Total has agreed to buy Tullow’s entire interests in the Uganda Lake Albert development project, including the East African Crude Oil Pipeline (EACOP), for an overall consideration of $575 million.
Under the terms of the deal, Total will acquire all of Tullow’s existing 33.3334 percent stake in each of the Lake Albert project licenses and the proposed EACOP System. Total will pay Tullow an initial $500 million at closing and $75 million when the partners take the final investment decision to launch the project. In addition, conditional payments will be made to Tullow linked to production and oil price, which will be triggered when Brent prices are above $62 per barrel.
The transaction is subject to the approval of Tullow’s shareholders, customary regulatory and government approvals and CNOOC’s right to exercise pre-emption on 50 percent of the transaction.
Tullow said the transaction marks first step in a portfolio management program to raise in excess of $1 billion. Proceeds of the sale will be used to reduce Tullow’s net debt, strengthen its balance sheet and move the company towards a “more conservative capital structure”, Tullow outlined. The company expects the deal to close in the second half of the year.
“We are pleased to announce that a new agreement has been reached with Tullow to acquire their entire interests in the Lake Albert development project for less than 2$ per barrel in line with our strategy of acquiring long-term resources at low cost, and that we have an agreement with the Uganda government on the fiscal framework,” Patrick Pouyanne, Total Chairman and CEO, said in a company statement.
“This acquisition will enable us, together with our partner CNOOC, to now move the project forward toward FID, driving costs down to deliver a robust long-term project,” he added.
Dorothy Thompson, Tullow Executive Chair, said the deal is important for Tullow.
“It represents an excellent start towards our previously announced target of raising in excess of $1 billion to strengthen the balance sheet and secure a more conservative capital structure,” Thompson stated.
“We have already made good progress with the Government of Uganda and the Uganda Revenue Authority in moving this transaction forward, including by agreeing the principles on tax treatment, and we will work closely with the government, Total and CNOOC over the coming months to reach completion as quickly as possible,” Thompson added.
“We have also received strong support from our leading shareholders and look forward to receiving formal approval of this deal,” Thompson continued.
To contact the author, email andreas.exarheas@rigzone.com
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