Sh61.7bn Uganda deal sets stage for Tullow Kenya sale

Tullow Oil PLC is expecting bids for sale of Kenyan unit to follow after sealing the sale of Ugandan assets at Sh61.7 billion ($575 million) to cut debt.

Tullow Oil PLC is expecting bids for sale of Kenyan unit to follow after sealing the sale of Ugandan assets at Sh61.7 billion ($575 million) to cut debt.

The firm disclosed yesterday that it had reached agreement to sell all its assets in Uganda to Total Uganda with the price being deeply discounted at 40.1 percent.

Tullow had put the carrying value of Uganda assets at Sh102.9 billion ($960 million) at the end of December last year.

The $575 million price also represents a significant discount compared with a $900 million price Tullow had struck with Total and CNOOC of China back in 2017.

Completion of Ugandan deal now turns focus on Kenya where Tullow is looking for a buyer for part of its oil blocks in Northern Kenya. It had valued the assets at Sh71.7 billion ($669 million) last December.

Tullow said in a statement the Uganda price was the “best outcome” it could get given the current market environment. Oil prices have touched lows last seen in 1992 on oversupply.

The firm now faces discounted bids for Kenya, going by the price it accepted in Uganda even though it maintained that the deal had no direct impact on its view about Kenya’s farm-down.

“Tullow expects to receive bids from potential buyers in the coming weeks, and the size and shape of the deal will be decided at that point. We will update you on deal progress in Kenya as soon as we are able to,” the firm said.

Kenya’s Early Oil Pilot Scheme (EOPS) remains shut down, due to impassable roads and Coronavirus pandemic that has resulted in various movement restrictions.

Tullow said it continues to monitor the impact the state restrictions may have on the final investment decision (FID) target.

The Uganda deal will see it transfer its entire interests in Blocks 1, 1A, 2 and 3A in Uganda and the proposed East African Crude Oil Pipeline (EACOP) to Total Uganda, a subsidiary of Total SA.

“This deal is important for Tullow and forms the first step of our programme of portfolio management,” said Dorothy Thompson, Tullow executive chair.