French oil company Total has entered into an agreement with British oil firm Tullow to acquire the latter's entire interests in Uganda's oil sector, including the East African Crude Oil Pipeline.
Total said in a statement issued Thursday that it will pay 575 million U.S. dollars to acquire Tullow's shares, which accounted for 33.3 percent in Uganda's oil sector. The French company said it will make an initial payment of 500 million dollars at closing and 75 million dollars when the partners take the Final Investment Decision to launch Uganda's oil project.
The French company said conditional payments will be made to Tullow linked to production and oil price, which will be triggered when Brent prices are above 62 dollars a barrel.
The terms of the transaction have been discussed with the Ugandan government and an agreement in principle has been reached on the tax treatment for the transaction, according to Total.
The transaction is subject to, among other issues, China National Offshore Oil Corporation's (CNOOC) right to exercise pre-emption on 50 percent of the transaction.
CNOOC owns the other 33.3 percent in Uganda's oil sector. This transaction will enable Total to have over 50 percent in the oil sector.
In a separate statement also issued Thursday, Dorothy Thompson, executive chair of Tullow Oil plc, referred to the transaction as a significant milestone.
"The sale of our Uganda assets is an excellent first step towards our target of raising over 1 billion dollars of proceeds to reduce net debt, strengthen the balance sheet and secure a more conservative capital structure," Thompson said.
Editor:Iris
