Tullow shares rise as an oil company grants a $320 million tax break
Tullow Oil shares rose on Friday after the London-listed company revealed it would no longer have to pay a $320 million (£258 million) tax bill.
West Africa-focused Tullow, founded in Ireland and headquartered in London, told investors after the market closed on Thursday that its Ghanaian subsidiary had been cleared of liability by an International Chamber of Commerce tribunal.
The tribunal had examined the applicability of the Ghana Branch Profit Remittance tax to Tullow’s Deepwater Tano and West Cape Three Points Petroleum Agreements, which include the group’s offshore Jubilee and TEN fields.
Ultimately, it was decided that the tax does not apply to Tullow Ghana “as it falls outside the tax regime provided for in the Petroleum Agreements,” the group said.
Tullow said: ‘As a result of the Tribunal’s ruling, Tullow Ghana will not be liable to pay the $320 million BPRT assessment issued by the Ghana Revenue Authority and will have no future exposure to BPRT in relation to its activities under the Petroleum Agreements.
“Tullow continues to work with the Government of Ghana on two new disputed tax claims, which were referred to the ICC in February 2023, with the aim of resolving these disputes on a mutually acceptable basis.”
Tullow Shares were up 12 percent to 24.5 percent by mid-morning.
A Tullow Oil drill at the Jubilee field, off the coast of Ghana
However, they remain roughly 40 percent lower than twelve months ago and have lost almost 60 percent over the past five years.
Tullow shares took another hit last month after takeover candidate Kosmos Energy abandoned its search for its London-listed rival.
It was hoped the deal would offer compelling operational synergies as the pair would share the same core assets – the Jubilee and TEN fields in offshore Ghana – and help restore Tullow’s balance sheet.
Tullow has been fighting to overcome a huge debt mountain, which it hopes will be reduced to $1.4 billion by the end of the year.
According to LSEG data, its valuation has fallen from around £15 billion at its 2012 peak to a market capitalization of just £319 million today.
The group was busy extracting large oil fields in Ghana and Uganda in the 1990s, but that came to an abrupt end. Debts skyrocketed after a number of failed exploration attempts.
The global race to net zero has also become increasingly damaging, with Tullow gradually winding down its exploration efforts in recent years to focus on effectively managing existing assets.
Tullow’s existing strategy is to have net debt of less than $1 billion by 2025 and cash gearing of less than 1x in the near term.
Chief executive Rahul Dhir said the tribunal’s decision on Tullow’s tax liabilities “removes a material overhang from our business”.
He added: “I look forward to constructive discussions with the Government of Ghana to resolve the remaining claims so that our collective focus remains on maximizing the value of the Jubilee and TEN fields.”
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