French oil major Total has expanded its stake in Uganda's Lake Albert oil project by snapping up most of Tullow Oil's stake for $900 million, the companies said on Jan. 9.
The deal, which includes $200 million in cash and $700 million to be used for future development costs of the Ugandan fields and pipelines, means Tullow will cease being an operator in Uganda and will give Total access to valuable fresh oil reserves.
The Lake Albert development project will produce about 230,000 barrels per day (Mbbl/d) and start producing oil by the end of 2020, Tullow said.
"Our increased share in the Lake Albert project will bring significant value to Total and fits with our strategy of acquiring resources for less than $3/barrel with upside potential," Total CEO Patrick Pouyanne said.
Tullow estimated the development phase of the project would cost $5.2 billion, of which $3 billion will be required to reach first oil production.
With net debt expected at $4.9 billion by the end of 2016, Tullow has been looking to cash in some of its assets. The African-focused oil company expects a write-off of about $400 million in its 2016 results due to the deal.
"This deal ... strengthens Tullow's finances and provides an endorsement for the Uganda project; some of this goodwill may even rub off on Tullow's analogous Kenyan project," said Al Stanton, analyst at RBC Capital Markets.
The news lifted Tullow's shares to the highest in 18 months at 352.1 pence per share.
Last August, Uganda granted Total and Tullow production licenses that paved the way for the project.
Recommended Reading
Aethon Cuts Rigs but Wants More Western Haynesville Acreage
2024-03-28 - Private gas E&P Aethon Energy has drilled some screamers in its far western Haynesville Shale play—and the company wants to do more in the area.
Energy Transition in Motion (Week of March 28, 2024)
2024-03-28 - Here is a look at some of this week’s renewable energy news, including proposals submitted to develop about 6.8 gigawatts of wind projects offshore Connecticut, Massachusetts and Rhode Island.
SLB to Acquire Majority Stake in Aker Carbon Capture
2024-03-28 - SLB and Aker Carbon Capture plan to combine their technology portfolios, expertise and operations platforms to bring carbon capture technologies to market faster and more economically, SLB said in a news release.
CERAWeek: Tecpetrol CEO Touts Argentina Conventional, Unconventional Potential
2024-03-28 - Tecpetrol CEO Ricardo Markous touted Argentina’s conventional and unconventional potential saying the country’s oil production would nearly double by 2030 while LNG exports would likely evolve over three phases.
DUG GAS+: Chesapeake in Drill-but-don’t-turn-on Mode
2024-03-28 - COO Josh Viets said Chesapeake is cutting costs and ready to take advantage once gas prices rebound.