Shares in UK-based Tullow Oil jumped 40 percent on Wednesday after the company announced that it received approval from the Ugandan government to sell a $575 million stake in assets to Total.
Tullow said the Government of Uganda and the Ugandan Revenue Authority 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.
“The Ugandan Minister of Energy and Mineral Development has also approved the transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2,” the company said.
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.
Tullow said it will provide a further update once the transaction has closed and funds have been received. On closing, the company 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,” the company stated.
Analysts at the Bank of Montreal have said the sale will increase Tullow’s liquidity to over $1 billion.