Gulf Energy has agreed a $120 million (Sh15.56 billion) deal to acquire the assets of Tullow Kenya, setting the stage for the British firm’s exit from Kenya after 13 years in the country.
The two firms disclosed the deal on Tuesday morning, which will see Gulf Energy make three payments of $40 million (Sh5.18 billion) each, the first on approval of Tullow’s Field Development Plan (FDP), but no later than June next year.
Tullow discovered commercially viable oil in South Lokichar, Turkana County in 2012, but has not been able to start commercial production.
Tullow’s operations in Kenya have been beset by a number of setbacks, including the withdrawal of joint project partners Africa Oil Corp and TotalEnergies, difficulties in securing a strategic investor to de-risk the project and delays by the Kenyan government in approving the FDP.
“We look 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,” Richard Miller, the interim CEO of Tullow said on Tuesday morning.
Gulf Energy will pay another $40 billion upon regulatory approval of the deal, while the remaining $40 billion will be paid no later than June 2033.
The third instalment is also subject to quarterly payments of $2 million (Sh259.46 billion) beginning in the third quarter of 2028, provided that the Brent oil price averages at least $65 per barrel during the preceding quarter.
Gulf Energy will, however, be compelled to make a bullet payment to Tullow if the aggregate $40 million has not been paid by June 2033.
Tullow had hoped to start commercial production of the Kenyan oil by last year, but missed the target after it failed to get a strategic investor to de-risk the project by injecting billions of shillings.
The British firm would be dealt another blow May 2023 after its joint partners, Africa Oil and TotalEnergies (each with 25 percent stake), pulled out of the project, citing concerns over its commercial viability compared to others.
