Tullow Oil plc has agreed to transfer 21.57 per cent of its 33.3 per cent stake in three oil exploration sites in Uganda to Total Uganda for $900 million.
“The deal will secure future cash flow for the Group from one of the industry’s few truly low cost development projects without any additional cash requirements expected. We will work closely with the Government of Uganda, its associated agencies and with Total and CNOOC to move this transaction forward as smoothly as possible over the coming months,” Tullow Oil CEO Aidan Heavey said.
The sale and purchase agreement is based on the transfer of licence interests to Total in exchange for $200 million in cash; $100 million on completion of the transaction and $50 million at both Final Investment Decision (FID)and at First Oil.
It also consists of a future payment of $700 million once the Lake Albert Development Project becomes profitable which will reimburse Tullow a portion of the cost of past exploration and development.
The Lake Albert Development Project is a Government-approved project expected to achieve 230, 000 barrels of oil per day at plateau.
This agreement will allow the development of the Lake Albert project to move swiftly, increasing the likelihood of FID this year and First Oil by the end of 2020.
The sale of Exploration Areas 1, 1A, 2 and 3A leaves Tullow with a 11.76 per cent stake in the upstream and pipeline which would reduce to 10 per cent when the Government of Uganda formally exercise its right to back-in.
Following this sale, Tullow expects to record a pre-tax write-off of approximately $0.4 billion in its 2016 Full Year Results.