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Tullow Ordered to pay $254 million in Ghana Rig Dispute

The London Court order that Tullow, also operates in in Uganda as Tullow Uganda Operations Pty to pay Seadrill Ghana Operations Ltd. a contractual termination fee and other standby fees of estimated at 254 million in total.
03 Jul 2018 18:06
Tullow workers in Uganda
The English Commercial Court has ordered Tullow ordered to pay Seadrill fees for termination of rig contract in Ghana.

The London Court order that Tullow, also operates in in Uganda as Tullow Uganda Operations Pty to pay Seadrill Ghana Operations Ltd. a contractual termination fee and other standby fees of estimated at $254 million in total.

Tullow is required to pay the bill within the next 14 days and that it will be liable for a net amount of about $140 million, which compares with the provision of $128 million it had set aside.

Tullow Oil plc (Group) in a statement on Tuesday said it was is disappointed with the decision and maintains the view that it was right to terminate the West Leo contract for force majeure.

Tullow says it will now examine its options, including seeking leave to appeal the judgment.

Tullow said it is disappointed with the decision and will now examine its options, including seeking leave to appeal the judgment.

Seadrill Ghana Operations Ltd. had initiated the case against Tullow's wholly owned subsidiary Tullow Ghana Ltd., arguing that it was not entitled to terminate the West Leo rig contract in December 2016 by invoking the contract's force majeure provisions.

The ruling comes just few days after Tullow Oil plc (Group) announced a strong performance so fa in 2018. 

Tullow Oil plc (Group), Chief Executive, Paul Mcdade had indicated that they are to focus on growth of the business.

“We are accelerating production and cash flow across West Africa, we continue to make good progress towards sanctioning our developments in East Africa and, having refreshed the exploration portfolio, we are about to embark on a multi-year frontier drilling campaign targeting high-impact prospects in Africa and South America. There is much to look forward to for the remainder of the year and beyond."

Tullow entered into three Ugandan exploration licences in 2004 following the acquisition of Energy Africa. The Group added further equity and operatorship to the licences in the Lake Albert Rift Basin when it acquired Hardman Resources in 2007.

On 9 January 2017, Tullow announced that it has agreed a substantial farm-down of its assets in Uganda to Total. 

Under the Sale and Purchase Agreement, Tullow has agreed to transfer 21.57% of its 33.33% interest in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total for a total consideration of $900 million.

CNOOC Uganda Limited (CNOOC) subsequently exercised its pre-emption rights under the joint operating agreements to acquire 50% of the interests being transferred to Total on the same terms and conditions.

The farm-down leaves Tullow with an 11.76% interest in the upstream and pipeline, which will reduce to 10% when the Government of Uganda formally exercises its right to back-in.

The $900 million deal whose transaction is yet to be sanctioned by the Uganda government.

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