Tullow Oil is considering selling part of its stake in a Ugandan oil field it is developing with France's Total and China's Cnooc Ltd. to focus on Kenya, where a more supportive government is helping a project there move faster, Tullow's chief operating officer said Wednesday.
It is the first time the company has disclosed it could look to sell a share in one of its prized assets. The project has been delayed for years and has weighed on the share price while the company and its partners hammered out a development plan with the Ugandan government, The Wall Street Journal has reported.
Tullow and partners struck an agreement with the Ugandan government on a development plan for the Lake Albert basin last month after years of talks. But in the meantime, a project to develop Kenya's South Lockichar basin, which was discovered in 2012—five years after the oil finds in Uganda—has steamed ahead.
Kenya "will be easier to develop and the government is very enthusiastic for us to get under way with that development and get first oil as soon as possible. So as we look at the phasing of our investments there's a lot of priority being given to Kenya. If it continues to be very material and grow then we may look to modify our holdings in Uganda," Paul McDade said in a telephone interview.
Tullow is aiming to sanction both projects in 2015 or 2016, with first oil expected around three years later. The oil from both countries is envisioned to be exported via an as-yet-unconstructed pipeline feeding the port of Lamu on Kenya's coast.
Mr McDade's comments come as the company said exploration drilling in the deep water off the coast of Mauritania in West Africa had opened up a new group of oil fields in the region, although further assessment and analysis will be required.
The company earlier Wednesday reported a 70% drop in full-year net profit after taking a $697 million net charge related to unsuccessful exploration in 2013 and in previous years.
The exploration write off was higher than in previous years due to the significantly higher costs of deep water drilling experienced across the industry, Tullow Chief Executive Aidan Heavey said.
Tullow is still evaluating bids for the sale of a stake in the Ghana Tweneboa-Enyenra-Ntomme project, said Mr. Heavey.
He said there was no timeframe for agreeing to a deal. The company had previously said it expected to close the deal this quarter.
He added that the company had received "quite attractive bids" for southern North Sea assets it was selling after it divided them up into smaller parcels
Separately, Mr. McDade, the COO, said Tullow had cut projected costs at the Lake Albert development by redesigning the number of wells and types of wells required and expected to bring the project in at the lower end of their previous guidance of $8 billion to $12 billion.