Tullow concludes exit from Kenya after sealing Sh15.6 billion deal with Gulf Energy
It will be entitled to royalty payments subject to certain conditions and retains a no cost back-in right for a 30 per cent participation in potential future development phases
Tullow Oil plc has announced the sale of 100 per cent of its stake in Kenya to Gulf Energy Ltd for Sh15.6 billion (US$120 million).
The sale and purchase agreement, first announced on April 15, has been signed between Tullow Overseas Holdings BV, a wholly owned subsidiary of Tullow, Tullow and Auron Energy E&P Limited, an affiliate of Gulf Energy Ltd., and is subject to customary adjustments.
Tullow Kenya BV holds Tullow’s entire working interests in Kenya, which it is disposing after the government rejected its Feld Development Plan (FDP) for its Turkana oilfields last July citing the company’s weak financial position.
The consideration will be split into a Sh5.18 (US$40 million) payment due on completion, Sh5.18 million payable at the earlier of FDP approval or June 30, 2026, and Sh5.18 million payable over five years from the third quarter of 2028 onwards.
In addition, Tullow will be entitled to royalty payments subject to certain conditions. Tullow also retains a no cost back-in right for a 30 per cent participation in potential future development phases at no historical cost. This right can be exercised if a third party investor participates in future development phases whether through a sale or farm-down of the Auron Energy E&P’s interest in the assets.
The deal is, however, subject to approval by the Competition Authority of Kenya, and Tullow Overseas Holdings BV and the Auron Energy E&P Limited agreeing and implementing a plan to achieve a physical and functional separation of Tullow Kenya from the Tullow group.
Richard Miller, Chief Financial Officer and Interim Chief Executive Officer, Tullow, commented: “We are pleased to announce the signing of the Kenyan SPA, marking another step closer to completion of the Transaction with Gulf Energy. For a total consideration of at least US$120 million, the Transaction supports our strategic priority to strengthen the balance sheet, with the first two payments totalling US$80 million expected before the end of the year. Furthermore, we are pleased to retain a potentially material zero cost value option to participate in future development phases. We continue to advance plans to optimise our capital structure during 2025. Coupled with the sale of our Gabonese assets, the disposal of these non-core assets is expected to provide cash proceeds of US$380 million in 2025.”
