Tullow shares rise after the oil company won a $320 million tax break

Shares in Tullow Oil jumped on Friday after the London-listed company revealed it would no longer have to pay $320m (£258m) in tax.

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

The tribunal investigated the applicability of the Ghana subsidiary’s 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 would not apply to Tullow Ghana ‘as it is outside the tax regime provided for in the Petroleum Treaties’, according to the group.

Tullow said: ‘As a result of the Tribunal’s ruling, Tullow Ghana is not liable 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 oil agreements.

‘Tullow continues to work with the Government of Ghana on two further disputed tax claims, which were referred to the ICC in February 2023, with a view to resolving these disputes on a mutually acceptable basis.’

Shares in Tullow rose 12 percent to 24.5 percent by mid-morning.

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

Tullow shares were dealt another blow last month after takeover contender Kosmos Energy dropped its pursuit of its London-listed rival.

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

Tullow is struggling to overcome huge debt, which it hopes to reduce to $1.4 billion by the end of the year.

Its valuation has fallen from some £15bn at its peak in 2012 to a market capitalization of just £319m today, according to LSEG data.

The group had been on a winning streak of major oilfield discoveries in Ghana and Uganda during the ground zero, but that came to an abrupt end. Debts skyrocketed after numerous unsuccessful investigations.

The global race to net zero is also increasingly damaging, and Tullow has phased out its research in recent years to focus on the efficient management of existing assets.

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

Chief executive Rahul Dhir said the tribunal’s decision on Tullow’s tax liabilities ‘removes a material problem 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.’