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Tullow, Partners Notify Govt on Farm-Down Deal

Tullow Oil, in January this year, agreed to transfer 21.57 percent of its 33.33 percent interests in Lake Albert Development Project covering exploration areas 1, 1A, 2 and 3A to Total for a total consideration of USD 900 million 3.27 trillion Shillings.
08 Nov 2017 12:25
Waraga Rigt Site Operated by Tulluw PLc
Tullow Oil Plc has notified the Ugandan government seeking approval of the planned sale part of its interests to Total E&P Uganda.

Tullow Oil, in January this year, agreed to transfer 21.57 percent of its 33.33 percent interests in Lake Albert Development Project covering exploration areas 1, 1A, 2 and 3A to Total for a total consideration of USD 900 million (3.27 trillion Shillings).

In February, another industry player, CNOOC Uganda Limited (CNOOC) notified Tullow that it has exercised its pre-emption rights under the joint operating agreements between Tullow, Total and CNOOC to acquire 50 percent of the interests being transferred to Total on the same terms and conditions that were agreed between Tullow and Total.

CNOOC, as well agreed to the amount, structure and timing of the consideration payable to Tullow. It is expected that Tullow will get all the payment by 2018.

The total consideration for the transaction includes USD 200 million (720 billion Shillings) in cash consisting of USD 100 million (360 million Shillings) on completion of the transaction and USD 50 million (180 billion Shillings) at both Final Investment Decision and First Oil.

The second consideration is USD 700 million (2.5 trillion Shillings) in deferred consideration which will be used by Tullow to fund the company's share of the costs of the upstream development project and the associated export pipeline project.

Once the farm-down is completed, Tullow will cease to be an operator in Uganda but will retain a presence in-country to manage its non-operated position.

A statement by Paul Mcdade, the Chief Executive Officer, Tullow Oil Plc, the farm-down in Uganda continues to progress with the signature of the pre-emption documents by the Joint Venture Partners. He said Tullow now anticipates that the farm-down with Total and CNOOC will complete in the first half of next year with cash payment on completion and payment.

The Joint Venture Partners have been working on concluding the definitive sale documentation in relation to the farm-down.

The completion of the farm-down has been subject to certain conditions, including the approval of the Government of Uganda.

Energy and Mineral Development Minister, Irene Muloni at end of September indicated that her ministry had indeed been notified by Tullow about the planned farm-down.  Muloni could not be reached by phone to confirm whether her Ministry had received notification from the Joint Venture.

She said the government was still waiting for the three parties to conclude negotiations.  Muloni said the shareholder's agreement stipulates conditions as to how the farm-down takes places.  

The Joint Venture partners are working towards reaching Final Investment Decision (FID) in the first half of 2018; at which point Tullow's second cash installment from the farm down will be received. In line with its post-transaction status, Tullow has been reducing its footprint in Uganda and is preparing for a non-operated presence only.

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