Tullow Oil plc, also known as Tullow, has announced that Tullow Overseas Holdings BV, its wholly-owned subsidiary, has agreed to sell Tullow Kenya BV, which owns all of Tullow’s working interests in Kenya, to Gulf Energy Ltd (the “Buyer”) for a minimum of $120 million (the “Transaction”).
The consideration will be paid in three installments: $40 million at completion, $40 million upon approval of the Field Development Plan (FDP) or by June 30, 2026, and $40 million spread over five years starting in the third quarter of 2028.
Subject to specific requirements, Tullow will also be eligible to receive royalties. Additionally, Tullow maintains the free right to a 30% share in any future development stages.
The transaction speeds up Tullow’s deleveraging process and is accretive to both equity and leverage.
According to UKLR 7 of the UK Listing Rules, which went into effect on July 29, 2024, this transaction will be considered substantial. Officials from Tullow say that, after the parties have signed the full form transaction paperwork, more announcements will be made.
Highlights of transactions
$120 million in cash is required as a minimum, and further royalties may be paid under specific circumstances.
Tullow maintains the right to a free 30% participation in prospective future development stages (prior to government back-in).
• Corporate sale of Tullow’s entire Kenyan portfolio of assets.
• All past and future liabilities will be transferred to the Buyer as part of the Transaction.
Conditions precedent for completion of the Transaction include:
• All necessary regulatory approvals.
• Delivery of payment guarantees satisfactory to Tullow in relation to the Tranche.
• Entering into the full sale and purchase agreement (SPA) is targeted within the coming months with completion of the Transaction and receipt of first payment during 2025.
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Richard Miller, Chief Financial Officer and Interim Chief Executive Officer of Tullow, commented on this:
“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, whilst retaining a material option on the future development of the project. I am confident that the proceeds from this transaction, coupled with the $300 million from the disposal of our assets in Gabon, position the business strongly for a successful refinancing.
“We look forward to working with Gulf Energy, who have the requisite financing to complete the transaction and are a strong and credible counterparty, and by doing so, unlock material value for the people of Kenya.”
Consideration structure
Total consideration of $120 million, consisting of:
Tranche A: $40 million payable on Transaction completion.
Tranche B: $40 million payable at the earlier of FDP approval or 30 June 2026.
Tranche C: $40 million payable no later than 30 June 2033, subject to the following payment schedule:
Payments of $2 million per quarter starting in the third quarter of 2028, provided Dated Brent oil price averaged at least $65/bbl during the preceding quarter.
Regardless of the current oil price, Tullow will be entitled to the remaining $40 million as a bullet payment on June 30, 2033, if the total amount has not been paid by then.Tranche D: 80% of total production multiplied by quarterly royalty payments of $0.5/bbl, contingent on criteria pertaining to production, resources, and oil prices.
