Tullow Oil loses $196.5m in Ghana tax dispute

By Yamini Kalia

Tullow Oil lost a $196.5m tax dispute with Ghana on Wednesday after a tribunal rejected the oil producer’s claim that the assessment breached its petroleum agreements, sending its shares plummeting.

Shares of the West Africa-focused Tullow were on track to record their worst day since December 2019. They were down 45.1% at 10.7p by 9.09am GMT, a reaction Panmure Liberum analyst Ashley Kelty called overdone.

“The loss of the tax case is not a huge surprise … but the problem is that until they make some decent progress on paying down debt, I can’t see long-term survival really for the company,” Kelty said.

The tribunal found that Ghana’s corporate income tax assessment on insurance proceeds received by Tullow between 2016 and 2019 did not violate the agreements and that penalties equal to 100% of the assessment were not covered by their contractual protections.

Tullow said it was disappointed with the ruling and would consider its next steps after further engagement with Ghana’s government.

Ghana’s finance ministry said it would work closely with Tullow to implement the arbitration award in line with Ghanaian law, while taking into account the need to maintain operations at the Jubilee and TEN oilfields and support the investment needed to sustain production.

The government will seek to enforce the tax liability and secure revenue owed to the state while preserving Tullow’s ability to continue operating and investing in Ghana, finance minister Cassiel Ato Forson said.

Wednesday’s ruling adds to a string of tax disputes between Tullow and Ghana that have weighed on the company. A separate $190.5m assessment over loan interest deductions will go to a tribunal hearing in 2027.

Tullow has spent the past year reshaping itself around Ghana by selling assets in Gabon and Kenya and refinancing in order to trim down its $1.4bn debt load.

“Tullow essentially needs the war in the Middle East to carry on, to keep oil prices high, to give them any chance of generating positive free cash flow in the second half as well,” Kelty said.