News
Tullow loses money and rights as oil deal goes bust
An oil rig in readiness to drill in western Uganda, near the shores of Lake Albert, June 15, 2007. Picture: File
Posted Monday, August 30 2010 at 15:34
The EastAfrican has learnt that Tullow was desperate to close the deal because it had not been completely honest with its shareholders. For months, it had been making positive statements about the Ugandan business, which pumped up its share price on the London Stock Exchange.
Such misrepresentations included data on oil finds that included finds by Heritage, which at the time did not belong to Tullow. A collapse of the transfer deal would expose this, threatening the $3.1 billion that has so far been spent by the company in Uganda.
Tullow’s $3.1 billion exposure in Uganda is made up as follows: The $1.1 billion Hardman buyout, $500 million exploration of block 2 and the $1.45 billion Heritage buyout. Block 3A expires on September 7 while Block 1 expires next year.
Questions are also emerging on how Tullow racked up such huge costs for its operations in Uganda.
While Heritage spent $150 million to explore 6,279 square kilometers, Tullow claims to have spent $500 million on a much smaller area.
Unless there are demonstrable geological differences to justify the costs, something is not right with Tullow’s costs, which are deductible from sales.
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