Tullow Oil offloads West African assets to Panoro
Tullow Oil has signed two separate sale and purchase agreements with Panoro Energy for all of its oil-producing assets in Equatorial Guinea and the Dussafu asset in Gabon.
The deal was made for an initial aggregate cash consideration of up to $140 million and aggregate contingent consideration of up to $40 million, based on effective date of 1 July 2020.
Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented: “These are important, value-accretive deals for Tullow that will have a positive effect on our financial position as we look to further reduce our net debt and continue constructive discussions with our creditors. These transactions are also in line with our strategy of investing our capital on cash-generative, high return investment opportunities in our core portfolio.
Dhir added: “We will be exiting Equatorial Guinea after many years of successful investment and co-operation and we thank the Government of Equatorial Guinea for their continued support. Gabon remains a core country of operations for Tullow and we will continue to invest in our assets and seek new opportunities”.
The Equatorial Guinea Transaction constitutes a Class 1 transaction under the UK Listing Rules and is subject to the approval of Tullow’s shareholders.
The Dussafu Transaction constitutes a Class 2 transaction and therefore does not require shareholder approval.
Completion of the two transactions is not inter-conditional. However, both transactions are subject to the approval by Panoro’s shareholders of a proposed equity fundraising, to part-finance the transactions by Panoro, and also customary government and other approvals.
Completion of both transactions and receipt of funds is expected in the first half of 2021.
Tullow, Panoro and their respective subsidiaries, Tullow Overseas Holdings and Panoro Energy Holding, have signed a sale and purchase agreement (EG SPA) pursuant to which Tullow Overseas Holdings has agreed to transfer its entire shareholding in Tullow Equatorial Guinea Limited (TEGL) to Panoro Energy Holding for cash consideration of $89 million payable at completion of the EG Transaction.
Deferred consideration of $5 million is payable on the later of completion of the EG Transaction, or within two business days of completion of the Dussafu Transaction and additional contingent consideration payments of up to a maximum of $16 million in aggregate will be payable over a 5 year period, triggered by meeting a production threshold and payable in years where that threshold is met and average oil prices are greater than $60/bbl.
Confirmation has been received from the Ministry of Finance, Economy and Planning that the disposal of TEGL will not trigger any Equatorial Guinean tax.
Equatorial Guinea’s national oil company (GEPetrol) has waived its preferential right to acquire Tullow’s interests in Equatorial Guinea. The EG Transaction is not subject to any further rights of pre-emption.
Subject to completion, Tullow will no longer hold any assets in Equatorial Guinea.
TEGL holds a 14.25% non-operated WI in Block G that contains the Ceiba and Okume Complex assets, offshore Equatorial Guinea. Block G is operated by Trident Energy.
The Ceiba field was discovered in 1999 and is located in 600-800 metres of water depth on the slope of the southern Rio Muni Basin approximately 35 kilometres offshore.
Oil production started in November 2000, with the field being developed in phases with production wells tied back to the Ceiba FPSO through a system of six subsea manifolds and flowlines. The produced liquids are processed on the Ceiba FPSO for export.
The Okume Complex consists of five separate oil fields, Okume, Ebano, Oveng, Akom North and Elon, that were discovered in 2001-2. All fields are tied back to a central processing facility (CPF) located at one of the Elon platforms. The processed oil from the CPF is transported via a 25 kilometres pipeline to the Ceiba FPSO for export.
During 2020, TEGL’s working interest production in these fields was 4,800 bopd.
Gabon – Dussafu
Tullow, Panoro and their respective subsidiaries, Tullow Oil Gabon SA and Pan Petroleum Gabon, have also signed a sale and purchase agreement (Dussafu SPA), with an effective date of 1 July 2020.
Under the Dussafu SPA, Tullow Oil Gabon has agreed to transfer its entire 10 per cent undivided legal and beneficial interest in the Dussafu Marin Permit Exploration and Production Sharing contract (Dussafu PSC) in Gabon and its interest in and under certain other documents related to the Dussafu PSC (the Dussafu Assets) to Pan Petroleum Gabon B.V. for cash consideration of $46 million payable at completion of the Dussafu Transaction, which is subject to customary working capital and other adjustments at completion.
Additional contingent payments of up to $24 million in aggregate will be payable over a 5 year period once production from the Hibiscus and Ruche discoveries meets an agreed daily average and where oil prices for the relevant year are greater than $55/bbl.
The BW Energy-operated Dussafu is currently producing approximately 15,000 bopd gross from four wells at the Tortue field, which is expected to increase to ~20,000 bopd during 2021 with the addition of two additional Tortue wells.
Through the Hibiscus/Ruche development, consisting of the Hibiscus and Ruche fields, production is expected to grow to ~40,000 bopd in 2023 with further growth potential from Hibiscus/Ruche phase 2.
A minimum of one exploration well is planned to be drilled in Q2 2021 into the greater Hibiscus structure, with another optional well being considered for Q3.
While Tullow will retain a number of other assets in Gabon it will have no exposure to the Dussafu PSC.
Upon completion of the Dussafu Transaction, Group production forecast for 2021 will reduce by approximately 1,500 bopd, Group 2P reserves will reduce by approximately 5 million barrels, 3P reserves will reduce by approximately 10 million barrels and 2C resources will reduce by approximately 5 million barrels.