TULLOW OIL plc is to buy out its partner in three Ugandan oil exploration blocks at a cost of $1.5 billion (€1 billion).
The company announced yesterday that its subsidiary, Tullow Uganda Ltd, is to exercise its right of pre-emption in respect of the proposed sale by Heritage Oil Gas of its 50 per cent interest in blocks 1 and 3 in Uganda.
The remainder of the two blocks are already owned by Tullow, which owns all of block 2.
On December 18th last, Heritage announced that the consideration for the transaction comprised $1.35 billion cash and a further contingent, deferred consideration of either $150 million cash or an interest in a mutually agreed producing oil field independently valued at a similar amount.
A syndicate of Tullow’s core relationship banks has provided the banking facilities required to enable Tullow to exercise its right of pre-emption.
Completion of the sale and purchase agreement with Heritage is subject to conditions which include approval by Heritage shareholders at a meeting scheduled for 3pm on January 25th, and the receipt of the necessary consents from the Ugandan government.
Tullow said it had also been running a transparent “farm-out” process which has attracted “a significant amount of interest” from major international and national oil companies. The process is now well advanced and potential partners supported the group’s decision to pre-empt, the company said.
Tullow chief executive Aidan Heavey said: “Tullow is committed to retaining a material stake in Uganda and to continue to invest for the long term.
“As we enter the development phase, we are working closely with the Ugandan government to introduce a mutually beneficial partner with downstream expertise who is aligned with this long-term approach.
“The pre-emption of the Heritage transaction and completion of Tullow’s farm-out process is an excellent opportunity to deliver an accelerated basin-wide development plan best suited to government needs and to optimise value for all stakeholders.”
A London spokesman said Tullow believed the deal was the quickest way to get a development plan in place. “Tullow will control the licences around Lake Alberta and is looking to farm out to a heavyweight oil industry player.”
Eni, Italy’s biggest energy company, said on November 23rd last that it had signed a letter of intent with Heritage to buy its share of the fields for $1.5 billion.
Oil companies are competing for new reserves in Africa in an era of dwindling resources and restricted access elsewhere. Tullow, which operates in 15 African states, plans to produce 5,000 to 10,000 barrels a day in Uganda by 2012 and 150,000 a day within five years.
Tullow has been working with the Ugandan government on a development programme for the country’s oil industry, and any deal on the Lake Albert fields must be approved by the state, Tullows Uganda manager, Brian Glover, said in December.
