Tullow Oil plc has revealed that the Uganda and the country’s tax body, the Ugandan Revenue Authority (URA) have executed a binding Tax Agreement that reflects the pre-agreed principles on the tax treatment of the sale of Tullow’s Ugandan assets to Total.
In August 2019, Tullow announced its farm-down to Total and CNOOC lapsed following the expiry of the Sale and Purchase Agreements (SPAs). The expiry of the transaction was a result of being unable to agree all on aspects of the tax treatment of the transaction with the government of Uganda which was a condition precedent to completing the SPAs.
On 23rd April 2020, the Company announced that it had signed a Sale and Purchase Agreement with Total Uganda with an effective date of 1 January 2020, in which it agreed to transfer its entire interests in Blocks 1, 1A, 2 and 3A in Uganda and the proposed East African Crude Oil Pipeline (EACOP) System to Total.
According to a statement released by Tullow Oil, the Minister of Energy and Mineral Development has approved the transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2.
On closing, Tullow will receive $500 million consideration and a further $75 million when a Final Investment Decision is taken on the development project. In addition, Tullow is entitled to receive contingent payments linked to the oil price payable after production commences.
“With all the Government-related conditions to closing having been satisfied, Tullow expects the transaction to close in the coming days after completing certain customary pre-closing steps with Total,” the statement reads in part.
The oil exploration company pledged to give update once the transaction is closed and when the funds have been received.
According to 2020 half year results the oil and gas exploration and production company posted $2.7 billion loss in 2020. The losses are alluded to write offs of exploration agreement with among other Uganda, Marina-1 well costs in Peru and the write-off of licence level costs associated with Peru, Comoros, Côte d’Ivoire and Namibia due to lower levels of planned activity and licence exits.