Tullow Overseas Holdings BV, a wholly owned subsidiary of Tullow Oil plc, has signed a heads-of-agreement with Gulf Energy Ltd to sell Tullow Kenya BV, which holds Tullow’s entire working interests in Kenya, for a total consideration of at least $120 million.

The consideration will be split into a $40 million payment due on completion, $40 million payable at the earlier of Field Development Plan (FDP) approval or 30 June 2026, and $40 million payable over five years from the third quarter of 2028 onwards which is subjected to the following payment schedule:

1) Payments of $2 million per quarter starting in the third quarter of 2028, provided Dated Brent oil price averaged at least $65/bbl during the preceding quarter.

2) If $40 million in aggregate has not been paid by 30 June 2033, the remainder will be due to Tullow as a bullet payment at that point irrespective of the prevailing oil price.

In addition, Tullow will be entitled to royalty payments subject to certain conditions. Quarterly royalty payments of $0.5/bbl multiplied by 80% of total production, subject to oil price, resource and production related conditions.

Tullow also retains a back-in right for a 30% participation in potential future development phases at no cost. The Transaction is accretive to both equity and leverage and further accelerates Tullow’s deleveraging process. All past and future liabilities will be transferred to the Buyer as part of the Transaction.

According to Tullow, the above Transaction will constitute a significant transaction for the purposes of UKLR 7 of the UK Listing Rules (as came into effect on 29 July 2024). Further announcements will be made in due course upon full form transaction documentation being entered into by the parties. Entering into the full sale and purchase agreement (SPA) is targeted within the coming months with completion of the Transaction and receipt of first payment during 2025.

“Today’s announcement marks another step forward in Tullow’s accelerated deleveraging journey with near-term cash receipts of $80 million and mitigating significant capital exposure, whilst retaining a material option on the future development of the project. I am confident that the proceeds from this transaction, coupled with the $300 million from the disposal of our assets in Gabon, position the business strongly for a successful refinancing.

“We look forward to working with Gulf Energy, who have the requisite financing to complete the transaction and are a strong and credible counterparty, and by doing so, unlock material value for the people of Kenya,” Richard Miller, Chief Financial Officer and Interim Chief Executive Officer of Tullow, commented.