Tullow Oil plc Announces Record Levels of Production, Turnover, Operating Profitability, Cash Flow and Net Profit.

LONDON -- Tullow Oil (LSE:TLW)(ISE:TLW):

Results for the year ended 31 December, 2004

2004 was, by any measure, a remarkable year for Tullow Oil. The Group more than doubled in size, driven largely by the acquisition of Energy Africa in May. Combined with sustained high oil and gas prices and good operational performance throughout the business, the Group delivered a strong set of results in terms of growth, profits and development.

Tullow Oil plc (symbol: TLW) is an independent oil and gas, exploration and production Group, quoted on the London and Irish Stock Exchanges and a member of the FTSE 250. The Group has interests in over 90 production and exploration licences in 16 countries worldwide focusing on three core areas of NW Europe, Africa and South Asia.

2004 HIGHLIGHTS

--Turnover up 74% to GBP 225.3 m (2003: GBP 129.6 m)

--Operating profit before exploration activities up 88% to GBP 83.2 m (2003: GBP 44.3 m)

--Basic earning per share up 112% to 6.18p per share (2003: 2.92p per share)

--Dividend per share up 75% to 1.75p per share (2003: 1.0p per share)

--Operating cash flow up 82% to GBP 154.3 m (2003: GBP 85.0 m)

--Working interest reserves amounted to 173 mmboe (2003: 70 mmboe)

Acquisitions/disposals

--Energy Africa, acquired at a cost of US$570 million (GBP 311 million), has been successfully integrated and consolidated with effect from 28 May 2004. Had these assets been included for the full year, pro-forma turnover for 2004 would have been in the order of GBP 310 million.

--The acquisition of the Schooner and Ketch producing assets and surrounding acreage for GBP 200 million was announced on 20 December 2004. This transaction was completed on 31 March 2005 and the focus is now on integration of these assets and initiation of the redevelopment of the fields.

--Since year end the Group has reached agreements to sell the non core Alba/Caledonia and offshore Congo assets for a combined headline consideration of $184 million (GBP 97 million). This is in line with the Group's strategy of actively managing its portfolio of assets.

Production and Reserves

--Weighted average working interest production for 2004 was 40,600 boepd, 62% ahead of 2003 levels, with a geographic balance between NW Europe (52%), Africa (47%) and Asia (1%) and a product balance between oil (56%) and gas (44%). Group working interest production continues to increase, current production is over 56,000 boepd.

--Energy Resource Consultants Ltd (ERC) performed an independent reserves review on Tullow's entire portfolio of assets as at 31 December 2004. The results of this review attributed commercial proven and probable reserves of 173 mmboe on a working interest basis. In addition, a further 153 mmboe are recognised as contingent reserves resulting in Group total reserves of 326 mmboe.

Production and Development

--The UK Gas market remains a key area of focus for the Group which, in 2004, made a number of notable advances in exploration, development, acquisitions and third party activity. Tullow now has a portfolio of over 50 North Sea Blocks and, post the integration of the Schooner and Ketch fields and the start up of Horne & Wren, will operate over 60% of its forecast 2005 UK gas production.

--The combination of the Energy Africa portfolio with Tullow's existing African interests has created a diversified pan-African business. Tullow now has production of over 30,000 boepd in Africa and holds interests in over 40 blocks across 11 countries, including high impact exploration acreage.

--2004 was a year of transition for Tullow's South Asian portfolio as this core area was repositioned in line with the enlarged Group. Pakistan in particular has been an area of renewed focus. The aim of the Group is to establish a larger exploration portfolio in South Asia, targeting high impact prospects.

--During 2005 Tullow will actively participate in development activity in the UK, Gabon, Congo, Equatorial Guinea, Cote d'Ivoire, Namibia and Pakistan. Planned expenditure is GBP 100 million, with the primary focus on the UK and West Africa.

Exploration and Appraisal

--In 2004 the Group had exploration success in Bangladesh, where the Bangora-1 exploration well tested gas at an aggregate rate of 120 mmscfd gross, and in Equatorial Guinea with the Akom North oil prospect, a satellite to the Okume complex. The Group drilled 16 exploration wells, of which seven were discoveries. The exploration write-off was GBP 18.0 million for the year.

--Tullow has approved a total exploration budget of GBP 40 million for 2005 with the objective of participating in up to 15 wells. Of those wells, a number remain subject to further technical review and partner approval.

Corporate Social Responsibility

--Tullow is committed to sustaining environmental and social performance. In 2004, an enhanced Environmental, Health and Safety Policy was implemented across the organisation. A CSR Committee with dedicated funding that will report to the Board regularly was established.

2005 OUTLOOK

Looking forward, 2005 will be a year of consolidation and delivery from Tullow's enlarged portfolio of assets. The Group has an active programme of development and exploration that will continue to grow and develop the business. The exploration risk-reward profile will be enhanced by farm-outs of licences where value has been added through geological and geophysical surveys.

At a global level, the market environment and oil and gas prices are expected to remain strong. In particular, the fine balance between gas supply and demand in the UK underpins the Group's view that the current favourable gas pricing environment in the UK will continue over the coming years.

The $184 million (GBP 97 million) realised from the disposal of non core assets, combined with a planned consolidation of Group banking facilities during 2005, leaves Tullow conservatively funded and well placed to continue to pursue its growth strategy.

GROWTH STRATEGY

Our vision is to be a leading independent oil and gas Group, with a balanced portfolio of exploration and production assets. This vision is underpinned by a consistent growth strategy, the cornerstones of which are a focus on gas in the UK Southern North Sea and oil in West Africa, with an ongoing appraisal and development programme in South Asia.

Commenting today, Pat Plunkett, Chairman, Tullow Oil, said:

"In four short years Tullow has increased its production from 2,500 boepd to over 56,000 boepd. The significant achievements of 2004 would not have been possible without the dedication and commitment of our staff, ably led by Aidan Heavey, and the support and confidence of our shareholders and bankers. The challenges and opportunities facing Tullow and our industry in 2005 are exciting ones and I look forward to reporting further progress to shareholders as the year unfolds."

Commenting today, Aidan Heavey, Chief Executive, Tullow Oil plc, said:

"With over $1 billion spent on acquisitions and investments in 2004, the Group has created a strong portfolio of international exploration, production and development assets with opportunities for future growth. Today Tullow has more than 90 exploration and production licences in 16 countries and the Group's reserves are over 320 mmboe. Quality assets, the current expectation of continued strength in oil and gas pricing and our unique characteristics will, I believe, continue to deliver long term growth and superior performance."

CONFERENCE CALLS AND WEBCAST

In conjunction with the Group's results presentation there will be conference calls and a Webcast today, hosted by Aidan Heavey, Chief Executive of Tullow Oil plc. Other senior management participating will be Tom Hickey, Chief Financial Officer, Paul McDade, Chief Operating Officer and Adrian Nel, Exploration Director.

9.00 am (BST): Conference Call and Webcast

In the UK/Europe please call [phone] and in Ireland please call [phone]. A replay facility will be available one hour after the conference call for seven days. To access the replay facility in the UK/Europe please call [phone] and in Ireland please call [phone]. The passcode is 4693758.

9.00 am (BST): Webcast

For further information on the Group, these results, and to view the Webcast, please visit www.tullowoil.com. An archive of this Webcast will be available from this afternoon.

2.30 pm (BST): Conference Call

In the US please call [phone] and in the UK please call [phone]. A replay facility will be available one hour after the conference call for seven days. To access the replay facility, please call + 1 719 457 0820. The passcode: 5564780.

2004 RESULTS

For the year ended 31 December 2004

In 2004 the Group reported record levels of production, turnover, operating profitability, cash flow and net profit. This was principally due to the acquisition of Energy Africa, combined with sustained high oil and gas prices during the year.

2004 weighted average working interest production was 40,600 boepd, 64% ahead of 2003 levels. The average realised oil price for the year was $36.99/bbl, excluding the cost of hedging. Against the background of net imports of gas into the UK market, UK gas prices were strong and the average price realisation for gas was 22.9p/therm (2003: 20.7p/therm).

Record turnover and profitability

Turnover increased 74% to GBP 225.3 million (2003: GBP 129.6 million), reflecting the Energy Africa acquisition contribution which was consolidated with effect from 28 May 2004. Despite increased UK gas prices turnover of existing operations was broadly flat as a result of a modest decline in UK production. Turnover was reduced by GBP 10.7 million by the realisation of hedge liabilities, including GBP 7.4 million relating to payments in excess of the fair value recognised in the balance sheet at the Energy Africa acquisition date. Pro forma turnover for 2004 would have been in the order of GBP 310 million had Energy Africa been included for the full year.

Operating profit before exploration activities increased 88% to GBP 83.2 million (2003: GBP 44.3 million), benefiting from the increased levels of production and reduced unit operating costs in the UK and Africa. This was partly offset by the write-down of GBP 2.2 million, included in the depreciation, depletion and amortisation (DD&A) charge, associated with a reserves downgrade in relation to the Sara and Suri gas fields in Pakistan.

Operating profit increased 107% to GBP 65.2 million (2003: GBP 31.5 million) and profit before tax increased 143% to GBP 58.0 million (2003: GBP 23.9 million), including the profit of GBP 2.3 million on the partial sale of licence interests in Horne & Wren as part of an initiative to balance equity participation and introduce new partners into the project.

Basic earnings per share amounted to 6.18 pence, an increase of 112% compared with 2.92 pence in 2003. Operating cashflow amounted to GBP 154.3 million, an increase of 82% over 2003, reflecting the quality of the Group's producing asset base.

Progressive dividend policy

Tullow paid a dividend of 1.0 pence per share for 2003. The Group's policy is to maintain a progressive dividend, that reflects both the cash generated by the business and the capital investment and acquisition opportunities available. A final dividend of 1.25 pence per share is being recommended by the Board which, following an interim dividend of 0.5 pence per share, brings the total dividend for the year to 1.75 pence per share.

Clear and effective corporate governance

The Tullow Board and management are committed to achieving and maintaining high standards of corporate governance. This approach ensures that the Board and management operate within a clear and effective governance framework that balances all stakeholder interests, including those of shareholders. Communication and interaction with shareholders, who have provided the Group with great support this year, is given a high priority and in 2005 Tullow is creating a dedicated Investor Relations function and undertaking a number of initiatives to enhance Investor Relations activities overall.

Strengthened Board and Management

In July 2004 David Bamford was appointed to the Board as a non-Executive Director and in September Adrian Nel of Energy Africa was appointed as an Executive Director with specific responsibility for Exploration. Between them, David and Adrian have over 60 years international exploration experience and they are instrumental in evolving the exploration strategy and performance of the Group.

As part of the Group's reorganisation of operations during the year, Paul McDade was appointed Chief Operating Officer and has responsibility for the management of the Group's production and development interests worldwide.

During the year, as previously announced in 2003, John Lander and Eskandar Maleki retired from the Board. Both John and Eskandar have made significant contributions to the Group with their dedicated service and commitment.

Consistent growth strategy

The Group's overall growth strategy comprises four principal drivers:

--Exploitation and expansion of Tullow's current reserve base

--A combination of developments and "snuggle" exploration close to Tullow's existing infrastructure, balanced with high impact and higher risk prospects

--Selective acquisitions to complement the Group's existing strong footprint within the three core areas of operation in NW Europe (mainly the UK), Africa and South Asia

--Maximisation and consolidation of Tullow's existing asset base through operational innovation and active portfolio management.

Exciting development opportunities

In the UK the Group intends to continue to develop its positions as a producer and operator in the gas market through a combination of bolt-on acquisitions, development of fallow fields, "snuggle" exploration and the expansion of third party business. Tullow has the technical and operational expertise to improve efficiency, returns and overall production. In addition, to exert material influence the Group targets significant equity participation and aligned joint venture partnerships. To enhance performance and cash flow, Tullow aims to maximise exposure to uncontracted gas production. This allows the Group the maximum flexibility in its UK gas marketing activities.

In the Africa core area there are important development opportunities for Tullow. Within the region there are significant under-explored areas, major companies are starting to exit the more mature fields and licencing of some areas and countries has only just begun. The combined Tullow and Energy Africa portfolio of assets provides the building blocks to implement and accelerate the Group's growth strategy in the region. This strategy is underpinned by strong relationships with partners and governments and extensive management and technical know how. The Group also has a material competitive advantage with its expansive portfolio across a number of countries, giving Tullow a broad and deep reach to participate where opportunities arise.

In 2004 a review of the South Asia core area determined the future options for development of this region, within the context of the newly enlarged Group and the major gas discoveries in Bangladesh during the year. Given the Group's history and knowledge of the area, Tullow believes that significant opportunities exist in South Asia and that further growth can be achieved, inter alia, by leveraging the Group's extensive acreage where there is major exploration potential and establishing a larger exploration portfolio with the objective of drilling high impact prospects.

Active portfolio management

One of the key aspects of the Group's strategy is to actively manage its portfolio of assets. Following the Energy Africa transaction, Tullow identified certain assets as being peripheral to its long term strategy. Agreements have consequently been reached to sell Alba & Caledonia to Itochu  Corporation for a headline consideration of $112 million (GBP 58 million) and the Groups offshore Congo assets to Total for a headline consideration of US$72 million (GBP 39 million).

Strong pipeline of activity

Overall, the significant level of achievement in all operations in 2004, combined with the new organisational structure, delivered increased production and reserves and provides a strong platform for future growth and development of the Group. At year end, the production portfolio comprised 25 fields located in 6 countries, with working interest production of over 56,000 boepd.

Looking forward, 2005 will be a year of further consolidation and delivery on the Group's enlarged portfolio of assets, while continuing to grow and develop the business. Tullow has approved a total exploration budget of approximately GBP 40 million with plans to participate in up to 15 wells. During 2005 Tullow will also actively participate in development activities in the UK, Gabon, Congo, Equatorial Guinea, Cote d'Ivoire, Namibia and Pakistan, with planned expenditure of approximately GBP 100 million. The operational focus of the production and development team for the year will be on:

--Integration of the Schooner and Ketch assets and initiation of the field redevelopments planned for the end of the third quarter 2005;

--Effective and timely execution of key developments of Horne & Wren and Munro in the UK, West Espoir in Cote d'Ivoire, Okume Complex in Equatorial Guinea and M'Boundi in the Congo;

--Completion of the Kudu FEED in Namibia in preparation for project sanction;

--Appraisal of the Bangora and Lalmai discoveries in Bangladesh and the sanction of the Chachar development in Pakistan and

--Continuing to build and diversify Tullow's operating activities both organically and through acquisition.

Tullow clearly recognises the risks associated with an increase in operational activity and the growing diversification of the Group's asset portfolio. Throughout the organisation there is an ongoing programme aimed at achieving excellence in the Environmental, Health and Safety aspects of Tullow's businesses, that considers staff and contractors, local communities and all external stakeholders.

Positive 2005 outlook

At a global level, the market environment and oil and gas prices are expected to remain strong. In particular, the fine balance between gas supply and demand in the UK underpins the Group's view that the current favourable gas pricing environment will continue over the coming years.

The $184 million (GBP 97 million) realised from the disposal of non core assets, combined with a planned consolidation of Group banking facilities during 2005, leaves Tullow conservatively funded and well placed to continue to pursue its growth strategy.

The challenges and opportunities facing Tullow and the industry in 2005 are exciting ones and the Board looks forward to reporting further progress to shareholders as the year unfolds.

OPERATIONS REVIEW

In addition to the major acquisition programme undertaken in 2004 Tullow continued to invest for the future in existing assets with expenditure of GBP 97 million on a wide range of operational enhancement and development projects.

Strong platform for growth and development

In 2004 Tullow reorganised and strengthened the Group's operational structure, integrating the Energy Africa assets and building a strong platform for future growth and development. The Group is now structured on a regional basis to run the enlarged business efficiently and to enhance operational reporting and accountability. The new production and development structure has five business units - UK, Gabon, West African Joint Ventures, Kudu and South Asia - aligned with the Group's three core areas of operation in NW Europe, Africa and South Asia.

NW Europe: leading producer and operator in the UK gas market

The Group's interests in NW Europe are almost exclusively in gas in the UK Southern North Sea. Tullow also operates two licences in Romania. Overall NW Europe accounts for 52% of Group turnover and 51% of Group production.

The UK Gas market is a key area of focus for Tullow and the Group intends to continue to grow as a producer and operator there. While UK gas production declined modestly during the year, Tullow made a number of notable advances in exploration, development, acquisitions and third party activity. The Group also completed its first year as operator of the Bacton/Hewett assets and obtained sanction of its first offshore development, Horne & Wren. Tullow's entire UK operations are ISO 14001 certified following certification of the Bacton Gas Terminal in 2004.

In March, Tullow announced first production from Boulton H, the final development well in the CMS III project. In April, the Munro field was discovered and development is already under way, targeting first gas in 2005. Tullow was awarded nine Blocks in the UK 22nd Licensing Round and in November the Department of Trade and Industry sanctioned the development of the Tullow operated Horne & Wren fields. In December, the announcement of the agreement to acquire the Schooner and Ketch producing assets and surrounding acreage represented a strong finish to the year and a major step in Tullow's strategy of building a substantial operated UK gas business.

Tullow now has a portfolio of over 50 North Sea Blocks and, post the integration of the Schooner and Ketch fields and the start up of Horne & Wren, will operate over 60% of its forecast 2005 UK gas production.

Africa: diversified pan-African oil and gas business

The combination of the Energy Africa portfolio and Tullow's existing African interests has created a diversified pan-African oil and gas business. Tullow now has production of over 30,000 boepd in Africa and holds interests in over 40 blocks across 11 countries, including prospective acreage in Mauritania, Namibia and Uganda, each of which could add materially to reserves and production over the coming years. Overall Africa accounted for 47% of Group turnover and 47% of Group production in 2004.

Within the producing assets progress is particularly encouraging, highlighted by recent field performance in Gabon, where production has increased substantially since the Energy Africa acquisition and reserves have also seen a significant upgrade. Elsewhere, the M'Boundi field in Congo, the West Espoir field in Cote d'Ivoire and the Group's acreage in Equatorial Guinea have important ongoing developments and will show a rising production profile over the coming years.

Major progress has also been made in relation to the commercialisation of the giant Kudu gas field offshore Namibia via a power generation project. The joint development agreement for this field was signed in July 2004 and the partners are currently focused on financing options and commercial structures to facilitate a final investment decision.

In addition to the Group's existing interests, the synergy from the combined knowledge, experience and technical databases of Tullow and Energy Africa has led to a number of exciting new venture opportunities which are currently under evaluation.

South Asia: refocused and targeting high impact prospects

2004 was a year of transition for Tullow's South Asian portfolio as the Group repositioned this core area in line with its enlarged portfolio of assets. Pakistan in particular has been an area of renewed focus. The aim of the Group this year is to establish a larger exploration portfolio in South Asia, targeting high impact prospects. Currently South Asia accounts for 1% of Group turnover and 2% of Group production.

The South Asia highlight of 2004 was the discovery of gas by the Lalmai and Bangora exploration wells in Block 9 onshore Bangladesh. Tullow has been active in Bangladesh since 1997, during which time the local gas market has evolved significantly and there is now considerable regional demand. As a result, in consultation with Petrobangla the state gas company, Tullow plans to deliver gas from Bangora into the market during 2005, while at the same time appraising the overall reserve potential of the Lalmai-Bangora anticline.

An appraisal of the Group's assets in Pakistan has resulted in the following decisions: 1) to review the potential for infill drilling in the Sara and Suri gas fields; 2) not to extend the Sara West licence under the current terms; and 3) to continue the development of the Chachar discovery, where first gas is expected by early 2006. The Group has also recently been awarded a material new exploration licence in the Potwar basin.

While there was limited activity in India during 2004, exploration activity will commence in 2005 on the prospective CB-ON-1 Block in the Cambay basin, which is on geological trend with a number of regional oil and gas discoveries.

Strength and diversity in reserves

During 2004 Tullow appointed ERC to undertake an independent review of the Group's oil and gas reserves.

This review attributed 173 mmboe of commercial proven and probable working interest reserves to Tullow and 150 mmboe net entitlement reserves. In addition, ERC also reviewed projects under the contingent category. Tullow has 153 mmboe in this category, dominated by the Kudu gas project offshore Namibia, where work on commercialisation is progressing. This clearly shows the strength and diversity of the Group's portfolio of assets.

In the UK, production during the year was substantially offset by the addition of reserves associated with the Horne & Wren and Munro developments. In Africa due to the strong development programme undertaken during 2004, reserves replacement as a whole was over 250%. In South Asia a reserves downgrade on Sara and Suri gas fields and Sara West reserves resulted in a GBP 4 million charge to profits in 2004. However the reserves reduction is significantly offset by the first recognition of reserves associated with the Bangora-1 discovery in Bangladesh, on which further appraisal is planned in 2005.

Coherent exploration and appraisal programme

Tullow's exploration strategy is to achieve significant growth in its reserve base at a finding cost appropriate to the various fiscal regimes in which projects are located and operated. This strategy has three primary components:

1) To grow prospect inventories in areas of relatively low risk where Tullow enjoys a competitive advantage. These are currently the Southern Gas Basin of the UK North Sea and Gabon, which account for more than 60% of the Group's 2004 total production.

2) To expand prospect inventory in areas with the possibility to deliver significant reserve growth in the medium term. Tullow will seek equity levels that could provide net reserves of over 20 mmbbls for individual prospects, in acreage with upside potential. Outside of the UK and Gabon the drilling programme will target higher risk-reward prospects with significant reserve potential.

3) To maintain an active new ventures programme and to build a portfolio capable of yielding significant additional reserves in the future. To achieve this, Tullow is aggressively pursuing new opportunities and accelerating work programmes in currently held acreage in Gabon and Cote d'Ivoire. The Group is also targeting further licence agreements in Pakistan and new acreage in the Ivorian-Ghanaian basin and other countries on the West African margin.

During 2004 Tullow participated in successful exploration wells in the UK North Sea, Gabon, Congo, Equatorial Guinea and Bangladesh. However there were also nine unsuccessful wells. The exploration write-off cost associated with those wells was GBP 18.0 million (2003: GBP 12.7 million). The Group has approved a total exploration budget of GBP 40 million for 2005 with the objective of participating in up to 15 wells during the year.

Exploration, by its very nature, carries risk and, in addition to the primary strategies outlined above, Tullow actively manages its exploration risk by farming out interests in licences where value has been added through geological and geophysical surveys. In 2004 there were various farm- outs which reduced the Group's financial exposure to exploration in Gabon, Romania and Morocco. Tullow also balanced its UK portfolio through the partial sale of the Horne & Wren fields to Centrica plc, for a profit of GBP 2.3 million. In Africa an asset swap in Gabon improved the production balance and enhanced Tullow's tax position in that country.

FINANCIAL REVIEW

As outlined above the Group delivered a strong performance in 2004 with increases across all key performance metrics of production, turnover, operating profitability, cash flow, net profit and earnings per share. This was principally as a result of the Energy Africa acquisition, a steady performance from the Group's existing operations and the positive global resource and UK gas price environment. The Group balance sheet also remains strong, with low levels of net debt.

A strong performance

Turnover grew 74% to a record GBP 225.3 million (GBP 236.0 million before hedging), compared with GBP 129.6 million in 2003. Operating profit before exploration costs increased 88% to GBP 83.2 million, compared with GBP 44.3 million in 2003. Profit before tax was up 143% to GBP 58.0 million, compared with GBP 23.9 million the previous year and net profit grew to GBP 32.9 million up 202% from GBP 10.9 million in 2003.

Improved operating costs of GBP 4.40/bbl (2003 - GBP 4.70/bbl), on a working interest basis, reflect the continuing drive for operational performance, the shift of UK production to the lower operating costs CMS area and the lower operating costs of the Energy Africa portfolio of assets.

The DD&A charge of GBP 4.68/bbl (2003 - GBP 4.37/bbl), on a working interest basis, was materially affected by the fair value allocation exercise undertaken post the Energy Africa acquisition and the write-down associated with the asset downgrade in Pakistan, which was partly offset by reserve upgrades in relation to the Group's Gabon and Congo interests.

In line with Tullow's "successful efforts" accounting policy in relation to the Group's exploration and development activities a total charge of GBP 18.0 million was incurred in 2004 (2003: GBP 12.7 million) in relation to nine unsuccessful wells, along with certain additional costs associated with relinquished acreage and new ventures.

A lower effective tax rate

The Group's overall effective tax charge, amounting to GBP 25.0 million, was 33.0% of profit before tax and exploration write-off (2003: 35.3%). The decrease in the effective tax rate is due to the fact that the majority of Energy Africa's production activities are under Production Sharing Contracts, where a portion of production is shared with the host Government instead of tax. The value of such production is no longer reflected in the Profit and Loss Account under the Group's revised accounting policy for Taxation and Turnover for such arrangements.

Robust cash flow and financial capacity

Tullow generated GBP 154.3 million in operating cash flow during the year (2003: GBP 85.0 million) principally driven by the Energy Africa acquisition and stronger oil and gas pricing. During the year the Group invested a total of over $1 billion in acquisitions, GBP 69 million on development projects and GBP 28 million on exploration activities. Net debt increased to GBP 113.5 million (2003: GBP 62.4 million) reflecting the strength of the Group's financial capacity.

During the year the Group concluded a $300 million Acquisition Bridge Financing Facility, arranged by ABN AMRO, BNP Paribas and Bank of Scotland. This facility was principally used to finance the cash component of the consideration paid to acquire Energy Africa. In addition the Group raised GBP 123.5 million before expenses through placing 130 million shares at 95p per share. Following the acquisitions and growth of recent years, Tullow currently has a variety of financing facilities in place. During 2005 it is the Group's intention to undertake a refinancing to substantially replace all of the Group's existing debt facilities.

Total cash balances at year end were GBP 85.1 million (2003: GBP 66.7 million).

The net interest charge for the year was GBP 9.6 million comprising GBP 8.3 million interest and fees payable on Group debt, GBP 3.5 million of interest income and GBP 4.8 million of non cash costs.

A prudent hedging policy

Tullow's policy is to mitigate the Group's exposure to oil and gas price risk for a portion of its production using a range of financial instruments. The main objectives of the hedging programme are to reduce exposure to price volatility and particularly downside risk, and to provide substantial assurance of appropriate levels of liquidity for the Group's various investment opportunities. Due to the natural hedge between assets in the UK and Sterling borrowings and the denomination and funding of the Group's international business in US Dollars, Tullow does not undertake active currency hedging.

At 31 March 2005 the Group's hedge position to the end of 2005 is as follows:

Oil Hedges                                 1H 05      2H 05     2006
       Volume - bopd                     12,983      9,946     7,731
       Average Price - $/bbl(a)            36.7       36.0      32.8
       Downside Price - $/bbl(b)           34.6       31.4      28.5

Gas Hedges
       Volume - mmscfd                       46         43        20
       Average Price - p/therm(a)            28.4       29.2      36.4
       Downside Price - p/therm(b)          26.9       27.0      33.1
(a)   Average hedge prices are based on market prices as at 31/03/05
 and represent the current value of hedged volumes

(b) Downside hedge prices reflect floor price protection
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Completed all aspects of the Energy Africa transaction

The Energy Africa transaction, announced in March 2004, was completed with the consolidation of those assets from 28 May 2004. Under FRS7 Tullow is required to undertake a fair value exercise to determine the values attributed to the acquired assets within the Group's Balance Sheet. A provisional estimate of fair value allocation was provided at the 2004 interims. Under the FRS Tullow are permitted to review this allocation within 12 months, and accordingly the final fair value allocated to the acquisition of Energy Africa may be summarized as follows:

$      GBP
                                                     million  million
Book value of oil and gas fixed assets               343.9    187.6
Market value of hedge contracts                      (51.8)   (28.3)
Fair value of other net liabilities                  (82.4)   (45.0)
Fair value adjustment to book values of oil and gas
 fixed assets                                        391.4    213.6
Total acquisition cost                               601.1    327.9
----------------------------------------------------------------------

Based on the fair value exercise and current production and reserves mix, the average DD&A rate for the Energy Africa assets is approximately $8.70/bbl, on a working interest basis.

On track to be fully prepared for IFRS

The Group will adopt IFRS with effect from 1 January 2005 and the 2005 interim figures will be prepared on the new basis. Comparative figures for 2004 will also be restated in accordance with IFRS. Tullow has established a project team that is managing the transition to IFRS and the exercise to restate the 2004 figures has commenced. A restatement of the 2004 balance sheet, including a reconciliation between UK GAAP and IFRS, will be issued to shareholders in advance of the interim results which will be published in September 2005. The project team is also considering the presentation of the Group's results, systems impacts and the wider business issues that arise from such a fundamental change.

Tullow's current understanding is that the major effects of changing from the Group's existing accounting practices to IFRS are likely to be in the areas of deferred taxation related to business combinations, oil and gas hedges and share based payments. As Tullow adopts the successful efforts method of accounting for exploration and appraisal costs it is anticipated that changes in accounting for fixed assets costs will be comparatively minor. Tullow is monitoring the approach adopted by the industry and the Group expects to be fully prepared for adoption of IFRS. -oOo-

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

GROUP PROFIT AND LOSS ACCOUNT

Acquisitions   Existing
                                        Operations     Total
                                  2004       2004      2004     2003
                                                             Restated
                               GBP '000   GBP '000  GBP '000 GBP '000

Turnover                        98,915    126,341   225,256  129,625
                           ------------ ---------- --------- --------

Cost of Sales
Operating Costs                (23,781)   (39,719)  (63,500) (42,621)
Depletion and Amortisation     (31,010)   (36,561)  (67,571) (39,628)
                           ------------ ---------- --------- --------
                               (54,791)   (76,280) (131,071) (82,249)
                           ------------ ---------- --------- --------

Gross Profit                    44,124     50,061    94,185   47,376
                           ------------ ---------- --------- --------

Administrative Expenses         (3,268)    (7,102)  (10,370)  (2,727)
Depreciation                      (272)      (375)     (647)    (332)
                           ------------ ---------- --------- --------
                                (3,540)    (7,477)  (11,017)  (3,059)
                           ------------ ---------- --------- --------

Operating Profit Before
 Exploration Activities         40,584     42,584    83,168   44,317
Exploration Costs Written
 Off                            (8,622)    (9,339)  (17,961) (12,772)
                           ------------ ---------- --------- --------
Operating Profit                31,962     33,245    65,207   31,545
Profit/(Loss) on Disposal
 of Producing Assets                                  2,292     (952)
                                                   --------- --------
Profit on Ordinary
 Activities before
 Interest                                            67,499   30,593
Interest Receivable and
 Similar Income                                       3,458    2,016
Interest Payable and
 Similar Charges                                    (12,960)  (8,730)
                                                   --------- --------

Profit on Ordinary
 Activities before
 Taxation                                            57,997   23,879
                                                   --------- --------

Taxation on Profit on
 Ordinary Activities
Current and Deferred
 Petroleum Revenue
 Taxation                                           (10,956)  (9,025)
Current Corporation
 Taxation                                            (9,863)  (6,675)
Deferred Corporation
 Taxation                                            (4,229)   2,742
                                                   --------- --------
                                                    (25,048) (12,958)
                                                   --------- --------

Profit for the Financial
 Year                                                32,949   10,921

Dividends                                            (6,995)  (3,782)
                                                   --------- --------

Retained Profit for the
 Financial Year                                      25,954    7,139
                                                   ========= ========

Earnings per Ordinary
 Share (Note 3)                                        Stg p    Stg p
-  Basic                                               6.18     2.92
-  Diluted                                             6.11     2.90
                                                   ========= ========

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

2004         2003
                                                GBP  '000    GBP  '000

Profit for the Financial Year                     32,949       10,921
Currency Translation Adjustments                 (19,338)      (5,034)
                                              ------------------------

Total Recognised Gains and Losses for the
 Financial Year                                   13,611        5,887
                                              ========================

RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS

2004         2003
                                                GBP  '000    GBP  '000

Retained Profit for the Financial Year            25,954        7,139
Currency Translation Adjustments                 (19,338)      (5,034)
Equity Shares Issued                             256,547       13,516
                                             -------------------------

Net Increase in Equity Shareholders' Funds       263,163       15,621
Equity Shareholders' Funds - At 1st January      115,921      100,300
                                             -------------------------

Equity Shareholders' Funds - At 31st December    379,084      115,921
                                             =========================

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

GROUP BALANCE SHEET

2004       2003
                                                  GBP  '000  GBP  '000
Fixed Assets
Intangible Assets                                  103,312     48,434
Tangible Assets                                    495,920    144,333
Investments                                            496        496
                                                ----------------------

                                                   599,728    193,263
                                                ----------------------
Current Assets
Stock                                                3,392        437
Debtors                                             54,207     26,115
Cash at Bank and in Hand                            85,070     66,686
                                                ----------------------

                                                   142,669     93,238
                                                ----------------------
Creditors - Amounts falling due within one year
Bank Loans and Overdrafts                           (5,302)   (27,544)
Trade and Other Creditors                         (114,014)   (33,173)
                                                ----------------------

                                                  (119,316)   (60,717)
                                                ----------------------

Net Current Assets                                  23,353     32,521
                                                ----------------------

Total Assets Less Current Liabilities              623,081    225,784

Creditors - Amounts falling due after more than
 one year
Bank Loans                                        (143,398)   (59,458)

Provisions for Liabilities and Charges
Decommissioning Costs                              (70,679)   (47,524)
Deferred Taxation                                  (29,920)    (2,881)
                                                ----------------------

Net Assets                                         379,084    115,921
                                                ======================

Capital and Reserves
Called Up Equity Share Capital                      64,537     37,784
Share Premium Account                              121,656     14,198
Merger Reserve                                     178,953     56,617
Foreign Currency Translation Reserve               (30,362)   (11,024)
Profit and Loss Account (Note 4)                    44,300     18,346
                                                ----------------------

Equity Shareholders' Funds                         379,084    115,921
                                                ======================

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

GROUP CASH FLOW STATEMENT

2004        2003
                                           Notes GBP  '000   GBP  '000

Net Cash Inflow from Operating Activities     5   154,307      84,960

Returns on Investments and Servicing of
 Finance                                      6   (13,053)     (7,533)
Taxation                                          (14,497)    (12,261)
Acquisition of Subsidiaries                      (166,055)          -
Disposal of Subsidiary                              4,730           -
Capital Expenditure and Financial
 Investment                                   7   (95,105)    (42,044)
                                                ----------------------

Net Cash (Outflow)/Inflow before Management
 of Liquid Resources and Financing               (129,673)     23,122

Management of Liquid Resources - Term
 Deposits                                         (10,299)      4,143

Financing                                     8   143,045      (6,399)
                                                ----------------------

Increase in Cash for the Year                       3,073      20,866
                                                ======================

Reconciliation of Net Cash Flow to Movement
 in Net Debt
Increase in Cash for the Year                       3,073      20,866
Cash (Inflow)/Outflow from Movement in Debt       (65,182)     14,802
Cash Outflow/(Inflow) from Management of
 Liquid Resources                                  10,299      (4,143)
                                                ----------------------

Change in Net (Debt)/Funds resulting from
 Cashflows                                        (51,810)     31,525
Currency Translation Adjustment                       710       1,507
Net Debt at 1st January                           (62,368)    (95,400)
                                                ----------------------

Net Debt at 31st December                        (113,468)    (62,368)
                                                ======================

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

GROUP CASH FLOW STATEMENT (CONTINUED)

Cash
Analysis of Changes in Net Debt 01.01.04    Flow   Exchange 31.12.04
                                GBP  '000 GBP '000 GBP '000 GBP  '000

Cash at Bank and in Hand         24,618    2,015    (112)    26,521
Overdrafts                       (1,055)   1,058     (3)       -
                                --------- -------- -------- ---------
                                 23,563    3,073    (115)    26,521
                                --------- -------- -------- ---------

Bank loans due within one year  (26,769)  20,619     848     (5,302)
Bank loans due after one year   (61,090)  (85,801)   (29)   (146,920)
                                --------- -------- -------- ---------
                                (87,859)  (65,182)   819    (152,222)
                                --------- -------- -------- ---------

Term Deposits                    1,928    10,299      6      12,233
                                --------- -------- -------- ---------

Net Debt                        (62,368)  (51,810)   710    (113,468)
                                ========= ======== ======== =========

Cash at Bank and in Hand at 31 December 2004 per the Group Balance Sheet includes GBP 26,520,796 of Cash, GBP 12,233,337 of Term Deposits, GBP 36,236,529 on fixed deposit in support of future decommissioning costs and GBP 10,079,815 on fixed term deposit under the terms of the debt facility.

Cash at Bank and in Hand at 31 December 2003 per the Group Balance Sheet includes GBP 24,617,585 of Cash, GBP 1,927,857 of Term Deposits, GBP 29,750,854 on fixed deposit in support of future decommissioning costs and GBP 10,389,324 on fixed term deposit under the terms of the debt facility.

Bank Loans are stated in the Group Balance Sheet net of related unamortised arrangement fees of GBP 3,521,511 (2003 - GBP 1,911,573).

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

NOTES TO THE PRELIMINARY ACCOUNTS

Note 1 Basis of accounting and Presentation of Financial Information

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2004 or 2003. The financial information for the year ended 31 December 2003 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2004 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

The Group has revised its previous accounting policy for Taxation and Turnover in relation to notional Cote d'Ivoire corporation tax levied under the terms of the Espoir field Production Sharing Contract (PSC) and deemed settled out of the Cote d'Ivoire state's share of Espoir production. Previously, the amount of Cote d'Ivoire corporation tax settled out of production was treated as Taxation and also included in Turnover. Under the revised treatment, this component of state profit oil is not included in Turnover and consequently is not included with other taxes, principally cash settled, under the Taxation heading. Turnover and Taxation for 2003 have been restated to comply with the revised accounting policy and have been reduced by GBP 2,739,830. There has been no effect on net assets or net profit in any period as a result of the change.

Save as discussed above there are no changes to the accounting policies as set out on pages 51 to 53 of the Annual Report and Statement of Accounts for the year ended 31st December 2003.

Note 2 Acquisitions

The Energy Africa Limited (Energy Africa) and Energy Africa Gabon Holdings Limited (EAGHL) acquisition is accounted for under the 'acquisition method' in accordance with FRS 7 "Fair values in acquisition accounting", whereby the assets and liabilities acquired are restated to fair value, with any excess of the purchase consideration over the fair values of the net assets acquired allocated to goodwill.

The fair value of the purchase consideration of GBP 327,911,243 comprised 132,987,442 Tullow shares issued valued at GBP 135,632,816, using the market price at the date of acquisition, plus cash consideration and acquisition expenses amounting to GBP 192,278,427.

The merger provisions of Section 131 of the Companies Act, 1985 applies to the share consideration amount and results therefore in a transfer of GBP 122,335,483 to the Merger Reserve.

After restating the acquirees' balance sheets at the acquisition date to comply with the Group's accounting policies, fair value adjustments were applied to restate oil and gas tangible and intangible fixed assets, stock, and the hedging instruments acquired to estimated fair values of GBP 402,355,701, GBP 643,356 and a liability of GBP 28,283,011 respectively.

The fair values of other net liabilities of GBP 45,593,109 materially approximate their book values, such that no fair value adjustments were necessary. The total of the fair values of the assets and liabilities acquired matches the purchase consideration, such that no goodwill arises on the acquisition.

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

NOTES TO THE PRELIMINARY ACCOUNTS (CONTINUED)

Note 3 Earnings per Ordinary Share

The calculation of basic earnings per share is based on the profit for the year after taxation of GBP 32,949,297 (2003 - GBP 10,920,541) and 532,980,261 (2003 - 374,427,152) ordinary shares, being the weighted average number of shares in issue for the year.

The calculation of diluted earnings per share is based on the profit for the year after taxation as for basic earnings per share. The number of shares outstanding is however adjusted to show the potential dilution if employee and other share options are converted into ordinary shares. The weighted average number of ordinary shares is increased by 6,042,545 (2003 - 2,071,203) in respect of the share option scheme, resulting in a diluted weighted average number of shares of 539,022,806 (2003 - 376,498,355).

Note 4 Profit and Loss Account

2004       2003
                                                  GBP  '000  GBP  '000

At 1st January                                      18,346     (7,379)
Profit Retained for Financial Year                  25,954      7,139
Transfer from Merger Reserve                             -     12,596
Transfer to Foreign Currency Translation Reserve         -      5,990
                                                ----------------------

At 31st December                                    44,300     18,346
                                                ======================

Note 5 Reconciliation of Operating Profit to Operating Cash Flows

2004         2003
                                                GBP  '000    GBP  '000

Operating Profit for the Year (Restated)          65,207       31,545
Depletion and Amortisation                        67,571       39,628
Depreciation of Other Fixed Assets                   647          332
Exploration Costs                                 17,961       12,772
Hedging Contracts                                  6,997            -
Increase in Stock                                 (1,721)        (437)
Increase in Operating Debtors                    (34,215)      (1,992)
Increase in Operating Creditors                   35,349        3,589
Currency Translation Adjustment                   (3,489)        (477)
                                           ---------------------------

Net Cash Inflow from Operating Activities        154,307       84,960
                                           ===========================

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

NOTES TO THE PRELIMINARY ACCOUNTS (CONTINUED)

Note 6 Returns on Investments and Servicing of Finance

2004            2003
                                             GBP  '000       GBP  '000

Interest Received                               3,436           2,016
Interest Paid                                  (9,494)         (5,767)
Dividend Paid                                  (6,995)         (3,782)
                                       -------------------------------
Net Cash Outflow from Returns on
 Investments and
Servicing of Finance                          (13,053)         (7,533)
                                       ===============================

Note 7 Capital Expenditure and Financial Investment

2004       2003
                                                  GBP  '000  GBP  '000
Purchase of Tangible & Intangible Exploration
 Assets                                            (96,592)   (45,951)
Purchase of Tangible Fixed Assets - Other             (132)      (235)
Disposal of Tangible Fixed Assets                        -      4,339
Disposal of Intangible Exploration Assets            1,619          -
Purchase of Investments                                          (197)
                                               -----------------------

Net Cash Outflow from Investing Activities         (95,105)   (42,044)
                                               =======================

Note 8 Financing

2004       2003
                                                  GBP  '000  GBP  '000

Issues of Ordinary Shares                          126,500     14,404
Costs of Share Issues                               (5,586)      (888)
Repayment of Loans                                 (33,437)   (17,334)
Drawdown of Loan                                    98,620      2,531
Acquisition of Subsidiary - Bank Loans Acquired    (33,824)         -
Transfer to Restricted Funds Deposit Account        (6,176)    (5,027)
Debt Arrangement Fees                               (3,052)       (85)
                                                 ---------------------

                                                   143,045     (6,399)
                                                 =====================

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

NOTES TO THE PRELIMINARY ACCOUNTS (CONTINUED)

Note 9 Subsequent Events

Since the balance sheet date Tullow has continued to progress its exploration, development and business growth strategies.

On 1 April 2005, the Company announced the completion of the acquisition, from Shell U.K. Limited and Esso Exploration and Production UK Limited, of their entire producing interests in the Schooner and Ketch gas fields and associated acreage. This transaction was first announced on 20 December 2004. The total consideration for the transaction is GBP 200 million, inclusive of capital allowances, which has been financed through a combination of bank debt and internal resources.

On 8 April 2005 the Company signed a Sale and Purchase Agreement ('SPA') to dispose of its minority interest in the Central North Sea to ITOCHU Corporation for a headline consideration of US$112 million (GBP 59 million). On the same date the Company signed an agreement to dispose of its interests in Offshore Congo to Total plc for a headline consideration of US$72 million (GBP 38 million).

Note 10 Group Reserves Summary (Unaudited)

Proven and Probable Reserves (Working Interest Basis)

Commercial            EUROPE             AFRICA          ASIA
                 -----------------------------------------------------
                      Oil        Gas     Oil     Gas     Oil    Gas
                     mmbbl       bcf    mmbbl    bcf    mmbbl   bcf

1  Jan 2004           -        148.60   17.76   37.05    -    128.24
Revisions           (2.21)      4.08    19.85   (8.14)   -    (30.10)
Acquisitions/
Disposals           18.00      14.78    85.31     -      -       -
Production          (1.19)     (35.51)  (6.85)  (0.90)   -     (1.94)

                 -----------------------------------------------------

31 Dec 2004         14.60      131.95  116.07   28.00    -     96.20


   Commercial                  TOTAL
                   -------------------------------------------
                         Oil            Gas        Petroleum
                        mmbbl           bcf            mmboe

1  Jan 2004             17.76         313.89        70.07
Revisions               17.64         (34.16)       11.95
Acquisitions/
Disposals              103.31          14.78        105.77
Production              (8.04)        (38.36)       (14.43)

                   -------------------------------------------

31 Dec 2004            130.67         256.15        173.36
Contingent         Oil        Gas     Oil     Gas     Oil    Gas
                     mmbbl       bcf    mmbbl    bcf    mmbbl   bcf
                  ----------------------------------------------------

   At 31 Dec 2004      -       121.80     -    780.60    -     16.20


   Contingent             Oil           Gas        Petroleum
                         mmbbl          bcf            mmboe
                    ------------------------------------------

   At 31 Dec 2004         -           918.60        153.10
Total                Oil      Gas      Oil     Gas     Oil    Gas
                      mmbbl      bcf     mmbbl    bcf    mmbbl   bcf
                      ------------------------------------------------

   At 31 Dec 2004       14.60   253.75   116.07  808.60      - 112.40


   Total               Oil       Gas      Petroleum
                      mmbbl      bcf           mmboe
                   -----------------------------------

   At 31 Dec 2004      130.67  1,174.75        326.46

Proven and probable Commercial reserves are based on a Group reserves report produced by an independent engineer and are defined in accordance with the UK SORP 'Accounting for Oil and Gas Exploration, Development, Production and Decommissioning Activities'. Proven and probable Contingent reserves are based on both Tullow's estimates and the Group reserves report produced by an independent engineer.

TULLOW OIL PLC

PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2004

NOTES TO THE PRELIMINARY ACCOUNTS (CONTINUED)

Note 10 Group Reserves Summary (Unaudited) (continued)

The Group provides for depletion and amortisation of tangible fixed assets on a net entitlements basis, which reflects the terms of the Production Sharing Contracts related to each field. Total net entitlement reserves were 149.99 mmboe at 31st December 2004 (61.26 mmboe - 31 December 2003).

Contingent Reserves relate to reserves in respect of which development plans are in the course of preparation or further evaluation is underway with a view to development within the foreseeable future.

Note 11 Dividends

During 2004 the Company paid a 2003 final dividend of 1p per share and a 2004 interim dividend of 0.5p per share, a total dividend of 1.5p (2003 - 1p). The Directors intend to recommend the payment of 1.25p per share which if approved at the AGM will be paid to shareholders in July 2005.

Note 12 2004 Annual Report and Accounts

The Annual Report and Accounts will be posted to all shareholders in due course, save those who have elected to receive these electronically. Investors willing to avail of this facility should visit our website (www.tullowoil.com) and follow the links.