Tullow Oil's Kenyan, Ugandan projects timelines slip

Crude Oil being transported from Turkana fields to Mombasa

Tullow Oil has delayed the final investment decision (FID) for its Kenya project to 2020 and has not yet sealed a tax deal in Uganda that is needed for the progress of its plans there with Total , it said on Wednesday.

The company had aimed to give the final go-ahead by the end of 2019 for its onshore Kenyan oilfields, which are expected to produce up to 100,000 barrels per day.

The Kenya delay was due to authorities asking for additional community consultations which Tullow expects to be submitted in the second half of the year - later than anticipated, it said in a trading statement.

“The Partners and the Government of Kenya are reviewing the most likely timeline to FID which Tullow now expects in 2020,” Tullow said.

On Tuesday, Tullow and its partners Total and Africa Oil signed commercial agreements with the Kenyan government, but it still needs to lock in financing for a $1.1 billion pipeline to bring the oil to the coast.

In Uganda, progress is also slower than expected. A tax deal needed to close the $900 million sale of a stake in its Ugandan fields to Total is pending.

As recently as April Tullow said the Uganda talks were expected to conclude shortly.

“We continue to work constructively with our Joint Venture Partners and the Government of Uganda to agree a way forward and the consequent timing of FID. Nevertheless, although negotiations continue, Tullow is currently considering all options in pursuing the sale of its interests in Uganda,” it said.

Barclays said in a note the likelihood of a final decision on Uganda to come in as planned this year was declining.

“Tullow’s comment... indicates the potential for a fresh approach/structure to the deal that can be acceptable to all stakeholders, but increases uncertainty around the timing of the development,” Barclays said.

Tullow expects its first-half gross profit to be $500 million, yielding pre-dividend free cash flow of about $100 million that would rise to $450 million for the full year, excluding $200 million due to be paid on closure of the Uganda deal.

Tullow’s much-watched net debt is expected to be at $3 billion in June compared with $3.1 billion in December.