Its Adios East Africa as curtain closes on Tullow in Uganda
Anglo-Irish explorer Tullow Oil has relinquished its Ugandan interests to French major Total in what could be the beginning of a complete exit from East Africa.
Total announced April23, that it had reached an “Agreement, through which Total shall acquire Tullow’s entire interests in Uganda Lake Albert development project including the East African Crude Oil Pipeline,” for a consideration of USD575M.
The deal covers Tullow’s 33.3334pc holding stake in the Lake Albert project licenses and the proposed East African Crude Oil Pipeline (EACOP) System, Total said in a statement.
“We are pleased to announce that a new agreement has been reached with Tullow to acquire their entire interests in the Lake Albert development project for less than 2$/bbl in line with our strategy of acquiring long-term resources at low cost, and that we have an agreement with the Uganda government on the fiscal framework,” said Patrick Pouyanné, Total Chairman and CEO.
“This acquisition will enable us, together with our partner CNOOC, to now move the project forward toward FID, driving costs down to deliver a robust long-term project,” he added.
However, closure is still subject to a nod by Tullow’s shareholders, as well as regulatory and government approvals. Chinese joint venture partner CNOOC would also have to waive its pre-emptive rights to 50pc of the transaction.
Tullow will initially receive $500 million at closure of the deal and USD75M after the partners take the final investment decision FID, on the project. In addition, conditional payments will be made to Tullow linked to production and oil price, which will be triggered when Brent prices are above $62/bbl. The terms of the transaction have been discussed with the relevant Ugandan Government and Tax Authorities and agreement in principle has been reached on the tax treatment of the transaction.
Tullow says the sale forms part of its efforts to raise USD1 billion this year that it needs to reduce its outstanding USD2.8 billion outstanding debt.
The company has also agreed to pay an initial USD 14.6 million on the transaction pending a final agreement on tax issues with Ugandan authorities.
Closure is expected during the second half of calendar 2020.
Dorothy Thompson, Tullow’s executive chairman said the deal represents “an excellent start towards our previously announced target of raising in excess of USD1 billion to strengthen the balance sheet and secure a more conservative capital structure.”
Tullow says shareholders who hold 27.5pc of the company’s stock had already indicated a willingness to support the transaction.
The exit from Uganda potentially marks Tullow’s departure from East Africa where the company played a pioneering role in confirming oil deposits in Kenya’s north rift.