The previous rolling Uganda discussion is here but today is the start of a new era for Tullow Oil Plc (LON:TLW) and, indeed, for Uganda, so it's time for a new one! Today Tullow announced the completion of its acquisition of Heritage's 50% interest in Blocks 1 and 3A that "following conditional Government approval on 6 July, all conditions have now been met and the assets have been transferred to Tullow Uganda".
This follows the pre-emption of Heritage's sale of its interests to ENI announced in February. The deal was originally expected to complete in Q1. Much of the delay has been caused by disagreements between Heritage and the Ugandan government on whether Heritage has to pay GCT on the deal, so it must be a huge relief to Tullow to have got this sorted. The price originally agreed with ENI was $1.35b, with a further contingent, deferred consideration of either US$150 million cash or an interest in a mutually agreed producing oil field independently valued at a similar amount. The price now paid is $1.35 plus 'an additional contractual amount' of $100m.
On first reading I assumed this was extra consideration paid by Tullow to get the deal over the Heritage tax dispute hurdle, but from todays Heritage RNS "a further US$100 million was paid by Tullow in full and final settlement of a potential contractual dispute between the parties relating to the contingent deferred amount", so it appears not. (n.b. Tullow does not expect to have to pay a major tax bill relating to its transactions). Tullow now owns 100% of Blocks 1,2 and 3A and is going to farm out 2/3 of each block, 1/3 to CNOOC and 1/3 to Total.
As Aiden Heavey, CEO, says
"This is a major step forward for Tullow and the Ugandan oil industry. We now look forward to signing the farmdown agreements with CNOOC and Total in the coming weeks and commence work with them on an accelerated basin-wide development plan that is expected to deliver production well in excess of 200,000 bopd from the Albert Rift Basin."
The drilling record is listed in full on Tullow's web-site. At the AGM, the exploration potential for the area was summarise as:
World-class basin discovered
• Over 800 mmbo discovered; over…
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