Tullow Oil has exercised its back-in right for a 10% stake in Gabon’s Dussafu production-sharing contract (PSC), although the amount payable is under dispute.
Tullow, which recently saw a major share price decline and the loss of top executives in the face of reduced production expectations in 2020, has agreed a deed of novation and amendment. Once the deal has completed, the other parties’ stakes will be reduced to 73.5% for BW Energy, 9% for Gabon Oil Co. (GOC) and 7.5% for Panoro Energy.
Completion of the back-in is based on Tullow covering historic costs associated with development of the Dussafu work. The undisputed cost is $40.9 million, BW Energy said, falling to $19.8mn after adjusting for Tullow’s share of oil lifted. Of this amount, $15.9mn is owed to BW Energy and $1.7mn to Panoro.
The disputed share is another $18.7mn, which would be divided 81.667% to BW Energy and 8.333% to Panoro.
BW Energy said that if an agreement could not be reached the dispute would go to simplified arbitration.
While the commerciality of the field was initially a question of some debate, BW Energy’s work on the area has seen it brought into production and generating cash.
The Tortue field, on the Dussafu licence, began producing in September 2018. Production was around 12,000 barrels per day gross in the first half of this year and with expansion plans under way, with the aim of increasing this to 16,000 bpd in the first half of 2020 and then 23,000 bpd in the second half.
This increase will be driven by Phase 2 work on the Tortue field, which is under way. Panoro, last week, said the DTM-4H well had been successfully completed and was expected to be hooked up next year. The second well, DTM-5H, has been spudded. First production from Phase 2 is due in March.
BW Energy approved expansion plans for its Ruche development, with the aim of taking it to 30,000 bpd through the incorporation of the Hibiscus find. Production will be tied to the Adolo floating production, storage and offloading (FPSO) unit.
GOC bought into the field in March with the payment of $28.5mn, for its 10% stake.