Tullow Oil plc has inked a significant deal, entering into a US$400 million five-year notes facility agreement with Glencore Energy UK Limited. This financial arrangement is a strategic move by Tullow, aiming to address the liability management of its senior notes maturing in March 2025.
Key Points of the Agreement:
- Facility Details: The $400 million facility, provided by Glencore, comes with a five-year term and will be available to draw for 18 months. The funds procured through this facility will be utilized for the liability management of Tullow’s senior notes maturing in March 2025.
- Interest Structure: The interest on the facility will be based on the Term Secured Overnight Financing Rate (SOFR) plus 10% on drawn amounts.
- Oil Marketing and Offtake Contracts: Simultaneously, Tullow has entered into oil marketing and offtake contracts with Glencore. These contracts cover Tullow’s crude oil entitlements from the Jubilee and TEN fields in Ghana, as well as the Rabi Light entitlements in Gabon.
- Endorsement of Business Plan: Rahul Dhir, CEO of Tullow, sees Glencore’s commitment as a strong endorsement of Tullow’s business plan and strategy. The move is considered a material step in Tullow’s refinancing strategy, following a successful and equity accretive tender offer in June.
- Refinancing Strategy: The proceeds from this facility, combined with existing cash on the balance sheet and an expected $800 million of free cash flow from 2023 to 2025, position Tullow to fully address all outstanding 2025 notes and sets the stage for a successful refinancing of the 2026 notes.
- Glencore’s Perspective: Alex Sanna, CEO of Glencore’s Oil & Gas Division, sees this facility and concurrent contracts as a strong endorsement of Tullow’s business plan and strategy. The deal showcases Glencore’s capability in structuring finance solutions in the oil and gas sector.
- Guarantees and Collateral: The notes facility is guaranteed on a pari passu basis by the same guarantors of Tullow’s senior notes maturing in March 2025, with subordination to the guarantees of Tullow’s senior secured notes maturing in May 2026. The facility is also secured by the same collateral as the 2026 notes.
This financial maneuver by Tullow reflects its strategic efforts to strengthen its financial position, address upcoming liabilities, and capitalize on the support and expertise of Glencore in the oil and gas sector.
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