Tullow Oil has secured approval from the Government of Uganda for the divestment of its stake in an oil project to Total for $575m.
Since 2017, the firm has been waiting to complete its stake sale in in the Lake Albert Development Project. However, its efforts were repeatedly thwarted by disagreements on taxes, reported Bloomberg.
The Government of Uganda and the Ugandan Revenue Authority have executed a binding Tax Agreement with the firm that reflects the pre-agreed principles on the tax treatment of the sale of the firm’s assets in the country to Total.
The Ugandan Minister of Energy and Mineral Development has also given its approval for the transfer of the firm’s interests to Total, as well as the transfer of operatorship for Block 2.
With all the government-related conditions for completion of the deal having been met, Tullow now expects the transaction to close in the coming days after completing some customary pre-closing steps with Total.
On completion of the deal, Tullow will receive $500m and an additional $75m when a final investment decision is taken on the development project.
Furthermore, Tullow will receive contingent payments related to the oil price payable once the production begins.
This year, Tullow Oil had sought relief from creditors to evade blowing through debt covenants and the sale proceeds will help the firm in restoring stability, reported Bloomberg.
Last year, its plan to divest the stake in the project to Total and Cnooc fell through because of a holdup around tax disagreements.
In a separate development surrounding mergers and acquisitions in the oil and gas industry, NGX Energy International has accepted an offer from Compañia Argentina de Comodoro Rivadavia Explotacion de Petróleo and Financier to buy 100% of its oil and gas interests in Alianza Petrolera Argentina, the Argentine subsidiary.
Through the subsidiary, NGX operates the Sur de Rio Deseado Este block and holds interest in the Estancia La Mariposa block. NGX will receive a royalty of 7% based on the future production result of the Sur de Rio Deseado Este block, with total royalty payments of up to $100,000.