Tullow Oil to exit Kenya, sells assets to Gulf Energy for Sh15.6 billion

Tullow Oil will sell the Kenyan unit to Gulf Energy for $120 million (Sh15.6 billion) to be paid in three phases until 2033.

The London Stock Exchange (LSE) listed multinational is exiting the Kenyan market after failing to break even, 13 years since it discovered oil in Lokichar, Turkana

In a statement the firm said that payment will be split into a $40 million (Sh5.2 billion) payment due on completion, $40 million (Sh5.2 billion) payable at the earlier of Field Development Plan (FDP) approval or 30 June 2026, and $40 million (Sh5.2 billion) payable over five years from the third quarter of 2028 onwards.

“In addition, Tullow will be entitled to royalty payments subject to certain conditions. It will also retain a back-in right for a 30 per cent participation in potential future development phases at no cost,’’ the statement reads.

“The transaction is accretive to both equity and leverage and further accelerates Tullow’s deleveraging process.”

The deal includes corporate sale of Tullow’s entire Kenyan portfolio of assets. All past and future liabilities will be transferred to the Buyer as part of the Transaction.

According to Tullow Oil interim CEO and CFO, Richard Miller, the announcement marks another step forward in the firm’s accelerated deleveraging journey with near-term cash receipts of $80 million and mitigating significant capital exposure, whilst retaining a material option on the future development of the project.

“ I am confident that the proceeds from this transaction, coupled with the $300 million from the disposal of our assets in Gabon, position the business strongly for a successful refinancing.”

He added that Tullow looks forward to working with Gulf Energy, who have the requisite financing to complete the transaction and are a strong and credible counterparty, and by doing so, unlock material value for the people of Kenya.

The company's oilfields in Kenya have not been brought into full production, as any export route would require building hundreds of miles of a heated pipeline to the coast. It recorded a $145 million (Sh18.8 billion) write-off on these operations last year.

It owns 100 per cent of Kenya’s operations following the exit of joint venture partners–Africa Oil Corp and Total Energies in 2023, a move said to have given Tullow flexibility in negotiations with strategic partners.

Tullow described the withdrawal of the Kenya Joint Venture Partners, as “ due to differing internal strategic reasons.

The Kenyan government's delays in issuing necessary licenses, such as the Field Development Plan (FDP) for the Turkana oil fields, have contributed to Tallow’s woes.

The FDP, which outlines environmental and social impact plans as well as production and cost forecasts, requires government approval before full development can proceed.

Mid-last month, members of Parliament gave the Energy Ministry and British oil firm Tullow until June 30, 2025, to finalise FDP for the Turkana oil fields. The directive is aimed at speeding up the commercialisation of Kenya’s crude reserves, which have faced repeated delays.

The oil firm estimates that Kenya's onshore fields in Turkana hold 560 million barrels of oil and expected to produce up to 100,000 barrels per day for a maximum of 23 years. It anticipated to earn close to Sh280 billion every year from the project which translates to Sh6.4 trillion at the end of its lifespan.

This is the second country the British firm is exiting in less than three months. Last month, it agreed to sell its working interests in Gabon for $300 million (Sh38.9 billion)in cash. It had a net debt of around $1.5 billion (close to Sh195 billion) at the end of last year.

The company had a market capitalisation of around $255 million (Sh33.05 billion) as of Tuesday.