Petroleum refiner Total and multinational oil and gas company Tullow have entered into an agreement through which Total will buy Tullow’s entire interests in the Uganda Lake Albert development project, including the East African crude oil pipeline.
Under the terms of the deal, Total will acquire Tullow’s existing 33.3334% stake in each of the Lake Albert project licences. The effective date is January 1, 2020, with the completion date expected to be in the second half of the year.
Total will pay a total consideration to Tullow of about $575-million, with an initial payment of $500-million at closing and $75-million when the partners take the final investment decision to launch the project.
The agreement is in line with Tullow’s portfolio management programme to raise in excess of $1-billion, the proceeds of which will be used to reduce its net debt, strengthening its balance sheet and moving Tullow towards a “more conservative capital structure”.
Conditional payments will also be made to Tullow, linked to production and oil price, which will be triggered when the Brent price is above $62/bl.
An agreement in principle has been reached on the tax treatment of the transaction following discussions with the relevant Ugandan government and tax authorities.
The agreement is in line with Total’s strategy of acquiring long-term resources at low cost.
Total chairperson and CEO Patrick Pouyanné says the acquisition will enable the company, together with partner CNOOC, to move ahead with its project toward a final investment decision, driving costs down to deliver a robust long-term project.
CNOOC has rights of pre-emption to acquire 50% of the Uganda interests on the same terms and conditions as Total Uganda.