Tullow shares spike as Canadian partner lands farm out
Shares in Irish-led oil company Tullow Oil surged yesterday after its partner in parts of Africa sold stakes in some of its assets to a Copenhagen-based firm.
Cash-rich Danish company Moller-Maersk said it will pay $365m upfront to buy 25pc stakes in three licences owned by Canada-based Africa Oil Corporation in Kenya as well as a 25pc stake in an exploration licence in Ethiopia and a 15pc stake in another Ethiopian licence.
The licences cover an area of around 100,000 square kilometres.
Maersk Oil has also agreed to pay future contingent payments of up to $480m to Africa Oil for the Lokichar Project in northern Kenya and southern Ethiopia, depending on the size of the resource after final appraisal and the agreed timetable for first oil production.
Africa Oil chief executive Keith Hill said that the new partnership lets Africa Oil keep a significant stake in the projects without having to carry out additional equity funding prior to first oil.
"We are delighted to have attracted a partner of the stature of Maersk Oil into our East Africa venture," he said.
"We believe they bring significant technical, financial and infrastructure development capabilities at a critical time when the Lokichar Development and related pipeline projects are moving towards sanction."
Tullow, which operates and controls 50pc of four of the licences, saw its shares rise by almost 18pc to 256.8 pence by early afternoon in London trading following the announcement.
Analysts from FirstEnergy Capital said that the move is "very positive" because it provides "imminent cash injection" and eliminates any funding concerns. "This is a big vote of confidence on the quality and materiality of these assets," they said.
Tullow is active in several African countries including Kenya. The company's main asset is the Jubilee field off Ghana, where it's also progressing another major offshore project due to come on stream in 2016.
Tullow has made some of Africa's largest oil discoveries in the past 10 years. Its Eastern African exploration and appraisal program has added 800 million barrels of resources since 2007 with discoveries in Kenya and Uganda.
Tullow, which was founded in Carlow, is based in London and is listed on the Irish and London Stock Exchanges.