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Africa-focused Tullow Oil sells stakes in North Sea gas assets

Tullow Oil, which describes itself as Africa's leading independent oil company, has sold majority stakes in two of its UK North Sea gas assets to Faroe Petroleum in a $75.6 million deal, it has announced.

The oil and gas exploration and production group has sold parts of its Schooner and Ketch North Sea gas fields to Faroe in a deal which it expects to complete by the end of the year.

London-based Tullow has 54 licenses across 15 countries in Africa, and has corporate offices in Ghana, Uganda and South Africa. The company is pursuing an exploration-led growth strategy focused on light oil in Africa. Light oil is liquid petroleum with a relatively low density, which tends to command a higher price than heavy crude oil because it produces a higher percentage of diesel and gasoline when refined.

Schooner and Ketch have been critical to Tullow’s success and growth since they were acquired in 2005," said Tullow Oil chief executive Aidan Heavey, announcing the sale. "During a transformational period of growth for Tullow, they provided important, stable, cash flows which have helped to fund the Group’s successful frontier exploration campaigns. However, we have a clear strategy of constant and active portfolio management and have focused our business on conventional light oil."

The company is to sell 53.1% of its current 93.1% interest in Schooner and 60% of its Ketch asset, which it currently fully owns. Both the gas assets lie in the UK Southern North Sea.

"The total consideration is the equivalent of $75.6 million plus a royalty on future Schooner developments, subject to the terms of the sale and purchase agreement," a statement released by the company said. Faroe will pay $58.8 million on completion of the sale with the balance payable "on the achievement of cumulative production milestones," Tullow said. "The purchase has an effective date of 1 January 2014 and is expected to complete by the end of the year at which point operatorship of Schooner and Ketch will transfer to Faroe," the statement said.

Tullow said that the sale is in line with its strategy of active portfolio management and monetisation of assets, and indicated that it is seeking buyers for other assets.

"The (Tullow) group continues to market its remaining Southern North Sea gas assets in the UK and in the Netherlands, with value being increased in the latter following the gas discovery at the Vincent well announced earlier in the year," the statement said.

Heavey said that Tullow was continuing with its strategy of "farm-down" processes, which is a process by which a licensed exploration company sells a share in its rights over an oil or gas discovery to other companies.

"Sales and farm-down processes continue across Tullow and, although transactions are taking longer than initially expected, we are making good progress in tough but improving market conditions," Heavey said.

According to Reuters, Tullow acquired Schooner and Ketch almost 10 years ago, after acquiring them from Shell and Exxon Mobil.

Last week Tullow announced that it is to plug and abandon the Tapendar-1 exploration well off the coast of Mauritania, after revealing that the exploration "has not encountered hydrocarbons".

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