Cnooc declines to buy Tullow’s assets

Friday May 29 2020



KAMPALA-The China National Offshore Oil Company (Cnooc) Uganda Ltd has decided against exercising its pre-emptive rights to acquiring part of the 33.33 per cent Tullow Oil stake floated to Total E&P last month.

A pre-emptive right is a contractual clause allotting a stockholder first right of refusal to acquire additional shares floated before the shares are available to the general public.

In a statement issued yesterday, Tullow Oil announced that Cnooc had communicated on Tuesday that it will not pre-empt the sale of Tullow’s assets to Total E&P.

Tullow Oil announced mid-last month the sale of its remaining stake to Total E&P for Shs2.1 trillion ($575m) for the stake, with Shs1.8 trillion ($500m) paid once the deal has been approved by government and the balance of Shs780 billion ($75m) paid whenever the Final Investment Decision (FID) has been reached.

This, in addition to Total E&P paying a “conditional” or bonus payment to Tullow when commercial oil production starts in the future, and only if a barrel of brent crude—the global benchmark for oil—will be trading upwards of Shs232,285 ($65) per barrel.

The deal attracted a paltry Shs54.6b ($14.6m) in capital gains tax, which Tullow Oil said yesterday “can now be progressed following Cnooc’s decision not to pre-empt.”


When Tullow first floated the sales deal of 21.57 per cent stake to Total E&P in January 2017 behind Cnooc’s back, the latter exercised its pre-emptive rights later in March, which sparked off protracted discussions that lasted for eight months, especially over operatorship of fields in Exploration Area 2 (EA2) in Buliisa, east of Lake Albert in the Butiaba region.

In the end it was ruled that both Total E&P and Cnooc will take over operatorship of EA2, but with Cnooc, operating its southern part—Kaiso-Tonya fields—adjacent to its EA-3 licenced area, the Kingfisher field, and Total E&P takes over fields in Buliisa, which is adjacent to its northern/Nwoya operations. Cnooc’s decision not to pre-empt gives Total E&P majority shareholding of 66.66 per cent, and Cnooc 33 per cent in each of the Exploration Areas—EA, 2 and 3—upstream. But it also means the proposed crude oil export pipeline, will take a bit longer.