Tullow Oil raises $900m from Ugandan asset sale

Shares in Tullow Oil jumped yesterday on the back of the Irish-founded exploration company announcing that it is set to net $900m (€852m) from the disposal of a substantial amount of its Ugandan-based asset base.

France’s Total — the fourth-largest oil and gas company in the world — has agreed to buy just shy of 21.6% of Tullow’s share in three exploration areas in the eastern African country for a total consideration of $900m.

Tullow currently owns 33.3% of the three exploration areas. After concluding the Total deal, Tullow’s share will reduce to 11.76% before decreasing to 10% after the Ugandan government exercises its ‘back-in’ rights.

Some $700m of the overall consideration will be re-invested by Tullow to fund its share of the costs of the upstream development project and associated export pipeline project at Uganda’s Lake Albert.

Tullow boss Aidan Heavey said the deal — which helped boost the company’s share price by 2.55%, or more than 8p, in London yesterday — will allow the Lake Albert project move ahead swiftly and produce first oil by 2020. He also said the move guarantees Tullow’s long-term commitment to Uganda.

“The deal will secure future cash flow for the group from one of the industry’s few truly low-cost development projects, without any additional cash requirements expected,” he said, adding that Tullow will work closely with Total and the Ugandan government to move the deal forward “as smoothly as possible over the coming months”.

Research analysts at Jefferies raised their price target for the Tullow stock, yesterday, but Macquarie lowered its rating to ‘neutral’, along with Credit Suisse.