Tullow Oil Plc expects a cash payment of US $100 million on its farm-down to CNOOC and Total, according to Paul McDade, Chief executive officer who presented the company’s financials for the year 2018.
McDade confirmed following meetings in January 2019 between the CEOs of both Tullow and Total and President Museveni where Tullow agreed the principles for Capital Gains Tax on its $900 million Uganda farm-down.
On 9 January 2017, Tullow announced that it had agreed a substantial farm-down of its assets in Uganda to Total. Under the Sale and Purchase Agreement, Tullow agreed to transfer 21.57 per cent of its 33.33 per cent interest in Exploration Areas 1, 1A, 2 and 3A in Uganda.
The Government of Uganda and the JV Partners are now engaged in discussions to finalise an agreement reflecting the tax that will enable completion of the farm-down to take place. “Any Capital Gains Tax is expected to be phased and partly linked to project progress,” said McDade.
At completion of the farm-down, Tullow also anticipates receiving a payment of the working capital completion adjustment and deferred consideration for the pre-completion period of US $108 million.
A further $50 million of cash consideration is due to be received when the final investment decision (FID) is taken on the development project. “The JV Partners continue to work towards reaching FID for the development project around mid-2019. During 2018, the upstream and pipeline FEED were completed in preparation for the award of Engineering, Procurement and Construction (EPC) contracts in 2019,” he said.
“Drilling and well construction designs and contracting activities are complete and contracts are ready to be awarded,” McDade said, adding that both Tilenga and Kingfisher were submitted to the National Environmental Management Authority for review with approval expected in the first half of 2019.
“Land access activities have progressed with the active support of the Government in line with project requirements. In addition, critical transport infrastructure, including roads and an airport within the development area is being improved by the government in support of the development.
Project financing for the pipeline is progressing well with the development of the financial model ongoing. In the first half of 2019, the JV Partners anticipate completing key commercial, technical and land agreements with the Governments of Uganda and Tanzania as well as the submission of an ESIA for the pipeline to both governments,” he says.