Monday January 18 2010

Tullow now offers to buy Heritage

By Katherine Haywood


Oil company Tullow Uganda Limited yesterday exercised its right of pre-emption in respect of the proposed sale by Heritage Oil & Gas Limited of its 50 per cent interest in Blocks 1 and 3A in Uganda.

Tullow Uganda will enter into a Sale and Purchase Agreement (SPA) with Heritage Oil & Gas, a subsidiary of Heritage Oil plc. The deal is likely to be the biggest single transaction in Uganda’s emerging petroleum history.

Heritage on December 18 2009 announced that the consideration for the transaction was $1.35 billion cash and a further contingent, deferred consideration of either $150 million cash or an interest in a mutually agreed producing oil field independently valued at a similar amount.
Heritage had previously offered to sell the stakes to Italian company Eni SpA’s (E). But Tullow, which owns Blocks 1 and 3A jointly with Heritage, later asserted its right to pre-empt them.

It is understood that completion of the SPA is subject to certain conditions which include approval by Heritage shareholders at a meeting scheduled for January 25 and receipt of necessary consents from the government.

Over the last six years, Tullow and Heritage have invested over $700 million in the Lake Albert Rift basin. Through the drilling of 27 wells they have proved up over 700 million barrels of oil and identified over 1.5 billion barrels of potential yet to be explored.

Selling stake
Tullow is also currently in the process of “farming down”, or selling a stake of its interests to other partners, to finance its activities. Commenting yesterday, Aidan Heavey, Chief Executive of Tullow Oil, said: “The pre-emption of the Heritage transaction, and completion of Tullow’s farm down process, is an excellent opportunity to deliver an accelerated basin-wide development plan best suited to government needs and to optimise value for all stakeholders.”

“Tullow is committed to retaining a material stake in Uganda and to continuing to invest for the long term. As we enter the development phase we are working closely with the government to introduce a mutually beneficial partner with downstream expertise who is aligned with this long term approach.” Heritage said they were unable to comment.