Tullow Oil Plc (LON:TLW), the mainly Africa focused oil and gas E&P giant, has released their trading statement showing all is on track. One of the main factors that investors were hoping to hear news upon was the Ugandan government approval for the purchase of Heritage’s stake in Tullow’s Ugandan assets, and the expected approval of the farm out of their Ugandan acreage to Total and CNOOC once the purchase was completed. Fortunately investors got what they wanted as it was stated that approval for the purchase of Heritage’s Ugandan assets was 'imminent'. Though this was not the news that was hoped for (they wanted to hear the much delayed – in investor eyes – approval had been given), it still was good news. And the wait turned out to be very short lived as today, Tullow has released confirmation of the approval of the purchase of Heritage’s Ugandan assets and the subsequent expected farm out, with the following being stated:
‘Tullow Oil plc (“Tullow”) announces that the Government of Uganda has approved the sale by Heritage Oil & Gas Limited (“HOGL”) of its 50% interest in Blocks 1 and 3A in Uganda to Tullow’s subsidiary, Tullow Uganda Limited (“Tullow Uganda”), subject to conditions outlined in a Heritage Oil Plc release issued today and reproduced below. Separately, Tullow Uganda has also received approval from the Government for its farmdown to CNOOC and Total, subject to certain routine conditions that Tullow intends to discuss with the Government in due course.’
The purchase and farm out approval
The deal, it is stated, is expected to be completed in five working days following finalisation with the government of a mechanism, including arbitration, for dealing with any taxes lawfully payable from the disposal of the Assets. This tax issue has been the factor behind why the deal has taken so long to go through, and may again possibly cause further delays with Heritage stating that after advice they believe that they owe no tax to the Ugandan government from the sale. But in response to this the following has been stated:
'In a separate letter Mr. Kabagambe-Kaliisa, Permanent Secretary to the Ministry of Energy & Mineral Development, advised that if HOGL was to resolve the tax matter by arbitration in London, then such arbitration would be on the basis that HOGL deposit approximately US$121.5 million, representing 30% of…
