Tullow Oil Plc has sold all its assets in Uganda to Total Uganda at $575 million to cut on debt, with bids for selling the Kenyan unit expected to follow.
The British oil explorer announced Thursday that it would transfer its entire interests in Blocks 1, 1A, 2 and 3A in western Uganda and the proposed East African Crude Oil Pipeline (EACOP) System for cash consideration of $575 million plus potential contingent payments after first oil.
"This deal is important for Tullow and forms the first step of our programme of portfolio management. It represents an excellent start towards our previously announced target of raising in excess of Sh107 billion ($1 billion) to strengthen the balance sheet and secure a more conservative capital structure," said Dorothy Thompson, Tullow executive chairperson.
The Cash Consideration consists of $500 million payable at completion and $75 million payable following final investment decision of the Lake Albert Development Project.
Ugandan deal is expected to strengthen Tullow's balance sheet as part of its financial strategy to move to a more conservative capital structure.
The deal will also eliminate all future capital expenditure associated with the Lake Albert Development Project while retaining potential benefits linked to production and the oil price through the contingent payments.
Tullow has been the operator of Block 2. Total Uganda is currently operator of Block 1 and Block 1A, while China National Offshore Oil Corporation (CNOOC) Uganda Limited is operator of Block 3A.