Tullow Oil has agreed to pay $250m to settle a tax dispute with the Ugandan government out of court.
This is almost half of the sum the east African country had originally demanded in tax relating to a sale of oil licences.
Legal proceedings have now been dropped, the exploration firm said today.
"The settlement of this long-running dispute is good news for Tullow and Uganda," the company's chief executive Aidan Heavey said.
Uganda ordered Tullow to pay $473m in capital gains tax following its $3 billion sale of a 66.6% stake in various oil licences to France's Total and China's CNOOC in 2012.
Analysts said that the settlement clears another obstacle in the path of developing East Africa's substantial oil resources.