right capability is in the organisation
Governance and risk management continued
41Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Risk of a compliance or regulatory breach (Ethics & Conduct risk)
Risk details Risk mitigations
The Company could be exposed to increased risk of non-compliance
with bribery and corruption legislation or contractual obligations
along with other applicable business conduct requirements.
In particular, an unforeseen material compliance breach could
leadto regulatory action, an unsettled litigation/dispute or additional
future litigation that may result in unplanned cash outflow, penalty/
fines, reputational damage and a loss of stakeholder confidence in
Management.
- Tullow maintains high ethical standards across the business.
Strong anti-bribery and corruption (ABC) governance processes/
procedures are in place as a core element of the Ethics and
Conduct (E&C) programme
- A mandatory annual Code of Ethical Conduct eLearning and
acknowledgement / certification process is in place for all
employees. Third-party due diligence procedures and assurance
processes are in place
- Investigation procedures and an associated Misconduct and Loss
Reporting Standard are in place
- Processes and controls are in place to deliver General Data
Protection Regulation (GDPR) compliance
- Anti-tax evasion risk assessments are undertaken with clear
mitigation actions identified, including targeted employee training
Risk of major cyber-attack (Cyber risk)
Risk details Risk mitigations
The external cybersecurity threat environment is continuously
evolving and intensifying, therefore the risk of a major cyber-attack
is an ongoing risk that requires constant monitoring and management.
Tullow may suffer an external cyber-attack which could have far
reaching consequences for the business. This could limit our ability
to operate, impact production, expose the Company to high
ransomware demands or potentially trigger a major incident. This
could result in financial loss, loss of stakeholder confidence, loss of
production, or additional cost by way of fines or resolution of service.
- Security Incident Event Management (SIEM) system in place,
supported by an Advanced Security Operations Centre (SOC)
providing 24/7 network and device monitoring, alerting and
response
- Security awareness programme in place supported by regular
staff susceptibility phishing training and testing. Annual
mandatory security awareness training for all staff
- An independent technical assurance programme is in place
Tullow Oil plc 2021 Annual Report and Accounts42
Governance and risk management continued
Lines of defence
Third line of defence
Internal Audit (independent assurance)
- Provide independent assurance of respective governance,
internal control systems and controls across all levels of
the business.
- Assurance provided through risk-based internal
auditreviews.
Second line of defence
Risk management and compliance functions (oversight
of risk management)
- Set the framework and support embedding of effective risk
management practices.
- Provide challenge to leadership on the identification
andmanagement of risk.
- Monitor compliance with functional standards
(minimumcontrols).
- Provide assurance through periodic reporting and focused
reviews.
First line of defence
Business leadership
(ownership and management of risk)
- Own and manage business risks. Implement and execute
controls in business. Monitor risks and control at business
level.
- Assurance provided through self-reviews and focused
assurance reviews.
- Projects – implement and execute controls at site/project
level. Monitor risks and controls at site/project level.
Internal control
A foundation of effective governance, risk management and
control exists throughout the organisation. Theeffectiveness
of the internal control framework is reviewed through the risk
management process and challenged as described above. In
addition to this, the Senior Leadership Team and Audit
Committee perform an annual review of the effectiveness of
internal control. This was last undertaken in March 2022.
Nature of assurance
- Assurance activities are put in place across the three
lines of defence to assure that control activities are
effective in mitigating risks to the business. These
specifically focus on areas where there are internal/
external changes, control failures and historical issues.
- Business leadership is the first line of defence and is
responsible for ensuring their key risks have been
identified and that adequate controls are in place to
manage those risks.
- Risk management and compliance functions act as the
second line of defence, providing support and challenge
to the business in managing risks effectively, and
providing assurance that compliance with functional
standards is being met.
- Internal Audit acts as the third line of defence and is
responsible for providing independent assurance
through its risk-based internal audit programme.
TheInternal Audit Plan and outputs are reviewed by
theAudit Committee. Agreed actions for improving
thecontrol environment and managing risk are owned
by assigned individuals and monitored through Tullow’s
actions tracking process. The Audit Committee
monitors the implementation of actions.
- Tullow’s risk management and assurance processes
provide the Board and the Management Team with
reasonable, but not absolute, assurance that our assets
and reputation areprotected.
43Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Section 172(1) statement
Statement by the Directors in performance of their statutory
duties in accordance with s172(1) of the Companies Act 2006
The Directors are required by law to act in a way that promotes the success of the Company for the benefit of shareholders as a
whole. In so doing the Company must, in accordance with s172(1)(a-f) of the Companies Act 2006, also have regard to wider
expectations of responsible business behaviour, such as having due regard to the interests of, and actively engaging with, its
employees; the need to engage and foster business relationships with suppliers, customers and others; the need to act fairly as
between Members of the Company; the likely consequences of any decision in the long term; the desirability of maintaining a
reputation for high standards of business conduct; and the impact of the Company’s operations on the community and the wider
environment. The section below further details on how the Directors have fulfilled their duties.
During the year, the Board was closely involved in all key decisions of the Company. In addition to providing rigorous evaluation,
risk management and challenge to maintain strong governance, the Board also engaged with stakeholders to inform decisions.
The Board is aware that in some situations, stakeholders’ interests will be conflicted, however, the engagement enabled them to
fully understand the key issues relevant to our stakeholders. Further details on how the Board considered stakeholders during
the decision making process, and how the stakeholder engagement fed into this process, are set out on the next few pages.
The Board consider, both individually and together, that they have acted in the way they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of its shareholders as a whole in the decisions taken throughout
the year ended 31 December 2021.
Decision Approval of 2021 Budget and long-term Business Plan (10 years)
Context and link
to strategy
The Company’s long-term Business Plan and operating strategy was presented to investors and the wider market at its
Capital Markets Day on 25 November 2020. The long-term Business Plan and operating strategy is focused on short-cycle,
high-return opportunities and the substantial potential associated with the Group’s producing assets within its large
resource base.
The long-term Business Plan reflects a shift in capital allocation from previous years to focus over 90% of the Group’s
capital expenditure over the next 10 years on its West African producing assets. The plan is also focused on generating cash
flow to significantly reduce debt and further strengthen thebalance sheet. After capital investment and other costs, the
plan is expected to generate material cashflow in the medium term which the Group would initially apply towards reducing
gearing to 1–2x net debt / EBITDAX, while retaining appropriate liquidity.
Challenges
andoutcome
In light of disappointing operational and financial performance in 2019, the Company carried out a Business Review,
involving a thorough reassessment of the Group’s operational structure, cost base, future investment and asset portfolio
plans. The result of this review was the long-term Business Plan.
The Board reviewed the long-term Business Plan as part of the 2021 budget process over the course of the second half of
2020, ahead of approval in January 2021. The Board considered that the long-term Business Plan can deliver material value
from the Company’s assets and generate substantial cash flow. In addition, the long-term Business Plan delivers sufficient
operating cash flow to achieve an appropriate balance between debt reduction and value creation.
Stakeholder
considerations
Whilst reviewing the 2021 budget and long-term Business Plan, the Board considered the following stakeholders:
- Investors/creditors: The long-term Business Plan should deliver production growth in the medium term and the ability
to sustain production over the longer term. The expenditure under the plan is expected to be self-funded and not to
require additional borrowing. In addition, the plan is expected to reduce the Company’s gearing to 1–2x net debt/EBITDAX
in the medium term while retaining appropriate liquidity.
- Host nations: The new plan is expected to deliver production growth and deliver significant value for Tullow’s host
nations. It also reconfirms the Company’s commitment to further develop and unlock value from its core assets and
deliver shared prosperity to our host nations in the process. The long-term Business Plan also confirms the shift from an
exploration-led company to one focused on the sustainable exploitation of its producing assets and infrastructure in line
with the Company’s Net Zero commitments.
- Employees: By creating long-term value for the Company, the long-term Business Plan creates value for its employees
through exciting professional opportunities, career development and potential remuneration upside through the
employee share plans.
Link to KPIs
2. Working Capital and Cost Management
3. Production
4. Business Plan Implementation
5. Capital Structure
8. Total Shareholder return
Tullow Oil plc 2021 Annual Report and Accounts44
Decision Refinancing of the Company’s debt
Context and link
to strategy
At the beginning of 2021, the Company had sufficient liquidity for its short-term needs. However, a liquidity shortfall was
forecast for April 2022 following the repayment of the $650 million Senior Notes due in April 2022. This liquidity shortfall fell
inside the liquidity forecast test periods in respect of the February 2021, September 2021 and March 2022 RBL Facility
redeterminations. As such, the ability of the Group to continue operating as a going concern relied on its ability to obtain
waivers or amendments from its banks with respect to the liquidity tests, and to implement a refinancing proposal to address
the April 2022 maturity.
Challenges
andoutcome
The Board considered various options to address the Company’s debt maturities and concluded that the issuance of $1.8billion
Senior Secured Notes and arrangement of a new $600 million Super Senior Revolving Credit Facility comprising of a $500 million
revolving credit facility and a $100 million letter of credit facility was in the best interests of all stakeholders, including the Group’s
creditors. The refinancing delivered a more stable capital structure for the Company, removed the uncertainty associated with
protracted refinancing discussions with creditors, and addressed the Company’s near-term debtmaturities.
Stakeholder
considerations
In reviewing the refinancing options for the Company, the Board considered the following stakeholders:
- Investors: The refinancing provides a clear pathway for the Company to invest in its assets to maximise their value.
- Creditors: The refinancing addressed the Company’s near-term debt maturities and allowed creditors to be repaid at par
and the choice to participate in the Refinancing.
- Employees: The refinancing provides employees with the confidence that Tullow remains an employer at which they can
continue to work with confidence and develop their skills and future opportunities.
- Suppliers: The refinancing provides our suppliers with the confidence that they can continue to engage with Tullow in the
long term for the success of the Company.
Link to KPIs
5. Capital Structure
8. Total Shareholder return
Decision Exercise of Ghana pre-emption
Context and link
to strategy
On 13 October 2021, Kosmos Energy announced that it had acquired an additional 18.0% interest in the Jubilee field andan
additional 11.0% interest in the TEN fields in Ghana from Occidental Petroleum for a purchase price of
$550 million. Under the Deep Water Tano (DWT) Joint Operating Agreement (JOA), Tullow has pre-emption rights in respect of
the 11.05% participating interest within the offshore DWT Block acquired by Kosmos Energy which includes the TEN field and
a portion of the Jubilee field.
Challenges
andoutcome
In making its decision to support the exercise of the pre-emption, the Board considered whether the acquisition was value
accretive, could be self-funded and could generate additional cash flow to help accelerate debt reduction.
The Board assessed that:
- The additional equity in these assets is expected to increase Group daily production by c.10% and generate over
$200million incremental free cash flow at $65/bbl for Tullow between 2022 and 2026, which could help accelerate
debtreduction.
- The consideration for the 7.7% increase in equity is expected to be c.$150 million with an economic effective date of
1April 2021, subject to concluding definitive agreements and closing adjustments. The purchase of the participating
interest in the DWT Block will be funded from Tullow’s existing resources.
In addition, the Board considered that increasing the Group’s operated stakes in the Jubilee and TEN fields also
underscores the Company’s commitment to investing in and delivering its long-term Business Plan. This opportunity also
fits well with the Group’s strategy to focus on maximising value from our producing assets.
On 11 November 2021, the Company announced that it had exercised its right of pre-emption over its participating interest
in the DWT Block.
Stakeholder
considerations
In making its decision, the Board considered the following stakeholders:
- Creditors: The Board considered the affordability of the transaction and concluded that Tullow could fund the transaction
from existing sources without causing undue risk to the Company’s liquidity position.
- Investors: The acquisition is expected to generate over $200 million incremental free cash flow at $65/bbl for Tullow
between 2022 and 2026. Self-funding the acquisition also presents no dilution to shareholders.
- Host nations: The increased operated stakes in the Jubilee and TEN fields underscore the Company’s commitment to
investing in these assets, which will continue to generate revenues for the Government of Ghana.
Link to KPIs
3. Production
4. Business Plan Implementation
5. Capital Structure
8. Total Shareholder Return
Section 172(1) statement continued
45Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Decision Sale of assets in Equatorial Guinea and the Dussafu Marin permit
Context and link
to strategy
Since Tullow’s announcement in December 2019 of Board changes and revisions to 2020 guidance, the Company has,
amongst other things, been focused on delivering reliable production, lowering its cost base and exploring portfolio
management options to reduce debt and strengthen its balance sheet. On 12 March 2020, Tullow’s Board announced its
plans to raise in excess of $1 billion of proceeds from portfolio management options in order to further streamline the
business and to reduce gearing. This $1 billion target was ultimately achieved through a combination of assets sales and
self-help measures. On 10 November 2020, Tullow completed the sale of its assets in Uganda to Total for an upfront
consideration of $500 million with a further $75 million payable following a Final Investment Decision for the Lake Albert
Development.
On 9 February 2021, Tullow announced that it had signed two separate sale and purchase agreements with Panoro
Energy ASA for all of Tullow’s assets in Equatorial Guinea and the Dussafu asset in Gabon.
Challenges
andoutcome
When making the decision to sell Tullow’s assets in Equatorial Guinea and the Dussafu asset in Gabon, the Board considered
that the sales would generate $180 million in proceeds, including $133 million in upfront cash consideration. It also
considered that the transactions were value accretive, with neutral impact on the Group’s operating cash flow (at $50/bbl) and
would further strengthen the Company’s balance sheet. The Board also considered that the sales were in line with Tullow’s
strategy of focusing on its core high-margin production assets and were comfortable with potential risks stemming from
increased concentration on Ghana as a result of the sales.
Stakeholder
considerations
In making its decision to support the sale of Tullow’s assets in Equatorial Guinea and the Dussafu asset in Gabon, the
Board considered the following stakeholders:
- Creditors: The transactions were an important step in reducing the Company’s net debt and were put towards the
delivery of $1 billion of proceeds and savings achieved through portfolio management and self-help measures over
two years. The sale of these assets provided important incremental liquidity to the Group ahead of the
comprehensive refinancing of the Group’s debt.
- Investors: In addition to the lowering of the Group’s cost base and capital expenditure, the transactions support the
delivery of improved margins from the Group’s remaining assets. Exiting non-core assets allows the Group to focus
on investing on the highest value and highest return opportunities within its portfolio.
- Host nations: Due to Tullow’s non-operated position in these assets, the Board considered that the impact of the
disposals on local employees would be extremely limited. The Governments of Equatorial Guinea and Gabon
approved the transactions.
- Employees: Due to Tullow’s non-operated position in these two assets, the Board considered that the impact of the
disposals on employees would be extremely limited.
Link to KPIs
2. Working Capital and Cost Management
4. Business Plan Implementation
5. Capital Structure
8. Total Shareholder Return
Tullow Oil plc 2021 Annual Report and Accounts46
Decision Net Zero Commitment
Context and link
to strategy
In 2020, Tullow issued its first Climate Policy and formalised its support for the goals of the Paris Agreement, namely, to hold
the increase in the global average temperature to well below 2
o
C and pursuing efforts to limit the temperature increase to
1.5
o
C above pre-industrial levels.
In 2021, Tullow refreshed its purpose, to build a better future through the responsible development of oil and gas. The
Company continues to support its host governments as they seek to use oil revenues to support social and economic
development and Tullow is committed to work to align with the actions that they take to manage climate change.
A number of oil and gas companies, including some of the Company’s peers, have announced ambitions to become Net Zero
on Scope 1 and 2 net equity emissions, by decarbonising their assets as far as practicable and offsetting any residual
emissions.
Challenges
andoutcome
The Board has endorsed the Group’s commitment to become a Net Zero Company by 2030 on its Scope 1 and 2 emissions
on a net equity basis. In doing so the Board considered in particular how the Company expects to deliver this commitment and
the possible challenges:
- An increase in the gas handling capacity on the Jubilee FPSO and process modifications on the TEN FPSO are required to
eliminate routine flaring in Ghana by 2025. The technical aspects of these changes are well understood and form part of
the long-term Business Plan which the Board has approved.
- Delivering Net Zero requires sustained gas offtake by the Ghana National Gas Company. After almost 10 years of excess
gas injection on Jubilee due to insufficient gas offtake, a request to flare was made to protect the reservoirs and to
maintain oil production at planned levels. The Board is satisfied that, following engagement with the Government of
Ghana, there is strong alignment and a robust commercial foundation to achieve the targeted levels of gas offtake that
would enable the elimination of routine flaring from the Jubilee and TEN fields.
- The Board is satisfied with the progress made in identifying nature-based carbon removal projects such as reforestation,
afforestation and conservation projects in Ghana that are required to offset the residual hard to abate carbon emissions.
Stakeholder
considerations
When approving the Net Zero commitment of the Company, the Board considered the following stakeholders:
- Investors/Creditors: Companies’ commitments towards addressing climate change are becoming central to investors’
investment decisions. Investors and corporates are subject to growing pressures to clearly outline ambitious targets to
reduce carbon emissions. The Board is convinced that meeting Net Zero targets will be critical for the Company to
maintain access to capital.
- Host nations: In 2019, Ghana became the third country to sign a landmark agreement with the World Bank that rewards
community efforts to implement projects that reduce carbon emissions from deforestation and forest degradation. Ghana
has a REDD+ strategy that is designed to meet the requirements of the Warsaw Framework and the United Nations
Framework Convention on Climate Change (UNFCCC). The Board is aware of the various engagements the Company has
with the Ghanaian Forestry Commission to align respective strategies and targets and help identify suitable REDD+
projects for carbon offsetting.
- JV Partners: Tullow’s Net Zero strategy is aligned with the ambitions of our JV Partners in Ghana.
- Employees: It is becoming increasingly important for individuals around the world to ensure that the organisation they
work for is proactively addressing climate change issues.
Link to KPIs
6. Sustainability
Section 172(1) statement continued
47Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Decision Employee Value Proposition
Context and link
to strategy
During 2020 Tullow fundamentally reset and downsized its business. During that time the Group directed its focus on
managing individuals impacted by the changes in a respectful and fair manner.
In 2021, following the redefinition of the Group’s purpose, strategy and values, the Company decided to implement
changes to its Employee Value Proposition to ensure that Tullow remains a compelling place to work and to empower
and incentivise employees to focus on the delivery of the Corporate Business Plan.
Challenges
andoutcome
The Employee Value Proposition introduced new working arrangements designed to provide staff with better work/life
balance. These include: smart working arrangements; the ability for employees to buy and sell up to five days annual
leave; and enhanced paternity leave available across all Tullow locations.
The restrictions imposed by the COVID-19 pandemic meant that much of 2021 was spent working remotely. When the
guidance from the UK Government to work from home was lifted, the Company introduced a hybrid working
environment enabling people to work from home, with two days working in the office to help build a cohesive culture.
Other features of the Employee Value Proposition include competitive pay including bonuses; private medical
insurance for employees and their dependants; professional development opportunities; and an open, transparent and
inclusive culture.
In July 2021 the Company also launched the Celebration Hub which provides a platform for Group-wide recognition of
the successes of individual employees or teams across the whole business.
Finally, to address concerns of Tullow’s Ghanaian employees with regards to the depreciation of the Ghanaian Cedi
against the US dollar and the impact this can have on their disposable income, the Company implemented a
mechanism to help mitigate this impact. This works by guaranteeing a lump sum payment as a percentage of
basesalary where the inflation used to calculate annual salary increments is less than the Cedi depreciation for
theprior year.
Stakeholder
considerations
In making its decision, the Board considered the following stakeholders:
- Employees: In making decisions related to the Employee Value Proposition, the Board took into account the
feedback received via the Tullow Advisory Panel who met with the Board four times during 2021, market pay and
policy data was shared to support all compensation related decisions and the data from three employee surveys
conducted in the year. The Board believes that flexible working arrangements support an inclusive and diverse work
environment.
- Investors/creditors: The Employee Value Proposition empowers and incentivises Tullow employees to focus on the
regeneration of the business and on creating value from the Group’s assets.
Link to KPIs
7. Leadership Effectiveness
Decision Self-operate model for Jubilee FPSO
Context and link
to strategy
As part of a longer-term operational transformation plan, Tullow has taken the decision to self-operate the Jubilee FPSO
Kwame Nkrumah and will take over all operations and maintenance (O&M) when the current third-party operator’s,
MODEC, contract comes to an end in mid-2022. Increased Tullow control over the operational turnaround achieved in the
past 18 months demonstrated that Tullow has the in-house capacity to self-operate. Taking this further to self-
operatorship presents an opportunity to realise and sustain efficiency improvements, cost reductions as well as gain ESG
benefits. Through this change, Tullow is targeting top quartile operating performance in terms of safety, emissions,
reliability and costs.
The decision to self-operate the Jubilee FPSO is part of a broader strategic goal to become a leading West African
operator, creating a differentiating core competence for Tullow which could be leveraged for potential future acquisitions.
Challenges
andoutcome
Following extensive discussions at the Board during the second half of 2020 and early 2021, a project team was
established in the second quarter of 2021 to assess, define and develop the plan for the transition. This plan was
reviewed and approved by the Board in July 2021. The Board review of the self-operate transition plan covered various
governance, safety, and technical aspects. The implementation of the transformation is ongoing, and the Board
continues to regularly review and support the transition process.
Stakeholder
considerations
In making its decision, the Board considered the following stakeholders:
- Investors: When the Board was considering the decision to transition to a self-operate model for the Jubilee FPSO
in Ghana, it took into account the long-term value this could deliver to the Group through reductions in operating
costs and an increase in FPSO efficiency. It also considered how developing this core competence could be of benefit
to Tullow’s broader strategy to grow in Africa.
- Local suppliers: The Board considered the potential additional revenue that could be captured by local suppliers via
an increased direct engagement with the Group on the procurement process, and the potential transfer of skills to
indigenous Ghanaian companies via training.
- Employees: The Board took time to understand any additional safety risks self-operation would bring to Tullow and
ensured appropriate mitigating systems and processes will be in place. Self-operate also provides opportunity for
professional development for many individuals in the Tullow team, especially in Ghana.
Link to KPIs
1. Safety
2. Working Capital and Cost Management
8. Total Shareholder Return
Tullow Oil plc 2021 Annual Report and Accounts48
Viability statement
Assessment period
In accordance with the provisions of the UK Corporate Governance Code, the Board has assessed the prospects and the viability
of the Group over a longer period than the 12 months required by the ‘Going Concern’ provision. The Board assesses the
business over a number of time horizons for different reasons, including the following: Annual Corporate Budget (i.e. 2022),
Corporate Business Plan (5 years i.e. 2022–2026), long-term Business Plan (10 years). During 2021 the Board revised its period
of assessment for the purpose of the viability statement, which was previously three years, to five years for the following
reasons:
i. during the first half of 2021 the Group refinanced its near-term debt maturities with the issuance of Senior Secured Notes
due in May 2026 (2026 Notes). The Group’s only other outstanding debt are Senior Notes due in March 2025, and therefore all
of the Group’s debt matures outside of three years but within five years;
ii. in September 2021 the Group provided guidance to the market over a five-year period (2021–2025); and
iii. this period also aligns with the Corporate Business Plan which targets an increase in production and operating cash flow
generation over the next five years.
Notwithstanding the assessment period selected for the viability statement the Group will continue to assess the business over
all time horizons noted above.
Assessment of the Group’s principal risks
In order to make an assessment of the Group’s viability, the Directors have made a detailed assessment of the Group’s principal
risks, and the potential implications these risks could have on the Group’s business delivery and liquidity over the assessment
period. This assessment included, where appropriate, detailed cash flow analysis, and the Directors also considered a number
of reasonably plausible downside scenarios, and combinations thereof, together with associated supporting analysis provided by
the Group’s Finance team. A summary of the key assumptions aligned to the Group’s principal risks and reasonably plausible
downside scenarios can be found below. It should be noted that some assumptions encompass multiple risks but have not been
repeated to avoid unnecessary duplication.
Principal risks Base case assumption Downside scenario
Failure to deliver
production targets
Production is assumed to be in line with the Corporate
Business Plan.
5% reduction in production in each year.
Failure to manage
geopolitical risks
The Group has included probable outflow associated with tax
exposures (refer to page 118 for a description of the Group’s
uncertain tax treatments).
In addition to the exposure included in the base case the
Group has included $56 million related to potential outflows
which are currently not deemed to be probable but whose
likelihood is greater than remote.
Failure to manage
climate change
risks
The key impact of climate change on the Group’s portfolio of
assets is reflected in the oil price assumptions. See below.
The Directors have considered an oil price sensitivity in line with
the IEA 'Net Zero by 2050 Scenario'; see below.
The Group has also assessed the impact of carbon pricing; refer
to the TCFD disclosure.
Risk of insufficient
liquidity and funding
capacity to sustain
and grow the
business / failure to
deliver a highly cash
generative business
Oil price assumptions are based on the forward curve at
31December 2021 for two years, followed by the Group’s
Corporate Business Plan assumption from 2024 onwards:
2022: $76/bbl; 2023: $71/bbl; 2024: $62/bbl; 2025: $64/bbl;
2026: $65/bbl.
Operating costs and capital investment are assumed to be in
line with the Corporate Business Plan.
The Group has analysed two downside oil price scenarios; the
first is based on the Directors’ assessment of a reasonably
plausible downside scenario: 2022: $60/bbl; 2023: $61/bbl; 2024:
$62/bbl; 2025: $64/bbl; 2026: $65/bbl. The second is in line with
the IEA 'Net Zero by 2050 Scenario': 2022: $62/bbl; 2023: $59/
bbl; 2024: $55/bbl; 2025: $52/bbl; 2026: $49/bbl.
12% increase in operating costs.
For detailed information on risk mitigation, assurance and progress in 2021 refer to the detailed discussion of risks on page 36.
For 'Risk of an asset integrity breach', 'Failure to unlock value', 'Risk of a major EHS accident and Security', 'Risk of a
compliance or regulatory breach', 'Failure to develop, retain and attract capability', and 'Risk of major cyber-attack' the Group
has assessed that there is no reasonably plausible scenario that can be modelled in isolation or in combination with other risks
from a cash flow perspective.
49Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Conclusion
The Group has $2.4 billion notes outstanding, maturing in 2025 and 2026. The Corporate Business Plan does not project
sufficient free cash flow generation to allow the Group to fully repay these notes when they fall due, and therefore it will need to
access debt markets within the viability assessment period.
In the base case, net debt and gearing are forecast to reduce sufficiently such that the Directors are confident that the Group
will be able to secure the funding required to maintain adequate liquidity headroom throughout the viability assessment period.
Under the two downside scenarios, which assume all risks arise simultaneously, execution of a refinancing would be very
challenging. Management is focused on mitigating the risks around production, operating cost increases and potential outflows
associated with disputes in order to reduce the likelihood of these risks materialising, or their impact in the event these risks
materialise. Furthermore, the Directors have considered additional mitigating actions that may be available to the Group, such
as incremental commodity hedging executed in periods of higher oil prices, alternative funding options, further rationalisation of
the Group’s cost base including cuts to discretionary capital expenditure, M&A, portfolio management and careful management
of stakeholder relationships.
Based on the results of the analysis and the ability to mitigate some of the risks associated with the downside scenarios, the
Board of Directors has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities,
including through refinancing activities, as they fall due over the five-year period of their assessment.
Tullow Oil plc 2021 Annual Report and Accounts50
Non-financial reporting
Tullow aims to comply with the non-financial reporting requirements contained in sections
414CA and 414CB of the Companies Act 2006.The table below outlines to stakeholders Tullow’s
position, principal policies, main risks and KPIs on key non-financial areas.
Requirement Group approach and policies Documents Related KPIs Related principal risks
Environment
Further information: Environment,
see pages 31 to 32.
Oil and gas production carries a high risk of environmental impact and
incidents related to production processes.
Our product and the process associated with its production generate carbon
emissions which contribute to climate change. Tullow is working to reduce
its impact on the environment through its Net Zero 2030 commitment and
through its standards and policies.
Climate Policy
Safe and Sustainable Operations Policy
Code of Ethical Conduct
Non-Technical Risk Standard
Level 0 KPI: Embed Sustainability
across the organisation.
Level 1 KPI: Progress NetZero plan.
Climate risk on page 40
EHS or security risk on page 39
Employees
Further information: Our People,
see pages 33 to 35.
Further information: Health and Safety,
see page 29.
Tullow aims to create an inclusive environment, free from discrimination,
where individual differences and the contributions of all our staff are
recognised and everybody is treated fairly. We have zero tolerance for any
form of discrimination and decisions related to recruitment selection,
development or promotion are based upon aptitude and ability only.
Code of Ethical Conduct
Smart Working Policy
Level 0 KPI: Leadership effectiveness.
Level 2 KPIs: Quarterly employment
engagement pulse checks; redefine
commitment to inclusion and diversity;
develop localisation plans.
People risk on page 40
Ethics & conduct risk on page 41
Social policy
Further information: Community relations,
go to our Sustainability Report online.
We engage with communities early in the planning process to identify the
key impacts, both positive and negative, of our operations. We maintain
ongoing dialogue to provide information about Tullow’s activities and create
opportunities for people to contribute to decisions which affect them.
Wealways listen to feedback and concerns, answer enquiries and register
grievances made by community members.
Code of Ethical Conduct
Non-Technical Risk Standard
Level 1 KPIs: Deliver 2022 social
investment plan and develop long term
shared prosperity strategy; implement
revised local content plan.
Stakeholder risk on page 39 & 40
Respect for human rights
Further information: Our Approach,
go to our Sustainability Report online.
Tullow respects and promotes internationally recognised human rights as
set out in the Universal Declaration of Human Rights and the International
Labour Organization’s Declaration on Fundamental Principles and Rights at
Work. When considering new investments, we review associated potential
human rights issues and their relationship to our operations.
Human Rights Policy
Code of Ethical Conduct
Level 2 KPI: Code of Ethical Conduct
training completed by all staff.
Stakeholder risk onpage 39 & 40
Ethics & conduct risk on page 41
Anti-corruption and anti-bribery
Further information: Anti-corruption and
anti-bribery, see page 33
Tullow has zero tolerance of any form of corruption. We conduct our
business honestly, fairly and transparently and we do not exercise improper
influence on any individual or entity. We are subject to many anti-bribery
laws in the jurisdictions within which we work and, as a UK registered
company, are required to comply with the UK Bribery Act (2010).
Code of Ethical Conduct Level 2 KPI: Code of Ethical Conduct
training completed by all staff.
Ethics & conduct risk on page 41
This Strategic Report and the information referred to herein have been approved by the Board and signed on its behalf by:
Phuthuma Nhleko Adam Holland
Chair Company Secretary
8 March 2022 8 March 2022
51Tullow Oil plc 2021 Annual Report and Accounts
STRATEGIC REPORT
Requirement Group approach and policies Documents Related KPIs Related principal risks
Environment
Further information: Environment,
see pages 31 to 32.
Oil and gas production carries a high risk of environmental impact and
incidents related to production processes.
Our product and the process associated with its production generate carbon
emissions which contribute to climate change. Tullow is working to reduce
its impact on the environment through its Net Zero 2030 commitment and
through its standards and policies.
Climate Policy
Safe and Sustainable Operations Policy
Code of Ethical Conduct
Non-Technical Risk Standard
Level 0 KPI: Embed Sustainability
across the organisation.
Level 1 KPI: Progress NetZero plan.
Climate risk on page 40
EHS or security risk on page 39
Employees
Further information: Our People,
see pages 33 to 35.
Further information: Health and Safety,
see page 29.
Tullow aims to create an inclusive environment, free from discrimination,
where individual differences and the contributions of all our staff are
recognised and everybody is treated fairly. We have zero tolerance for any
form of discrimination and decisions related to recruitment selection,
development or promotion are based upon aptitude and ability only.
Code of Ethical Conduct
Smart Working Policy
Level 0 KPI: Leadership effectiveness.
Level 2 KPIs: Quarterly employment
engagement pulse checks; redefine
commitment to inclusion and diversity;
develop localisation plans.
People risk on page 40
Ethics & conduct risk on page 41
Social policy
Further information: Community relations,
go to our Sustainability Report online.
We engage with communities early in the planning process to identify the
key impacts, both positive and negative, of our operations. We maintain
ongoing dialogue to provide information about Tullow’s activities and create
opportunities for people to contribute to decisions which affect them.
Wealways listen to feedback and concerns, answer enquiries and register
grievances made by community members.
Code of Ethical Conduct
Non-Technical Risk Standard
Level 1 KPIs: Deliver 2022 social
investment plan and develop long term
shared prosperity strategy; implement
revised local content plan.
Stakeholder risk on page 39 & 40
Respect for human rights
Further information: Our Approach,
go to our Sustainability Report online.
Tullow respects and promotes internationally recognised human rights as
set out in the Universal Declaration of Human Rights and the International
Labour Organization’s Declaration on Fundamental Principles and Rights at
Work. When considering new investments, we review associated potential
human rights issues and their relationship to our operations.
Human Rights Policy
Code of Ethical Conduct
Level 2 KPI: Code of Ethical Conduct
training completed by all staff.
Stakeholder risk onpage 39 & 40
Ethics & conduct risk on page 41
Anti-corruption and anti-bribery
Further information: Anti-corruption and
anti-bribery, see page 33
Tullow has zero tolerance of any form of corruption. We conduct our
business honestly, fairly and transparently and we do not exercise improper
influence on any individual or entity. We are subject to many anti-bribery
laws in the jurisdictions within which we work and, as a UK registered
company, are required to comply with the UK Bribery Act (2010).
Code of Ethical Conduct Level 2 KPI: Code of Ethical Conduct
training completed by all staff.
Ethics & conduct risk on page 41
This Strategic Report and the information referred to herein have been approved by the Board and signed on its behalf by:
Phuthuma Nhleko Adam Holland
Chair Company Secretary
8 March 2022 8 March 2022
Tullow Oil plc 2021 Annual Report and Accounts52
Directors’ report
A framework for
corporate governance
As a UK-listed company, Tullow Oil plc’s governance policies
and procedures are based on the Financial Reporting Council’s
UK Corporate Governance Code (the Code) and the Financial
Reporting Council’s Guidance on Board Effectiveness, both
of which can be found at www.frc.org.uk. This Directors’
Report summarises how the Group has complied with the
Code during the year ended 31 December 2021 and describes
changes to the governance structure that took place before
year end. The Code sets out how governance is achieved
through the application of its five main principles and their
supporting provisions:
- Board leadership and Company purpose;
- division of responsibilities;
- composition, succession and evaluation;
- audit, risk and internal control; and
- remuneration.
Board leadership and Company purpose
The Board is accountable to shareholders and the Group’s
other stakeholders for the creation and delivery of long-term,
sustainable operational and financial performance for the
enhancement of shareholder and stakeholder value. The Board
meets these aims through setting the Group’s objectives,
Values and strategy and ensuring that the necessary resources
are available to achieve the agreed strategic priorities. During
2021, the Group has been focused on cost and operations to
achieve a more reliable and consistent operating performance
and a sustainable improvement in operating margins. Our
purpose is to build a better future through responsible oil and
gas development.
The Board operates through a governance framework with
clear procedures, lines of responsibility and delegated
authorities to ensure that strategy is implemented and
key risks are assessed and managed effectively. These are
underpinned by the Board’s work to set the Group’s core
Values, behaviours, culture and standards of business
conduct and to ensure that these are clearly understood
bythe workforce, shareholders and other stakeholders.
The Board also ensures that there is sufficient engagement
with the Group’s stakeholders such that their views can be
considered in Board decision making. The Group’s stakeholders
are divided into the following main groups: our investors,
ourhost countries and their communities, our people.
Division of responsibilities
The Chair is responsible for leadership of the Board and its
overall effectiveness whilst the Chief Executive Officer is
responsible for the operational management of the business,
for developing strategy in consultation with the Board and for
implementation of the strategy with the Senior Leadership
Team. One of the non-executive Directors has been selected
by the Board to be the Senior Independent Director. The
Board is fully satisfied that the Senior Independent Director
demonstrates complete independence and robustness of
character in this role. The Senior Independent Director is
available to meet shareholders if they have concerns that
cannot be resolved through discussion with the Chair or
for matters where such contact would be inappropriate.
Inaddition, during the year the Senior Independent Director
meets with the other non-executive Directors, without the
Chair present, to discuss the Chair’s performance. The Chair
meets regularly with the other non-executive Directors, without
Executive Directors present, to review Board discussions
and engagement as well as the performance of the Senior
Leadership Team.
The Chair offers governance meetings with shareholders at
least once a year to receive their direct feedback. In line with
the guidance issued by the Institute of Chartered Secretaries
and Administrators (ICSA), the Board has approved formal
terms of reference for a Committee of the Executive Directors.
The separation of responsibilities between the Board and the
Senior Leadership Team is clearly defined and agreed by the
Board and is published on the Group’s website.
Until 31 December 2021, the Board consisted of eight
independent non-executive Directors and two Executive Directors.
On 31 December 2021 Dorothy Thompson stepped down as
the non-executive Chair of the Board and left the Company,
whereupon Phuthuma Nhleko, an existing non-executive and
independent Director and the Chair-Designate, was appointed
non-executive Chair of the Board. After 31 December 2021, the
independent non-executive Directors consist of an independent
non-executive Chair, one Senior Independent Director and five
independent non-executive Directors.
The Executive Directors consist of the Chief Executive Officer
and the Chief Financial Officer.
53Tullow Oil plc 2021 Annual Report and Accounts
CORPORATE GOVERNANCE
Following the appointment of the new Chair of the Board, the
Board undertook a review of the schedule of matters reserved
for the Board and also the division of responsibilities between the
Chair of the Board, the Chief Executive and the Senior Independent
Director, and all of these are available on our website.
The Board has reviewed the criteria set out in the Corporate
Governance Code and the FRC’s Guidance on Board
Effectiveness and considers each of the non-executive
Directors to be independent in character and judgement
withno conflicts of interest. In addition, the Board is satisfied
that all non-executive Directors have disclosed their other
significant commitments and confirmed that they have
sufficient time to discharge their duties effectively. The
Board is also of the view that no one individual or group of
individuals dominates decision making.
As part of the governance framework, the Board has
delegated some of its responsibilities to four Committees: the
Audit Committee, the Nominations Committee, the Safety and
Sustainability Committee and the Remuneration Committee.
The Board is satisfied that the Committees have sufficient
time and resources to carry out their duties effectively. Their
terms of reference are reviewed and approved annually by
the Board and the respective Committee Chairs report on
their activities to the Board. The individual Committee terms
of reference can be found on the Group’s website. Director
attendance at Board and Committee meetings is summarised
in the table overleaf.
Committee Reports on pages 61 to 87
The Board of Directors
Chair, Executive Directors, Senior Independent Director and non-executive Directors
The Board operates under the leadership of the Chair and is collectively responsible for setting the Company’s strategy to
deliver long-term value to shareholders and other stakeholders. The Board ensures that the appropriate resources, leadership
and effective controls are in place to deliver the strategy. The Board also sets out the Company’s culture and Values, monitors
business performance, oversees risk management and determines the Company’s risk appetite. The Board delegates some of
its responsibilities to the Board sub-committees. The Board is accountable for the stewardship of the Company’s business to the
shareholders and other stakeholders.
Audit
Committee
Responsible for financial
reporting, audit,
internal control and risk
management processes.
Nominations
Committee
Responsible for Board
composition, appointment
of Directors and
succession planning.
Safety and
Sustainability
Committee
Responsible for health,
safety, environment,
climate change, shared
prosperity, security and
business sustainability.
Remuneration
Committee
Responsible for reward
and compensation for
the Chair, Executive
Directors and Senior
Managers and reviewing
the remuneration
arrangements of the
workforce.
Senior Leadership Team
Chief Executive Officer, Chief Financial Officer and three Senior Managers
The Senior Leadership Team operates under the leadership of the Chief Executive Officer and is responsible for the
delivery and execution of the Board’s strategy as well as the day-to-day management of the Company’s business including
operational performance. The Senior Leadership Team is accountable to the Board.
pages 61 to 66 pages 67 to 68 pages 69 to 70 pages 71 to 87
Tullow Oil plc 2021 Annual Report and Accounts54
Board and Board Committee attendance 2021
Director Board (8)
Audit
Committee (5)
Nominations
Committee (3)
Safety and
Sustainability
Committee (6)
Remuneration
Committee (4)
Phuthuma Nhleko 1
1
1
1
Rahul Dhir 8
Mitchell Ingram 8 6 4
Les Wood 8
Dorothy Thompson
4
8 3 6
Jeremy Wilson 8 5 3 4
Mike Daly 8 5 3 5 2
2
Sheila Khama 8 6
Genevieve Sangudi 8 2
2
3
3
4
Martin Greenslade 8 5
1. Denotes Director(s) who joined the Company part way through the year.
2. Denotes Director(s) who ceased to be a Committee member part way through the year.
3. Denotes Director(s) who joined a Committee part way through the year.
4. Denotes Director(s) who are no longer Directors of the Company.
The Board is supported and advised by the Company Secretary
who ensures that it has the policies, processes, information,
time and resources it needs for it to function effectively
and efficiently. The Company Secretary is also responsible
for ensuring compliance with all Board procedures and for
providing advice to Directors when required. The Company
Secretary acts as secretary to the Audit, Nominations, Safety
and Sustainability and Remuneration Committees and has
direct access to the Chairs of these Committees.
The Board typically meets seven times a year. One of those
meetings is devoted to an extensive review of the long-term
strategy of the business and another is usually held at an
overseas office of the Group to provide the Board with deeper
insights into the Company’s operations and an opportunity
to engage with stakeholders. In preparation for the Group’s
refinancing, as well as the asset disposals implemented by
the Group, certain Directors and Committees held a number
of meetings and calls between meetings more frequently
than usual. Due to the restrictions imposed by the COVID-19
pandemic, several of these meetings were held via video-
conference. Unfortunately, the Board was unable to travel as
a group to an overseas office. However, the Chief Executive
Officer was able to visit certain overseas offices, including
Ghana, and engage with a variety of stakeholders.
The focus of the Board’s meetings during the first half of
the year was on operational performance, the oversight of
the Business Plan and the refinancing of the Group. The
second half of the year focused on capital allocation and the
Company’s long-term strategy, stakeholder engagement,
and the energy transition and sustainability. Later in the
year, the Board focused on culture, and the Employee Value
Proposition. At various meetings during the year, the Board
also reviewed the key risks facing the Company and discussed
the Group’s appetite for those risks.
Composition, succession and evaluation
To ensure that serving Executive Directors and Senior
Managers of the Company continue to possess the necessary
skills and experience required for the strategy of the business,
the Board has established a Nominations Committee
to oversee the process of appointments and succession
planning for Directors and other Senior Managers. The role
of the Nominations Committee is critical in ensuring that
the Group’s Board and Committee composition and balance
support both the Group’s business ambitions and best
practice in the area of corporate governance.
During 2021, two significant changes to the Board were
announced. In June, Dorothy Thompson announced her intention
to step down as non-executive Chair of the Board. A search
process was initiated and in October Phuthuma Nhleko was
appointed as an independent non-executive Chair-Designate
of the Board. Phuthuma brings extensive emerging markets
experience to Tullow having worked successfully across
Africaover the past three decades. His biography can be
foundon page 58. He was appointed Chair of the Board on
1January 2022. In September, the Company announced that
Les Wood, Chief Financial Officer and Executive Director, had
mutually agreed with the Board that he would step down from
Tullow on 31 March 2022, after the presentation of the 2021
full year results. A search process was initiated and, as at the
date of this Report, Tullow’s recruitment of a new CFO and
Executive Director to replace Les Wood is ongoing. Further
detail on the appointment process for these Directors can
be found in the Nominations Committee Report on pages
67 to 68.
Directors’ report continued
55Tullow Oil plc 2021 Annual Report and Accounts
CORPORATE GOVERNANCE
Upon joining the Board, Directors receive induction
programmes which are specifically designed to complement
their background, experience and knowledge with a more
detailed understanding of the upstream industry and other
matters regularly discussed by the Board. The programmes
include one-to-one meetings with Senior Management,
functional leaders and, where possible, visits to the Group’s
principal offices and operations. The Directors also receive an
overview of their duties, corporate governance policies and
Board processes.
Directors are initially appointed for a term of three years.
All of the Directors will seek re-election at the next Annual
General Meeting. The Board will set out in the Notice of
Annual General Meeting its reasons for supporting the
re-election or election of each of the Directors. In October
2022, Jeremy Wilson will have completed nine years on the
Board. It is his intention to seek re-election at the AGM in
early 2022 and in due course agree with the Board a date that
is mutually convenient for him to retire before October 2022.
As part of the ongoing evaluation of the Board’s effectiveness,
and following the externally facilitated evaluation of the
Board in 2019, the Board carried out an internal evaluation
of its performance and that of its Committees in 2021. This
was facilitated by the Company Secretary with input from the
Chair of the Board, the Senior Independent Director and the
Chair of the Committees. The review required each of the
Directors to submit responses to a series of questionnaires
to reflect their individual performance, the performance of
the Board as a whole and the main areas under consideration
by the Board and its Committees. Contributors to Board and
Committee meetings and the wider group of direct reports to
Senior Managers were also provided with the opportunity to
provide their feedback to be incorporated into the evaluation.
All responses were compiled and discussed at the Board and
relevant Committee meetings.
The evaluations reported a number of positive observations
including that the Board believes it has a positive diversity
of views, skills and experience and a boardroom culture
where challenge is welcomed and delivered in a constructive
manner. Following the refinancing in 2021, the Board was
pleased to take the time to review and debate the Company’s
long-term strategy. The evaluation highlighted areas for the
Board to further focus on in the near term future, including:
a deep dive on the Company’s principal risks; succession
strategy; a strategy for data and technology; and in-person
engagement with the Company’s senior leaders following
COVID-19. These areas have been incorporated into the
Board’s agenda for 2022.
Shareholder engagement
At the AGM on 16 June 2021, a significant number
(25.30%)ofvotes were cast against Resolution 7 to re-elect
Dorothy Thompson as a Director of the Company. Although
the resolutions passed, members of the Board, including
the Senior Independent Director engaged with our major
shareholders who voted against the resolution and now
havean understanding of the concerns raised by them.
Theirfeedback was incorporated into the search for our
new Chair.
Board time* (%)

Strategy 25%
Business operations,
restructuring
and portfolio
management 25%
Capital structure and
capital allocation
25%
Safety and
sustainability
(including
stakeholder
engagement) 10%
Culture
and people5%
Principal risks and
governance 10%
Nominations Committee Report on pages 67 and 68
* Percentages are approximate.
Tullow Oil plc 2021 Annual Report and Accounts56
Audit, risk and internal control
The Board has delegated responsibility to the Audit
Committee to satisfy itself on the integrity of the Financial
Statements and announcements on financial performance,
overseeing the relationship with the external auditor and
reviewing significant financial reporting and accounting
policyissues.
The Audit Committee has also assumed responsibility
for overseeing the Group’s internal audit programme and
the process of identifying principal and emerging risks
and ensuring that they are managed effectively. As part
of that process, the Company’s internal financial controls
and internal control and risk management systems are
assessedannually.
The Directors acknowledge their responsibility for the
Group’s systems of internal control which are designed
to safeguard the assets of the Group and to ensure the
reliability of financial information for both internal use and
external publication and to comply with the requirements
of the Code. Overall control is ensured by a regular detailed
reporting system covering both operational and commercial
performance and the state of the Group’s financial affairs.
The Board has procedures for identifying, evaluating and
managing principal risks that impact the Group and these
are regularly reviewed. Tullow recognises that any systems
of risk management and internal control can only provide
reasonable, and not absolute, assurance that material
financial irregularities will be detected or that the risk of
failure to achieve business objectives is eliminated. However,
the Board does seek to ensure that Tullow has appropriate
systems in place for the identification and management
of key risks, including emerging risks. In accordance with
the requirements of the Code, the Board has established
procedures to manage risk, oversee the internal control
framework and determine the nature and extent of the
principal risks the Company is willing to take in order to
achieve its long-term strategic objectives.
Safety and Sustainability Committee
The Board has delegated to this Committee the responsibility
and oversight of the Company’s occupational and process
safety, people and asset security, health and environmental
stewardship. The Committee monitors performance and
key risks associated with these areas. The Committee also
provides oversight of the implementation of the Company’s
strategic priorities with respect to sustainability, namely; a
Net Zero delivery plan, Safe Operations, Shared Prosperity,
Environmental Stewardship, and Equality and Transparency.
Safety and Sustainability Committee Report pages 67 to 68
Audit Committee
The Audit Committee retains responsibility for oversight
of the external audit of reserves and resources. Board
governance was strengthened by the nomination of a
non-executive Director with appropriate technical expertise
who has responsibility for engagement with the Chief
Petroleum Engineer on all matters relating to reserves and
resources. The same non-executive Director is available to
assist with technical concerns raised through the Company’s
confidential speaking-up service, Safe Call. The Company’s
external independent reserves auditor meets with the Audit
Committee at least once a year to provide the Committee
with an opportunity to ask questions and provide challenge
toSeniorManagement’s assumptions.
Audit Committee Report pages 61 to 66
Remuneration Committee
The policies and practices for determining the remuneration
of the Executive Directors and the Senior Managers have been
delegated to the Remuneration Committee. The principal role
of the Remuneration Committee is to develop and maintain
a Remuneration Policy that ensures Executive Directors and
Senior Managers are rewarded in a manner that closely aligns
with the successful delivery of the Company’s long-term
purpose and strategy as well as those of the shareholders
andother stakeholders, including the workforce.
Remuneration Committee Report pages 71 to 87
Board oversight of climate change and disclosures in
alignment with TCFD
Climate change remains one of Tullow’s nine Principal
Risks with governance over climate related risks provided
at Board, senior Management and operational levels. The
Board has ultimate accountability for ensuring Tullow
maintains sound climate risk management and internal
control systems. Directors are responsible for ensuring
they remain sufficiently informed of climate related
risks to Tullow and the broader energy sector, required
to be able to meet their fiduciary duties under the UK
Companies Act 2006.
The Board:
- takes account of the financial impact on Tullow’s existing
portfolio stemming from the risks of lower oil demand,
lower oil prices and potential carbon taxes identified in
a range of commonly accepted climate scenarios for the
energy industry;
- ensures mitigation of climate change risks is embedded in
Tullow’s strategy, decision making on capital allocation and
Management compensation;
- monitors indications of any changes in Tullow’s access to
and cost of capital and debt, particularly stemming from
shifts in investor sentiment towards the oil and gas sector
related to climate change;
- approves Tullow’s carbon management and performance,
including targets for emissions reductions; and
- reviews Tullow’s assessment of climate risks and
opportunities including host nations’ Nationally Determined
Contributions in support of the Paris Agreement.
The Board undertakes these responsibilities primarily
through three sub-committees. The Safety and Sustainability
Committee holds responsibility for operational performance
on carbon emissions management and how this translates
into sustainability performance and disclosures. Oversight
Directors’ report continued
57Tullow Oil plc 2021 Annual Report and Accounts
CORPORATE GOVERNANCE
of decarbonisation initiatives which underpin Tullow’s Net
Zero commitment is also part of the Committee’s remit.
The Audit Committee oversees the assessment of Tullow’s
financial resilience considering the forecasts of various
scenarios on our portfolio and ensures it is appropriately
and transparently reflected in our financial disclosures.
Through the Remuneration Committee the Board ensures
climate and sustainability performance, including
performance against our Net Zero target, is embedded
inthe corporate scorecard and annual performance KPIs.
The Board approved the inclusion of a Sustainability KPI
inthe 2022 Scorecard with a weighting of 10%.
The Tullow Senior Leadership Team, led by the Director
of People and Sustainability, supports climate risk
management through review of Tullow’s commercial
resilience against various climate modelling scenarios.
The Senior Leadership Team is also tasked with leading
the incorporation of climate related risks, opportunities
and scenario assumptions into enterprise risk registers.
The Ghana Managing Director is furthermore accountable
for the implementation of decarbonisation initiatives in our
Ghana operations. The Non-Operated Business Manager
and Head of Exploration are respectively responsible
for identifying and managing climate related risks and
opportunities for their businesses. Senior Leadership are
supported in managing these responsibilities through
our multi-disciplinary climate risk review process,
incorporating assessment of our portfolio and strategy
against a range of commonly accepted climate scenarios,
policy positions and regulations within our host nations.
Each part of the business therefore evaluates climate
related risks and opportunities within their remit as part
of an ongoing risk review cycle; climate risk management
reflects Tullow’s ‘top-down, bottom-up’ approach to risk,
recognising the cross-cutting nature of climate change risk
which may affect other principal risk categories.
Audit Committee
Beyond its fiduciary duties in relation to the integrity of the
Company’s Financial Statements, the Audit Committee is
also responsible for ensuring there is a sufficient level of
assurance being provided on the risk management and
internal controls systems, including for Climate Risk, and
whether it is sufficient for the Board to satisfy itself that
they are operating effectively. During 2021 this included
a review of the climate scenario analysis undertaken to
test the resilience of Tullow’s portfolio as well as review
ofclimate risks.
Safety and Sustainability Committee
Tullow modified the scope of its standing EHS Committee
to include safety and sustainability in 2019 to reflect
the material nature of ESG and sustainability risks.
Embedding sustainability across the organisation, which
includes progress against Tullow’s Net Zero Commitment,
was a key focus of the Committee for 2021. Among others,
this included a review of the climate risk analysis process
and findings of this assessment.
Compliance
The Board is satisfied that the Group has complied in full with
the Code during the year ended 31 December 2021, with the
following exception:
i. The Directors’ Remuneration Policy, approved by
shareholders in 2020, provides that Executive Director
pension contributions for new Executive Directors are
aligned (as a percentage of salary) with those available
to the workforce. However, it provides that pension
contributions for existing Executive Directors will be
frozen at the 2019 cash amount and adjusted downwards
so they are aligned (as a percentage of salary) with those
available to the workforce by 1 January 2023. This does
not comply with Provision 38 of the Code which requires
these contributions to be aligned with those available
to the workforce; however, this is reflective of Provision
143 of the FRC’s Guidance on Board Effectiveness, which
acknowledges that it may not be practical to alter existing
contractual arrangements. The Board confirms that the
pension contributions for the Chief Executive Officer
appointed in 2020 and those of the new Chief Financial
Officer to be appointed in 2022 are aligned (as a percentage
of salary) with those available to the workforce and that,
following the departure of Les Wood by mutual agreement
of the Board on 31 March 2022, there will no longer be any
Executive Director receiving pension contributions which
are not in line with the workforce.
Phuthuma Nhleko
Chair
8 March 2022