Tullow Oil Plc (Tullow) announced its decision to divest its complete stake in Tullow Guyana B.V. (TGBV) which encompasses the Orinduik licence in the South American country. The sale will be conducted with Eco Guyana Oil and Gas (Barbados) Limited (Eco) in a strategic move the company said, aligns with its emphasis on high-yield production assets in Africa and exploration focused around productive hubs.
The Orinduik Block lies 170 kilometres (km) offshore. Tullow owns 60% operating interest, while Eco-Atlantic has 15% working interest and TotalEnergies/Qatar Energy JV has 25%.
In its August 10 announcement, Tullow said the transaction, which includes the transfer of its 60% operated equity and operatorship of the Orinduik licence to Eco, will be realized through a mix of upfront cash and contingent considerations. Upon completion of the transaction, Tullow will receive an initial cash payment of US$700,000. This payment will be directed to Tullow Overseas Holdings B.V. (TOHBV), a subsidiary of Tullow. The deal also stipulates potential future payouts for Tullow, contingent upon certain milestones being met.
Eco will pay Tullow an additional US$4 million in the event of a commercial discovery within the Orinduik licence area. Furthermore, a US$10 million payment will be triggered upon the issuance of a production license by the Government of Guyana. This arrangement highlights Tullow’s strategic decision to maintain exposure to the potential success of the region, even as it divests its immediate stake.
In addition to these milestone-based payments, Tullow is set to receive royalty payments on future production from the Orinduik licence. These royalties will amount to 1.75% of the 60% working interest entitlement revenue, calculated net capital expenditure and lifting costs.
The successful completion of the transaction is contingent upon the fulfillment of market-standard conditions precedent, which includes securing the necessary approvals from both the Government of Guyana and the joint venture partners. The anticipated closing is scheduled for the latter part of 2023.
Jean-Medard Madama, the Director of Exploration, Non-Operated Assets, and Decommissioning at Tullow, emphasized the strategic alignment of this transaction with Tullow’s overarching portfolio optimization strategy. He expressed the company’s commitment to unlocking value from emerging basin licenses, while simultaneously channeling capital expenditures towards lucrative producing assets and growth prospects linked to existing infrastructure.
With 11 billion barrels of oil found since 2015 by ExxonMobil, spread over 30 commercial discoveries at Stabroek Block, and successes at other acreages, the Guyana Basin is considered the hottest for exploration on the continent.
Tullow’s departure will therefore no doubt come as a surprise to industry players, as multiple oil exploration companies look to get in on the action off Guyana’s shores.