By Rogers Wanambwa
KIU, Main Campus – Tullow Oil says it expects a UGX264bn “earn-out” from Total Energies after a Final Investment Decision for the Tilenga Project in Uganda and the East African Crude Oil Pipeline (EACOP). The Irish-founded company said in a statement on Wednesday that the FID taken by Total Energies Ltd (Total) on February 1, 2022, has activated a contingent consideration of USD75 million (UGX264bn) in relation to Tullow’s sale of its assets in Uganda to Total in 2020.
An Earnout or Contingent consideration represents payments that buyers and sellers will pay or receive after the closing of a transaction based on future performance. Tullow Oil plc (Tullow), on November 10, 2020, announced that the sale of its assets in Uganda to Total had been completed with a USD500 million pay-out.
According to the sale agreement with Total energies, Tullow was to receive a further USD75 million when a Final Investment Decision is taken on the development project. It is supposed to receive an unspecified amount of money in contingent payments linked to the oil price payable after production commences.
It had been anticipated that the deal's conclusion would see Tullow Plc out of Uganda after almost sixteen years of successful oil exploration in the Albertine, where CNOOC and Total Energies are about to begin getting oil out of the ground.
Tullow’s transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2 followed approval by the government of Uganda after a tax agreement on October 21, 2020.