Tullow oil Plc has announced the successful completion of the sale of its assets in Equatorial Guinea to Panoro Energy ASA (Panoro) to the tune of US$88.8 million.
The cash transaction completed yesterday, March 31, 2021 with Tullow Oil Plc selling off the Tullow Oil Equatorial Guinea Limited.
Following the closure of this transaction includes the satisfaction of all completion conditions viz; the approval from the Government of Equatorial Guinea, Tullow Oil Plc, Panoro shareholders and other customary share approvals.
The transaction includes additional contingent cash payments of up to US$16 million in aggregate, payable over a five year period. These contingent payments are linked to asset performance and oil price.
Furthermore, the closure of this transaction marks Tullow’s exit from its licences in Equatorial Guinea after 18 years.
This notwithstanding, Tullow Oil Plc will still maintain financial link to its assets in Ceiba and Okume fields located in shallow offshore, Equatorial Guinea.
Tullow aims at reducing its net debt from the sale of its assets. Thus, upon completion of the Equatorial Guinea transaction and following the transfer of funds, Tullow now has net debt of US$2.3 billion and liquidity of US$1 billion.
Moreover, Tullow Oil Plc is also in talks with Panoro concerning the sale of its Dussafu assets in Gabon. Tullow has indicated that the said transaction nears completion in the second quarter of 2021. After the completion of both transactions, Tullow will receive a further US$5 million cash consideration.
Classifications of both transactions
The Equatorial Guinea transaction constitutes a Class 1 transaction under the UK Listing Rules. Therefore, it required the approval of Tullow’s shareholders.
However, the Dussafu transaction, yet to be agreed upon constitutes a class 2 transaction. As a result it does not require the approval of Tullow’s shareholders.
The aggregate asset sales under the two transactions constitute about US$180 million. Of this amount, the Equatorial Guinea transaction consists of up to US$105 million and US$70 million for the Dussafu transaction. A further US$5 million consideration will be paid after both transactions are completed.
Particular to the Dussafu transaction, cash considerations of up to US$46 million shall be paid at completion, subject to a customary working capital and other adjustments at completion. Additional contingent payments of up to US$24 million in aggregate will be payable for over a five year period.
Speaking about the two transactions, Rahul Dhir, CEO of Tullow Oil Plc intimated that:
“These are important value-accretive deals for Tullow that will have a positive effect on our financial position. As we look to further reduce our net debt and continue constructive discussions with our creditors. These transactions are also in line with our strategy of investing our capital on cash-generative, high return investment opportunities in our core portfolio.
Rahul Dhir, CEO Tullow Oil Plc
“Our Equatorial Guinea assets have formed an important and stable part of our non-operated West Africa producing portfolio since 2003. We will be exiting Equatorial Guinea after many years of successful investment and co-operation and we thank the Government of Equatorial Guinea for their continued support. Gabon remains a core country of operations for Tullow and we will continue to invest in our assets and seek new opportunities.”
