Tullow Oil incurred a loss of $4.5 million on the sale of its assets in Kenya, reflecting a difficult period for the British company’s operations in the East African nation, as it continues battling a $170 million tax claim related to the transaction, which was completed in September last year.

 

The company says in its 2025 annual report that it made a loss from the sale of Tullow Kenya BV – which holds its entire working interest in Kenya – to Gulf Energy Limited, compounding its problems in the wake of tax demand by the Kenya Revenue Authority (KRA) and difficulty in attracting investors to de-risk its commercial production.“The net assets disposed from the transaction and the subsequent loss on disposal for the year ended December 31, 2025 are as follows: Loss on disposal ($4.5 million),” the company listed in London says.

Details of the transaction, disclosed by Tullow show that the total value of the Kenyan assets disposed of stood at $118.3 million, comprising intangible exploration and evaluation assets ($107.7 million), trade receivables ($8.4 million), other current assets ($0.4 million) and cash and cash equivalents of $1.8 million.

The value of the total liabilities of the disposed of project stood $5.1 million, resulting in net assets of $113.2 million disposed of, the annual report says.

According to Tullow, the cash consideration for the agreement was pegged at $110.5 million.

With the company paying $1.8 million as transaction fees, the deal resulted in a loss.

On September 25, 2025, Tullow completed the sale of Tullow Kenya BV to Auron Energy E&P Ltd, an affiliate of Gulf Energy Ltd, for a total consideration of at least $120 million.

But the British company says the $110.5 consideration relates to $40 million cash received (Tranche A) and the present value of Tranches B to C.

Tranche B includes $40 million receivable at the earlier Field Development Plan approval or June 30, 2026, while Tranche C includes $40 million receivable not later than 2033.

No amount has been recognised with respect to the royalties and the back-in right as their fair value cannot be reliably estimated as of the reporting date, according to the report.“Consideration relates to $40 million cash received (Tranche A) and the present value of Tranches B to C. No amount has been recognised with respect to the royalties and the back-in right as their fair value cannot be reliably estimated as of the reporting date,” the report adds.

Cash consideration refers to the payment of money – rather than stock or other assets – to complete a transaction such as a merger, acquisition or the purchase of a company’s assets.

Gulf Energy fully bought Tullow’s stake 10BB, 13T and 10BA in South Lokichar, Turkana County.

The $120 million consideration for the transaction is divided into $40 million received on completion (Tranche A), $40 million receivable at the earlier of Field Development Plan approval or June 30, 2026 (Tranche B) and $40 million receivable no later than 2033 (Tranche C), the report says.

If $40 million in aggregate will not have been settled by June 30, 2033, the remainder will be due as a bullet payment at that point, irrespective of the prevailing oil price, it adds.

In addition, Tullow is entitled to royalty payments subject to oil price, resource and production related conditions.

The company also retains a back-in right for a 30 percent participation in potential future development phases at no cost.

According to the report, $36 million proceeds of the Tranche B was received on March 9, 2026, and the final 10 percent of Tranche B proceeds ($4 million), was received on April 1, following completion of transition support services.

On July 29, 2025, Tullow completed the sale of Tullow Oil Gabon SA to the Gabon Oil Company for a cash consideration of $307 million, net of tax and customary adjustments, making a gain of $165.3 million.

In Kenya, Tullow claims that the $170 million tax demand by the KRA is unmerited and unfair, adding that it will jointly challenge it with Gulf Energy.

KRA insists that Tullow Kenya BV, the local subsidiary of the British company, underpaid Capital Gains Tax (CGT) from the agreement and underpaid value added tax while undertaking the project in Turkana.

Tullow discovered commercially viable oil in Kenya in 2012 and had targeted to start production in 2020.

That target would later be revised as the company struggled to get a deep-pocketed investor to de-risk the projectGulf Energy says it will start commercial oil production in Turkana by December this year, which would see Kenya join Uganda in exploring crude oil.

Tullow’s $170 million tax demand in Kenya mirrors a similar dispute in neighbouring Uganda, where the company was forced to increase the amount it paid as CGT before authorities in Kampala cleared the sale of its Lake Albert oil project to Total and China National Offshore Oil Corporation (CNOOC), more than 12 years ago.

In Uganda, the British company’s sale of the Lake Albertine oil project in 2013 flew into headwinds after government authorities declined to approve the transaction until the firm settled the tax demand.

The Uganda Revenue Authority had demanded a CGT of $473 million, a drive that Tullow resisted and appealed at the Ugandan High Court and later international arbitration claim.

Tullow later withdrew from the fight and agreed to pay $250 million in full and final settlement of its CGT liability, paving the way for the Ugandan government to sanction the sale of the project to Total and CNOOC.

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