Total goes all-in on Uganda as Tullow reduces position in US$900m deal

Total is buying 21.57% of Tullow Oil's 33.33% stake in the Lake Albert project, northwest Uganda, for a headline consideration of US$900 million. Total, Tullow and CNOOC formerly held equal one-third stakes in the project. Tullow is seeking to reduce the burden of its capital commitments in East Africa. Since 2005, over 1.4 billion barrels of commercial reserves have been discovered in the Lake Albert Basin. A basin-wide development project will supply a peak of just over 200 kb/d to a new-build refinery and to international markets through a Tanzanian export pipeline. We assume FID in Q1 2018 and first oil in 2022. Of the US$900 million consideration, only US$100 million will be paid on deal completion, with the remainder falling across various milestones. We have calculated an effective consideration of US$717 million (2017 real). Our valuation is lower than this, but is highly sensitive to oil prices.