Tullow sells its entire stake in the Lake Albert Development Project in Uganda to Total
By Our Team
Tullow and Total Uganda have signed a Sale and Purchase Agreement with an effective date of 1 January 2020, in which 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 System to Total Uganda for cash consideration of US$575 million plus potential contingent payments after first oil.
Tullow is currently the operator of Block 2. Total Uganda is currently operator of Block 1 and Block 1A and CNOOC Uganda Limited (CNOOC) is operator of Block 3A.
The Cash Consideration consists of US$500 million payable at completion and US$75 million payable following FID of the Lake Albert Development Project.
Additional cash consideration may be received by Tullow in the form of contingent payments which will be payable on upstream revenues from the Lake Albert Development Project, depending on the average annual Brent price once production commences.
Tullow and Total have had supportive discussions with the Government of Uganda and the URA in recent weeks, including to agree the principles of the tax treatment of the Transaction.
This includes the position on Ugandan tax on capital gains, which is to be remitted by Total Uganda on behalf of Tullow Uganda, and which is expected to be US$14.6 million in respect of the Cash Consideration.
Tullow Uganda and Total Uganda now intend to sign a binding tax agreement with the Government of Uganda and the URA that reflects these principles which will enable the Transaction to complete.
CNOOC has rights of pre-emption to acquire 50% of the Uganda Interests on the same terms and conditions as Total Uganda.
“The closing of this transaction follows the satisfaction of all deal conditions, announced on October 21, 2020, which included the execution of the binding Tax Agreement, the approval for the transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2,” the statement said.
Although Tullow will retain a financial link to the development project through the potential contingent payments, the closing of this transaction marks Tullow’s exit from its licenses in Uganda after 16 years of operations in the Lake Albert basin, the statement said.
“While we are sad to be exiting Uganda after many years, the 575 million dollars of proceeds form an important part of our plan to strengthen Tullow’s balance sheet and improve our financial position,” Rahul Dhir, Chief Executive Officer of Tullow Oil Plc said.
Uganda discovered 1.6 billion barrels of oil and commercial production is projected to start in 2023.