DEVELOPMENT & OPERATIONSStrategic priority: Safely manage and deliver all major projects and production operations, increasing cash flow and commercial reserves.Growing our production profile develops a strong predictable cash flow for the Group and improves our financial flexibility. In recent years we have enhanced our capability as an Operator to deliver major development projects. This has allowed us to significantly increase the EHS, technical, project execution and operating expertise within our organisation.Our team's focus is on safely managing all activities and the early commercialisation of our exploration discoveries to ensure we maximise the value of our exploration success. The latter is delivered through the sale of the resource in ground or the early development to generate cash flow. This approach underpins funding for a long-term exploration campaign, selective investment in key development projects and acquisitions and a progressive dividend policy. DELIVERING MATERIAL P RODUCTION GROWTH 19www.tullowoil.com0708091011 60,00070,00080,00050,00030,00020,00010,00040,00001,5001,7502,0001,0005001,2507502500 Oil GasWorking interest production and operating cash flowboepd$mOperating cash flow

BUILDING A WELL FUNDED BALANCE SHEET FINANCE & PORTFOLIO MANAGEMENTStrategic priority: Manage financial and business assets to enhance our portfolio, replenish upside potential and support the Group's funding needs.Our financial strategy is to maintain a well funded balance sheet to enable growth through exploration, development and acquisitions. We utilise a range of funding sources including debt, equity, operating cash flow and portfolio management.Tullow's appetite for funding is very significant and growing. 2012 capital expenditure is forecast to be approximately $2 billion. Over a period of time capital expenditure is split approximately 50:50 between Exploration & Appraisal and Development & Operations. In any given year it will depend on our investment priorities, which are based on a rigorous approach to capital allocation. The key principle of Tullow's financial management is to achieve a good balance between high-impact exploration campaigns and world-class developments that have strong near-term momentum in growing production.Another key element of our growth is portfolio management, an area where we have built up a strong track record and considerable expertise. There are opportunities to reorganise our existing portfolio and consolidate our assets through divestment. We are also well positioned to continue to create value through acquisitions. Opportunities include adding new big oil plays to our portfolio, increasing an existing equity interest to material levels or enhancing our production profile.07080910112,0002,5003,0001,0005001,5000Capital and acquisition expenditure ($m)Capital expenditureAcquisition expenditure20Tullow Oil plc 2011 Annual Report and Accounts: Special feature