Tullow Drops After Newspaper Says Uganda Cancelled an Exploration License

-- Tullow Oil Plc, the U.K. explorer with the most licenses in Africa, dropped in London trading after the New Vision newspaper reported that Uganda canceled one of its exploration licenses in Lake Albert.

Tullow shares fell 3.8 percent to 1,211 pence in London. The stock has lost 6.6 percent this week after warning of likely delays to its projects in Uganda because of a tax dispute.

Uganda has canceled the exploration license for the Kingfisher area in Block 3A because it has expired and the Tullow hasn’t applied for a production license, the Kampala- based newspaper said, citing a letter from Hillary Onek, the country’s energy minister.

London-based Tullow paid about $1.5 billion in July to Heritage Oil Plc for interests in Block 1 and 3A in the Lake Albert basin. Heritage is currently disputing capital gains tax imposed on the transaction by Uganda. The government hasn’t yet agreed to arbitration in London, Heritage Chief Financial Officer Paul Atherton said today, declining to estimate when the dispute will be resolved.

“Uganda has been clear that the only issue remaining is with Heritage and their CGT liability,” said George Cazenove, an outside spokesman at Tullow. “Negotiations are ongoing but Tullow is confident that the government of Uganda will respect Tullow’s legal rights.”

Tullow plans to bring in China National Offshore Oil Corp. and Total SA as partners to develop the fields in Lake Albert, which may pump more than 200,000 barrels of oil a day in 2014 or 2015.

“In the very short term, it is therefore anticipated that there may be some slowdown in activity,” Tullow said in the Aug. 25 statement. “This includes development activities on the Kingfisher field where the government have indicated that they will not grant an appraisal license extension until the tax matter is resolved.”

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

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