Tullow shares gush as oil agency handed $320m tax exemption

Tullow Oil shares soared on Friday after the London-listed firm revealed it would no longer have to pay a tax bill worth $320million (£258million).

West Africa-focused Tullow, which was founded in Ireland and is headquartered in London, told investors after market close on Thursday that its Ghana subsidiary had been cleared of liability by a tribunal of the International Chamber of Commerce.

The tribunal had been exploring the applicability of Ghana’s 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 is not applicable to Tullow Ghana ‘since it falls outside of the tax regime provided for in the Petroleum Agreements’, according to the group.

Tullow said: ‘As a result of the Tribunal’s award, Tullow Ghana is not liable to pay the $320million BPRT assessment issued by the Ghana Revenue Authority and will have no future exposure to BPRT in respect of its operations under the Petroleum Agreements.

‘Tullow continues to engage with the Government of Ghana on two further 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 per cent to 24.5 per cent by midmorning.

However, they remain roughly 40 per cent lower than 12 months ago and have lost almost 60 per cent over the last five years.

Tullow shares were handed another blow last month after takeover suitor Kosmos Energy abandoned its pursuit of its London-listed rival.

It had been hoped the deal would offer compelling operational synergies as the pair share the same core assets – the Jubilee and TEN fields in offshore Ghana – and help repair Tullow’s balance sheet.

Tullow has been fighting to overcome an enormous debt pile, which it hopes to have reduced to $1.4billion by the end of the year.

It has seen its valuation plunge from some £15billion at its 2012 peak to a market capitalisation of just £319million today, according to LSEG data.

The group was on a winning streak of major oil field discoveries in Ghana and Uganda during the noughties, but this abruptly came to an end. Debts skyrocketed after a number of unsuccessful exploration attempt.

The global race to net zero has also increasingly been damaging, with Tullow in recent years gradually calling an end to its exploration efforts to focus on effectively managing existing assets.

Tullow’s existing strategy aims to have less than $1billion in net debt by 2025 and cash gearing below 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 maximising value from the Jubilee and TEN fields.’