Tullow Oil fell the most in almost two months in London trading after the Africa-focused explorer reported "slower progress" in resolving a tax dispute in Uganda and full-year profit missed analyst estimates.

Tullow retreated as much as 3.4 per cent, the steepest intraday decline since January 20th, and traded at 1,415 pence as of 8.27am. Today's drop pared the gain for 2011 to 12 per cent.

Last year's pretax profit of $152 million missed the $210 million mean estimate of 21 analysts surveyed by Bloomberg.

The company said it made "slower progress' in getting approval from the Ugandan government to start a joint venture with Total SA and China National Offshore Oil Corp.

"We are still very pessimistic that we will see any traction in the short term and feel there is a real possibility that Tullow's partners may exit the joint venture should the situation not be resolved favorably," said Dougie Youngson, an analyst at Arbuthnot Securities in London.

Tullow said in a statement today that it expects to receive approval for the proposed deal in the first half of this year.
"All the main points have been agreed at this stage," chief executive Aidan Heavey said in a telephone interview. "We are in the process of finalizing the memorandum of understanding and that's the priority right now."

Tullow paid about $1.5 billion in July to Heritage Oil for interests in Block 1 and 3A in the Lake Albert basin. Uganda withheld the final approval of the deal amid a tax dispute, an issue that has to be resolved before Cnooc and Total can be brought in as partners. Last month's elections in Uganda delayed a resolution, Tullow said.

"It will be Tullow, Cnooc and Total, one third each," Mr Heavey said. "We are liable for our taxes and Heritage are liable for their taxes and these are the basic principles."

The partners plan to tap fields in the Lake Albert basin that may be able to pump more than 200,000 barrels of oil a day in 2015.

Write-offs almost doubled to $154.7 million last year from $82.7 million in 2009 following exploration failures in Gabon, Ghana and Tanzania and after Tullow gave up some licenses in Gabon and Angola.

"We review our licenses and periodically relinquish them," chief financial officer Ian Springett said in a phone interview.