Oil giant Tullow is selling $300 millions worth of convertible bonds to raise money for the development of new oil fields in East and West Africa.
This is expected to diversify funding sources for the London Stock Exchange-listed firm.
“The proposed convertible bond issue will further diversify sources of funding and give the company access to a new investor base,” said Tullow’s chief financial officer Ian Springett.
The bonds will be issued by Tullow Oil (Jersey) Ltd, a wholly owned subsidiary incorporated in Jersey. Barclays Bank Plc and BNP Paribas are acting as joint bookrunners.
The private placement is only open to institutional investors.
The bonds are expected to carry a coupon of between 5.875 per cent and 6.625 per cent a year payable semi-annually in arrears on January 12 and July 12 every year.
The first interest payment date is January 12, 2017. The bonds is convertible to fully paid ordinary shares of Tullow is the holder so desires.
The initial conversion price is expected to be set at a premium of between 30 per cent and 35 per cent the average price of Tullow’s ordinary shares on London Stock Exchange between opening and closing of the market on July 6.
In April, Tullow announced that banks had agreed on amendment of a reserve-based lending of $3.5 billion and an extension of its corporate facility to April 2018. The facility commitments remain at $1 billion until April 2017. This will help Tullow keep finances stable in the wake of weak crude oil prices.
Tullow and its partners have found 750 million barrels of oil in northwestern Kenya and 6.5 billion barrels in western Uganda.
Tullow will move to the production stage once Uganda’s government grants approval.
Tullow, Africa Oil Corporation and Maersk Oil jointly plan to drill four wells in the South Lokichar basin in Kenya.
Front end engineering and design of Kenya’s crude pipeline from South Lokichar to Lamu port on the Coast and Uganda’s export facility from Hoima through northern Tanzania to Tanga port, are expected to start in 2017.
Tullow, Africa Oil and Maersk are currently negotiating a joint development agreement with Kenyan government to implement the Kenya crude oil pipeline.
“In East Africa, the governments’ agreement that there will be separate pipelines to develop resources in Uganda and Kenya brings greater clarity to both projects,” said Tullow chief executive officer Aidan Heavey.
Tullow submitted a draft of field development plan to Kenya’s Energy Ministry in December 2015, covering flow pipelines and other requisite production facilities for the South Lokichar basin.
The joint venture partners are currently carrying out field development studies, after which the final plan will be submitted to the government.
An early oil pilot plan to transport oil from South Lokichar to Mombasa port using a combination of road and rail is being assessed to assist in full field development planning.
The plan will make use of existing discovery wells in Lokichar and crude storage tanks to initially produce 2,000 barrels of oil per day in July 2017 subject to Tullow signing an agreement with the national government and the Turkana county government.
Source: business daily