Substantial farm down to Total in Uganda

RNS Number : 7131T

Tullow Oil PLC

09 January 2017

 

News Release
 

THIS PRESS RELEASE CONTAINS INSIDE INFORMATION

Tullow announces a substantial farm down to Total in Uganda

9 January 2017 - Tullow Oil plc (Tullow) is very pleased to announce that it has agreed a substantial farm-down of its assets in Uganda to Total E&P Uganda B.V. (Total).

A Sale and Purchase Agreement with an effective date of 1 January 2017 has been signed in which Tullow has agreed to transfer 21.57% of its 33.33% interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total for a total consideration of $900 million. This agreement will allow Tullow to retain an 11.76% interest in the upstream and pipeline, which would reduce to 10% when the Government of Uganda formally exercises its right to back-in.

This agreement is based on the transfer of licence interests from Tullow to Total in exchange for cash and deferred consideration to be paid as and when the Lake Albert Development Project reaches a series of key milestones and represents a reimbursement by Total of a portion of Tullow's past exploration and development cost. The total consideration for the transaction is structured as follows:

·      $200 million in cash consisting of $100 million on completion of the transaction and $50 million at both Final Investment Decision and First Oil.

·      $700 million 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.

The Lake Albert Development Project is a major development which expects to achieve around 230,000 bopd when it reaches plateau. Development Plans were approved by the Government in August 2016 which Tullow expects will require $5.2 billion gross of upstream capex to develop the first 1.2 billion barrels of oil with $3 billion expected to be required to reach First Oil around three years after FID. The Government of Uganda has agreed an export route through Tanzania and the current estimate for the pipeline capital cost is around $3.5 billion. The pipeline is expected to be funded through a combination of debt and equity. Tullow carries approximately $1.7 billion for Uganda which includes fair value allocations and capitalised interest. The Group expects a pre-tax write-off as a result of this disposal of approximately $0.4 billion to be booked in its 2016 Full Year Results.

Completion of this transaction is subject to certain conditions, including the approval of the Government of Uganda.  Once this transaction has completed, Tullow will cease to be an operator in Uganda but will retain a presence in-country to manage its non-operated position.

Aidan Heavey, Chief Executive Officer, commented today:

"Today's agreement will allow the Lake Albert Development to move ahead swiftly, increasing the likelihood of FID in 2017 and First Oil by the end of 2020. I am particularly pleased that Tullow's long-term commitment to and presence in Uganda is guaranteed by this transaction and that we will remain an active investor in Uganda's oil and gas sector. 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 will host a conference call at 09:00 BST on Wednesday 11 January 2017, following the release of its Trading Statement. The dial-in details are below.

Conference call - 09:00 BST, Wednesday 11 January 2017 To access the call please dial the appropriate number below shortly before the call and ask for the Tullow Oil conference call.
Participants	[phone]
UK  free phone	0800 358 6377
Access Code	9156929

FOR FURTHER INFORMATION CONTACT:

Tullow Oil plc (London)  ([phone]) Chris Perry George Cazenove Nicola Rogers

Murray Consultants (Dublin)  ([phone]) Pat Walsh Joe Heron

Notes to Editors              

Tullow Oil plc

Tullow is a leading independent oil & gas, exploration and production group, quoted on the London, Irish and Ghanaian stock exchanges (symbol: TLW). The Group has interests in over 110 exploration and production licences across 19 countries which are managed as three business delivery teams: West Africa, East Africa and New Ventures.

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Twitter: www.twitter.com/TullowOilplc                                         YouTube: www.youtube.com/TullowOilplc 

Facebook: www.facebook.com/TullowOilplc                                                LinkedIn: www.linkedin.com/company/Tullow-Oil

Website: www.tullowoil.com 

 

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