Tullow Oil selling part of its North Sea gas interests to partner

TULLOW OIL is selling part of its North Sea natural gas interests to its partner Eni UK for €265 million. The company also announced yesterday that it has had positive test results from exploratory drilling off the coast of Ghana in west Africa.

The firm has reached an initial agreement to sell its 51.69 per cent holding in the Hewett gas fields in the North Sea to Eni UK for £210 million (€265 million).

Tullow said the agreement formed the basis for “definitive sale and purchase” documents that the pair would exchange over the coming weeks. It expected the deal to go through by the end of this year.

Eni is one of Tullow’s partners in the Hewett field, and the sale will increase its overall interest there to 89 per cent.

Commenting on the deal, Tullow chief executive Aidan Heavey said it would free up capital for further investment. The company had sold a range of assets that were not central to its operations this year.

“Today’s transaction brings total 2008 portfolio-management proceeds to approximately $1 billion (€646 million) and leaves Tullow ideally placed to fund the major growth anticipated over the coming years,” he said.

Tullow is producing gas from a number of other fields in the North Sea, and said yesterday it planned to continue exporting the fuel via the Bacton terminal in the Thames area.

Merill Lynch analyst Andrew Knott said the deal valued the Hewett field at more than 10 times its estimated worth. He suggested that this was because the area was seen as a long-term prospect for gas storage.

Mr Knott added that the $1 billion it had earned from asset sales over the last year has left Tullow almost debt free.

Tullow also reported yesterday that test drilling of a well off the coast of Ghana produced oil at a rate of 5,200 barrels a day.

The well, known as Mahogany-2, was drilled to test the potential of the Jubilee field off the African country’s coast. The company said the result confirmed that it was highly productive.

It also pointed out that the available test equipment and facilities limited the rate at which oil flowed from the well.

Mr Knott said Merrill Lynch remained “bullish” about the potential of Tullow’s interests in Ghana. He recommended that investors buy the stock yesterday.

Tullow shares added 35 cent, more than 3 per cent, to close at €11.85 on the Dublin market yesterday.