The decision by energy giant Tullow Oil PLC to divest from Kenya has accelerated with the British firm announcing the signing of a sale agreement with Auron Energy E&P. Auron Energy E&P Limited is an affiliate of Kenya’s Gulf Energy Ltd.

In the sale and purchase agreement (SPA), Tullow Oil PLC will dispose its entire stake in Tullow Kenya BV for US$120 million or KES15.4 billion.

According to Tullow Kenya BV Managing Director Madhan Srinivasan, the agreement reflects "a pivotal milestone" as the oil explorer engages forward gear in reducing the risk associated with its debt refinancing that is due this year.

"For a total consideration of at least US$120 million, the Transaction supports our strategic priority to strengthen the balance sheet, with the first two payments totalling US$80 million expected before the end of the year," stated Richard Miller, Chief Financial Officer and Interim Chief Executive Officer, Tullow.

He added, "we are pleased to retain a potentially material zero-cost value option to participate in future development phases."

In an update, the British company said the consideration will be split into a US$40 million payment due on completion, US$40 million payable at the earlier of Field Development Plan (FDP) approval or 30 June 2026, and US$40 million payable over five years from the third quarter of 2028 onwards. 

Additionally, Tullow will be entitled to royalty payments, subject to meeting certain conditions.

"The seller will receive quarterly royalty payments of US$0.5/bbl multiplied by 80 percent of total production, subject to oil price, resource and production-related conditions to the extent that the Purchaser retains its interest in the disposed assets," the notice explains.

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