FPSO Kwame Nkrumah - Tullow Oil - Ghana

Tullow Oil bolsters position in Ghana fields

Oil and gas company Tullow Oil has completed the pre-emption related to the sale of Occidental Petroleum’s interests in the Jubilee and TEN fields in Ghana to Kosmos Energy, increasing its interest in the fields.

FPSO Kwame Nkrumah - Tullow Oil - Ghana
FPSO Kwame Nkrumah - Jubilee field; Source: Tullow Oil

The cash consideration paid on completion was $118 million reflecting closing adjustments and was funded from cash on the balance sheet, Tullow Oil informed on Monday.

This transaction takes Tullow’s equity interests to 38.9 per cent in the Jubilee field and to 54.8 per cent in the TEN fields and adds c.5 kbopd of unhedged daily production. This equates to c.4 kbopd on an annualised basis and increases 2022 group production guidance to 59-65 kbopd (30-32 kbopd at Jubilee, 13-14 kbopd at TEN and non-op portfolio unchanged at 16-19 kbopd).

Moreover, this additional equity increases Tullow’s 2022 capital expenditure forecast by $30 million to $380 million and is expected to generate c.$300 million incremental free cash flow at $75/bbl between 2022 and 2026.

Rahul Dhir, CEO of Tullow Oil plc, commented: “This transaction underscores our confidence in the assets and meets our objectives of value accretion and deleveraging.”

As a reminder, Occidental in October 2021 agreed to sell its interests in the Jubilee and TEN fields for $750 million to Kosmos Energy ($550 million) and Ghana National Petroleum Corporation (GNPC) ($200 million).

Specifically, it was agreed for Kosmos to acquire an additional 18 per cent interest in the Jubilee field and an additional 11 per cent interest in the TEN fields for a purchase price of $550 million with an effective date of 1 April 2021. However, the transaction was subject to a 30-day pre-emption period.

Come November 2021 and Tullow Oil exercised its right of pre-emption related to the sale of Occidental Petroleum’s interests in the Jubilee and TEN fields to Kosmos Energy. The completion was subject to finalising definitive agreements with Kosmos Energy/Anadarko WCTP Company and gaining approval from the Government of Ghana consistent with the agreed Kosmos/Occidental transaction.

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Kosmos said in a separate statement on Monday that, after execution of definitive transaction documentation and receipt of required government approvals, Kosmos and Tullow have now concluded their pre-emption transaction.

Kosmos also received notice in November 2021 that PetroSA, another partner in the fields, intends to exercise pre-emption rights in relation to the sale. However, the process with PetroSA is ongoing and remains subject to the execution of definitive agreements and required government approvals.

Following completion of the pre-emption by both Tullow and PetroSA, Kosmos’ ultimate interest in Jubilee will be reduced by 3.8 per cent to 38.3 per cent (Kosmos retains ~80 per cent of the original acquired interest), and Kosmos’ ultimate interest in TEN will be reduced by 8.3 per cent to 19.8 per cent (Kosmos retains ~25 per cent of the original acquired interest).

In addition to the consideration paid to Kosmos from Tullow, an additional ~$10 million is expected to be payable on completion of the PetroSA pre-emption process. Kosmos plans to accelerate debt reduction with the proceeds.

The net 2022 production impact of the pre-emption exercise for Kosmos is a reduction of approximately 4,000 barrels of oil per day, based on the March 17 closing date, and is expected to result in one less Ghana cargo lifting this year and a reduction in 2022 capital expenditure of approximately $30 million.