Tullow Oil has signed separate sale and purchase agreements with Oslo-listed Panoro Energy (Panoro) for all its assets in Equatorial Guinea and the Dussafu asset in Gabon, Africa.
The two agreements are valued at a total of up to $180m, which consists of up to $105m for the Equatorial Guinea transaction, and up to $70m for the Dussafu assets deal, and a further $5m consideration to be paid following the completion of these two deals.
The deals will aid Tullow in minimising its $2.4bn debt, which is about four times the size of its present market capitalisation of $577m.
Tullow is in discussions with its creditors to restructure its debt and expects these talks to conclude in the Q2 of 2021.
After the transactions, Tullow plans to focus more on its flagship fields in Ghana.
Tullow Oil CEO Rahul Dhir said: “These are important, value accretive deals for Tullow that will have a positive effect on our financial position as we look to further reduce our net debt and continue constructive discussions with our creditors. These transactions are also in line with our strategy of investing our capital on cash-generative, high return investment opportunities in our core portfolio.”
The transactions cover a 14.25% stake in Block G offshore Equatorial Guinea and 10% stake in Dussafu Marin Permit in Gabon.
Under the deal, Panoro will pay Tullow an initial $140m in cash with an option for an additional up to $40m associated to oil prices and the performance of the acquired assets.
Africa-focused Panoro intends to fund the deal with a $70m equity private placement and $90m in debt underwritten by commodities trader Trafigura.
Panoro’s major shareholders, Sundt and Kistefos, have announced their commitment to subscribe to the placement of shares, which is expected to close today.
With this deal, Panoro will add 6,900 barrels per day (bpd) net production, quadrupling its present output. The firm also intends increase its output to up to 12,000bpd.
Panoro expects that the increasing output will allow it to commence paying dividend in 2023.
Panoro plans to scout for acquisition opportunities in Africa.
Panoro CEO John Hamilton said: “There are a number of companies, including the oil majors, who are busy looking to rationalise their portfolios in some of these countries and we do see growth opportunities in these areas.”
Completion of the deals is expected in the first half of 2021.