West Africa: Tullow Agrees US$180 million Sale of Assets to Panoro
Tullow has signed two separate sale and purchase agreements with Panoro, pursuant to which Tullow has agreed to the sale to Panoro of its entire interest in Equatorial Guinea through the sale of Tullow Equatorial Guinea Limited and its entire interest in the Dussafu Marin Permit Exploration and Production Sharing contract in Gabon, in each case with an effective date of 1 July 2020.
The EG Transaction constitutes a Class 1 transaction under the UK Listing Rules and is subject to the approval of Tullow’s shareholders. The Dussafu Transaction constitutes a Class 2 transaction and therefore does not require shareholder approval. Completion of the EG Transaction and the Dussafu Transaction are not inter-conditional. However, both transactions are subject to the approval by Panoro’s shareholders of a proposed equity fundraising, to part finance the transactions by Panoro, and also customary government and other approvals.
Panoro’s two largest shareholders, Sundt AS and Kistefos AS, have committed to subscribe for new ordinary shares in Panoro, representing an amount of NOK 100 million (approximately US$11.6 million) and NOK 86 million (approximately US$10 million) respectively, in Panoro’s equity fundraising. In addition, members of Panoro’s board and executive management team, including its Chairman, Julien Balkany and its CEO, John Hamilton, are participating in the placing.
Completion of both transactions and receipt of funds is expected in the first half of 2021.
EG Transaction highlights
Tullow, Panoro and their respective subsidiaries, Tullow Overseas Holdings B.V. and Panoro Energy Holding B.V. have signed a sale and purchase agreement (EG SPA), with the consideration payable thereunder calculated with effect from 1 July 2020, pursuant to which Tullow Overseas Holdings B.V. has agreed to transfer its entire shareholding in Tullow Equatorial Guinea Limited (TEGL) to Panoro Energy Holding B.V. for cash consideration of US$89 million payable at completion of the EG Transaction (based on a locked box mechanism as at 1 July 2020 and subject to a customary locked box indemnity for a period of 6 months after completion).
Deferred consideration of US$5 million is payable on the later of
(i) completion of the EG Transaction, or
(ii) within two business days of completion of the Dussafu Transaction and additional contingent consideration payments of up to a maximum of US$16 million in aggregate will be payable over a 5 year period, triggered by meeting a production threshold and payable in years where that threshold is met and average oil prices are greater than US$60/bbl.
Confirmation has been received from the Ministry of Finance, Economy and Planning that the disposal of TEGL will not trigger any Equatorial Guinean tax. Equatorial Guinea’s national oil company (GEPetrol) has waived its preferential right to acquire Tullow’s interests in Equatorial Guinea. The EG Transaction is not subject to any further rights of pre-emption.
Subject to completion, the EG Transaction will remove all future capital expenditure associated with TEGL, forecast to be around US$12 million in 2021 and Tullow will no longer hold any assets in Equatorial Guinea beyond retaining exposure to the Equatorial Guinea operations via the potential contingent payments described above. Upon completion of this transaction, Tullow and its consolidated subsidiaries and subsidiary undertakings’ (the Group) production forecast for 2021 will reduce by c. 4,500 bopd. Group 2P reserves will reduce by approximately 14 million barrels, 3P reserves will reduce by approximately 22 million barrels and 2C resources will reduce by approximately 26 million barrels.
Under the UK Listing Rules, the EG Transaction constitutes a Class 1 transaction and is therefore conditional on the approval of Tullow’s shareholders by a simple majority.
Subject to the satisfaction of the conditions to completion of the EG Transaction, including Tullow and Panoro shareholder approvals and customary government and other approvals, the EG Transaction is expected to complete in the first half of 2021.
Meanwhile Panoro has announced that it has successfully raised US$ 70 million in gross proceeds through the Private Placement of 38,276,451 new shares in the Company .
The net proceeds from the Private Placement will be used to partially finance the acquisitions in Equatorial Guinea and Gabon, and related fees and expenses as well as for general corporate purposes. In the event that one or both acquisitions do not close, the net proceeds will (in whole or in part) be used for general corporate purposes.