LONDON/PARIS Jan 9 French oil major Total
has expanded its stake in Uganda's Lake Albert oil
project by snapping up most of Tullow Oil's stake for
$900 million, the companies said on Monday.
The deal, which includes $200 million in cash and $700
million to be used for future development costs of the Ugandan
fields and pipelines, means Tullow will cease to be an operator
in Uganda and give Total access to valuable fresh oil reserves.
The Lake Albert Development Project will produce around
230,000 barrels per day (bpd) and start producing oil by the end
of 2020, Tullow said.
"Our increased share in the Lake Albert project will bring
significant value to Total and fits with our strategy of
acquiring resources for less than $3/barrel with upside
potential," Total Chief Executive Patrick Pouyanne said.
Tullow estimated the development phase of the project would
cost $5.2 billion, of which $3 billion will be required to reach
first oil production.
With net debt expected at $4.9 billion by the end of 2016,
Tullow has been looking to cash in some of its assets. The
African-focused oil company expects a write-off of around $400
million in its 2016 results due to the deal.
"This deal ... strengthens Tullow's finances and provides an
endorsement for the Uganda project; some of this goodwill may
even rub off on Tullow's analogous Kenyan project," said Al
Stanton, analyst at RBC Capital Markets.
The news lifted Tullow's shares to the highest in 18 months
at 352.1 pence a share.
Last August, Uganda granted Total and Tullow production
licences that paved the way for the project.
(Reporting by Karolin Schaps in London and Bate Felix in Paris;
Editing by Alison Williams)