Ugandan president objects to Tullow’s asset farm-down

THE formal go-ahead for Tullow Oil to farm-down part of its Ugandan asset portfolio to its international partners, Total and CNOOC, has been reportedly slowed by the country’s president objecting to part of the deal.

Tullow had earmarked September as the month for final closure to the long-running saga which concerns the Lake Albert-based assets it acquired from Canadian firm, Heritage Oil, last year. While technically still on track to meet that target, the latest hitch is likely to see the issue carry on for the foreseeable future.

The Ugandan president has, apparently, objected to the current stabilisation clause in the contract — a standard addition to such contracts, which copper- fastens economic and fiscal agreements.

A spokesperson for Tullow declined to comment on the situation, but it is understood that negotiations are ongoing and a counter-proposal regarding the stabilisation clause has been tabled. Analysts, on the other hand, seem more perturbed with the situation.

“For Tullow, completion of the farm-down isn’t just relevant from a funding perspective, but also in terms of proceeding with the development in Uganda. A further delay to deal completion is, hence, clearly not helpful,” Gerry Hennigan of Goodbody Stockbrokers said.

However, Job Langbroek of Davy Stockbrokers, suggested that the latest development may not prove too much of a hurdle: “The completion of the deal will result in a receipt of $2.9 billion (€2.1bn) to Tullow, completely de-leveraging the group. On the other hand, there is investment of up to $10bn expected in the coming years, so the Ugandans should also be keen to finalise matters.

In unrelated Irish exploration news, Petrel Resources — the John Teeling-chaired AIM-listed oil and gas company — has posted a pre-tax loss of €558,000 for the first six months of this year — up from a loss of €171,000 for the first half of 2010.