Tullow Oil sells Uganda asset to Total for $575m

Tullow said proceeds from the sale, which marks the first step in a portfolio management programme to raise more than $1bn, will be used to reduce net debt, strengthen the balance sheet and move the company towards "a more conservative" capital structure.

The group will receive $500m in cash and $75m once a final investment decision is reached on the project.

News of the sale came alongside a trading update in which Tullow said it has averaged production of 75,800 barrels of oil per day in the first quarter, in line with expectations. The group also reiterated full-year guidance for production of between 70,000 and 80,0000 bopd.

Tullow said the first-quarter realised oil price was around $56 a barrel including the benefit of approximately $27m of net hedge receipts during the period.

Executive chair Dorothy Thompson said: "I am very pleased with the material progress Tullow has made in the first quarter of this year given the challenges facing the group after our performance in 2019, the Covid-19 pandemic and recent very low oil prices.

"Operationally, we are delivering well against our production targets following improvements put in place by our asset team in Ghana and we have made significant changes to the structure and cost base of our organisation. Finally, the recent successful redetermination of our Reserves Based Lending facility (RBL) has underpinned Tullow's liquidity and the strength of our assets."

At 1020 BST, the shares were up 28% at 26.07p.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "Tullow has done an excellent job making the best of a bad situation.

"The Ugandan field has been problematic for some time, and realising some value up front would be welcome in any scenario. The cash reinforces the balance sheet ahead of what look to be some rocky times for the sector and there’s even scope for further payments if the oil price picks up.

"Meanwhile an extensive hedging programme has kept the group’s received oil prices well above the pretty ugly market price, and looks set to continue doing so for much of the next year. Further efforts to reduce costs have also yielded results and, as a result, Tullow looks better placed to weather the current market turmoil than many larger companies, at least in the short term."