Tullow Oil (TLW) has scrapped the two-year-old Lake Albert farm-out deal and plans to start afresh, after last month warning investors it was having trouble with the government of Uganda.
The oil and gas company announced it had given up the farm-down of the Lake Albert project, in which it owns a third alongside Total and the China National Offshore Oil Corporation (CNOOC).
The deal that expired this week would have seen Tullow cut its share to 11.76 per cent for $900m (£814m). When the deal was announced in 2017, a final investment decision was expected that year and first oil in 2020. Tullow said the Ugandan tax office would not cut the tax bill on the transaction, and will now start a new sales process. A final investment decision on Lake Albert was expected this year. Tullow chief executive Paul McDade said while the project remained "very attractive", his company was still committed to selling down its stake.
Panmure Gordon analyst Colin Smith said this was the right move from Tullow, despite resulting in a later possible project start and the delay of a $215m payment on completion that would have helped this year’s books. “Given the national importance of the project we expect a resolution will be found and that the most likely outcome is that the previous deal or something similar with the existing partners will be concluded,” he said.
Outside of Uganda Tullow is in a purple patch, with a wildcat oil discovery in Guyana this month and further positive news expected from the Joe well in the same area.
