Uganda: Tullow Shareholders Set to Approve Sale of Assets to Total

Tullow Oil Camp in Uganda (file photo).

Tullow Oil Plc shareholders are set to approve the company's sale of all its assets in the Lake Albert Development project to Total E&P Uganda BV.

In a statement, Tullow Oil Plc said it has called a general meeting to allow shareholders approve the sale and consequently the company's exit from Uganda's oil and gas sector. According to the statement, the meeting is scheduled for July 15, 2020 in Landon, United Kingdom.

"The transaction is of critical importance to Tullow and the Tullow board unanimously recommends that all shareholders vote or procure votes in favour of the resolution being proposed at the general meeting," the circular calling for a general meeting reads in part.

Under the British law, Tullow's proposed sale of assets to Total constitutes a class 1 transaction conditional on, among other things approval by the company shareholders by a simple majority of the votes cast.

Tullow Uganda Operations Pty Ltd - a subsidiary of Tullow Oil plc owns 33.3 percent interests in oil blocks 1, 1A, 2 and 3A and the proposed East African Crude Oil Pipeline Project (EACOP). Other partners in the Lake Albert Development Project are; Total E&P Uganda BV and CNOOC Uganda Ltd each with 33.3 percent.

Tullow is currently the operator of Block 2; Total Uganda is currently operator of Blocks 1 and 1A; and CNOOC Uganda Limited (CNOOC) is operator of Block 3A. Should shareholders and Government of Uganda approve the sale, Tullow will consequently exit Uganda's oil and gas sector.

The company has been one of the major players in Uganda's oil and industry since 2004.

On April 23, 2020 the company announced that it had agreed to sale all its assets in Uganda Total E&P Uganda B.V for $ 575 million (approximately Shs 2. 1 trillion).

However, the transaction remains subject to several conditions and approvals. Even if the shareholders give the transaction a greenlight, it shall still be subject to other conditions including government of Uganda's approval, execution of a binding tax agreement between Tullow, government of Uganda and Uganda Revenue Authority that reflects the agreed tax principles.

A similar proposed sale of part of Tulllow's assets in Uganda that was announced in 2017, it collapsed last year following misunderstandings with Uganda Revenue Authority (URA) among other reasons.

However, the current transaction seems to be already gaining a greenlight from Government of Uganda.

Robert Kasande, Permanent Secretary, Ministry of Energy and Mineral Development in April soon after Tullow announcing the proposal sale said that Government and the oil companies have in principle agreed on the tax treatment of the transaction.

"Government has received the Sale and Purchase Agreement (SPA) from the oil companies which is being reviewed to facilitate the grant of the necessary approvals and conclusion of the transaction," Kasande noted.

Tullow remains optimistic that the sale will be concluded this year. "Subject to the satisfaction of the conditions, the transaction is expected to be complete in the second half of 2020," Tullow notes in a statement.

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