Tullow Oil Completes Sale of Ugandan Assets to TOTAL
Tullow Oil Plc announced that it is has closed its agreement with French oil major TOTAL SA to divest its entire stake in the Lake Albert project in Uganda, for a total cash consideration of US$575 million plus certain additional contingent payments. As a result, TOTAL now holds a 33.33% interest in the project, with Chinese state-owned CNOOC Ltd. holding the rest.
Under the terms of an agreement signed in April this year, TOTAL has acquired Tullow’s interest in each of the Lake Albert project licenses (Blocks 1, 1A, 2 and 3A), as well as the proposed East African Crude Oil Pipeline (EACOP) system, in exchange for an initial payment of US$500 million at closing and additional consideration of US$75 million payable when a final investment decision (FID) is made on the project. In addition, Tullow will also receive certain conditional payments if Brent crude prices rise above US$62 per barrel.
“Although Tullow will retain a financial link to the development project through the potential contingent payments, the closing of this transaction marks Tullow’s exit from its licences in Uganda after 16 years of operations in the Lake Albert basin,” Tullow said in a statement.
The Lake Albert project covers an area of approximately 1,511 sq. km, and is located along the Lake Albert Rift basin. The project’s major technical aspects have been completed, including all major pre-development technical work, and the first oil is expected by the end of 2020, with an expected plateau production of approximately 230,000 barrels of oil per day (bbl/d). The transaction also includes the EACOP system, which is a 1,445 km pipeline that will transport crude oil south from Uganda for export at the Port of Tanga in Tanzania.
“The closing of our transaction with Total clearly evokes mixed emotions within Tullow. While we are sad to be exiting Uganda after many years, the $575 million of proceeds form an important part of our plan to strengthen Tullow’s balance sheet and improve our financial position. We will watch the progress of Uganda’s oil & gas industry with much interest and all of us at Tullow wish the people and Government of Uganda and our former Joint Venture Partners every good fortune as they take this important project forward,” said Rahul Dhir, Tullow’s CEO.
The transaction was subject to customary closing conditions and regulatory approvals, including the receipt of shareholder approvals, signing of a binding tax agreement between the parties and government, approval of Uganda’s Minister of Energy & Mineral Development, and CNOOC’s right to exercise pre-emption rights to acquire 50% of the interest being sold to TOTAL, all of which were satisfied.
Barclays, JP Morgan Cazenove and Robey Warshaw acted as financial advisors to Tullow for the deal.