Tullow Oil concluded a years-long process to sell its Uganda assets to Total SA, the first step in an asset-sale program that’s crucial to reducing its debt. The shares jumped the most on record.

The U.K. explorer agreed to divest its entire interest in the Lake Albert Development Project to the French oil major for $575 million. That’s a steep discount on its original 2017 deal -- which was stymied by tax disagreements -- but includes more cash upfront and will be a relief to Tullow after a calamitous year.

 

“An agreement to sell Uganda for cash proceeds is very positive news for Tullow right now,” Mark Wilson, an analyst at Jefferies, said in a note. “As a first step to the target of raising over $1 billion disposal proceeds, this deal is beyond what we believed possible.”

Tullow surged as much as 75% in London on Thursday, the biggest leap since the shares started trading in 1989. The stock was up 29% at 26.1 pence as of 8:52 a.m. local time, paring its loss this year to 59%.

The company, which will sell its 33.3% stake and operatorship of the project, signed the agreement with Total late on Wednesday, Chairwoman Dorothy Thompson said in an interview.

Total will pay $500 million in cash on deal completion and $75 million when a final investment decision on the project is taken, the companies said in separate statements. Tax issues have been ironed out with the Ugandan authorities, and both parties are hoping to wrap up the transaction in the second half of 2020.

Tullow has been working to reduce its pile of net debt, which was $2.8 billion at the end of last year. It recently completed a redetermination of its reserve-based lending facility, leaving it with $700 million of undrawn facilities and free cash, and has cut its capital-spending forecast for 2020 twice.

The sale to Total is the second big announcement this week for Tullow, which appointed a new chief executive officer on Tuesday. Rahul Dhir, founder and CEO of Delonex Energy, will start July 1. His predecessor Paul McDade and Tullow Exploration Director Angus McCoss quit in December after the company cut its production outlook and suspended the dividend.

The resignations capped a terrible year for Tullow, which saw its Uganda deal collapse but also problems in Kenya, technical difficulties in Ghana and disappointing results from wells in Guyana.

“Coming on the heels of a successful debt re-determination and confirmation of new CEO leadership, the Uganda deal is a major step in the right direction,” Job Langbroek, an analyst at Dublin-based research firm Davy, said in a note.

The Uganda transaction will include the East African Crude Oil Pipeline. Conditional payments will be made to Tullow linked to production and oil prices, triggered when Brent prices are above $62 a barrel. They’re currently languishing near $20 amid the unprecedented collapse in demand.

The transaction is subject to the approval of Tullow shareholders and customary regulatory and government approvals. Cnooc Ltd. has pre-emption rights on 50% of the transaction, Total said.