Tullow announced that it would transfer its entire interests in Blocks 1, 1A, 2 and 3A in western Uganda and the proposed East African Crude Oil Pipeline (EACOP) System for cash consideration of US$575 million plus potential contingent payments after first oil.
“This deal is important for Tullow and forms the first step of our programme of portfolio management. It represents an excellent start towards our previously announced target of raising in excess of US$1 billion to strengthen the balance sheet and secure a more conservative capital structure,” said Dorothy Thompson, Tullow executive chairperson.
The Cash Consideration consists of US$500 million payable at completion and US$75 million payable following final investment decision of the Lake Albert Development Project.
Ugandan deal is expected to strengthen Tullow’s balance sheet as part of its financial strategy to move to a more conservative capital structure.
The deal will also eliminate all future capital expenditure associated with the Lake Albert Development Project while retaining potential benefits linked to production and the oil price through the contingent payments.
“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 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,” Mr Patrick Pouyanné, Total Chairman and CEO said.
“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.”
In addition, conditional payments will be made to Tullow linked to production and oil price, which will be triggered when Brent prices are above US$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.