•The British oil explorer has agreed to sale its entire stake in the Lake Albert Development Project in Uganda to Total for $575 million (Sh61.6 billion).
•Tullow yesterday said it is expecting to receive bids from potential buyers of its Kenyan stake in the coming weeks.
Image: FILE
Tullow Oil has sold its stake in Uganda and shifted focus to Kenya, it announced yesterday.
It said in a statement it had successfully offloaded its Ugandan stake, in its plan to raise in excess of $1 billion (Sh107.2billion) to strengthen its balance sheet.
The British oil explorer has agreed to the sale of its entire stake in the Lake Albert Development Project in Uganda to Total for $575 million (Sh61.6 billion).
Tullow and Total E&P Uganda B.V. (Total Uganda) have signed a Sale and Purchase Agreement (SPA), with an effective date of January 1, 2020.
Tullow has agreed to transfer its entire interests in Blocks 1, 1A, 2, and 3A in Uganda and the proposed East African Crude Oil Pipeline (EACOP) System.
It is currently the operator of Block 2. Total Uganda is currently the operator of Block 1 and Block 1A and China National Offshore Oil Corporation(CNOOC) is the operator of Block 3A.
The cash consideration consists of $500 million (Sh53.6 billion) payable at completion and $75 million (Sh8 billion) payable following the Final Investment Decision of the Lake Albert Development Project.
“Additional cash consideration may be received by Tullow in the form of contingent payments which will be payable on upstream revenues from the Lake Albert Development Project, depending on the average annual Brent price once production commences,” it said.
Sealing of the Uganda deal now gives the UK firm ample time to focus on its investments in Kenya, where it intends to sell a stake of its oil interests in Turkana.
Its assets in the country’s oil project are estimated at bout $667 million (Sh71.5 billion).
Tullow, the lead explore in Turkana, in February announced that it was willing to sell part of its stake in the Lokichar oil blocks, where it holds a 50 per cent stake in three blocks.
Together with Total, its partner in the project, have contracted French bank Natixis to run the joint sale process for Blocks 10 BA, 10 BB and 13T in the South Lokichar Basin.
Tullow plans to offload a 25 per cent stake while Total plans to sale 12.5 per cent of its 25 per cent share in the investment.
The firm yesterday said the Uganda transaction has no direct effect on Tullow’s view of its Kenya farm-down, which remains ongoing.
It, however, confirmed it is expecting to receive bids from potential buyers in the coming weeks, and the size and shape of the deal will be decided at that point.
“We will update you on deal progress in Kenya as soon as we are able to,” Dorothy Thompson, the executive chair said.
The sale comes amid delays in the Final Investment Decision (FID) after the first consignment of oil was shipped in August last year.
The Joint Venture Partners are expected to commit resources as well as agree on the award of key construction contracts under the FID, expected to be made this year.
This includes construction of the proposed 892-kilometres Lokichar–Lamu Crude Oil Pipeline.
Tullow, which has been leading an early oil scheme in the Turkana fields, has been producing 2,000 barrels of oil per day, which now remain interrupted.
“The Early Oil Pilot Scheme (EOPS) remains shut down, due to both the status of the roads, and now Coronavirus,” it said yesterday.
A sale of its stake is likely to affect timelines for the country's plans of becoming a net oil exporter.
After testing the markets last year with the sale of 200, 000 barrels at Sh1.2 billion,, the country expected to start the commercial phase of the project this year, with 2022 targeted for net exports.
“Tullow is working with partners to progress field development, though a number of key workstreams have been suspended due to COVID-19 and Tullow continues to monitor the impact these restrictions may have on the FID target, and a high-quality exploration portfolio with important near-term catalysts,” it said.
The firm targets to raise in excess of $1 billion (Sh107.2billion) to strengthen its balance sheet and secure a more conservative capital structure.