Page 6 - AfrOil Week 17 2020

AfrOil INVESTMENT AfrOil
Tullow sells Ugandan assets to Total
The $575mn agreement ties up loose ends left by the expiration of a previous farm-out deal
UGANDA
TULLOW Oil (UK/Ireland) revealed last week that it had arranged to sell its assets in Uganda to Total (France). The deal brings the company one step closer to exiting the East African country.
In a statement dated April 23, Tullow said it had agreed to sell all of its stakes in three oil-bearing blocks near Lake Albert and its stake in the proposed East African Crude Oil Pipe- line (EACOP). Total will pay $575mn in cash for these assets and will also make oil-indexed contingent payments once production begins, it reported.
“The cash consideration consists of $500mn payable at completion and $75mn payable fol- lowing FID [final investment decision] of the LakeAlbertDevelopmentProject,”thecompany explained. “Additional cash consideration may be received by Tullow in the form of contingent payments [that] will be payable on upstream revenues from the Lake Albert Development Project, depending on the average annual Brent price once production commences.”
The sales and purchase agreement (SPA) will be effective retroactively to January 1, it noted. It also noted that China National Offshore Oil Corp. (CNOOC) would have the pre-emptive right to acquire 50% of its assets in Uganda on the same terms as Total.
The deal will see Total gain Tullow’s 33.3334% stakes in EACOP and in Blocks 1, 1A, 2 and 3A. (Tullow has been serving as operator of Block 2, while Total is operating Blocks 1 and 1A and CNOOC is operating Block 3A.)
Tullow went on to say that the Uganda Rev- enue Authority (URA) had agreed in principle to the terms of the SPA. This agreement extends to the tax treatment of the deal, “[including] the position on Ugandan tax on capital gains, which is to be remitted by Total Uganda on behalf of Tullow Uganda, and which is expected to be $14.6mn in respect of the cash consideration,” it said.
The parties’ next step will be to sign a binding tax agreement with the Ugandan government,
Tullow said. Once the accord is finalised, it said, Tullow and Total will be able to go forward with the acquisition.
Tullow is taking this step within the frame- work of a wider effort to reduce costs and streamline its portfolio. The company hopes to raise at least $1bn via sell-offs and will use the proceeds to improve its finances and reduce its debt burden.
The signing of the SPA also serves to tie up the loose ends left by the expiration of Tullow’s previous farm-out deal with Total and CNOOC in August of last year. The parties had negotiated a $900mn deal that would have allowed Tullow to reduce its holdings in the Ugandan assets to about11%,buttheywereunabletoreachagree- ment with the URA on the tax treatment of the transaction. ™
Uganda’s fields are near Lake Albert (Image: Heritage Oil & Gas)
PERFORMANCE
Low prices could affect Ghana’s oil output
GHANA
GHANA’S Institute of Energy Security (IES) has warned that sinking oil prices may force the company to reduce crude output.
Paa Kwesi Anamuah Sakyi, the executive
director of IES, said last week that the country’s oil industry would not necessarily be affected by the recent plunge of WTI, the main US bench- mark crude, into negative territory.
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w w w . N E W S B A S E . c o m Week 17 29•April•2020