(Alliance News) - Tullow Oil PLC on Thursday said it has agreed the sale of its assets in Uganda to French petroleum refining company Total SA, with an effective date of January 1.
In addition, Tullow said it appointed Rahul Dhir as chief executive officer and an executive director from July 1.
Dhir joins Tullow from Delonex Energy Ltd, where he is CEO and the Africa-focused oil and gas firm's founder. Prior to Delonex, he served as managing director & CEO of exploration and production company Cairn India.
Tullow also said Director Steve Lucas will step down from the board later on Thursday and Martin Greenslade will take over as chair of the Audit Committee.
On the deal with Total, the London-headquartered oil & gas exploration company said it expects to secure a cash payment of USD500 million on deal completion and USD75 million at the final investment decision.
Contingent payments linked to the oil price will be paid after production commences, Tullow noted.
Proceeds from the sale will be used to reduce Tullow's net debt, it said, strengthening the balance sheet and moving Tullow towards a more conservative capital structure.
Under the deal, Tullow said it will transfer its entire interests in blocks 1, 1A, 2 and 3A in Uganda and the proposed East African Crude oil pipeline system to Total subsidiary Total E&P Uganda BV.
As a result, Tullow will remain as the operator of block 2, while Total Uganda will be operating block 1 and block 1A and CNOOC Uganda Ltd is operator of block 3A.
"This deal is important for Tullow and forms the first step of our programme of portfolio management," said Executive Chair Dorothy Thompson.
"Tullow has been a pioneering explorer in Uganda over many years and we are very proud of the role we have played in the founding and development of Uganda's oil industry," added Thompson.
Turning to operations, Tullow said production in the first quarter of 2020 averaged 75,800 barrels of oil per day, in line with expectations. The company maintained its full year guidance at between 70,000 and 80,000 barrels of oil a day.
In exploration, Tullow said it continues to pursue potential farm downs of its exploration licences to reduce equity interests ahead of drilling and further reduce costs.
"I am very pleased with the material progress Tullow has made in the first quarter of this year given the challenges facing the group after our performance in 2019, the Covid-19 pandemic and recent very low oil prices," said Thompson.
Tullow shares were trading 32% higher in London early on Thursday at 26.71 pence each, while Total shares were up 2.2% in Paris at EUR31.80 each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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Tullow Oil (TLW)