The news that the Ugandan government has finally awarded the U.K. oil firm three production licenses brings “extra flexibility” to its balance sheet
Oil industry analysts welcomed news from U.K. firm Tullow Oil Friday that it had finally been awarded three production licenses by the Ugandan government, with some who follow the company suggesting that Tullow could double production during the next five years.
New production sharing agreements (PSAs) cover the EA-1 and Kanywataba licenses in the Lake Albert Rift Basin, while Tullow has also been awarded the Kingfisher production license.
Tullow watchers expect the deal to ultimately unlock $10 billion worth of investments, which include Uganda’s first refinery and a pipeline to the Indian Ocean, in the country’s nascent oil sector. Ugandan geologists have indicated that there could be as much as six billion barrels of oil in the country.
The deal takes any funding concerns that Tullow might have “off the table”, according to analysts at Bank of America Merrill Lynch.
“Crucially, closing the Uganda deal is key to [bringing] extra flexibility to the balance sheet, particularly as TLW has embarked on a US $2 billion capex program this year. Concerns over TLW funding position now prove completely overstated and we believe that this news should allow the market to focus on the strong fundamentals that the company offers,” said the investment bank.
BoAML added: “We believe that the development of the Tweneboa/Enyenra (TEN) complex along with new phases of the Jubilee field and Uganda could easily double TLW’s production over the next five years.”
“This will further ease Tullow’s balance sheet and gives them the go-ahead to finally start producing from the basin,” said Anish Kapadia, an oil analyst at Tudor Pickering Holt.