| Tullow Oil plc (Tullow) has announced that CNOOC Uganda Limited (CNOOC) has informed both Tullow and Total that it will not pre-empt the sale of Tullow’s assets in Uganda to Total. On 23 April 2020, Tullow announced that it had agreed to the sale of its assets in Uganda to Total and that CNOOC had rights of pre-emption to acquire 50% of these assets on the same terms and conditions as Total. Total is to acquire all of Tullow’s 33.3334% interests in Blocks 1, 1A, 2 and 3A in Uganda’s Lake Albert development project as well as its interests in the proposed East African Crude Oil Pipeline (EACOP) for a total consideration of USD575 million (UGX2.2 trillion) “CNOOC has now informed Tullow and Total that it has elected not to exercise its pre-emption rights. Accordingly, there are no changes to the previously announced transaction or timeline and Tullow continues to expect the transaction to complete in the second half of 2020,” reads a media statement released by Tullow this morning. “The transaction remains subject to a number of conditions, including approval by Tullow’s shareholders, customary government and other approvals and the execution of a binding tax agreement with the Government of Uganda and the Uganda Revenue Authority that reflects the agreed tax principles previously announced. Tullow will now look to progress the tax agreement following CNOOC’s decision not to pre-empt,” further said the statement. In an earlier statement by Tullow Oil, the Irish oil firm had said that the transaction would strengthen Tullow’s balance sheet as part of its financial strategy to move to a more conservative capital structure. “The Transaction will remove all future capital expenditure associated with the Lake Albert Development Project whilst retaining exposure via contingent consideration linked to production and the oil price through the contingent cash payments described above,” added Tullow in their statement. The no-objection by CNOOC brings close to an end, a transaction that started in January 2017, when Tullow attempted to sell 21.57% of its 33.33% interest in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total for a total consideration of $900 million, but the deal was dropped after CNOOC Uganda Limited (CNOOC) subsequently exercised its pre-emption rights to the deal. In August 2019, Tullow announced that this farm-down had been terminated, following the expiry of the Sale and Purchase Agreements (SPAs). That it has now accepted a much lower price and for the entire 33.3334% per cent is an indication of cash stretched Tullow oil. Tullow declared a USD1.6 billion loss in 2019. |
CNOOC gives Total a go-ahead to acquire Tullow’s interests in Uganda for USD575 million Tullow Oil moves closer to closing the USD575 million farm-out to French oil giant, Total as CNOOC elects not to exercise pre-emptive rights on the deal. Tullow now needs to secure a no-objection from its shareholders and Gov’t of Uganda.
