This archive report was first published on 23 April 2020.
On April 23, 2020, Tullow Oil PLC concluded the sale of its entire stake in the Lake Albert Development Project in Uganda for US$575 million. The company has agreed to transfer its full interests in Blocks 1, 1A, 2, and 3A in Uganda, as well as the proposed East African Crude Oil Pipeline (EACOP) System, to Total Uganda.
The cash consideration consists of US$500 million payable at completion and US$75 million payable following the Final Investment Decision (FID) of the Lake Albert Development Project. Tullow may also receive additional cash consideration 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.
As part of the transaction, Total Uganda will become the operator of Block 1 and Block 1A, while CNOOC Uganda Limited (CNOOC) will remain the operator of Block 3A. Tullow is currently the operator of Block 2.
"Tullow has been a pioneering explorer in Uganda over many years, and we are very proud of the role we have played in the founding and development of Uganda's oil industry. We wish all Ugandans and our joint venture partners well as they take this important project forward," said Dorothy Thompson, Executive Chair of Tullow Oil.
The transaction is a significant step in Tullow's program of portfolio management, aimed at strengthening its balance sheet and securing a more conservative capital structure. Tullow and Total have had supportive discussions with the Government of Uganda and the Uganda Revenue Authority (URA) to agree on the principles of tax treatment and the position on Ugandan tax on capital gains.
Completion of the transaction will enable Tullow to realize value from the Lake Albert Development Project in Uganda, following the expiry of its previous farm-down agreement with Total and CNOOC in August 2019.
