Tullow Oil plc has announced that it is exiting operations in Kenya, following the signing of a heads of terms agreement with Nairobi-based Gulf Energy Ltd.
The deal, worth a minimum of $120 million (Ksh15.5 Billion), will see Gulf Energy acquire Tullow’s entire Kenyan portfolio through the purchase of Tullow Kenya BV.
Tullow Kenya BV is a fully owned subsidiary of the United Kingdom (UK) -based oil and gas company.
Consequently, Gulf Energy will take over one of the country’s most high-profile oil exploration and development projects in the South Lokichar Basin, Turkana County.
“Tullow Oil plc (Tullow) is pleased to announce that its wholly-owned subsidiary, Tullow Overseas Holdings BV, has signed a heads of terms agreement with Gulf Energy Ltd (the “Buyer”) to sell Tullow Kenya BV,
“Which holds Tullow’s entire working interests in Kenya, for a total consideration of at least $120 million (the “Transaction”),” stated the company in a Tuesday, April 15, statement.
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Tullow Oil Explains Details of the Deal
The deal will be structured in three phases, according to the UK company.
Ksh5.1 billion ($40 million) will be paid upon completion of the sale, followed by a second Ksh5.1 billion ($40 million), which will be due at the earlier of the Field Development Plan (FDP) approval or June 30, 2026.
Moreover, the final Ksh5.1 billion ($40 million) will be paid over five years, starting from the third quarter of 2028.
In addition, Tullow will receive royalty payments under certain conditions and retains a 30% back-in right, allowing it to participate in any future development phases at no additional cost.
All liabilities, both past and future, will be transferred to Gulf Energy as part of the deal.
“Further announcements will be made in due course upon full form transaction documentation being entered into by the parties,” Explained Tullow Oil.
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Gulf Energy Takes Over Operations
Richard Miller, Tullow’s Chief Financial Officer and Interim CEO, said that the agreement was a strategic win.
“Today’s announcement marks another step forward in Tullow’s accelerated deleveraging journey, with near-term cash receipts of $80 million and mitigating significant capital exposure,” said Miller.
Further, he added that the move would complement the Ksh39 billion ($300 million) received from the recent sale of assets in Gabon, improving the company’s financial positioning ahead of refinancing efforts.
Gulf Energy, a prominent local player in the energy sector and part of the Rubis Group, is expected to bring new financing to the project, which has been stagnant for years.
If successful, the development could unlock significant value in Turkana’s oil reserves, estimated at over 560 million barrels of recoverable oil.
However, the transaction is still subject to several regulatory approvals and the finalization of a detailed Sale and Purchase Agreement (SPA).
Completion is expected in 2025, with the first payment due at that time.
Under the UK Listing Rules, the transaction is classified as a significant transaction, and further updates are expected as the full documentation is finalized in the coming months.
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