Tullow Oil may be set for $200m boost after tax deal with Uganda

Accord allows Irish-founded firm to sell part of its share in a major Ugandan oilfield

Tullow Oil could be in line for a $200 million (€177 million) boost this year after agreeing a tax settlement with Uganda's government. The deal will allow the company sell part of its share of a major oilfield in the African country.

The news came as Irish-founded Tullow said it would pay $67 million to shareholders – its first dividend since 2015 – after reporting that 2018 post-tax profits reached $85 million.

The explorer’s shares were up 4.22 per cent at 219.9 pence sterling in London, where most of its stock is traded, early on Wednesday afternoon.

Tullow chief executive Paul McDade has agreed a capital gains tax settlement with Ugandan president, Yoweri Museveni, enabling the $900 million sale of part of the company's one-third share in an oilfield in Uganda's Lake Albert rift valley to partners Total and China-owned CNOOC.


Tullow will get $200 million cash for the 21.57 per cent it is selling and defer the remaining $700 million to cover its share of the potential $5.2 billion cost of developing the field, which holds at least 1.2 billion barrels of oil.

Mr McDade said that Tullow hoped the sale could go ahead this year, triggering the $200 million payment to the company.

“We then have no other capital exposure until first oil in the early 2020s,” he pointed out.

The farm-down – as it is dubbed – will leave Tullow with 11.76 per cent of the Ugandan field and its partners with slightly in excess of 44 per cent each. The company agreed the transaction first with Total two years ago and then with CNOOC.

"It's been a bit of time coming," Mr McDade conceded, but he added that the deal required agreeing a tax settlement with Uganda. Payments to Uganda's exchequer will be phased and the final figure will be partly tied to the oilfield project's progress.


Tullow discovered the Lake Albert field and subsequently recruited Total and CNOOC to develop and bring it into production.

Tullow’s revenue rose 7.5 per cent to $1.86 billion in 2018 from $1.73 billion the previous year. The group earned profits after tax of $85 million last year against a $175 million loss in 2017.

Mr McDade said Tullow would start returning cash to shareholders with the payment of a final year dividend of 4.8 US cent a share, totalling about $67 million. The company halted such payments in 2015 after oil prices dived.

In November, the company pledged to restart paying dividends from 2019, and said that the total paid to investors in any year will be no less than $100 million in total.

Its chief executive noted that Tullow’s financial health at the end of 2018 prompted it to begin paying dividends ahead of schedule. “We’re starting that policy early,” he said.

The explorer has cut costs to ensure the business can generate cash at oil prices of $40 a barrel, according to Mr McDade.

The company earned $68.50 a barrel in 2018, when production averaged 81,400 barrels a day, most of it from the Jubilee and TEN fields off Ghana’s coast. This year it expects production to reach 100,000 barrels a day.

Tullow plans to spend $570 million this year, including $70 million on exploring its licence blocks off Guyana, close to where Exxon has discovered a reservoir of up to 5.5 billion barrels of crude.

Tullow employs large numbers of geophysicists and other experts who analyse much of the data from its oil prospects at a centre in Sandyford, Co Dublin.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas