Tullow Oil

UK’s Tullow Oil is yet to seal a tax deal in Uganda that is needed for the progress of its plans there with another oil dealer Total, it said days ago.

In April the company said the Uganda talks were expected to conclude shortly. But progress is also slower than expected. A tax deal needed to close the US $900 million (about Shs3.3 trillion) sale of a stake in its Ugandan fields to Total is pending.

“We continue to work constructively with our Joint Venture Partners and the government of Uganda to agree a way forward and the consequent timing of FID. Nevertheless, although negotiations continue, Tullow is currently considering all options in pursuing the sale of its interests in Uganda,” it said.

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Barclays recently said the likelihood of a final decision on Uganda to come in as planned this year was declining.

“Tullow’s comment… indicates the potential for a fresh approach/structure to the deal that can be acceptable to all stakeholders, but increases uncertainty around the timing of the development,” said Barclays.

Tullow Oil in January 2017 announced plans to farm down its interest in Uganda’s Albertine Oil Project to Total for US$900 million.

Tullow Oil said in a statement issued then, “A Sale and Purchase Agreement with an effective date of 1 January 2017 has been signed in which Tullow has agreed to transfer 21.57 per cent of its 33.33per cent interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total for a total consideration of $900 million.”

Tullow, Total and China’s CNOOC have hitherto all had equal stake of 33.3 per cent of the three exploration areas of Uganda’s Albertine Oil Project. It will be remembered that in line with the terms of its exploration MoU with the Government of Uganda, in March 2011, Tullow sold two-thirds of its exploration interest- one third each to Total and CNOOC at a combined value of US$2.9 billion.

The sale of the 21.57 per cent of share means that Tullow still retains an 11.76 per cent interest in the upstream and pipeline, which is expected to reduce to 10 per cent when the Government of Uganda formally exercises its right to back-in. Tullow intends to have a non-operated interest in the venture, that is, it will not have a management role.
Total on the other hand with a new accumulated 54.6 per cent shareholding will take the role of lead

Tullow Oil has also delayed the final investment decision (FID) for its Kenya project to 2020 and The company had aimed to give the final go-ahead by the end of 2019 for its onshore Kenyan oilfields, which are expected to produce up to 100,000 barrels per day.

The Kenya delay was a result of authorities asking for additional community consultations which Tullow expects to be submitted in the second half of the year – later than anticipated, it said in a trading statement.

“The Partners and the Government of Kenya are reviewing the most likely timeline to FID which Tullow now expects in 2020,” said Tullow.

Days ago, Tullow and its partners Total and Africa Oil signed commercial agreements with the Kenyan government, but it still needs to lock in financing for a US$1.1 billion pipeline to bring the oil to the coast.

Tullow expects its first-half gross profit to be $500 million, yielding pre-dividend free cash flow of about $100 million that would rise to $450 million for the full year, excluding $200 million due to be paid on closure of the Uganda deal.

Tullow’s much-watched net debt is expected to be at $3 billion in June compared with US$3.1 billion in December.