Tullow Oil Sells Its Kenyan Assets to Gulf Energy Ltd in KSh 15.5b Deal
- Tullow Oil released a statement on Tuesday, July 22, on the sale of its assets in the South Lokichar Basins in Turkana county
- The British oil and gas company revealed the cost of the deal and how it will be paid by the buyer, Gulf Energy Ltd
- Tullow Oil faced several challenges in Kenya that forced it to quit the local market before commercialising oil
TUKO.co.ke journalist Japhet Ruto has over eight years of experience in financial, business, and technology reporting and offers deep insights into Kenyan and global economic trends.
Tullow Oil has reached a sale and purchase agreement with Auron Energy E&P Limited, a subsidiary of Gulf Energy Ltd, to sell its full stake in Kenya for $120 million (KSh 15.5 billion).
Source: Getty Images
The agreement, signalling a strategic exit for the London-based company from the East African market, was carried out via Tullow Overseas Holdings BV, a fully-owned subsidiary of Tullow plc.
Gulf Energy will serve as the guarantor for Auron Energy, with Tullow plc providing a guarantee for the seller's obligations.
"It is with great pleasure that Tullow Oil plc ("Tullow") announces the signing of a sale and purchase agreement (SPA) between Tullow (as guarantor for the seller), Auron Energy E&P Limited (the "purchaser"), an affiliate of Gulf Energy Ltd., and Tullow Overseas Holdings BV (the "Seller"), a wholly owned subsidiary of Tullow.
For a minimum cash consideration of US$120 million (the "transaction"), subject to customary adjustments, Gulf Energy Ltd will serve as guarantor for the purchaser (the "purchaser guarantor") in the sale and purchase of 100% of the shares in Tullow Kenya BV ("Tullow Kenya"), which holds Tullow's entire working interests in Kenya," Tullow said in a statement on Tuesday, July 22.
Which assets did Tullow Oil own in Kenya?
Tullow Kenya BV, the company that owns all of Tullow's assets in Kenya, will have 100% of its shares transferred as part of the deal.
Approximately 463 million barrels of probable oil reserves are among the assets.
Source: Getty Images
The agreement will be divided into three payments: $40 million (KSh 5.16 billion) due upon completion, $40 million due at the earliest of June 30, 2026, or Field Development Plan (FDP) approval, and $40 million payable over five years starting in the third quarter of 2028.
An FDP summarises an oil company's plans for developing a petroleum field, managing the effects on society and the environment, and providing production and cost projections.
What challenges did Tullow Oil face in Kenya?
The main activities of Tullow Oil included the investigation, evaluation, and growth of oil projects in Kenya.
The main asset was its working interest in the Turkana oil project, namely in the South Lokichar Basin's Blocks 10BB, 13T, and 10BA.
Although Tullow had been operating in Kenya since 2010, the project was never commercialised despite discovering oil in 2012, because of several challenges.
The company faced several challenges, including financial strain, which was made worse by regulatory delays, technical shortcomings, and other community-related issues.
It was further worsened by the departure of partners and the inability to draw in new investors.
Proofreading by Asher Omondi, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
