Tullow Oil Plc agreed to sell its entire stake in an onshore Uganda oil project in what the company calls its “first significant step” to raise $1 billion this year in order to tackle mounting debt woes.
French oil major Total SA agreed to buy Tullow’s roughly 33.3% stake in the Uganda Lake Albert development project including the East African Crude Oil Pipeline for $575 million in cash. Tullow plans to use proceeds to pay down its debt, which currently stands at $2.8 billion.
An African-focused oil and gas explorer, Tullow suffered setbacks in 2019 after persistent problems and missed production targets that eventually led to its CEO, Paul McDade, to resign late last year. The company recently appointed Rahul Dhir, who currently leads smaller Africa-focused oil and gas producer Delonex, as CEO.
“This deal is important for Tullow and forms the first step of our program of portfolio management,” Dorothy Thompson, executive chair, said in a statement. “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.”
As part of the agreement, Tullow will receive $500 million at closing and the remaining $75 million once a final investment decision (FID) is reached on the project. Additionally, China’s CNOOC Ltd., a third partner on the project, has pre-emption rights for half of the stake to be sold to Total.
According to Total CEO Patrick Pouyanné, Total is paying less than $2/bbl for the assets, which is he said is in line with the company’s strategy of acquiring long-term resources at low cost.
“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,” Pouyanné added in a statement.
The purchase and sale agreement between Tullow and Total has an effective date of Jan. 1. The transaction is expected to close second-half 2020, subject to a number of conditions.
Recommended Reading
CERAWeek: Tecpetrol CEO Touts Argentina Conventional, Unconventional Potential
2024-03-28 - Tecpetrol CEO Ricardo Markous touted Argentina’s conventional and unconventional potential saying the country’s oil production would nearly double by 2030 while LNG exports would likely evolve over three phases.
DUG GAS+: Chesapeake in Drill-but-don’t-turn-on Mode
2024-03-28 - COO Josh Viets said Chesapeake is cutting costs and ready to take advantage once gas prices rebound.
CERAWeek: Trinidad Energy Minister on LNG Restructuring, Venezuelan Gas Supply
2024-03-28 - Stuart Young, Trinidad and Tobago’s Minister of Energy, discussed with Hart Energy at CERAWeek by S&P Global, the restructuring of Atlantic LNG, the geopolitical noise around inking deals with U.S.-sanctioned Venezuela and plans to source gas from Venezuela and Suriname.
Exclusive: Chevron Balancing Low Carbon Intensity, Global Oil, Gas Needs
2024-03-28 - Colin Parfitt, president of midstream at Chevron, discusses how the company continues to grow its traditional oil and gas business while focusing on growing its new energies production, in this Hart Energy Exclusive interview.
Baltimore Port Closure Could Dent US Coal Export Volumes, EIA Says
2024-03-28 - Baltimore handled exports of 28 million short tons last year, making up 28% of total U.S. coal exports.