Tullow Oil’s exit from East Africa is gathering steam after the firm signed a deal to sell all its assets in Uganda.
In an announcement made Thursday, Tullow said it’s transferring its assets for Lake Albert Development project and the proposed East African Crude Oil Pipeline System to Total Uganda at $575 million (Sh57.5 billion).
The British firm made the deal at a time it’s bidding for 20 per cent of the 50 per cent shares it owns in Kenya’s South Lokichar oil project. The transaction is likely to be concluded in less than two months.
Tullow said the Ugandan deal is part of its plan to raise more than $1 billion, adding that proceeds would go to reducing debts and strengthening its balance sheet.
“It is part of Tullow’s strategy to move to a more conservative capital structure. The cash consideration consists of $500 million payable at completion and $75 million payable following final investment decision of the Lake Albert project,” the company said.
The sale and purchase agreement was signed with an effective date of January 1, 2020, in which Tullow Uganda Ltd and Tullow Uganda Operations Pty Ltd committed to transfer their interests in blocks 1, 1A, 2 and 3A in the Lake Albert project and the pipeline to Total Uganda.
Tullow owned 33 per cent interests in each. The deal was struck after weeks of discussions between the two companies, the Ugandan government and the Uganda Revenue Authority.
“Having evaluated the alternatives for the project and discussed its future with Tullow’s joint venture partners and the government of Uganda, Tullow’s board and senior management believe the transaction represents an attractive outcome,” the company said.
Tullow executive chairperson Dorothy Thompson said the deal would form a basis for the firm to improve its finances.
“This is important for Tullow and forms the first step for our programme of portfolio management. It represents an excellent start towards our previously announced target of raising $1 billion,” she said.
Tullow announced plans to sell the assets on December 9. It expects to conclude the deal in the second half of this year.
This was shortly after a plan to reduce its shareholding for the Lake Albert project from 33 to 11 per cent by selling to Total and China National Offshore Oil Corporation failed.
The sale came as the London-listed firm continues to surrender its assets in East Africa, despite having established itself as an African market-focused company.
Credit: Daily Nation Kenya