Tullow Oil has reached an agreement to divest its Kenyan subsidiary, Tullow Kenya, to Gulf Energy for a minimum consideration of $120m (£90.48m).

The deal was signed by its own subsidiary Tullow Overseas Holdings.

The transaction's payment structure includes an initial $40m upon completion, another $40m due by 30 June 2026, or with the approval of the field development plan, whichever comes first, and the final $40m to be paid over five years, starting from the third quarter of 2028.

Additionally, Tullow retains the right to a royalty payment, contingent on certain conditions, and a back-in option for a 30% stake in any future development phases at no cost.

This deal is not only accretive to Tullow's equity and leverage metrics but also expedites the company's deleveraging efforts.

This transaction will be classified as a significant transaction under the UK Listing Rules (UKLR), specifically UKLR 7 as updated on 29 July 2024 .

Tullow interim chief executive officer and chief financial officer Richard Miller said: “Today’s announcement marks another step forward in Tullow’s accelerated deleveraging journey with near-term cash receipts of $80m and mitigating significant capital exposure, whilst retaining a material option on the future development of the project. I am confident that the proceeds from this transaction, coupled with the $300m from the disposal of our assets in Gabon, position the business strongly for a successful refinancing.

“We look forward to working with Gulf Energy, who have the requisite financing to complete the transaction and are a strong and credible counterparty, and by doing so, unlock material value for the people of Kenya.”

Last month, Tullow Oil agreed to sell its Gabon assets to Gabon Oil Company for $300m, net of tax.

The deal encompasses Tullow's Gabonese assets, which are expected to produce 10,000 barrels of oil per day by 2025 and include around 36 million barrels of proven reserves.