Tullow Sells $575 million Ugandan Stake to Total

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Tullow Oil plc (Tullow) on Thursday said it has agreed to sell its entire stake to French oil company Total in their joint onshore oil fields in Uganda for $575 million ( KSh61 billion).

In the Sale and Purchase Agreement (SPA) Tullow has agreed to transfer its entire interests in Blocks 1, 1A, 2, and 3A in Uganda and the proposed East African Crude Oil Pipeline (EACOP) System to Total Uganda.

“It is part of Tullow’s strategy to move to a more conservative capital structure. The cash consideration consists of $500 million payable at completion and $75 million payable following final investment decision of the Lake Albert project,” the company said.

The British petroleum explorer says through the sale, it “will strengthen Tullow’s balance sheet as part of its financial strategy to move to a more conservative capital structure’.

Dorothy Thompson, Executive Chair Tullow, “This deal is important for Tullow and forms the first step of our programme of portfolio management. It represents an excellent start towards our previously announced target of raising in excess of US$1 billion to strengthen the balance sheet and secure a more conservative capital structure.”

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Tullow disclosed that its resolve to sells its Uganda assets will not affect the Kenyan and Ghana markets.

“Tullow’s business remains solid, supported by material underlying reserves and resources and a strong production base in West Africa generating strong cash flow; an onshore development project in Kenya where Tullow is working with partners to progress field development, through a number of key workstreams have been suspended due to COVID-19 and Tullow continues to  monitor the impact these restrictions may have on the FID target; and a high-quality exploration portfolio with important near-term catalysts.”

However, analysts are pessimistic of their continual exploration of the Kenyan market.

Aly khan Satchu, Economist and Investment analyst who spoke to People Daily said, “There is no one I know who is insane enough to continue with these projects. Tullow Oil is no longer a going concern. Of course, the positive flip side is that our oil import bill will crater. And this will be singularly helpful at this time.”

“Tullow will either announce a Kenya sale to Total imminently, or Total has skipped the opportunity, which would be a negative signal for Kenya’s oil dream. Clearly, Kenya is not sustainable on a “stand-alone” basis, especially in the new normal of oil prices.”

In 2019, the oil firm said it had written off $800 million (KSh81 billion) of its exploration costs in Kenya and Uganda after lowering its forecast for long-term crude oil prices.