UK oil company Tullow is exiting the Guyana market after poor returns from its efforts in the offshore Orinduik Block.
In a press release, Tullow said that it has agreed to sell its total interest in Tullow Guyana B.V. (“TGBV”), which includes the Orinduik licence (Tullow 60% operated equity) in Guyana to Eco Guyana Oil and Gas (Barbados) Limited (“Eco”) (the “Transaction”) in exchange for a combination of upfront cash and contingent consideration.
“Tullow’s decision to exit the Orinduik licence is in line with its strategy to focus on its high return production assets in Africa and infrastructure-led exploration around producing hubs and delivers its objective to unlock value in emerging basins. In 2019, Tullow drilled two exploration wells on the Orinduik licence which yielded uncommercial oil discoveries. Nonetheless, Tullow recognises the material oil resource potential remaining in the Orinduik licence and as such, the terms of the Transaction allow Tullow to retain exposure to any potential future success in the region”, the release said.
Transaction summary:
– US$700,000 cash payment upon transfer of TGBV’s 60% equity and operatorship of the Orinduik licence to Eco, to be paid to Tullow Overseas Holdings B.V. (“TOHBV”) on completion of the Transaction (the “Initial Consideration”).
– Contingent consideration is payable to TOHBV, which is linked to a series of potential future milestones and triggered as follows:
o US$4 million in the event of a commercial discovery
o US$10 million payment upon the issuance of a production licence from the Government of Guyana
o Royalty payments on future production – 1.75% of the 60% working interest entitlement revenue net of capital expenditure and lifting costs
– Transaction and payment of the Initial Consideration outlined above is subject to certain market-standard conditions precedent, including Government and JV approvals.
– Proceeds from this transaction will be put towards general corporate purposes.
– Completion is expected to occur in the second half of 2023.
In January 2020, Tullow drilled the Carapa-1 well in the Kanuku licence. The well was uncommercial on a standalone basis but according to Tullow the result extended the prolific Cretaceous light oil play into the group’s Guyana acreage, across both the Kanuku and Orinduik blocks.
“In the Orinduik Block, the Jethro-1 and Joe-1 wells discovered 55 metres and 14 metres of net oil pay, respectively in Tertiary-age reservoirs. Full analysis of the oil found indicated both deepwater discoveries contained heavy oil with high sulphur content. In the Kanuku block, operated by Repsol, the Carapa-1 well drilled in a water depth of 80 metres discovered four metres of net oil pay containing good quality low sulphur oil, but in poorly developed reservoirs of Cretaceous age,” a Bloomberg report had stated.
