UK-based oil and gas company Tullow Oil Plc is moving closer to exiting its Kenyan operations following the signing of a sales and purchase agreement (SPA) with Gulf Energy Limited.
Tullow Oil, in a press release on Monday, July 21, announced that its wholly owned subsidiary, Tullow Overseas Holdings BV, has signed an SPA with Auron Energy E&P Limited, an affiliate of Gulf Energy Ltd.
Gulf Energy Ltd shall act as guarantor for the purchaser for the sale and purchase of 100% of the shares in Tullow Kenya BV, which holds Tullow’s entire working interests in Kenya, for a minimum cash consideration of $120 million (Ksh15.5 billion), subject to customary adjustments.
The consideration will be split into a $40 million payment due on completion, $40 million payable at the earlier of Field Development Plan (FDP) approval or 30 June 2026, and $40 million payable over five years from the third quarter of 2028 onwards.
In addition, Tullow will be entitled to royalty payments subject to certain conditions.
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Tullow Oil signs SPA for strategic sale of Kenyan assets to Gulf Energy Ltd
The company also retains a back-in right for a 30% participation in potential future development phases at no historic cost.
This right can be exercised if a third-party investor participates in future development phases, whether through a sale or farm-down of the purchaser’s interest in the assets.
“We are pleased to announce the signing of the Kenyan SPA, marking another step closer to completion of the Transaction with Gulf Energy. For a total consideration of at least $120 million, the Transaction supports our strategic priority to strengthen the balance sheet, with the first two payments totalling $80 million expected before the end of the year,” said Richard Miller, Chief Financial Officer and Interim Chief Executive Officer, Tullow.
“Furthermore, we are pleased to retain a potentially material zero cost value option to participate in future development phases.”
Miller added that the company continues to advance plans to optimize its capital structure during 2025.
Coupled with the sale of Tullow Oil’s Gabonese assets, the CEO said that the disposal of these non-core assets is expected to provide cash proceeds of $380 million in 2025.
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Net proceeds from the transaction will be used to strengthen Tullow’s balance sheet by materially reducing Tullow’s net debt, and the transaction is therefore expected to reduce the risk associated with a holistic debt refinancing expected in 2025.
Information on the disposed of assets
The disposed assets comprise all of Tullow’s working interests in Kenya, where significant discovered oil resources are progressing towards development in the South Lokichar Basin in Turkana County.
Tullow has undertaken exploration and appraisal of the assets as part of the longer-term development objective since 2011.
Since the first commercial discovery of oil in Turkana County in 2012, the company has struggled to bring it into full production.
Among the challenges has been the finances to build a heated pipeline down to the coast, which any export route would require.
Additionally, in May 2023, Tullow’s license partners in the Lokichar oilfield, Africa Oil Corp and TotalEnergies, withdrew, leaving the British firm as its sole owner.
Talks with Indian state-run companies on a possible sale did not result in a deal.
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