Mixed news for Tullow Oil as oil field disappoints but deal inked
THERE was mixed news for Tullow Oil yesterday as the company revealed disappointing results from Sierra Leone but finally signed a long-awaited $2.9bn deal to bring in French oil major Total and Chinese group CNOOC as partners to develop its oil fields in Uganda.
The shares fell from Monday's record highs in Dublin after an exploration well in Sierra Leone, in which Tullow holds a 20pc stake, showed a reservoir may not be commercial.
Tullow closed down 4.2pc at €18.39 in Dublin. The shares are still up about 10pc this year.
"It appears the well was a technical success, but there are questions about whether it's commercially viable," said Braden Purkis, an analyst at Canaccord in London.
The conclusion of the deal in Uganda marks the transfer of $2.9bn to Tullow from Total and CNOOC, after repeated delays following the initial announcement of the deal early in 2010, and the signing of the sale agreements in March 2011.
The group will now focus on their $10bn plan to start pumping oil from huge reserves discovered on the shores of Lake Albert. Early production is scheduled to start in 2013 before ramping up to a major production phase in 2016, Tullow said.
The final closing of the deal had been expected following Tullow's signing of two production-sharing agreements with Uganda earlier in February.
A tax dispute between Kampala and Heritage Oil, Tullow's former partner in the oil fields, as well as wrangling over details connected to the production sharing agreements, resulted in delays to the deal's progress.
In a separate development, Ugandan lawmakers may resume investigations next week over allegations that three ministers took bribes to endorse oil deals after the Constitutional Court lifted an injunction against the probe yesterday.
Parliament is "excited about the ruling" because it will enable it to conclude the investigations that were halted after a month, Michael Werikhe, chairman of the committee handling the probe, told Bloomberg.
Lawmakers in the country formed the committee last October to investigate Prime Minister Amama Mbabazi; Internal Affairs Minister Hilary Onek, who held the energy portfolio until May last year; and Foreign Affairs Minister Sam Kutesa.
(Additional reporting Bloomberg and Reuters)