Shares in Tullow Oil gain after Ghana ruling
Tullow Dhir Of Executive Oil Chief Rahul
Shares in oil and gas exploration company Tullow Oil gained on Friday after an international body found it wasn’t liable for a $320m (€310.8m) tax assessment in Ghana, where its key oil assets are located.
The International Chamber of Commerce (ICC) said the tribunal found the branch profit remittance tax assessment by the West African nation “falls outside of the tax regime provided for in the petroleum agreements,” according to a Tullow statement published late Thursday.
The company filed a request for arbitration in 2021.
The shares rose as much as 14% to 25 pence before slipping slightly throughout the course of the day.
Ghana handed back-tax demands to some of the biggest companies operating there, including MTN Group Ltd, Gold Fields Ltd and Kosmos Energy Ltd. in recent years.
The country was seeking additional revenue after losing access to international capital markets because of its ballooning debt and loan-service costs.
The ICC announcement is a boost for Tullow after chief executive Officer Rahul Dhir said he would step down and Kosmos Energy dropped a bid for the explorer following “very preliminary discussions” around a deal.
“The removal of a further liability will take some pressure off the stretched balance sheet,” Ashley Kelty, an analyst at Panmure Gordon & Co, said in a note.
Tullow still has two remaining disputed tax assessments from the Ghana Revenue Authority for which it filed requests for arbitration with the ICC. They relate to loan interest over a decade and business interruption insurance proceeds it received. Those assessments total $387m plus penalties, Tullow said in 2023.
“I look forward to constructive discussions with the government of Ghana to resolve the remaining claims,” Dhir said in the statement.
While the decision in favor of Tullow brings optimism ahead of the other cases, replacing Dhir presents another obstacle, Kelty said. “Uncertainty over who will become the next CEO is set to remain a cloud over the company for the coming months.”
Tullow Oil was originally founded in Tullow in Co. Carlow. It signed its first licence agreement with Senegal in 1986 with gas production and sales commencing in 1987. In the years since, the company has moved most of its operations to the UK.
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