Tullow Plc has agreed to sell all its Kenyan oil assets through its subsidiary – Tullow Overseas Holdings BV to Auron Energy E&P Ltd, an affiliate of Gulf Energy Ltd, for at least $120 million (KES 15.5B).
The upstream oil company arrived at this decision following strategic and operational challenges, forcing it shift its concentration to its lucrative countries, especially Ghana. Additionally, Tullow has been under pressure to reduce debt and enhance cash flow.
According to Tullow CFO and Interim CEO Richard Miller, disposing of its non-core assets would help raise capital to strengthen its financial position.
“We are pleased to announce the signing of the Kenyan SPA (sale and purchase agreement), marking another step closer to completion of the transaction with Gulf Energy. For a total consideration of at least $120 million, the transaction supports our strategic priority to strengthen the balance sheet, with the first two payments totaling $ 80 million expected before the end of the year,” said Mr. Miller.
The transaction involves a full transfer of all assets, including 463 million barrels of potential oil reserves owned by Tullow Overseas Holdings BV on behalf of Tullow Plc, bringing to an end the company’s presence for over 10 years at Lokichar Basin in Turkana.
Structured payment arrangement
The payment is set to take place in three phases, with $40 million to be paid immediately after all approvals, regulatory checks, and legal processes are done. The second $40 million will be paid on approval of the Field Development Plan (FDP) or on 30th June 2026 – whichever comes first. The last instalment will be paid in smaller instalments over 5 years starting in the third quarter of 2028.
Field Development Plan
The field development plan is a detailed blueprint that explains how an oil company plans to develop, produce, and manage a discovered oil field. It is a proposal submitted to the relevant government authorities showing the location of oil fields, costs, infrastructure plans, environmental and community impact, and compliance with the law. The government must approve the FDP for large-scale operations to start.
Holds on future gains
If the project attains financial success, the international oil company will get a small percentage of the profit. Additionally, it reserves the right to own 30% of the project’s future developments if only a third party joins. Tullow will also not incur the previous operation costs. This gives it flexibility that if the project realizes a good return on investment, it can still benefit.
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