Tullow Oil instructs Freshfields on USD 575 million Ugandan project exit

Tullow Oil has chosen a team of lawyers from Freshfields Bruckhaus Deringer to guide it through the potential disposal of its entire 33.3% interest in Ugandan project, the Lake Albert Development Project, to French oil and gas firm, Total.

The transaction is expected to close in the second half of this year.

Tullow has instructed a trio of financial advisers, Barclays , JP Morgan Cazenove and Robey Warshaw to act for it on the transaction, with the former two also acting as joint sponsor.

The assets being acquired by Total’s Ugandan business, which will include the East African Crude Oil Pipeline System and the licenses in the project owned by Tullow, is for the total price of USD 575 million in cash payments. This will be made up of an initial USD 500 million payment on closing, and the remaining USD 75 million when the final investment decision (FID) is made by the new partners.

As part of the agreement, Tullow will also receive contingent payments from Total, payable on upstream revenues from the Lake Albert Development Project after production has begun, in relation to production and oil price. The condition includes the requirement that the price of Brent reach USD 62 per barrel (bbl).

The transaction will have no impact on Tullow’s gross profit.

The deal’s closure is conditional on Total’s partner in the project, the China National Offshore Oil Corporation (CNOOC), receiving the right to exercise a pre-emption right on 50% of the transaction, under the same agreement terms. “This acquisition will enable us, together with our partner CNOOC, to now move the project forward toward FID,” said Total’s CEO and chairman, Patrick Pouyanné , in a statement.

London Stock Exchange -listed Tullow Oil and Total have, like many other businesses in the sector, suffered the effects of the coronavirus, which has exasperated existing weaknesses in a recovering industry, following the impact of the 2008 financial crisis. This has left the industry inundated. As it currently stands, the oil price is at its lowest for almost two decades and in some markets, prices have plunged into negative figures.

For Tullow specifically, its directors announced in March this year that the company was a going concern for 12 months, upon release of its full year results for the year ended 31 December 2019.

The sale forms part of Tullow’s portfolio management programme, which aims to raise a total of USD 1 billion. In addition, Tullow […]

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