Tullow Oil shares spike as $500m Uganda proceeds due ‘within days’

Sale of Tullow’s stake in the project is a crucial part of its debt-reduction strategy

Tullow Oil’s Ngamia 8 drilling site in Lokichar, Turkana County, Kenya. Photograph: Baz Ratner/File Photo/Reuters

Tullow Oil’s Ngamia 8 drilling site in Lokichar, Turkana County, Kenya. Photograph: Baz Ratner/File Photo/Reuters


Tullow Oil’s shares spiked on Wednesday as it said it expects to receive an initial $500 million (€422 million) of proceeds from the sale of its Ugandan assets, after the government there rubber-stamped the planned tax treatment of the transaction.

The sale of Tullow’s entire stake in the so-called Albert Development Project in Uganda to French oil major Total, agreed in April, is a crucial part of the Irish-founded company’s debt-reduction strategy.

“With all the government-related conditions to closing having been satisfied, Tullow expects the transaction to close in the coming days after completing certain customary pre-closing steps with Total,” the company said.

“Tullow will provide a further update once the transaction has closed and funds have been received,” the company said.

“On closing, Tullow will receive $500 million consideration and a further $75 million when a final investment decision is taken on the development project. In addition, Tullow is entitled to receive contingent payments linked to the oil price payable after production commences.”

Tullow’s shares were up over 23 per cent as London trading headed for the close on Wednesday.


Shares in Tullow had plunged in the past 12 months as a result of exploration and production disappointments, the exit of its then chief executive and exploration director, and beaten-down oil prices which triggered a $1.4 billion writedown in the value of assets in the first half of this year.

The company’s new chief executive, Rahul Dhir, will unveil plans on November 25th on how it can lower its $3 billion net debt pile amid depressed oil prices. The group warned in September that it faces a potential cash shortfall if no action is taken.

The Irish-founded but Africa-focused exploration company will hold a so-called capital markets day on November 25th, it said in a statement on Wednesday.

“Tullow’s outlook would look very different without the disposal in Uganda but, with government approvals now received, completion should follow shortly which will increase liquidity to over $1 billion,” said David Round, an analyst with BMO Capital Markets in London.

“Tullow still has work to do to address its medium-term financing but we don’t see a pinch point until mid-2022, meaning it has time and, in our view, options [disposals, tenders, refinancing, asset outperformance, oil price] to address any shortfall.”