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Tullow to buy EO Group’s oil interests in Ghana for $305m

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Tullow Oil has announced today that it has entered into a conditional agreement to acquire the interests of EO Group Limited (EO), a Ghanaian owned-oil producer, “consisting of its entire interests offshore Ghana, for a combined share and cash consideration of $305 million,” it says.

In a press release issued and copied to ghanabusinessnews.com Thursday May 26, 2011, Tullow says this acquisition will increase its interest in the West Cape Three Points licence offshore Ghana by 3.5% to 26.4% and increase the Group’s interest in Ghana’s world-class Jubilee oil field, which it operates, by 1.75% to 36.5%.

Commenting, Tullow’s CEO, Aidan Heavey, said, “This acquisition represents an excellent opportunity to extend our interest in these high-quality assets in Ghana. Following our exploration and production successes over the last few years, which culminated in First Oil in late 2010, this purchase further demonstrates Tullow’s long-term commitment to Ghana and our belief in its significant remaining potential.”

Tullow says it will issue 10,137,196 ordinary shares of 10p each in the share capital of the Company (“the Shares”) to EO to satisfy approximately $216 million of the consideration. “The balance, which will include certain working capital adjustments, will be paid in cash.”

According to Tullow, the number of shares has been determined using an average of the closing share prices and exchange rates for the five business days up to and including May 24, 2011.

Tullow also indicates that the receipt of its shares as part of the consideration gives EO the opportunity to retain an indirect interest in the upside potential of all of its Ghanaian assets.

The effective date of the transaction, Tullow says is December 1, 2010, and that was before commercial production of oil started in Ghana. Commercial production of oil began in Ghana on December 15, 2010.

The agreement, Tullow says is conditional on the receipt of various consents, approvals and assurances, including from the Government of Ghana.

Upon completion of the agreement, Tullow adds, application will be made to the UK Listing Authority and the Irish Stock Exchange for the Shares to be admitted to the official list of the UK Listing Authority and the official list of the Irish Stock Exchange and application will be made to the London Stock Exchange and the Irish Stock Exchange for the Shares to be admitted to trading on their respective main markets.

EO Group Limited is the successor to a Ghanaian corporation established in 2002 by George Yaw Owusu and Dr. Kwame Bawuah-Edusei.

Meanwhile, EO Group is indebted to Kosmos Energy to the tune of $61.7 million. And Kosmos has said that the company’s ability to collect the $61.7 million owed to it under the EO Participation Agreement depends on the EO’s ability to sell its share of the Jubilee oil production or sell all or part of their interest in the West Cape Three Point Petroleum Agreement.

And if this sale agreement goes through, then EO will likely be able to repay its debts to Kosmos.

By Emmanuel K. Dogbevi

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