Tullow Oil moved closer to exiting its Kenyan operations, announcing Monday the signing of a sales and purchase agreement with Gulf Energy.
The U.K.-listed oil and gas explorer in April 15, 2025 agreed to sell its local oil deposits to Nairobi-based Gulf Energy for at least $120 million (Sh15.5 billion) as it strives to reduce its debt.
Managing director of Tullow Kenya BV, Madhan Srinivasan confirmed the signing of the agreement with Gulf affiliate Auron Energy E&P Ltd. in a statement.
It signed a sale and purchase agreement (SPA) with Tullow (as guarantor for the Seller), Auron Energy E&P Limited (the “Purchaser”), an affiliate of Kenya’s Gulf Energy Ltd.
Srinivasan said the signing of the SPA marks a pivotal milestone in the ongoing transaction and brings the sale closer to completion.
In the transaction, Gulf Energy Ltd shall act as guarantor for the Purchaser (the “Purchaser Guarantor”) for the sale and purchase of 100% of the shares in Tullow Kenya BV (“Tullow Kenya”), which holds Tullow’s entire working interests in Kenya (the “Disposed Assets”) for a minimum cash consideration of US$120 million (the “Transaction”), subject to customary adjustments.
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 certain conditions. Tullow also retains a no-cost back-in right for a 30% participation in potential future development phases.
This right can be exercised if a third-party investor participates in future development phases, whether through a sale or farm-down of the Purchaser’s interest in the assets.
Richard Miller, Chief Financial Officer and Interim Chief Executive Officer, Tullow, commented:
“We are pleased to announce the signing of the Kenyan SPA, marking another step closer to completion of the Transaction with Gulf Energy. 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.”
He said they are pleased to retain a potentially material zero-cost value option to participate in future development phases.
We continue to advance plans to optimise our capital structure during 2025.
“Coupled with the sale of our Gabonese assets, the disposal of these non-core assets is expected to provide cash proceeds of US$380 million in 2025.”
Transaction highlights
Corporate sale of Tullow’s entire Kenyan portfolio of assets, representing c.463 million barrels of 2C resources.
Minimum cash consideration of US$120 million, with additional royalty payments subject to certain conditions.
Tullow retains a back-in right for a 30% participation in potential future development phases at no historic cost. This right can be exercised if a third-party investor participates in future development phases, whether through a sale or farm-down of the Purchaser’s interest in the assets.
All past and future decommissioning liabilities and all material past and future environmental liabilities will be transferred to the Purchaser as part of the Transaction, details of which are noted in paragraph 2 of Part C of Appendix III.
The conditions precedent to be met in advance of completion of the Transaction include (i) approval of the Transaction by the Competition Authority of Kenya, and (ii) the Seller and the Purchaser agreeing and implementing a plan to achieve a physical and functional separation of Tullow Kenya from the Tullow group.
Completion of the Transaction, satisfaction of conditions precedent and receipt of funds from Tranche A and FDP approval (and consequent receipt of funds from Tranche B) are expected in 2025.
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