Tullow Sells Its Oil Stake at $900 Million
Tullow oil says it is to sell part of its oil stake in a Ugandan oil project to Total at of $900 million amounting to over 3.2 trillion shillings.
A statement by Tullow Oil Chief Executive Officer, Aidan Heavy on Monday said Total will acquire a 21.6 per cent stake in the Lake Albert Development project.
The deal according to Heavy will see Tullow transferring 21.57% of its 33.33 interests in Exploration area 1,1A, and 3 A t Total.
The sales purchase agreement signed on 1st January this year allows Tullow to retain an 11.76% interest in the upstream and pipeline, which would reduce to 10% when the Government of Uganda formally exercises its right to back-in.
This agreement is based on the transfer of licence interests from Tullow to Total in exchange for cash and deferred consideration to be paid as and when the Lake Albert Development Project reaches a series of key milestones and represents a reimbursement by Total of a portion of Tullow's past exploration and development cost.
According to the agreement, Total will pay $200 million in cash consisting of $100 million on completion of the transaction and $50 million at both Final Investment Decision and First Oil.
The Lake Albert Development Project is a major development which expects to achieve around 230,000 bopd when it reaches plateau.
Development Plans were approved by the Government in August 2016 which Tullow expects will require $5.2 billion gross of upstream capex to develop the first 1.2 billion barrels of oil with $3 billion expected to be required to reach First Oil around three years after Final investment Decision.
The Government of Uganda has agreed an export route through Tanzania and the current estimate for the pipeline capital cost is around $3.5 billion. The pipeline is expected to be funded through a combination of debt and equity.
Tullow carries approximately $1.7 billion for Uganda which includes fair value allocations and capitalised interest. The Group expects a pre-tax write-off as a result of this disposal of approximately $0.4 billion to be booked in its 2016 Full Year Results.
Completion of this transaction is subject to certain conditions, including the approval of the Government of Uganda. Once this transaction has completed, Tullow will cease to be an operator in Uganda but will retain a presence in-country to manage its non-operated position.
Aidan Heavey said the agreement will allow the Lake Albert Development to move ahead swiftly, increasing the likelihood of Final investment Decision in 2017 and First Oil by the end of 2020.
He said he is particularly pleased that Tullow's long-term commitment to and presence in Uganda is guaranteed by this transaction and that we will remain an active investor in Uganda's oil and gas sector.