Tullow shares soar as oil company gets $320 million tax break

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

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

The court had been exploring the applicability of Ghana’s branch profits remittance tax to Tullow’s Deepwater Tano and West Cape Three Points oil deals, which include the group’s Jubilee and TEN offshore fields.

In the end it was decided that the tax is not applicable to Tullow Ghana “because it falls outside 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 required to pay the $320 million 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 other 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 they increased between 12 percent and 24.5 percent by mid-morning.

However, they are still about 40 percent lower than 12 months ago and have lost almost 60 percent over the past five years.

Tullow shares suffered another hit last month after takeover suitor Kosmos Energy abandoned its pursuit of its London-listed rival.

The deal was expected to offer compelling operational synergies as both share the same core assets (the Jubilee and TEN fields offshore Ghana) and would help repair Tullow’s balance sheet.

Tullow has been struggling to overcome huge debt, which it hopes to have reduced to $1.4 billion by the end of the year.

It has seen its valuation fall from around £15bn at its 2012 peak to a market capitalization of just £319m today, according to LSEG data.

The group was on a winning streak of major oilfield discoveries in Ghana and Uganda during the 2000s, but this came to an abrupt end. Debts skyrocketed after several failed exploration attempts.

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

Tullow’s current strategy aims to have less than $1 billion in net debt by 2025 and less than 1x cash leverage in the near term.

Chief executive Rahul Dhir said the court’s decision on Tullow’s tax liabilities “removes a material excess 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.”