DAVY VIEW

On the face of it, the cancellation of the Uganda farm-out is disappointing as it will delay the development and onset of the cash element of the deal consideration. However, the group is adamant that it will not proceed with a 33% share and the termination of the deal may allow all parties involved, including the Ugandan State, to reconsider the best way forward. We think the valuation impact is marginal as the underlying quality of the asset is unchanged. Without a decision to develop, which is the stated position at 33% equity, the impact on the balance sheet will slow the rate of deleveraging but not reverse it.