Tullow shareholders approve Uganda sale

Anglo-Irish Tullow Oil Plc shareholders yesterday afternoon voted by 99 per cent majority to sell the company’s entire stake (33.33 per cent) in Uganda’s oil fields and the proposed East African Crude Oil Pipeline (EACOP). The transaction is expected to be completed in the coming months.

In a statement issued yesterday, Tullow indicated that 788,781,164 or 99.93 per cent of shareholders had voted yes, in approval of the sale, technically known as the farm down, to French oil giant Total E&P. Only 0.07 per cent voted against it.

The cash-strapped company announced its intention to sell its stake in April to raise Shs2.1 trillion ($575m) as the company seeks to reinvent itself, paving way for its exit from the Ugandan market after 16 years.

According to the terms of the deal, Total E&P will pay Tullow 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 Shs760 billion ($209m) will be paid whenever the Final Investment Decision (FID) has been reached.

In addition, Total E&P is committed to pay a 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 Shs239,200 ($65) per barrel.

Both Tullow and Total E&P, however, maintained that the “transaction remains subject to a number of other conditions, including customary government approvals and the execution of a binding tax agreement with the Uganda Revenue Authority that reflects the agreed tax principles previously announced.”

The Energy ministry Permanent Secretary, Mr Robert Kasande, yesterday said: “Government review of the various aspects of Tullow’s operations are nearly complete.”

Currently, a team comprising officials from the Petroleum authority and the oil sector regulator, among others, is on ground until Saturday reviewing the company’s areas of operations before they are taken over by Total E&P.

Initially, in 2017 Tullow intended to sell only 21.57 per cent of its interests and remain with 10 per cent in non-operatorship capacity in each of the three exploration areas to Total E&P for $900m.

The transaction was structured in two ways; $200 million (Shs736b) in cash consisting of $100 million (Shs368b) on completion of the transaction and $50 million  at both FID  and first commercial oil, and another $700 million (Shs2.6 trillion) in deferred consideration which will be used by Tullow to fund the company’s share of the costs of the upstream development project and the associated export pipeline project.

This deal collapsed last August after almost one year of haggling between Tullow/Total E&P, and government over Capital Gains Taxes (CGT), and other commercial issues over the proposed pipeline (EACOP) from Hoima to Tanga port in Tanzania.

The discussions on the matter were revived in September and concluded the following month in October following a meeting between President Museveni and oil company executives, leading to yesterday’s long overdue announcement.

Also, government will be raking in only Shs54b ($14.6m) on the transaction down from Shs313b ($85m) which Tullow offered initially on premise that part of the money—$700m—was going to be reinvested in the development phase while government, which did not buy the argument, insisted on a sum of$167m (Shs609b) assessed by Uganda Revenue Authority.