THE SUNDAY TIMES (UK): Ireland: Tullow prepares to pour €740m into acquisitions pipeline: “Tullow last week added to its assets in the southern North Sea. It bought 100% of the Ketch gas field and 90.4% of the Schooner gas field for £200m from Shell and ExxonMobil.” (ShellNews.net) 26 Dec 04

Ciaran Hancock

December 26, 2004

TULLOW OIL will spend $1 billion (€740m) on acquisitions next year as part of an attempt to become Europe’s biggest independent oil business.

The €1.4 billion company will be scouting opportunities primarily in the North Sea and Africa, where its exploration and production activities are focused.

“Our ambition is to become a substantial independent oil company,” said Aidan Heavey, the chief executive of Tullow. “This year we’ve spent about $1 billion on buying assets in our core areas and I would be surprised if we don’t do $1 billion or more (of acquisitions) next year. We’ve a pipeline of acquisitions that we’re looking at.”

This expansion will be funded in a large part by the company’s free cash flow, which next year is expected to amount to between £250m (€360m) and £300m. Tullow’s hand will also be strengthened by the strong oil price. “Oil prices will stay high . . . I think $50 a barrel is a medium- to long-term price,” said Heavey.

Tullow is already Europe’s largest independent oil company in terms of production and second behind Cairn Holdings, its British rival, in terms of market value. The company produces more than 50,000 barrels of oil a day and Heavey said this would rise to 75,000 a day within two years before acquisitions are factored in.

Tullow last week added to its assets in the southern North Sea. It bought 100% of the Ketch gas field and 90.4% of the Schooner gas field for £200m from Shell and ExxonMobil.

Both are close to the CMS development in the southern North Sea, an area in which Tullow is already actively involved. The firm now plans to spend £140m in the next three years to double gas production from the fields.

Heavey said Tullow intends to expand its footprint in this area by buying neighbouring gas fields. “There is a lot of potential around Schooner,” he said.

Tullow also spent £300m acquiring Energy Africa, a South African-based oil and gas exploration and production company, in May and the firm completed about 12 “small” deals this year for between €5m and €20m.

Tullow has grown steadily over the past four years since buying North Sea assets from BP Amoco for £201m. Before the Energy Africa deal, Tullow boasted a market value of £370m. It is now a member of the FTSE 250 index.

Revenues are forecast to rise from £230m this year to more than £310m in 2005, which marks the first full year of contribution from Energy Africa. At the time of its acquisition by Tullow, Energy Africa was producing about 25,000 barrels a day, of which about 30% was in Britain. Heavey said its production has increased by about 15% since the deal was completed in May.

Although Tullow’s primary stock market listing is in London, the company’s international exploration and production activities are based in Dublin and about 20% of its equity is held by Irish institutions and private investors.

It is active in 16 countries, primarily the North Sea, west Africa and Pakistan. Heavey said the firm would spend about $80m next year on exploration activities, two-thirds of which would be in Africa.