Maersk Oil delivers boost for Tullow with east Africa deal
Denmark’s Maersk Oil beat several rivals to buy half of Africa Oil’s stakes in five east African oil blocks for up to $845m in a deal that delivered an immediate boost to the UK’s Tullow Oil and will revive international interest in the region’s push to become a fuel exporter.
Shares in Tullow Oil, which owns 50 per cent of four of the five blocks, jumped 19 per cent at one point on news of the deal. They have plunged 38 per cent this year as the oil price has fallen. Shares in Africa Oil, which is listed in Stockholm and Toronto, soared 48 per cent.
Tullow closed the day up 4.45 per cent at 228.1p. Africa Oil was up more than 27 per cent at C$2.16 at midday in Toronto.
Maersk Oil, which is part of the Maersk group, will pay $365m on completion of the deal for 25 per cent stakes in three Kenyan blocks and one Ethiopian block and a 15 per cent stake in an additional Ethiopian block. All are in the Turkana region that straddles the two nations.
Additional payments of up to $485m will be paid if the fields contain more oil than is estimated and it is delivered ahead of schedule.
Keith Hill, Africa Oil’s chief executive, said a dozen companies expressed an interest in the stakes of which “several made firm offers”. “Maersk’s was above the competition,” he said.
Jakob Thomasen, Maersk Oil’s chief executive, said the deal was part of the company’s strategy to rebuild “the exploration business with new acreage positions and pre-development discoveries to balance the risk profile in our portfolio”.
The company already has interests in Africa; it is producing in Algeria is exploring in Angola.
Mr Thomasen said that because the company was part of the cash-rich Maersk group it was “in a position, where we can take advantage of opportunities arising in current market conditions”.
Mr Hill said the biggest risk to the projects was delays in building a pipeline from the fields, and others in neighbouring Uganda, to the coast.
Uganda and Kenya have agreed a route through northern Kenya but some upstream operators in the region, notably Total — which has significant interests in Uganda — has expressed reservations about the route because it passes close to the Somalia border and regions where al-Shabaab, an Islamist group linked to al-Qaeda, is active.
“This is a big vote of confidence on the quality and materiality of these assets,” analysts from FirstEnergy Capital said in a note. The announcement is “very positive” because it provides “imminent cash injection” and eliminates any funding concerns, they said.
In addition to its east African assets, Tullow runs the Jubilee field in Ghana and is developing the Tweneboa, Enyenra and Ntomme project nearby, the ownership of which the Ghanaian and Ivorian governments are fighting over.