Tullow-farm out deal cleared

OIL

The French company, Total, will acquire all the 33.33% worth of assets from Tullow after its joint venture partner said it would not exercise its pre-emption rights to buy part of the resource.

The London-listed Tullow announced last month that Total had agreed to purchase its Ugandan assets for $575 (sh2.1trillion). However, the deal's approval was subject to a decision by Chinese firm, Cnooc - a joint venture partner - to either acquire part of the assets or not.

In the May 28 statement, Tullow said that Cnooc had informed them together with Total that it would not pre-empt the transaction.

"In a notice received on May 26, Cnooc informed Tullow and Total that it has elected not to exercise its pre-emption rights," Tullow said. The seller said there would be no changes to the previously announced transaction or timeline.

"Tullow continues to expect the transaction to complete in the second half of 2020," Tullow added.

But the transaction is still subject to some conditions, including approval by Tullow's stakeholders and government tax agreements. Uganda has already cleared the Tullow farm-out deal.

In 2017, Total and Cnooc had agreed to buy 21.57% worth of  Tullow's interests in Block 1 and 1A, Block 2 and Kingfisher discovery area to Total for $900m.

However, the transaction collapsed last August after Uganda and the oil companies failed to agree on the tax treatment of the transaction. Once the deal has been concluded, Tullow would leave the Ugandan market.

Uganda would have earned $167m in capital gains tax from the earlier deal. But the country will now take only $14.6m from the latest deal, which involves the sale of Tullow's entire assets in Uganda.