Tullow Oil has announced its decision to buy or exercise the right of pre-emptions over the recent sale of US Oil firm Occidental Petroleum interest in Jubilee and TEN fields to Kosmos Energy.

The announcement was contained in a circular sent to investors this morning.

Tullow Oil is hoping to increase its equity interest to 38 per cent in the Jubilee Field and 54.8 per cent in TEN Fields. The company is considering the offer to be $150 million, subject to closing adjustments.

Background

Occidental Petroleum recently sold its interest in the Jubilee and TEN fields to Kosmos Energy and GNPC for $750 million.

GNPC paid $200 million for its share, while KOSMOS paid, $550 million for the 18 per cent in Jubilee field and 11 per cent in the TEN Field.

The transaction has increased Kosmos’ stake to 28.1% in the TEN field and 42.1% in the Jubilee Field.

TULLOW OIL on details on the proposed transaction

The consideration is expected to be c.$150 million (if pre-emption by other Joint Venture (JV) Partners is fully exercised), which will be subject to closing adjustments.

Tullow Oil  added that “ Post completion, it is anticipated that Tullow’s equity interests will increase to 38.9% in the Jubilee field and to 54.8% in the TEN Fields.”

The additional equity interests are expected to add c.10% to daily Group production and the associated incremental cash flow will help to accelerate Tullow’s debt reduction.

“The consideration is expected to be c.$150 million (if pre-emption by other Joint Venture (JV) Partners is fully exercised), which will be subject to closing adjustments”, Tullow added. Tullow will fund this transaction through existing resources

Assets being acquired

Tullow Oil under the deal in its Deep Water Tano block, Tullow Tullow has pre-emption rights in respect of the 11.05% participating interest within the offshore DWT Block acquired by Kosmos Energy as a result of its acquisition of Anadarko WCTP Company announced on October 13, 2021.

Tullow has exercised its right of pre-emption over this participating interest in DWT and assuming all JV Partners also fully exercise their pre-emption rights, this would increase Tullow’s share in the Block by 7.7% (to a total of 54.8%).

This would in turn increase Tullow’s equity interests in the Jubilee and TEN fields to 38.9% and 54.8%, respectively.

Consideration

The consideration for the 7.7% increase in equity would be c.$150 million with an economic effective date of April 1 2021, subject to concluding definitive agreements and closing adjustments, Tullow Oil added in the statement.

The purchase of the participating interest in the DWT Block will be funded from Tullow’s existing resources.

Financial Impact of the Transaction

Tullow Oil maintained that Increasing exposure to these assets is aligned with Tullow’s strategy to focus on its producing assets.

 The additional equity is expected to increase Group daily production by c.10% and generate over $250 million incremental free cash flow at $65/bbl for Tullow between 2022 and 2026, which will help to accelerate debt reduction.

As of June 30 2021, based on Tullow’s reported Half Year 2021 Reserves Report, the 7.7% additional equity would increase Tullow’s net 2P reserves by approximately 21 mmboe and has an estimated post-tax NPV 10 valuation of $347 million.