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(Alliance News) - Tullow Oil PLC said Tuesday it has signed two separate sale and purchase agreements with Panoro Energy ASA for all of Tullow's assets in Equatorial Guinea and its Dussafu asset in Gabon.
The two agreements total USD180 million, consisting of up to USD105 million for the Equatorial Guinea deal, and up to USD70 million for the Dussafu assets and a further USD5 million consideration to be paid after both transactions have completed.
"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," Chief Executive Rahul Dhir said.
Tullow noted the Equatorial Guinea deal is made up of USD89 million upfront cash and contingent cash payments of up to USD16 million linked to asset performance and oil price.
For its Dussafu asset, Panoro will pay USD46 million upfront cash and up to USD24 million linked to asset performance and oil price.
The assets, Tullow said, saw a performance of the sale of about 6,000 barrels of oil per day in 2021 and held about 20 million barrels of 2P reserves.
Dhir continued: "Our Equatorial Guinea assets have formed an important and stable part of our non-operated West Africa producing portfolio since 2003. 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."
Upon completion of the Equatorial Guinea deal, Tullow production forecast for 2021 will reduce by about 4,500 bopd. Group 2P reserves will reduce by about 14 million barrels, 3P reserves will reduce by approximately 22 million barrels and 2C resources will reduce by approximately 26 million barrels.
After the Dussafu deal, Tullow production forecast for 2021 will reduce by about 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.
Completion of both deal is expected in the first half of 2021.
Net proceeds from the deal, the company said, will be used to strengthen its balance sheet as part of its strategy to reduce its net debt and focus its capital on high-return investment opportunities within its current portfolio.
Turning to trading, Tullow said its working interest oil production in 2020 averaged 74,900 bopd, which was in line with expectations.
As a result, 2020 full year revenue is expected to be about USD1.4 billion, down from USD1.68 billion in 2019. While gross profit is expected to be about USD400 million compared to the USD1.69 billion loss recorded in 2019.
Looking to 2021, working interest oil production is forecast to average 60,000 to 66,000 bopd - partly attributed to the Covid-driven drilling hiatus in 2020.
Capital expenditure is forecast to be about USD265 million, with an additional USD100 million to be spent on decommissioning.
Tullow previously started discussions with its creditors with regards to its debt refinancing options and these discussions are progressing constructively and are expected to conclude in the second quarter of 2021.
"As part of these discussions, Tullow and its lenders agreed to extend the redetermination of the group's RBL facility, which was due to complete in January 2021, by up to one month. This is to allow additional time for the lending banks to review the new business plan and operating strategy. Following its September 2020 RBL facility redetermination, Tullow had USD1.8 billion of debt capacity approved by the lending syndicate," the company added.
Shares in Tullow Oil closed 1.1% higher in London on Tuesday at 30.09 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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