Tullow hits shareholders with surprise cash call to cut debt

* Tullow plans to raise $750 mln in rights issue

* Proceeds for investments in Africa, Latin America

* Shares (Berlin: DI6.BE - news) down 16 pct (Recasts, adds quotes and details, updates share)

By Ron Bousso and Arathy S Nair

March 17 (Reuters) - Africa-focused Tullow Oil (LSE: TLW.L - news) took investors by surprise on Friday with plans for a $750 million rights issue to help it pay down heavy debts amassed during the oil price downturn.

Tullow shares fell 16 percent after the company revealed the deeply discounted cash call, which the company said would help it back to growth and allow it to make new investments in Africa and Latin America.

Oil prices fell sharply in mid-2014 just as the London-listed oil producer was investing heavily in an offshore oil project in Ghana. At the end of last year Tullow, which is valued at around $2.7 billion, had debt of around $4.9 billion.

Low oil prices have forced Tullow to curb spending over the past two years and it is aiming for savings of around $600 million by mid-2018. It has cut almost half of its employees and is also selling a stake in a project in Uganda for $900 million.

However, with oil prices stabilising above $50 a barrel and better financial flexibility, Tullow plans to explore its existing Jubilee and TEN fields in Ghana and Kenya as well as in Surinam later this year, Tullow's chief operating officer Paul McDade, who is due to become chief executive in April, said.

"The rights issue and the work we've done removes any questions about our financial strength and allows myself as I take over as CEO and the new management team to get the company back to growth," McDade told Reuters.

He expects Tullow's capital spending to fall to $500 million in 2017 before rising next year, though cost discipline "needs to stay" given oil prices are still around $50 a barrel.

One analyst said the debt reduction and the dilution of the share price could make Tullow an acquisition target.

"If you're a major looking to buy reserves of scale, Tullow's valuation is probably not that far away from what you'd think is reasonable," RBC Capital Markets analyst Al Stanton said.

The rights issue, at a 45 percent discount to Thursday's closing share price of 130 pence a share, was fully underwritten by Barclays (LSE: BARC.L - news) , JPMorgan (LSE: JPIU.L - news) and other banks.

Separately, Tullow said China's CNOOC (HKSE: 0883-OL.HK - news) had exercised its pre-emption rights to buy 50 percent of the interests in Uganda which it is selling to Total (LSE: 524773.L - news) .

Total agreed in January to buy most of Tullow's stake in a Uganda project for $900 million.

The terms of the CNOOC's agreement will be the same as agreed between Tullow and Total, Tullow said.

($1 = 0.8091 pounds) (Reporting by Arathy S Nair in Bengaluru; Editing by Jason Neely and Alexander Smith)