REG - Tullow Oil PLC - SPA for strategic sale of Gabon assets to GOC
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RNS Number : 5116I Tullow Oil PLC 13 May 2025
Tullow Oil plc
Sale and Purchase Agreement for strategic sale of Gabon assets to Gabon Oil Company
13 May 2025 - Following the announcement on 24 March 2025, Tullow Oil plc
(Tullow) is pleased to announce that Tullow Gabon Limited (the "Seller"), a
wholly owned subsidiary of Tullow, has signed a sale and purchase agreement
(SPA) with Gabon Oil Company (the "Purchaser") for the sale of 100% of the
shares in Tullow's subsidiary, Tullow Oil Gabon S.A. (TOGSA), which holds all
of Tullow's non-operated working interests in Gabon (the "Disposed Assets")
for a total cash consideration of US$300 million net of tax (the
"Transaction"), subject to customary adjustments.
Transaction highlights
· Corporate sale of Tullow's entire Gabonese portfolio of assets,
representing c.10 kbopd of 2025 production guidance and c.36 million barrels
of 2P reserves (independently audited at year-end 2024).
· The total cash consideration of US$300 million net of tax
(subject to customary adjustments) due on Completion.
· The conditions precedent to be met in advance of Completion of
the Transaction include all necessary government and regulatory approvals.
· Completion of the Transaction, satisfaction of conditions
precedent and receipt of funds is expected around the middle of the year.
Richard Miller, Chief Financial Officer and Interim Chief Executive Officer,
Tullow, commented:
"We continue to make strong progress towards completing this strategic, value
accretive divestment of our Gabon assets, with the signing of the SPA. The
proceeds, expected in the coming months, will materially reduce our net debt
and strengthen our balance sheet, which positions us well as we look to
optimise our capital structure."
"Looking ahead, the Transaction enables Tullow to continue to deliver against
our business objectives to unlock value from our high-margin, self-funded
assets to grow our reserve base and create value for all stakeholders."
Rationale for and expected benefits of the Transaction
· Value accretive transaction that significantly reduces leverage,
further strengthens Tullow's balance sheet and is in line with Tullow's
strategy of focusing on high-margin, self-funded production with strong cash
flows.
· Positions the Group well to optimise its capital structure in
2025 and accelerate deleveraging.
· Revised portfolio of assets will enable Tullow to leverage its
technical skills and focus on more material positions in key fields to grow
its reserve base.
· Provides strong foundations for organic growth within the core
portfolio and inorganic growth opportunities, with a focus on deepwater
operated positions in West Africa.
Use of proceeds
Net proceeds from the Transaction will be used to strengthen Tullow's balance
sheet by materially reducing Tullow's net debt and is therefore expected to
reduce the risk associated with a holistic debt refinancing expected in 2025.
Information on the Disposed Assets
· The Disposed Assets comprise all of Tullow's non-operated working
interests in Gabon.
· The total asset value subject to the Transaction is c.US$256
million (excluding outstanding intercompany balances) as at 31 December 2024
and the gross profit attributable to the Disposed Assets was c.US$119 million
for the year ended 31 December 2024.
· The Disposed Assets produced 9.6 kbopd in 2024 and had 36 million
barrels of 2P reserves as of 31 December 2024.
· Further information about the Disposed Assets is set out in
Appendix I to this announcement and historical financial information relating
to the Disposed Assets is set out in Appendix II to this announcement.
Effect of the Transaction on the Continuing Group
Financial impacts of the Transaction on Tullow are currently expected to be
(based on financials as at 31 December 2024) as follows:
· Reduction in pro forma gross profit of c.US$119 million.
· Reduction in pro forma operating profit before tax of c.US$120
million (excluding the impact of one-off gains recognised on disposal of
assets in 2024).
· Reduction in pro forma total assets of c.US$256 million excluding
outstanding intercompany balances at 31 December 2024.
· Reduction in pro forma total liabilities of c.US$108 million
excluding current tax liabilities at 31 December 2024, of which c.US$31
million was provision for decommissioning.
· The net amount of the proceeds will be recognised in the Group's
consolidated financial statements after Completion, including any associated
financial impacts of the Transaction.
Following Completion, the Group will no longer receive the contribution that
the Disposed Assets currently make to the Group's financial results. In the
Group's forthcoming interim consolidated financial results for the six months
ended 30 June 2025, the Disposed Assets will be presented as a disposal group
held for sale and discontinued operations in accordance with IFRS 5 if
Completion takes place by 30 June 2025. As a result, comparative financial
information will be restated in the interim consolidated income statement for
the six months ended 30 June 2024 to present the financial results for the
Disposed Assets in the prior period as discontinued operations.
Risks to Tullow as a result of the Transaction
Details regarding the risks to Tullow as a result of the Transaction are set
out in Appendix III to this announcement.
Board opinion
The Transaction is, in the opinion of the directors of Tullow (the
"Directors"), in the best interests of the shareholders of Tullow as a whole.
Additional information
Due to the size of the Disposed Assets relative to Tullow, the Transaction
constitutes a Significant Transaction for the purposes of the UK Listing Rules
made by the Financial Conduct Authority (the "FCA") for the purposes of Part
VI of the Financial Services and Markets Act 2000 (as amended), which came
into effect on 29 July 2024 (the "ULKR") and is therefore notifiable in
accordance with UKLR 7.3.1R and 7.3.2R. In accordance with the UKLRs, the
Transaction is not subject to shareholder approval.
Peel Hunt LLP is acting as the Group's corporate broker and Norton Rose
Fulbright LLP is acting as the Group's legal counsel.
Unless otherwise stated, all financial information relating to Tullow
disclosed in this announcement (including the Appendices) has been extracted,
without material adjustment, from Tullow's Full-Year 2023 and 2024 published
audited financial statements.
The person responsible for arranging for the release of this announcement on
behalf of Tullow is Adam Holland, Company Secretary.
CONTACTS
Tullow Investor Relations Camarco (Media)
(+44 20 3757 4980)
ir@tullowoil.com (mailto:ir@tullowoil.com)
Billy Clegg
Matthew Evans
Georgia Edmonds
Rob Hayward
Rebecca Waterworth
Notes to editors
Tullow is an independent energy company that is building a better future
through responsible oil and gas development in Africa. Tullow's operations are
focused on its core producing assets in Ghana. Tullow is committed to becoming
Net Zero on its Scope 1 and 2 emissions by 2030, with a Shared Prosperity
strategy that delivers lasting socio-economic benefits for its host nations.
The Group is quoted on the London and Ghanaian stock exchanges (symbol: TLW).
For further information, please refer to: www.tullowoil.com
(http://www.tullowoil.com/) .
Follow Tullow on:
X: www.X.com/TullowOilplc (http://www.twitter.com/TullowOilplc)
LinkedIn: www.linkedin.com/company/Tullow-Oil
(http://www.linkedin.com/company/Tullow-Oil)
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 (as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 as amended by virtue
of the Market Abuse (Amendment) (EU Exit) Regulations 2019). Upon publication
of this announcement, this inside information will be considered to be in the
public domain. The person responsible for arranging the release of this
announcement on behalf of Tullow is Adam Holland, Company Secretary.
This announcement is not intended to, and does not, constitute or form part of
any offer, invitation or the solicitation of an offer to purchase, subscribe
for or otherwise acquire, or to sell, transfer or otherwise dispose of, any
securities or the solicitation of any vote or approval in any jurisdiction,
whether pursuant to this announcement or otherwise.
The release, publication or distribution of this announcement in, into or from
jurisdictions outside the United Kingdom may be restricted by law and
therefore persons into whose possession this announcement comes should inform
themselves about, and observe, such restrictions. Any failure to comply with
the restrictions may constitute a violation of the securities law of any such
jurisdiction.
Important Notices
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated by the
Financial Conduct Authority in the UK, is acting as corporate broker
exclusively for Tullow and for no one else and will not be responsible to
anyone other than Tullow for providing the protections afforded to its clients
or for providing advice in relation to the matters referred to in this
announcement. Neither Peel Hunt, nor any of its affiliates, owes or accepts
any duty, liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any person who is
not a client of Peel Hunt in connection with this announcement, any statement
contained herein or otherwise.
APPENDIX I
PRINCIPAL TERMS OF THE TRANSACTION
Background to and rationale for the Transaction
In recent years Tullow has undertaken a number of asset sales as it has
restructured and focused the business towards operating mid to late life
assets and on short-cycle, high-return opportunities that capture the
substantial potential associated with Tullow's large resource base. Tullow's
current strategy, alongside a rigorous focus on costs, is expected to enable
reduction of its current debt levels and deliver significant value for its
host nations and investors.
The Transaction would allow the Group to further accelerate its deleveraging
pathway. The Directors believe that a lower net debt combined with a
continuous focus on costs and capital investment would allow the Group to
become more competitive in pursuing organic and inorganic growth opportunities
by lowering return hurdles and providing access to additional funding sources,
increasing the refinancing prospects of the Group for its remaining debt
maturities.
Summary of the terms of the Transaction
Tullow, the Seller, the Purchaser and TOGSA entered into the SPA on 13 May
2025, under which the Seller has conditionally agreed to transfer the entire
issued capital of TOGSA to the Purchaser for cash consideration of US$300
million net of tax payable on Completion by the Purchaser, subject to
customary adjustments and adjustments for contributions and leakages in
respect of the period between 1 January 2025 and the Completion Date. Subject
to the satisfaction of the conditions precedent (summarised below) to the
Transaction, the Transaction is expected to complete around the middle of the
year.
The Disposed Assets consist of:
· forty per cent. (40%) undivided participating legal and
beneficial interest in the Echira Permit and in and under the Echira JOA;
· seven point five per cent. (7.5%) undivided participating legal
and beneficial interest in the Etame PSC;
· seven point five per cent. (7.5%) undivided participating legal
and beneficial interest in the Ezanga PSC and in and under the Ezanga JOA;
· forty per cent. (40%) undivided participating legal and
beneficial interest in the DE8 PSC and in and under the DE8 JOA;
· forty per cent. (40%) undivided participating legal and
beneficial interest in the Niungo Permit and in and under the Niungo JOA;
· forty per cent. (40%) undivided participating legal and
beneficial interest in the Simba PSC and in and under the Simba JOA;
· forty per cent. (40%) undivided participating legal and
beneficial interest in the Kowe PSC and in and under the Kowe JOA,
together with all related liabilities and obligations arising under or in
respect of such interest documents and together with all rights and
obligations attaching thereto.
Completion of the SPA is conditional upon the satisfaction of the following
conditions precedent:
· the written waiver by the Gabonese Ministry of Hydrocarbons of
its pre-emption right or, if earlier: (i) the expiry of the relevant legal
waiting period or (ii) the fulfilment of the Ministry of Hydrocarbons Approval
Condition (the "Ministry of Hydrocarbons Pre-emption Condition");
· the written approval by the Gabonese Ministry of Hydrocarbons of
the Transaction (the "Ministry of Hydrocarbons Approval Condition");
· the execution by Gabon of an amendment agreement to an investment
framework related to certain Disposed Assets between Gabon, Tullow and Tullow
Gabon Limited (the "Investment Framework Condition");
· the waiver of pre-emption rights set out in the DE8 JOA by
Perenco in respect of the DE8 Asset to be sold pursuant to the Transaction or,
if earlier: (i) the expiry of the relevant legal waiting period prescribed by
the DE8 JOA; or (ii) if Perenco notifies a pre-emption, the sale and purchase
agreement in respect of the sale of the DE8 Asset to Perenco or an affiliate,
thereof, subject to such sale having obtained all necessary government and
regulatory approvals (including by the Gabonese Ministry of Hydrocarbons)
becoming unconditional (the "DE8 JOA Pre-Emption Condition");
· either the written approval by the CEMAC Merger Control Authority
of the Transaction or, if earlier, the expiry of the relevant legal period
pursuant to the CEMAC Regulation, without the CEMAC Merger Control Authority
having expressed any objection to the Transaction within this period (the
"CEMAC Merger Control Condition");
· payment of a dividend by TOGSA to Tullow Gabon Limited in respect
of TOGSA's profits for the financial year ended 31 December 2024 and
settlement of corresponding intra-group balances (the "Dividend Payment
Condition"); and
· the: (i) receipt from the tax authority of Gabon of a tax
assessment and collection notice in respect of tax due on the Transaction; and
(ii) the entry by the tax authority of Gabon, the Seller, the Purchaser and
TOGSA into a delegated payment agreement confirming that the tax due as shown
on the tax assessment and/or the collection notice shall be payable by the
Purchaser for and on behalf of TOGSA and the Seller in clearance of such tax
liability (the "Tax Condition").
The Seller has undertaken to use all reasonable endeavours to procure the
fulfilment of the DE8 JOA Pre-emption Condition, the Ministry of Hydrocarbons
Pre-emption Condition, the Ministry of Hydrocarbons Approval Condition, the
Investment Framework Condition and the Tax Condition as soon as possible after
the signing date of the SPA and in any event by no later than 5.00pm London on
the date that is six (6) months following the date of the SPA (unless the
Seller and the Purchaser mutually agree to extend such date) (being the "Long
Stop Date").
The Purchaser has undertaken to use all reasonable endeavours to procure the
fulfilment of the CEMAC Merger Control Condition as soon as possible after the
signing date of the SPA and in any event by the Long Stop Date.
Under the Transaction, the Purchaser will pay US$300 million in cash (net of
tax) at Completion (subject to customary adjustments and adjustments for
contributions and leakages in respect of the period between 1 January 2025 and
the Completion Date).
The SPA includes customary covenants on the Seller in the period between
signing and Completion, including to procure that TOGSA continues to operate
its business in all material respects in the ordinary and usual course.
Additionally, the Seller has provided the Purchaser with customary warranties
in relation to the Transaction. Tullow has provided a parent guarantee in
support of the Seller's obligations under the SPA.
The SPA includes indemnities under which the Purchaser has agreed to: (i)
indemnify the Seller with respect to all environmental and decommissioning
liabilities; and (ii) indemnify the Seller for any other liabilities which
relate to TOGSA or the Disposed Assets. The Seller has also provided
indemnities under the SPA under which it has agreed to indemnify the Purchaser
in respect of certain third-party claims.
The Seller has provided customary business and fundamental warranties under
the SPA. The Seller's liability for claims under the SPA (other than in
respect of certain locked box and indemnity claims) is capped at 100 per cent.
of the total consideration (that is, the consideration payable at Completion
after adjustments) received by the Seller from the Purchaser, except for
breach of business warranty claims in respect of which the Seller's liability
is capped at US$90 million. The Seller and Purchaser have agreed to customary
de minimis limitations on the Purchaser's ability to bring claims under the
warranties given by the Seller.
The SPA will terminate automatically if:
· the conditions to Completion have not been fulfilled in
accordance with the SPA on the Long Stop Date; or
· a tax on sale receipt in respect of tax due on the Transaction is
not issued by the Long Stop Date.
The Seller has the right to terminate the SPA between signing and Completion
if the Purchaser fails to pay the completion payment (being the total cash
consideration due on Completion following adjustments by the Seller for
estimated contributions and leakages in respect of the period between 1
January 2025 and the Completion Date) within five business days of the tax on
sale receipt in respect of tax due on the Transaction being issued.
The Seller and the Purchaser also each have a right to terminate the SPA
between signing and Completion if any of the following occur: (i) the other
party fails to comply with its pre-completion obligations at pre-completion
(being six business days after the last condition precedent of the Transaction
is satisfied (or such other date as the Seller and Purchaser may agree in
writing)); or (ii) the other party breaches or becomes subject to any
applicable international sanctions.
The SPA is governed by English law. The parties have agreed that any disputes
shall be finally settled under the arbitration rules of the London Court of
International Arbitration in force at the date of applying for arbitration by
three arbitrators, in London, England and in the English language. Each party
has provided a waiver of any claim to sovereign immunity for itself or any of
its assets.
Funding of the Transaction
The Purchaser intends to fund the Transaction through a combination of cash on
hand and a prepayment facility from Gunvor. Prior to signing the SPA, Tullow
received a letter from Gunvor Middle East DMCC dated 12 May 2025 (the "Gunvor
Letter"), confirming that the Purchaser has entered into a term sheet with
Gunvor on 12 May 2025 for a fully underwritten prepayment facility in an
amount of US$220 million for the partial funding of the Transaction (the "Term
Sheet").
The balance of the consideration is to be funded from the Purchaser's cash
resources. The Purchaser has confirmed to Tullow that it has sufficient cash
on hand to fund the balance of the consideration not covered by the debt
facility on Completion.
Use of proceeds of the Transaction
Net proceeds from the Transaction will be used to strengthen Tullow's balance
sheet by materially reducing Tullow's net debt and is therefore expected to
reduce the risk associated with a holistic debt refinancing.
APPENDIX II
HISTORICAL FINANCIAL INFORMATION RELATING TO THE DISPOSED ASSETS
The following historical financial information relating to the Disposed Assets
has been extracted without material adjustment from the consolidation
schedules and supporting accounting records that underlie the audited
consolidated financial statements of Tullow for the years ended 31 December
2023 and 31 December 2024.
Ernst & Young LLP was the auditor of Tullow in respect of each of the
years ended 31 December 2023 and 31 December 2024. The consolidated statutory
accounts for the Group in respect the year ended 31 December 2023 have been
delivered to the Registrar of Companies and the Independent auditor's report
in respect of these statutory accounts was unqualified.
The consolidated statutory accounts for the year ended 31 December 2024 are
expected to be delivered to the Registrar of Companies following approval by
Tullow's shareholders in the Annual General Meeting of Tullow Oil plc
scheduled on 22 May 2025. The independent auditor's report in respect of these
statutory accounts was unqualified, with emphasis of matter relating to
material uncertainties with regards to going concern and did not contain
statements under section 498(2) or (3) of the Companies Act.
The following financial information does not constitute statutory accounts
within the meaning of section 434 of the Companies Act. The financial
information in this Appendix II (Historical Financial Information relating to
the Disposed Assets) has been prepared using the IFRS accounting policies used
to prepare the consolidated financial statements of the Group for the years
ended 31 December 2023 and 31 December 2024.
The Income Statement of the Disposed Assets for years ending 31 December 2023
and 31 December 2024 is as follows:
Income Statement (US$000) Dec-24 Dec-23
Revenue 247,371 419,087
Cost of sales (128,435) (213,554)
Gross profit 118,936 205,532
Administrative expenses (967) (539)
Asset revaluation1 38,865 -
Exploration costs written off (10,344) (3,390)
Operating profit 146,490 201,603
Finance revenue 9 16
Finance costs 1,376 (2,805)
Inter-company interest 11,324 13,877
Other income and expenses (67) 1
Profit before tax 159,132 212,691
Income tax expense (38,195) (101,177)
Profit for the year 120,937 111,514
(Supplementary information)
Adjusted EBITDAX2 143,439 233,789
1 - Asset revaluation relates to the one-off revaluation of Disposed Assets as
part of the asset swap agreement with Perenco Oil and Gas S.A (Perenco)
completed in 2024.
2 - EBITDAX is defined as profit/(loss) from continuing activities adjusted
for income tax expense, finance costs, finance revenue, asset revaluation,
depreciation, depletion and amortisation and exploration costs written off.
Consolidated balance Sheet of the Disposed Assets as at 31 December 2024:
Net Asset Statement (US$000) Dec-24
Intangible exploration and evaluation assets 5,716
Property, plant and equipment 176,655
Goodwill 44,902
Non-current assets 227,273
Inventories 15,085
Trade receivables 12,769
Other current assets 752
Inter-company3 142,862
Cash and cash equivalents 204
Current assets 171,672
Total assets 398,945
Trade and other payables (34,627)
Current tax liabilities (42,478)
Current liabilities (77,105)
Deferred tax liabilities (42,165)
Provisions4 (30,742)
Non-current liabilities (72,907)
Total liabilities (150,012)
Net assets 248,933
3 - Intercompany balance represents the net balances due from / to the
continuing Group of Tullow Companies. These intercompany balances are expected
to be settled or novated prior to or at Completion of the Transaction.
4 - The Provisions balances represent the present value of decommissioning
costs relating to the Disposed Assets.
APPENDIX III
ADDITIONAL INFORMATION
PART A - Risk factors
This Part A (Risk factors) addresses the risks known to the Group and the
Directors which are material risk factors to the Transaction, will be material
new risk factors to the Continuing Group as a result of the Transaction, or
are existing material risk factors to the Group which will be impacted by the
Transaction. The information given is as of the date of this announcement and,
except as required by any applicable law, rules or regulations, will not be
updated. Shareholders should carefully consider the risks and uncertainties
described below, together with all other information contained in this
announcement. The risks described below are not set out in any order of
priority, assumed or otherwise.
Additional risks and uncertainties currently unknown to the Group and the
Directors, or which the Group and the Directors currently deem immaterial, or
deem material to the Group, but which will not result from or be impacted by
the Disposal, may also have an adverse effect on the business, financial
condition, operating results or prospects of the Continuing Group. In such
cases, the market price of Tullow's shares may decline, and investors may lose
all or part of their investment.
1. Risks related to the Transaction
The following risks and uncertainties relate to the Transaction:
(a) The Transaction may not proceed to completion
Completion of the SPA is conditional upon satisfaction of customary conditions
(described in Appendix I).
There is no guarantee that these conditions will be satisfied by the Long Stop
Date or at all. As a result, Completion (and the timing of Completion) are
outside the control of Tullow. The SPA will terminate automatically if:
· the conditions to Completion have not been fulfilled in
accordance with the SPA on the Long Stop Date; or
· a tax on sale receipt in respect of tax due on the Transaction is
not issued by the Long Stop Date.
The Seller has the right to terminate the SPA between signing and Completion
if the Purchaser fails to pay the completion payment (being the total cash
consideration due on Completion following adjustments by the Seller for
estimated contributions and leakages in respect of the period between 1
January 2025 and the Completion Date) within five business days of the tax on
sale receipt in respect of tax due on the Transaction being issued.
The Seller and the Purchaser also each have a right to terminate the SPA
between signing and Completion if any of the following occur: (i) the other
party fails to comply with its pre-completion obligations at pre-completion
(being six business days after the last condition precedent of the Transaction
is satisfied (or such other date as the Seller and Purchaser may agree in
writing)); or (ii) the other party breaches or becomes subject to any
applicable international sanctions.
There can be no assurance that these termination rights will not be exercised
if applicable. If they are so exercised, the Transaction will fail to
complete.
If Completion does not occur, or the SPA is terminated, Tullow will also have
incurred significant costs and management time in connection with the
Transaction, which it will not be able to recover. It will also not realise
the anticipated benefits of the Transaction (including the Transaction
proceeds) and its ability to implement its stated strategy may be prejudiced.
(b) Warranties and indemnities in the SPA
The SPA contains customary warranties, indemnities and other contractual
protections given by the Seller in favour of the Purchaser, with specific
representations and warranties provided in respect of the Disposed Asset.
Tullow has undertaken due diligence to minimise the risk of liability under
these provisions. However, any liability to make a payment arising from a
successful claim by the Purchaser under any of the relevant provisions of the
SPA would reduce the net proceeds of the Transaction and could have an adverse
effect on the business, financial condition, cash flow or prospects of the
Group. Tullow acts as guarantor in respect of the obligations of the Seller
under the SPA.
(c) Tullow is exposed to the purchaser's credit risk and the purchaser's ability to access funding
The Purchaser intends to fund the Transaction through a combination of cash on
hand and a prepayment facility from Gunvor. Prior to signing the SPA, Tullow
received the Gunvor Letter which confirmed that the Purchaser has entered into
a Term Sheet with Gunvor for a fully underwritten prepayment facility in an
amount of US$220 million for the partial funding of the Transaction.
Whilst the Gunvor Letter confirms the availability of a part of the funds for
the Transaction and the intention of Gunvor to fully underwrite an amount of
US$220 million to part-finance the Transaction, the underwriting is stated to
be subject to satisfactory documentation and completion of standard conditions
precedent for this kind of transaction. As such, there can be no assurance
that such conditions precedent and documentation will be completed and that
the funds will be available for drawdown.
The balance of the consideration is to be funded from the Purchaser's cash on
hand resources. The Purchaser has confirmed to Tullow that it has sufficient
cash on hand to fund the balance of the consideration not covered by the debt
facility on Completion.
2. Risks related to the Group and following Completion, the Continuing
Group
The following risks and uncertainties relate to the Group and following
Completion, the Continuing Group:
(a) The Continuing Group's operations will be less diversified
Following Completion, the Continuing Group will no longer be able to benefit
from the production from the Disposed Assets. As a result, the Continuing
Group's production will continue to be concentrated on the Group's Ghanaian
assets and such concentration will increase.
The long-term concentration of the Group's production on its Ghanaian assets
may in turn make the Group more vulnerable in the future to any political,
economic, legal, regulatory and social uncertainties in Ghana, to which it
would otherwise have been proportionally less exposed had its production
included production arising from the Disposed Assets.
The Continuing Group's business reputation and brand may be adversely affected
as a result of its operations being less diversified and the sale of the
entirety of its Gabonese assets. The Group's reputation is important to its
business for reasons including, but not limited to, finding commercial
partners for business ventures, securing licences or permits with governments,
procuring offtake contracts, attracting contractors and employees and
negotiating favourable terms with suppliers. As a less diversified business,
governments and business partners, particularly in Africa, may consider that
the Continuing Group has a reduced network and fewer commercial connections
and as such is less attractive, both as an investor and partner.
(b) The reduction in size of the Continuing Group may make it more difficult to attract and retain key employees
The success of the Continuing Group depends on the efforts, abilities,
experience and expertise of its senior management teams, and on recruiting,
retaining, motivating and developing highly skilled and competent people at
all levels of the organisation. The reduction in size, geographical footprint
and diversification of the Continuing Group, may make it more difficult to
attract and retain talented employees which may have an adverse effect on the
Continuing Group's business, financial condition, results of operations and/or
prospects.
(c) The reduction in size of the Continuing Group may make it more difficult or more expensive to secure funding
The reduction in size and diversification of the Continuing Group may make
raising funding more difficult or more expensive as the Continuing Group will
not be able to use the Disposed Assets as collateral for future financing
initiatives. The Disposed Assets are currently part of the collateral of the
10.25% Senior Secured Notes and Completion may result in a reduction in the 2P
NPV Coverage Ratio as well as the SSRCF borrowing capacity. This may result in
a reduction of financing sources available to the Group, or a deterioration of
the terms of financing sources, which may in turn result in a significant
increase in the Group's financing costs.
(d) If the Continuing Group is unable to replace the commercial reserves that it produces, its reserves and revenues will decline
While well supervision and effective maintenance operations can contribute to
sustaining production rates over time, the future success of the Continuing
Group depends on its ability to allocate capital to the Group's producing
assets in order to develop the discovered resource. The Group will also
undertake additional exploration and appraisal and development activities in
order to replace reserves which are depleted by production and/or consider the
acquisition of additional commercial reserves that are economically
recoverable.
Completion will result in the reduction of the Group's reserves and contingent
resources. As of 31 December 2024, the estimated 2P reserves of the Disposed
Assets net to the Group were 36 mmboe, as described in the mineral expert's
report prepared by TRACS and the estimated 2C resources of the Disposed Assets
net to the Group were 31 mmboe, as described in the 2024 Non-Operated Assets
Reserves and Resources Audit. Completion of the Transaction will reduce the
Group's 2P reserves and 2C resources accordingly.
Whilst the Continuing Group may seek to develop or acquire additional assets
containing commercial reserves, it may not be able to find, develop or acquire
suitable additional reserves on commercially acceptable terms or at all, which
could result in depletion of the Group's reserves which in turn could
materially and adversely affect the business, financial condition, results of
operations and/or prospects of the Continuing Group. This may negatively
impact the Group's future production, which in turn may negatively affect the
Group's free cash flow.
In addition, with a lower reserve base, the Group may not be able to attract
funding to the level required to support its capital investment programme,
which may reduce or delay some of the Group's capital expenditure plans and
may further adversely impact the Group's future production and the Group's
reserves, as well as the Group's future prospects with respect to its
development projects and its new ventures activities.
(e) The market price of Tullow's shares may go down as well as up
Shareholders should be aware that the value of an investment in Tullow may go
down as well as up and can be highly volatile. The price at which Tullow's
shares may be quoted and the price which investors may realise for their
shares in Tullow will be influenced by a large number of factors, some
specific to the Continuing Group and its operations and some which may affect
the industry as a whole.
The sentiments of the stock market regarding the Transaction, in particular
whether the stock market considers whether the Group has secured a fair value
for the Disposed Assets, will be one such factor and this, together with other
factors, including the likelihood of Completion occurring, actual or
anticipated fluctuations in the financial performance of the Continuing Group
and its competitors, market fluctuations and legislative or regulatory changes
in the industry or generally those affecting consumers, could lead to the
market price of Tullow's shares going up or down. Such sentiments may vary
between the date of this announcement and Completion depending on how certain
pre-completion events progress, such as obtaining relevant governmental
consents.
3. Risks related to the Transaction not proceeding
If the Transaction does not proceed, the following risks and uncertainties may
affect the Group's business, financial condition, results of operations and/or
prospects:
(a) Tullow may face risks associated with its funding position if Completion is delayed or the Transaction does not complete
If the Transaction is not completed, or the SPA is terminated, the Group will
not receive any of the consideration payable in respect of it. As noted in
Tullow's 2024 Full Year Results, this could potentially reduce the Group's
ability to implement a holistic refinancing by the end of June 2025 or by May
2026 at the latest, and impact the Group's ability to obtain sufficient
liquidity to cover the expiration of the revolving credit facility at the end
of June 2025, if a holistic refinancing is not implemented by that date, by
extending the maturity of the facility or with alternative bridge financing.
In addition, if Completion is delayed or the Transaction does not complete,
whilst the Group would continue to benefit from the operating cash flow
generated by the Disposed Assets, the Group would be required to meet its
funding requirements in relation to the Disposed Assets when it would not
otherwise have expected to have to do so had Completion occurred. This would
impact the Group's free cash flow for the current year. In addition, in such
circumstances, the Board may decide (in order to reallocate free cash flow in
the near-term) to reduce or delay some of the Group's current capital
expenditure plans, which may adversely impact the Group's future production
and the Group's reserves.
(b) Loss of shareholder value
The Board believes that the Transaction is in the best interests of
Shareholders and that the Transaction provides the best opportunity to realise
an attractive and certain value for the Disposed Assets. If the Transaction
does not complete, as well as potentially having an adverse impact on the
Group's reputation and business relationships, the value realised by the Group
for the Disposed Assets may be lower than can be realised by way of the
Transaction.
(c) No assurance of future sale
If the Transaction does not complete, there can be no assurance that the Group
would be able to sell the Disposed Assets at a later date, in favourable or
equivalent market circumstances, or to sell the Disposed Assets at all. If the
Group is unable to identify another suitable purchaser for the Disposed
Assets, this could lead to a loss of confidence amongst relevant stakeholders
and a reduction in value of the Disposed Assets. In addition, even if the
Group were able to identify another suitable purchaser for the Disposed
Assets, the relevant governmental consents would need to be obtained. There is
no assurance that such approvals, consents or agreements would be forthcoming
under any such alternative transaction.
(d) There may be an adverse impact on the Group's reputation and business relationships if the Transaction does not complete
If the Transaction does not complete, there may be an adverse impact on the
reputation of the Group due to amplified media and market scrutiny arising in
connection with a failed Transaction. In particular, failure to complete the
Transaction may result in a loss of trust and confidence on the part of
shareholders, debt holders and other stakeholders in the ability of the Board
and Tullow's management to deliver on its publicly stated strategy of raising
material proceeds from non-core asset disposals. Any such reputational risk
could adversely affect the Group's business, financial condition, results of
operations and/or prospects.
In addition, failure to complete the Transaction may have an adverse impact on
Tullow's relationships with its stakeholders in the Disposed Assets because
its attractiveness as a counterparty may be reduced. This may negatively
impact the Group's ability to monetise the Disposed Assets in the future as
well as the Group's dealings with the same commercial partners and
stakeholders going forward.
PART B - Material contracts
1. The Continuing Group
The following is a summary of each material contract (other than contracts
entered into in the ordinary course of business) to which Tullow or any member
of the Group is a party, for the two years immediately preceding the
publication of this announcement, and each other contract (not being a
contract entered into in the ordinary course of business) entered into by
Tullow or any member of the Group which contains any provisions under which
Tullow or any member of the Group has an obligation or entitlement which is
material to Tullow as at the date of this announcement, in relation to the
Continuing Group:
(a) Gabon Sale and Purchase Agreement
Details of the SPA are set out in Appendix I of this announcement.
(b) Kenya Heads of Terms
On April 15, 2025, Tullow Overseas Holdings BV signed a heads of terms
agreement with Gulf Energy Ltd to sell Tullow Kenya BV which holds Tullow's
entire working interest in Kenya for a total consideration of at least US$120
million (the "Kenya Disposal") with a full form share and purchase agreement
to follow.
The consideration will be split into a US$40 million payment due on completion
of the Kenya Disposal, US$40 million payable at the earlier of the Field
Development Plan approval on June 30, 2026, and US$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. Tullow also
retains a 30% participation in potential future development phases at no cost.
(c) Guyana SPA
On 9 August 2023, Tullow Overseas Holdings B.V. entered into a sale and
purchase agreement with Eco Guyana Oil and Gas Barbados Limited ("Eco") (the
"Guyana SPA") which completed in November 2023.
Under the Guyana SPA, Tullow Overseas Holdings B.V. sold its entire interest
in Tullow Guyana B.V., which included a 60% working interest in the operated
Orinduik license in Guyana, to Eco for upfront cash and contingent
consideration (the "Guyana Disposal"). In connection with the Guyana Disposal,
Eco agreed to pay an initial consideration of US$700,000 and a contingent
consideration of (i) US$4 million in the event of a commercial discovery, (ii)
US$10 million upon the issuance of a production license from the government of
Guyana and (iii) royalty payments on future production amounting to 1.75% of
the 60% working interest entitlement revenue net of capital expenditure and
lifting costs.
The Guyana SPA includes customary financial thresholds and de minimis
limitations on Eco's ability to bring claims under the warranties given by
Tullow Overseas Holdings B.V. As the completion of the Guyana Disposal
occurred in November 2023, the time limit for claims under the Guyana SPA has
expired, except for claims under the tax warranties or a UK tax indemnity
provided by Tullow Overseas Holdings B.V.
(d) Perenco Asset Swap
On 27 April 2023, TOGSA signed an Asset Swap Agreement ("ASA") with Perenco
Oil and Gas Gabon S.A. ("Perenco"), which completed on 29 February 2024.
Under the ASA, TOGSA assigned and transferred, through a cashless asset swap,
certain existing participating interests in Limande, Turnix, M'oba, Oba and
Simba assets to Perenco in return for the assignment and transfer by Perenco
of certain existing participating interests in Kowe (Tchatamba) and the DE8
license.
The ASA includes customary warranties and indemnities given by TOGSA. As the
completion of the ASA occurred in February 2024, the time limit for the
majority of potential claims under the ASA has expired. However, Perenco
remains able to raise (i) claims related to tax; and (ii) indemnity claims in
respect of environmental and decommissioning liabilities for the period prior
to the economic date of the ASA.
(e) Novation of Dussafu Sale and Purchase Agreement
On 9 February 2021, TOGSA, Tullow (as guarantor), Pan Petroleum Gabon B.V. and
Panoro Energy ASA entered into the Dussafu sale and purchase agreement
("Dussafu SPA") which completed on 9 June 2021.
Under the Dussafu SPA, TOGSA agreed to transfer its (i) entire 10% undivided
legal and beneficial interest in the Dussafu Marin Permit Exploration and
Production Sharing contract (Dussafu PSC) in Gabon and (ii) its interest in
and under certain other documents related to the Dussafu PSC (the "Dussafu
Assets") to Pan Petroleum Gabon B.V. for cash consideration of US$46 million
payable at completion of the Dussafu transaction, subject to customary working
capital and other adjustments at completion. Furthermore, additional
contingent payments of up to US$24 million in aggregate are payable under the
Dussafu SPA over a five-year period once production from the Hibiscus and
Ruche discoveries meets an agreed daily average and where oil prices for the
relevant year are greater than US$55/bbl (the "Dussafu Contingent
Consideration").
The Dussafu SPA includes customary warranties and indemnities given by TOGSA.
As the completion of the Dussafu SPA occurred in June 2021, the time limit for
warranty claims by the purchaser under the Dussafu SPA has expired. However,
the purchaser remains able to raise indemnity claims in respect of
environmental and decommissioning liabilities for the period prior to the
economic date of the Dussafu SPA.
On 25 April 2025, the parties to the Dussafu SPA entered into a deed of
novation under which TOGSA transferred and Tullow agreed to accept and assume
all of the rights (including the right to receive the Dussafu Contingent
Consideration) and obligations of TOGSA under the Dussafu SPA.
(f) Notes Facility Agreement
On 11 November 2023, Tullow and certain of its subsidiaries, including TOGSA,
entered into a senior secured notes issuance facility described below (the
"Notes Facility Agreement"), with, among others, Glencore Energy UK Ltd as
mandated lead arranger, Law Debenture Corporate Services Limited as agent,
Glas Trust Corporation Limited as security trustee, Law Debenture (Ireland)
Limited as registrar and Glencore Energy UK Ltd as original noteholder
("Glencore"). The interest on the facility is Term Secured Overnight Financing
Rate (SOFR) plus 10% on drawn amounts. The final maturity date of the Notes
Facility Agreement is 11 November 2028.
The Notes Facility Agreement was entered into for liability management of
Tullow's senior notes that were to mature in March 2025, and which have since
been repaid in full. The Notes Facility Agreement has been utilised in full in
connection with that repayment.
The Notes Facility Agreement is guaranteed by TOGSA and certain other of
Tullow's subsidiaries. It is subordinated to the guarantees of Tullow's senior
secured notes maturing in May 2026 ("2026 Notes"). In addition, the Notes
Facility Agreement was secured by the same collateral as the 2026 Notes but
ranks contractually behind the 2026 Notes with respect to the right to receive
proceeds from any enforcement of collateral.
The Notes Facility Agreement contains customary representations, information
undertakings, general undertakings and events of default, in each case subject
to certain exceptions and materiality qualifications. It also includes
customary default interest provisions on overdue amounts and is redeemed in
full immediately upon the occurrence of certain events, including a change of
control of Tullow.
(g) Glencore Sale and Purchase Agreements
On 11 November 2023, in connection with the entry into the Notes Facility
Agreement, Tullow Ghana Limited ("Tullow Ghana") entered into oil marketing
and offtake contracts with Glencore for the crude oil produced and extracted
from the Jubilee and TEN fields in Ghana and TOGSA entered into an oil
marketing and offtake contract for the Rabi Light crude oil produced and
extracted in Gabon (the "TOGSA Glencore Sale and Purchase Agreement" and
together with the Tullow Ghana offtake contracts described above, the
"Glencore Sale and Purchase Agreements") and certain ancillary arrangements,
all of which run concurrently with the Notes Issuance Facility (together, the
"Glencore Sale and Purchase Agreements").
Pursuant to those Glencore Sale and Purchase Agreements, TOGSA and Tullow
Ghana (as applicable) agreed to sell and Glencore as buyer agreed to buy 100%
(subject to the applicable royalties and other mandatory deductions) of
quantities of (i) Rabi Light crude oil produced and extracted from various
assets of TOGSA in Gabon, (ii) crude oil produced and extracted from Tullow
Ghana's entitlements in the TEN Fields, offshore Ghana and (iii) crude oil
produced and extracted from Tullow Ghana's entitlements in the Jubilee Field,
offshore Ghana. Glencore also undertakes under those Glencore Sale and
Purchase Agreements to perform certain marketing activities in relation to the
oil delivered thereunder.
The Glencore Sale and Purchase Agreements expire in 2028 subject to certain
early termination events such as the Notes Facility Agreement terminating or
being repaid in full.
The Glencore Sale and Purchase Agreements contain customary representations,
warranties, undertakings and trade restrictions, in each case subject to
certain exceptions and materiality qualifications. The Glencore Sale and
Purchase Agreements also set out various customary events of default and
material breach provisions.
In connection with the sale of TOGSA, the TOGSA Glencore Sale and Purchase
Agreement in respect of Rabi Light, Gabon will need to be terminated, and as a
result, compensation provided to Glencore.
(h) Super Senior Revolving Facility Agreement
On 6 May 2021, Tullow, TOGSA and certain of its subsidiaries entered into a
super senior revolving facilities agreement, as amended and restated pursuant
to an amendment and restatement deed on 14 May 2021 and as further amended on
12 August 2021, 30 March 2023 and 21 November 2024 by way of amendment letters
and as further amended and/or restated from time to time, between, among
others, ABSA Bank Limited, Barclays Bank PLC, J.P. Morgan Securities PLC, ING
Belgium SA/NV, Nedbank Limited, London Branch, Standard Chartered Bank and The
Standard Bank of South Africa Limited, Isle of Man Branch as mandated lead
arrangers, J.P. Morgan Securities PLC as global coordinator and bookrunner,
J.P. Morgan SE as agent and GLAS Trust Corporation Limited as security agent
(the "SSRCF Agreement").
TOGSA is a guarantor under the SSRCF Agreement.
The SSRCF Agreement provides for a senior revolving credit facility in an
amount of US$250 million (the "SSRCF") for general corporate and working
capital purposes of the Group (but not to redeem, defease, repurchase or repay
any amount of the 2026 Notes (as defined further) (other than a scheduled
amortisation) or any other principal indebtedness which may be borrowed or
issued by the Group in the future).
The SSRCF is secured by the same security package as that provided in respect
of the Notes Issuance Facility and 2026 Notes, that is, English law account
charges (including a charge over accounts held by TOGSA), an English law fixed
and floating charges debenture, an English law assignment of intragroup loan
receivables, a Gabonese law share pledge over the shares in TOGSA, Isle of Man
law security agreements in respect of shares, Dutch law deeds of pledge of
shares, a Jersey law security interest agreement in respect of shares and a
French law account pledge.
On account of the Transaction and TOGSA being a guarantor under the SSRCF
Agreement, certain steps will need to be taken pursuant to the terms of the
SSRCF Agreement and Intercreditor Agreement (as defined further), including
the release of certain security granted in favour of the lenders under the
SSRCF Agreement.
Repayment and maturity
The final maturity date of the SSRCF Agreement is 30 June 2025.
Tullow can voluntarily cancel the whole or any part (being a minimum amount of
US$10 million) of the available commitments under the SSRCF upon no less than
five business days' notice (or such shorter period as the majority lenders may
agree) to the facility agent.
Interest and fees
The rate of interest payable on loans under the SSRCF is the rate per annum
equal to the aggregate of the applicable margin (being 4.5 per cent. per
annum) plus either term reference rate or the applicable compounded reference
rate for that day. Default interest is also payable, at a rate of 2 per cent.
per annum higher than the standard rate of interest payable on loans under the
SSRCF, on overdue amounts.
Tullow is required to pay a commitment fee under the SSRCF, quarterly in
arrears, based on:
· the daily amount (if any) by which the aggregate commitments
under the SSRCF (the "Global Commitments") exceed the amount which is the
lower of: (i) the sum of the applicable borrowing base amount applicable on
that day; and (ii) the Global Commitments applicable on that day (such lower
amount being the "Maximum Available Amount"), at a percentage rate per annum
calculated by multiplying the then applicable margin by a set rate; and
· the daily amount (if any) by which the applicable Maximum
Available Amount exceeds the sum of the outstanding loans under the SSRCF in
the base currency, at a percentage rate per annum calculated by multiplying
the then applicable margin by a set rate.
Representations, covenants and events of default
The SSRCF Agreement contains customary representations, information
undertakings, general undertakings and events of default, in each case subject
to certain exceptions and materiality qualifications.
Among other things, the general undertakings contain restrictions on Tullow
and its restricted subsidiaries (which includes TOGSA) in relation to
disposals, acquisitions, change of business, incurrence of financial
indebtedness and the provision of security.
Prepayment
The SSRCF Facility is to be prepaid in full immediately upon the occurrence of
certain events, including a change of control of Tullow.
(i) 2026 Senior Secured Notes
On 17 May 2021, Tullow issued US$1,800 million in aggregate principal amount
of 10.25 per cent. Senior Secured Notes (the "2026 Notes") pursuant to an
indenture (the "2026 SSN Indenture"). The 2026 Notes mature on 15 May 2026.
The 2026 Notes are guaranteed on a senior secured basis by certain
subsidiaries of Tullow, including TOGSA, and a collateral package. The 2026
SSN Indenture provides that the guarantee of TOGSA shall be automatically and
unconditionally released and discharged upon Completion.
As of 15 May 2025, Tullow may redeem all or part of the 2026 Notes at a
redemption price equal to 100 per cent. of the principal amount thereof, plus
accrued and unpaid interest, if any. The 2026 SSN Indenture limits, among
other things, the ability of Tullow and its restricted subsidiaries to make
certain payments, including dividends and other distributions, with respect to
outstanding share capital, sell, lease or transfer certain assets, including
shares of any of Tullow's restricted subsidiaries, to make certain investments
or loans and to incur additional financial indebtedness. These limitations
are, however, subject to a number of important qualifications and exceptions.
The 2026 SSN Indenture also contains customary events of default.
The 2026 Notes and the 2026 SSN Indenture are governed by New York law.
(j) Guarantee Subordination Agreement
Tullow entered into a guarantee subordination agreement on 6 November 2013, as
amended and restated on 12 July 2016, to which certain creditors and/or
trustees have acceded from time to time including the trustees under the 2026
SSN Indenture and the Notes Facility Agreement (the "Guarantee Subordination
Agreement").
The Guarantee Subordination Agreement governs the relationship and relative
priorities among: (i) the creditors of the SSRCF (the "SSRCF Creditors"); (ii)
certain banks and institutions that act as counterparties to hedging
agreements (the "Hedging Banks"); (iii) the trustee for the 2026 SSN
Indenture, on its own behalf and on behalf of the noteholders (the "Notes
Trustee" and together with the SSRCF Creditors and Hedging Banks, the "Senior
Creditors") and (iv) the trustee for the Notes Facility Agreement, on its own
behalf and on behalf of the noteholders (the "Notes Creditors").
The Guarantee Subordination Agreement provides that the liabilities owed by
the debtors to the Senior Creditors under the senior finance documents (the
"Senior Liabilities") and the liabilities owed by the note guarantors to the
Notes Creditors under the notes documents (the "Notes Guarantee Liabilities")
will rank in right and priority of payment: (i) first, the Senior Liabilities
pari passu and without any preference between them; and (ii) second, the Notes
Guarantee Liabilities. The parties to the Guarantee Subordination Agreement
agree that the liabilities owed by Tullow (or certain of Tullow's direct and
indirect subsidiaries which may in the future issue notes and on-lend the
proceeds of such issuance to Tullow) to the Notes Creditors under the notes
documents, certain amounts owed to the trustee under the notes documents and
certain notes security enforcement and preservation costs (if any) are senior
obligations (and are therefore not Notes Guarantee Liabilities) and the
Guarantee Subordination Agreement does not purport to rank, postpone and/or
subordinate any of such liabilities in relation to the other liabilities.
The Guarantee Subordination Agreement does not purport to rank any of the
Senior Liabilities as between themselves or any of the Notes Guarantee
Liabilities as between themselves. In addition, the Guarantee Subordination
Agreement does not purport to rank any of the liabilities of Tullow (or
certain of Tullow's direct and indirect subsidiaries which may in the future
issue notes and on-lend the proceeds of such issuance to Tullow).
(k) Intercreditor Agreement
On 6 May 2021, Tullow and certain of its subsidiaries entered into an
intercreditor agreement with, among others, and GLAS Trust Corporation Limited
as security agent, as amended and restated pursuant to an amendment and
restatement agreement dated 11 November 2023, and as further amended and/or
restated from time to time (the "Intercreditor Agreement").
The Intercreditor Agreement provides (among other things) that liabilities
owed by the obligors to: (i) the lenders under the SSRCF Agreement; (ii) each
noteholder under the Notes Facility Agreement, (iii) certain banks and
institutions that act as counterparties to certain secured hedging agreements;
and (iv) the senior secured noteholders and senior secured notes trustees
under the 2026 Senior Secured Notes Indenture shall rank pari passu and
without preference as between these liabilities. There is an application of
proceeds waterfall governing the order of priority of application of all
amounts received or recovered by the security agent in connection with the
realisation or enforcement of security.
(l) Hedging arrangements
The Group maintains certain commodity hedges to manage its exposure to
movements in oil prices. Such commodity derivatives tend to be priced using
benchmarks, such as Platts Dated Brent crude oil, which correlate as closely
as possible to the Group's underlying oil revenues. The Group hedges a portion
of its estimated oil revenues on a portfolio basis (rather than on a single
asset basis), aggregating its oil revenues from substantially all of its
African oil interests. The Group only uses hedging counterparties with strong
credit ratings. Tullow uses financial instruments such as put options, collars
and three ways (put plus call spread trades) normally conducted rateably over
time to hedge Tullow's exposure to these risks and may continue to do so in
the future. As of the date of this announcement, Tullow has hedged
approximately 60% of its production entitlement for 2025 with a weighted
average price of c.US$60/bbl. Tullow has a commodity hedging policy in place
to ensure 60% downside protection for the calendar year ahead, while
maintaining full upside exposure for no less than 60% of Tullow's forecast
production entitlement. Tullow's commodity hedging policy further includes a
target to deliver downside protection for 30% of production entitlement es,
subject to credit line availability and market conditions. Currently, there
are no commodity hedges in place beyond 2025.
(m) Capital lease agreement-floating production storage and offloading unit
On August 14, 2013, Tullow Ghana entered into an engineering, procurement,
installation, commissioning and bareboat charter agreement (the "TEN FPSO
Contract") with T.E.N. Ghana MV25 B.V. (the "TEN FPSO Contractor"), a
subsidiary of MODEC Inc., in respect of an FPSO for use at the TEN fields (the
"TEN FPSO"). Tullow Ghana, as operator of the TEN fields, entered into the
agreement on behalf of itself and its joint venture partners.
The TEN FPSO Contractor agreed to design, procure, construct, install and
commission the TEN FPSO. Tullow Ghana will charter and lease the TEN FPSO from
the TEN FPSO Contractor for an initial term of ten years commencing on the
date on which the TEN FPSO's offshore completion certificate is issued. Upon
the expiration of the initial term, Tullow Ghana has the option to extend the
charter period for ten additional and consecutive one-year extension periods,
provided it gives six months' written notice to the TEN FPSO Contractor prior
to the expiration of the initial term or any extension thereto (as the case
may be). Tullow Ghana is responsible for paying the hire cost during the
charter period (which costs include a mobilization fee, compensation for
demobilization and a specified daily rate).
Tullow Ghana may terminate the TEN FPSO Contract on not less than 30 days'
written notice to the TEN FPSO Contractor, provided Tullow Ghana pays the TEN
FPSO Contractor hire costs up to the date of termination and, if applicable,
interest rate hedging unwinding costs. If the termination occurs during the
initial ten-year charter period, Tullow Ghana will also be required to pay
demobilization costs and an early termination fee which will be equal to the
value of the remaining initial hire period (less 5% Ghanaian withholding tax)
discounted using a discount rate of 6.5% per annum on a 360 days per year
basis grossed up by 25% in relation to Ghanaian corporate income tax. An early
termination payment is also due by Tullow Ghana in the event that there is an
unauthorized requisitioning or taking of the TEN FPSO or Tullow Ghana
terminates the agreement for continuing force majeure. No early termination
fee is incurred in the event that termination occurs as a result of other
conditions, including the actual or constructive total loss of the TEN FPSO or
breach of the TEN FPSO Contractor's material obligations under the TEN FPSO
Contract. The TEN FPSO Contractor is also entitled to terminate the contract
during the charter period under certain circumstances, including a breach of
Tullow Ghana's obligations to pay undisputed amounts under the TEN FPSO
Contract when they fall due.
Tullow Ghana has the option to purchase the TEN FPSO at any time during the
charter period, provided that 180 days' written notice is given to the TEN
FPSO Contractor. In addition, if the TEN FPSO Contractor wishes to sell the
TEN FPSO to a non-affiliated third party during the charter period, Tullow
Ghana has a right of first refusal to purchase the TEN FPSO at the same price
and on substantially the same terms as those offered by such third party, and
has 60 days within which to exercise such right. Upon any purchase of the TEN
FPSO, the TEN FPSO Contract will terminate automatically.
As of December 31, 2024, the present value of the TEN FPSO gross lease
liability was US$650 million, compared to US$763.5 million in 2023. A
receivable from the joint venture partners of US$244.9 million, compared with
US$288.8 million in 2023, was recognized in other assets to reflect the value
of future payments that will be met by cash calls from partners relating to
the TEN FPSO lease.
In addition, on August 14, 2013, Tullow Ghana entered into an operation and
maintenance services contract (the "TEN O&M Contract") with the TEN FPSO
Contractor pursuant to which the TEN FPSO Contractor will provide certain
operation and maintenance services in connection with the TEN FPSO during the
initial ten-year charter period (the "O&M Period"), such charter period
commenced on 26 March 2017. Upon the expiration of the O&M Period,
Tullow Ghana has the option to extend the TEN O&M Contract for ten
additional and consecutive one year extension periods. Provided that Tullow
Ghana has terminated the charter of the TEN FPSO, Tullow Ghana may terminate
the TEN O&M Contract for convenience on giving at least 30 days' notice.
In such event, Tullow Ghana must pay the TEN FPSO Contractor for the services
provided to the date of termination and any other amounts owing under the TEN
O&M Contract, together with any other cancellation costs incurred by the
TEN FPSO Contractor as a result of such termination (including in relation to
the demobilization of personnel and equipment). In addition, the parties to
the TEN O&M Contract have termination rights typical for a contract of
this nature, including as a result of the occurrence of insolvency events or a
material breach by the other party of the terms of the TEN O&M Contract.
If the TEN FPSO Contract is terminated, the TEN O&M Contract terminates
automatically.
2. Disposed Assets
The following is a summary of each material contract (other than contracts
entered into in the ordinary course of business) to which Tullow or any member
of the Group is a party, for the two years immediately preceding the
publication of this announcement, and each other contract (not being a
contract entered into in the ordinary course of business) entered into by
Tullow or any member of the Group which contains any provisions under which
Tullow or any member of the Group has an obligation or entitlement which is
material to Tullow as at the date of this announcement, in relation to the
Disposed Assets:
(a) Gabon Sale and Purchase Agreement
Details of the SPA are set out in Appendix III (Part B) of this announcement.
(b) Perenco Asset Swap
Details of the ASA are set out in Appendix III (Part B) of this announcement.
(c) Notes Facility Agreement
Details of the novation of the Notes Facility Agreement are set out in
Appendix III (Part B) of this announcement.
(d) TOGSA Glencore Sale and Purchase Agreement
Details of the novation of the TOGSA Glencore Sale and Purchase Agreement is
set out in Appendix III (Part B) of this announcement.
(e) Super Senior Revolving Facility Agreement
Details of the novation of the Super Senior Revolving Facility Agreement are
set out in Appendix III (Part B) of this announcement.
PART C - Legal and arbitration proceedings
1. Continuing Group
Tullow becomes involved from time to time in various claims and lawsuits
arising in the ordinary course of Tullow's business. In addition, Tullow may
be affected by the various claims and lawsuits of other parties. Other than as
discussed below, Tullow is not, nor has Tullow been during the past twelve
months, involved in any governmental, legal or arbitration proceedings which,
either individually or in the aggregate, have had, or are expected to have, a
significant effect on Tullow's financial position or profitability, nor, so
far as Tullow is aware, are any such proceedings pending or threatened.
(a) High Court dispute with Vallourec
On behalf of the Group and Tullow's Jubilee field joint venture partners,
Tullow Ghana is claiming from Vallourec Oil and Gas France ("Vallourec")
losses of approximately £256 million, arising from the supply by Vallourec of
defective tubular goods, which Tullow believes constitutes a breach of
contract from which Tullow Ghana and the Jubilee field joint venture partners
have suffered loss.
In June 2015 (as amended in August 2015 and October 2015), Tullow Ghana and
Vallourec entered into standstill agreements which provide that neither party
will proceed with a claim unless a party gives the other 28 days' notice to
terminate the applicable standstill agreement, which was terminated on April
21, 2023. Tullow Ghana filed the Particulars of Claim and the Claim Form with
the Commercial Court on May 22, 2023. The case is funded by a third-party
litigation funder.
Vallourec's Defense was served on November 17, 2023, and Tullow Ghana issued
its Reply to the Defense on December 22, 2023. Tullow Ghana took part in two
rounds of mediation on November 28, 2023 and March 4, 2025 to seek an early
resolution as part of the pre-action protocols, in parallel with the
commencement of proceedings to preserve limitations and the formalities of
service being complied with. No settlement was reached at the mediation, but
the parties will continue to keep the mediation route open for a potential
settlement.
On April 26, 2024, a Case Management Conference took place where the judge
decided that there should be a Preliminary Issues Trial on seven issues due to
be held between May 20-22, 2025.
(b) Additional Oil Entitlement
In February 2018, Tullow Ghana received an assessment from the Ghana Revenue
Authority (the "GRA") for additional oil entitlement ("AOE") totalling US$64
million plus penalties, which the GRA originally withdrew and later
re-submitted in June 2018. Tullow Ghana considers that the assessment
represents a misapplication of the net cash flow formula in the petroleum
agreements, and that on a proper application of the formula it should not be
subject to any assessment for AOE. Tullow Ghana issued an objection notice to
the GRA in August 2018. In October 2018, the GRA wrote to Tullow Ghana
maintaining the assessment for US$64 million but without reference to the
penalties. In November 2018, the Ministry of Finance of Ghana requested all
parties to suspend all actions to enforce the AOE assessment until they
determined the Government's position, which is still awaited. Subsequently,
the MoF has advised the formation of a Working Group to resolve the positions.
(c) BPRT
In September 2021, the GRA assessed Tullow Ghana and issued a branch profit
remittance tax ("BPRT") liability of US$320.3 million as part of the direct
tax audit of financial years 2014 to 2016, superseding an original US$331
million BPRT assessment issued in December 2019. Prior to the December 2019
assessment, the GRA had never suggested that Tullow Ghana was, or could be,
liable for BPRT. In October 2021, Tullow Ghana filed a Request for Arbitration
with the ICC disputing the BPRT assessment. On January 2, 2025 the ICC
delivered the Tribunal's award with regard to the application of BPRT to its
operations under the Deepwater Tano and West Cape Three Points Petroleum
Agreements, offshore Ghana, which include the Jubilee and TEN fields. The
Tribunal determined that BPRT is not applicable to Tullow Ghana since it falls
outside of the tax regime provided for in the Petroleum Agreements. As a
result of the Tribunal's award, Tullow Ghana has no liability with respect to
the US$320 million BPRT assessment issued by the GRA and will have no future
exposure to BPRT in respect of its operations under the Petroleum Agreements.
(d) Loan interest
In December 2022, Tullow Ghana received a US$190.5 million corporate income
tax assessment and payment demand from the GRA relating to the disallowance of
loan interest for the financial years 2010 to 2020. The GRA took a position to
disallow all interest charged on intercompany loans granted by Tullow from
inception to date in its revised assessments of December 2019 raising an
income tax assessment of US$190,552,387 and related penalty of same amount.
Tullow Ghana's view is that the disallowance of the intercompany loan interest
resulting in the loan interest assessment was not conducted in accordance with
the provisions of the petroleum agreements and Petroleum Income Tax Law
("PITL") and is therefore a breach of the petroleum agreements, which
stipulate that Tullow Ghana must be taxed in accordance with the PITL.
Tullow Ghana filed a Request for Arbitration on February 13, 2023. On June 14,
2023, the ICC confirmed the appointment of arbitrators and agreed the
procedural documents and timetable. The hearing of the case is scheduled for
30 June - 4 July 2025.
(e) Insurance
In December 2022, Tullow Ghana received a US$196.5 million corporate income
tax assessment and an associated penalty of an additional US$196.6million in a
payment demand from the GRA relating to proceeds received by Tullow during the
financial years 2016 to 2019 under Tullow's corporate Business Interruption
Insurance policy. This income was disclosed in the relevant tax returns of
Tullow and Tullow considers the assessment to breach Tullow Ghana's rights
under its petroleum agreements.
Tullow Ghana filed a Request for Arbitration on February 13, 2023. The
substantive hearing will take place in November 2025.
(f) Bangladesh Tax Dispute
Tullow Oil International Limited ("TOIL") has conduct of a dispute between
Tullow Bangladesh Limited ("TBL") and the National Board of Revenue ("NBR") of
Bangladesh relating to certain taxes payable in Bangladesh relating to the
assets of TBL in Block 9, Bangladesh. The dispute arose in respect of the
disallowance of tax relief for US$118.6 million of development costs. TBL was
successful at the High Court of Bangladesh in 2013. The NBR then appealed to
the Supreme Court of Bangladesh and in March 2017 the Supreme Court handed
down its decision granting NBR's appeal and subsequently provided its written
judgment in March 2018. The judgment found in favour of the NBR but was not
conclusive as to the position or liability of TBL. In April 2018, TBL filed a
civil review petition seeking a review of the Supreme Court's decision. In
November 2019, the civil review hearing was held by the Supreme Court and TBL
was unsuccessful. The NBR subsequently issued a payment demand to TBL in
February 2020 for Taka 3,094 million (C. US$25 million) requesting payment by
March 15, 2020 (the "Payment Demand").
Under the Production Sharing Contract for Block 9, the Government of the
People's Republic of Bangladesh (the "Bangladesh Government") has given an
indemnity to TBL for all taxes levied by any public authority, and the share
of production paid to Petrobangla, Bangladesh's national oil company ("PB"),
is deemed to include all taxes due which PB is then to pay to the NBR. TBL
sent the Payment Demand to PB and Bangladesh Government requesting the payment
or discharge of the Payment Demand under their respective PSC indemnities. On
June 14, 2021, TBL issued a formal notice of dispute to the Bangladesh
Government and PB. A further request for payment was received from NBR on
October 28, 2021, demanding settlement by November 15, 2021. Arbitration
proceedings were initiated on December 29, 2021, and the tribunal hearing took
place between May 20-24, 2024 with a decision expected in 2025.
(g) TechnipFMC Ghana Limited
Technip Ghana Limited ("TFMC") is claiming sums from Tullow Ghana in respect
of the Jubilee South East Contract in the amount of US$64.2 million (plus
interest and legal costs). TFMC is claiming that the contract is largely
reimbursable and that Tullow Ghana has failed to pay all reimbursable sums due
thereunder. TFMC also alleges that Tullow Ghana has withheld certain sums it
is not entitled to withhold. Tullow Ghana argues that there are certain sums
that TFMC has claimed which it is not entitled to be paid under the contract,
and Tullow Ghana has made permitted deductions.
The Jubilee South East Contract is governed by English law and the dispute has
been referred to arbitration under the rules of the London Court of
International Arbitration. The hearing is scheduled for December 2025.
Settlement of the dispute is a possibility.
(h) Joyce Enukan & Others (Kenya)
A petition has been filed by a section of the local community of Turkana
County, Kenya alleging that Tullow's operations have adversely affected the
environment including pollution of soil and ground water; contribution to
climate change; and contamination of water leading to death of livestock. The
main relief sought by the petitioners is in the form of an environmental bond
rather than direct compensation; however, the petitioners have also asked for
unspecified general damages, which, if awarded, will be determined by the
court. Tullow, the Ministry of Energy & Petroleum of Kenya and the
Attorney General of Kenya have filed their responses to the petition, denying
all allegations made by the 73 Petitioners. Tullow's substantive and detailed
affidavits setting out the evidentiary issues in response to the petition were
all filed by 16 December 2024. The Ministry of Energy & Petroleum and the
Attorney General filed their responses to the petition, denying all
allegations made by the 73 petitioners on 19 March 2025. The matter came up
for further court directions on 25 March 2025 and the court directed that: (i)
referral of the file to the Chief Justice is suspended until all the parties
comply; (ii) Respondents who are yet to comply are granted 30 days to file and
serve responses and affidavits; (iii) upon service the petitioner is granted
21 days to file and serve any supplementary affidavits; (iv) parties are to
formulate issues that require the petition to be referred to the Chief Justice
for empanelment of a Bench; (v) parties are to address the Court through brief
submissions on the issues necessitating the referral; and (vi) parties are to
courier the physical documents directly to the Deputy Registrar Environment
and Land Court in Kitale. The Amici Curiae (the Kenya Legal & Ethical
Issues Network on HIV and the AIDS Initiative for Strategic Litigation in
Africa) indicated that they had filed the Amici Brief on 24 March 2025 and
requested that it be admitted to the Court Record. The parties will appear
before the Court on 10 June 2025 for purposes of confirming compliance and to
take further directions. The substantive hearing is likely to commence in Q3
2025.
2. Disposed Assets
There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which Tullow is aware)
during a period covering at least the previous 12 months preceding the date of
this announcement which may have, or have had in the recent past, a
significant effect on the Disposed Assets' financial position or
profitability.
PART D - Significant change
1. Continuing Group
Other than those matters disclosed in Tullow's 2024 Full Year Results and/or
otherwise disclosed in this announcement (including the Appendices), there has
been no significant change in the financial position of Tullow since 31
December 2024, the end of the most recent financial period for which
historical financial information of the Group has been published.
2. Disposed Assets
Other than those matters disclosed in Tullow's 2024 Full Year Results and/or
otherwise disclosed in this announcement (including the Appendices), there has
been no significant change in the financial position of the Disposed Assets
since 31 December 2024, the end of the most recent financial period for which
historical financial information of the Disposed Assets has been published.
PART E - Related party transactions
1. Continuing Group
Other than those matters disclosed previously in the published Annual Report
and Accounts of Tullow and/or otherwise disclosed in this announcement
(including its Appendices), there were no related party transactions entered
into by Tullow during the period since 31 December 2024.
APPENDIX IV
DEFINITIONS
The following definitions apply in this announcement unless the context
otherwise requires:
"Board" the board of directors of Tullow
"CEMAC" the Central African Economic and Monetary Community (in French "Communauté
Economique Et Monétaire De L'Afrique Centrale") founded by a treaty signed in
N'Djamena (Chad) on 16 March 1994 or any of its successor bodies
"CEMAC Merger Control Authority" together or individually, the Commission of the CEMAC and the Council of the
CEMAC (Conseil Communautaire de la Concurrence) or any of its successor bodies
"CEMAC Merger Control Condition" has the meaning given to it in Appendix I
"CEMAC Regulation" Regulation No. 06/19-UEAC-639-CM-33 dated 7 April 2019 on competition,
Regulation No. 000350 dated 25 September 2020 relating to the procedure for
the implementation of competition rules and Regulation No. 00087 dated 16
March 2022 amending and supplementing various provisions of Regulation No.
000350
"Companies Act" the Companies Act 2006, as amended from time to time
"Completion" the completion of the Transaction
"Completion Date" the date on which Completion of the Transaction occurs
"Continuing Group" the Group following Completion
"DE8 JOA" the joint operating agreement governing the DE8 Permit dated 8 December 2017,
as amended, novated and supplemented from time to time
"DE8 JOA Pre-Emption Condition" has the meaning given to it in Appendix I
"DE8 Permit" the DE8 n°G4-238 exclusive exploration authorisation dated 4 December 2014
and awarded to the Contracteur under the DE8 PSC
"DE8 PSC" the exploration and production sharing contract n°G4-238 dated 13 December
2011, as amended, novated and supplemented from time to time
"Directors" the directors of Tullow and "Director" means any one of them
"Disposed Assets" the undivided participating legal and beneficial interest of TOGSA in and
under the interest documents, representing:
(a) forty per cent. (40%) undivided participating legal and beneficial
interest in the Echira Permit and in and under the Echira JOA;
(b) seven point five per cent. (7.5%) undivided participating legal and
beneficial interest in the Etame PSC;
(c) seven point five per cent. (7.5%) undivided participating legal and
beneficial interest in the Ezanga PSC and in and under the Ezanga JOA;
(d) forty per cent. (40%) undivided participating legal and beneficial
interest in the DE8 PSC and in and under the DE8 JOA;
(e) forty per cent. (40%) undivided participating legal and beneficial
interest in the Niungo Permit and in and under the Niungo JOA;
(f) forty per cent. (40%) undivided participating legal and beneficial
interest in the Simba PSC and in and under the Simba JOA;
(g) forty per cent. (40%) undivided participating legal and beneficial
interest in the Kowe PSC and in and under the Kowe JOA,
together with all related liabilities and obligations arising under or in
respect of such Interest Documents and together with all rights and
obligations attaching thereto
"Dividend Payment Condition" has the meaning given to it in Appendix I
"Echira JOA" means the joint operating agreement governing the Echira Permit dated 25 July
1996, as amended, novated and supplemented from time to time
"Echira Permit" the ministerial decree dated 11 December 1990, as amended by a subsequent
decree dated 1 October 1992, granting an exploitation permit n°G5-43
"Etame PSC" the exploration and production sharing contract n°G4-160 dated 7 July 1995,
as amended, novated and supplemented from time to time
"Ezanga JOA" the joint operating agreement governing the Ezanga PSC dated 6 June 2019, as
amended, novated and supplemented from time to time
"Ezanga PSC" the exploration and production sharing contract n°G4-244 dated 10 January
2014, as amended, novated and supplemented from time to time
"Gabon" the Gabonese Republic
"Gabonese Ministry of Hydrocarbons" the Ministère du Pétrole, du Gaz, des Hydrocarbures et des Mines of Gabon
"Group" Tullow and its consolidated subsidiaries and subsidiary undertakings as at the
date of this announcement
"Gunvor Letter" has the meaning given to it in Appendix I
"Investment Framework Condition" has the meaning given to it in Appendix I
"Kowe JOA" the joint operating agreement governing the Kowe Permit dated 16 August 1993,
as amended, novated and supplemented from time to time
"Kowe Permit" the following exclusive exploitation authorisations, awarded to the
Contracteur under the Kowe PSC:
(a) Tchatamba Marin n°G5-70, dated 4 June 1998;
(b) Tchatamba Sud n°G5-83, dated 15 January 1999; and
(c) Tchatamba Ouest n°G5-84, dated 6 January 2000
"Kowe PSC" the exploration and production sharing contract n°G4-146 dated 17 December
1992, as amended, novated and supplemented from time to time
"Long Stop Date" means 5 p.m. on the date that is six months following the date of the SPA or
such later date as the Seller and Purchaser may mutually agree in writing
"Ministry of Hydrocarbons Approval Condition" has the meaning given to it in Appendix I
"Ministry of Hydrocarbons Pre-emption Condition" has the meaning given to it in Appendix I
"Niungo JOA" the joint operating agreement governing the Niungo Permit dated 3 May 1999, as
amended, novated and supplemented from time to time
"Niungo Permit" the ministerial decree dated 26 November 1996
"Perenco" Perenco Oil and Gas Gabon S.A.
"Purchaser" Société Nationale des Hydrocarbures du Gabon (trading as Gabon Oil Company)
"Seller" Tullow Gabon Limited
"Simba JOA" the joint operating agreement governing the Simba Permit dated 1 October 2010,
as amended, novated and supplemented from time to time
"Simba Permit" the Simba n°G5-137 exclusive development and exploitation authorisation dated
25 July 2019 and awarded to the Contracteur under the Simba PSC
"Simba PSC" the Arouwe exploration and production sharing contract n°G4-221 dated 25
November 2005, as amended, novated and supplemented from time to time
"SPA" the sale and purchase agreement between Tullow, the Seller, the Purchaser and
TOGSA (as described in Appendix I)
"Tax Condition" has the meaning given to it in Appendix I
"Term Sheet" has the meaning given to it in Appendix I
"TOGSA" Tullow Oil Gabon S.A.
"Transaction" the proposed sale of TOGSA to the Purchaser on the terms and subject to the
conditions set out in the SPA
"Tullow" Tullow Oil plc
"Tullow Ghana" Tullow Ghana Limited
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