Committees

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

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David Williams was appointed Chairman of the Committee on 23 October 2007 in place of Rohan Courtney. He is a Chartered Accountant and, until his retirement in 2006, was Finance Director of Bunzl plc. Currently, he is also a member of the audit committees of four other companies including Meggitt PLC and Taylor Wimpey plc. For the purposes of the Combined Code, David Williams is considered by the Board to have recent and relevant experience. In addition, the other members of the Committee have a range of financial and commercial experience and have all served on the Committee for a number of years.

The Group’s external auditors are Deloitte & Touche LLP and the Committee closely monitors the level of audit and non-audit services they provide to the Group. Non-audit services are normally limited to assignments that are closely related to the annual audit or where the work is of such a nature that a detailed understanding of the Group is necessary. A breakdown of the fees paid to the external auditors in respect of audit and non-audit work is included in note 3 of the Group Financial Statements (166kB). In addition to processes put in place to ensure segregation of audit and non-audit roles, as part of the assurance process in relation to the audit, Deloitte & Touche LLP are required to confirm to the Committee that they have both the appropriate independence and objectivity to allow them to continue to serve the members of the Company. No matters of concern in relation to the above were identified by the Committee.

The Chief Financial Officer, the Group Internal Audit Manager, the Group Finance Manager and representatives of the external auditors normally attend meetings of the Audit Committee, at the invitation of the Committee. The Chairman of the Board also attends meetings of the Committee by invitation. The external auditors have unrestricted access to the Committee Chairman. During the 2007 audit process, the Audit Committee Chairman met with Deloitte’s Audit Engagement Partner without the presence of management.

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During 2007, the Audit Committee met on a total of four occasions. The key work undertaken by the Committee was as follows:

• Consideration and review of annual and interim financial statements The Committee met with the external auditors as a part of the interim and final accounts approval process. During this exercise the Committee considered the most appropriate treatment and disclosure of any new or judgemental matters identified during the audit, as well as any recommendations or observations made by the external auditors.
• Audit planning and update on relevant accounting developments Following the Group’s adoption of IFRS in 2004/5, there were limited further regulatory or financial accounting changes during 2007. These changes are described in the accounting policies note in Group Financial Statements (166kB).
• Consideration and approval of the risk management framework, annual Internal Audit Plan and periodic reports from Internal Audit The Group Internal Audit Manager has direct access and responsibility to the Audit Committee. His main responsibilities include: evaluating and developing the Group’s overall control environment, operating efficiency and risk identification and management at operating, regional and corporate levels. In fulfilling his role, the Group Internal Audit Manager has direct access to the Committee without reference to executive management. During 2007, the Audit Committee Chairman met with the Group Internal Audit Manager without the presence of management. The Committee approved the programme of internal audit work aimed at addressing both financial and overall risk management objectives identified within the Group. A number of internal audit reviews were undertaken during 2007 covering a range of financial and business processes in the Group’s three main business unit centres in London, Dublin and Cape Town. Detailed results from these reviews were reported to management and in summary to the Audit Committee during the year. Recommendations made as a result of the work of Internal Audit are tracked for timely implementation and reported to the Audit Committee periodically. No significant weaknesses were identified as a result of risk management and internal controls reviews undertaken by Internal Audit. The Group also undertook regular audits of non-operated joint ventures under the supervision of business unit management and the Group Internal Audit Manager. The Committee considers the whistle-blowing procedures implemented by management are appropriate for the size and scale of the Group.
• Acquisition of Hardman Resources As part of the acquisition of Hardman Resources in late 2006, the overall audit approach to the Hardman acquisition and potential risks identified were approved by the Committee. The Committee gave extensive consideration to the preliminary and final fair value allocation exercise undertaken to record the assets and liabilities acquired in the Company’s Balance Sheet at 31 December 2007.
• Review of the effectiveness of the Audit Committee During the year the Audit Committee completed a review of the effectiveness of external audit, internal audit and of the Audit Committee itself through a series of questionnaires answered by key stakeholders. Internal Audit coordinated the review with results presented to the members of the Audit Committee. The Committee was considered to be operating effectively and in accordance with the guidance recommended by the Smith Committee included in the Combined Code. A number of enhancements to current processes will be implemented during 2008 to improve the effectiveness of the Committee further. The internal audit and external audit processes were also considered to be operating effectively.

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The Committee comprises all the non-executive Directors and the Chief Executive and meets as required. Rohan Courtney was a member of the Committee until 31 December 2007. The Committee met twice in 2007, primarily to review Board Committee composition and succession matters. The decision by Rohan Courtney in October 2007 to step down as a non-executive Director with effect from 31 December 2007 resulted in the Committee recommending a number of changes to Board Committee composition and governance arrangements. These changes which were approved by the Board were as follows:

• the appointment of Steven McTiernan as Senior Independent Director in place of Rohan Courtney with effect from 1 January 2008;
• the appointment of David Williams as Audit Committee Chairman in place of Rohan Courtney with effect from 23 October 2007; and
• the appointment of Clare Spottiswoode as Remuneration Committee Chairman in place of Pat Plunkett (who remains a member of the Committee) with effect from 1 January 2008.

At the same time, the Board agreed with the Committee’s recommendation that a new non-executive Director be sought to replace Rohan Courtney. A role profile was produced and external recruitment advisers engaged to assist in the identification of suitable candidates. The Committee is currently in the process of interviewing short-listed candidates.

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The Directors’ Remuneration Report contains details of the role and activities of the Remuneration Committee.

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