Tullow Oil plc has finalised a major asset disposal agreement, selling its entire working interest in Kenya to Auron Energy E&P Limited, an affiliate of Gulf Energy Ltd, for a minimum consideration of US$120 million.
The deal, announced on 15 April 2025 and formalised through a newly signed Sale and Purchase Agreement (SPA), represents a strategic exit from Tullow’s Kenyan operations as the company sharpens its focus on high-margin, cash-generative production assets.
Tullow CFO and Interim CEO, Richard Miller, described the deal as a value-accretive transaction that aligns with Tullow’s long-term strategy to strengthen its balance sheet.
“We are pleased to announce the signing of the Kenyan SPA, marking another step closer to completion of the transaction with Gulf Energy.
“For a total consideration of at least US$120 million, the transaction supports our strategic priority to strengthen the balance sheet.”
Richard Miller, Tullow CFO and Interim CEO
Miller added that the first two payments, amounting to US$80 million, are expected before the end of 2025.
The transaction, executed through Tullow’s subsidiary Tullow Overseas Holdings BV and guaranteed by Gulf Energy Ltd, includes the sale of 100% of the shares in Tullow Kenya BV.
This entity holds all of Tullow’s interests in Kenya, comprising approximately 463 million barrels of 2C contingent oil resources in the South Lokichar Basin.
The consideration is structured in three tranches. An initial US$40 million will be paid on completion, followed by another US$40 million due at the earlier of Field Development Plan (FDP) approval or June 30, 2026.
The final US$40 million will be paid in quarterly instalments from 2028 through 2033, contingent on oil price thresholds being met. A bullet payment will cover any outstanding balance by mid-2033, irrespective of the prevailing oil market conditions.
In addition to this, Tullow will receive quarterly royalty payments, based on a formula that ties production volumes and market prices to a capped per-barrel fee.
Debt Reduction and Growth
Crucially, the agreement also gives Tullow a zero-cost back-in option to re-enter up to a 30% stake in future development phases of the assets if a third-party investor is brought in.
Miller called this a “potentially material zero-cost value option,” allowing shareholders future upside exposure to a project that remains technically and commercially promising.
Under the terms of the agreement, Gulf Energy Ltd assumes all past and future decommissioning and environmental liabilities associated with the assets, thereby insulating Tullow from any operational or legal risks tied to its historical involvement.
The transaction is subject to customary regulatory approvals, including clearance from the Competition Authority of Kenya.
Another condition is the full physical and functional separation of Tullow Kenya from the wider Tullow group. Once fulfilled, completion of the transaction and receipt of the first tranche of payment is expected later this year.
According to Tullow, the disposed assets had no production or proven reserves (2P) as of December 2024 but accounted for US$112.2 million in asset value.
The company had been active in Kenya since 2011, focusing primarily on exploration and appraisal. Despite the absence of current output, the 463 million barrels of 2C resources represent significant discovered oil potential.
The deal marks Tullow’s second major divestment this year. In May, the company signed an SPA for its interests in Gabon, generating an additional US$300 million in cash proceeds.
These combined disposals are expected to generate a total of US$380 million in 2025, which the company will use to reduce net debt and optimise its capital structure.
“We continue to advance plans to optimise our capital structure during 2025.”
Richard Miller, Tullow CFO and Interim CEO
Tullow’s revised portfolio will allow the company to double down on its core assets, particularly in deepwater projects across West Africa, where it seeks to scale up its production base and operational profitability.
“These transactions provide strong foundations for organic growth within our core portfolio and open doors for further inorganic growth opportunities.”
Richard Miller, Tullow CFO and Interim CEO
The proceeds will significantly reduce Tullow’s leverage and support an anticipated debt refinancing later in the year, providing a more stable financial footing as the company repositions for future growth.
The transaction reinforces Tullow’s strategy of divesting non-core assets while maintaining the flexibility to re-enter key development phases should future conditions prove favourable.
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