Tullow Overseas Holdings BV has entered into a Sh15.6 billion transaction to divest its entire Kenyan operations to Gulf Energy Ltd, a move the British oil and gas company says will ease its debt burden and sharpen its focus.

According to Tullow, the agreement, which remains subject to regulatory approvals, outlines a three-tiered payment structure beginning with Sh5.2 billion payable once the deal concludes.

Another Sh5.2 billion will be triggered by either the approval of a Field Development Plan or by 30 June 2026—whichever comes first. The final Sh5.2 billion will be paid gradually over five years, beginning in the third quarter of 2028.

“In addition, Tullow will be entitled to royalty payments subject to certain conditions. Tullow also retains a back-in right for a 30 per cent participation in potential future development phases at no cost,” the company said in a statement.

The deal also ensures a full transfer of Tullow’s liabilities, past and future, to Gulf Energy Ltd, as part of a corporate sale of its entire Kenyan portfolio.

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These assets are currently held under Tullow Kenya BV, the subsidiary set to change ownership.

Tullow said the sale would help strengthen its balance sheet, marking progress in its drive to reduce debt.

“The Transaction is accretive to both equity and leverage and further accelerates Tullow's deleveraging process,” it stated.

In a procedural note, the company added, “This transaction will constitute a significant transaction for the purposes of UKLR 7 of the UK Listing Rules (as came into effect on 29 July 2024). Further announcements will be made in due course upon full-form transaction documentation being entered into by the parties.”

Regulatory consent remains a prerequisite for the deal’s completion.