Thursday August 12 2010

Heritage founder to earn Shs293b from oil deal

Oil exploration in western Uganda.

Oil exploration in western Uganda. FILE PHOTO 

By Walter Wafula

While Uganda tries to wring some money out of Heritage, the firm’s owners are laughing all the way to their offshore banks, writes Walter Wafula

As far as investments go, this must be one of the most profitable ever.

Anthony Leslie Rowland “Tony” Buckingham and his partners in Heritage Oil say they invested anywhere between $135m and $150m in exploring for oil in western Uganda.
Last month Heritage received over a billion dollars from Tullow Oil for its interests in the oil fields in western Uganda where commercially viable oil deposits have been found. The figure is expected to rise to around $1.5 billion.

Before the transaction, the government of Uganda handed Heritage a capital gains tax bill of about $405 million. Heritage disputes the bill but paid $121.4 million out of the cash it received from Tullow to Uganda Revenue Authority in order to get the transaction approved.

Heritage put aside another $283.4 million in an escrow account pending the resolution of the tax dispute in a court of arbitration in London.

However, in a U-turn by the government, Energy minister Hilary Onek wrote to two companies last week and informed them that the “no-objection” that the government gave to the transaction was on condition that Heritage pays capital gains tax of about $405 million from the sale.

It is not clear what the government’s turnaround means and whether it will have any implications to Heritage.

What is clear is that the Heritage shareholders are set to collect on their investment long before Uganda gets the first barrel of oil out of the ground.
After receiving the cash from Tullow, Heritage announced a special dividend of £1 (Shs3,470) per ordinary share to its shareholders on August 27, 2010.

Mr Tony Buckingham, the founder and chief executive of Heritage Oil Plc, is poised to earn at least Shs293 billion from the transaction. Mr Buckingham owns at least 84.5 million shares of the firm’s 285 million shares, making him the single largest shareholder of the company.

Heritage’s directors Gregory Turnbull, John McLoeds, Michael Hibberd, and Salim Hassan Macki and Mr Paul Atherton, the company’s chief financial officer, are also in for a tidy payday.

If the dividends were paid today, Mr Turnbull would earn about Shs1.2 billion, Salim Shs482 million, Mr Hillberd Shs433 million, and Mr Atherton Shs395 million.
Heritage claimed its cash bonanza just 13 years after it entered Uganda investing under $150 million (Shs334 billion).

It is the latest chapter in the dramatic and colourful life of Buckingham, a soldier turned mercenary, turned oil baron. Although Heritage documents describe Buckingham, 59 this year, as a former “security adviser to various governments”, it is way more colourful than that.

Buckingham was a founding partner of Executive Outcomes, a crack unit of mainly South African commandos and a key man in Sandline International, a mercenary group that operated across Africa.

“The Executive Outcomes mercenaries are not simply ‘guns for hire’,” noted the Observer newspaper in Britain in 1997. “They are the advance guard for major business interests engaged in a latter-day scramble for the mineral wealth of Africa [including] oil, gold and diamond-mining ventures... and offshore financial management services.”

Buckingham entered the picture in the mid-90s during the conflict in the Democratic Republic of Congo and soon spread his interest into Uganda.
Branch Energy, another of his companies, was involved in gold mining in Karamoja as well as a private security firm in Uganda, in partnership with a highly placed military official.

In interviews with British newspapers, Buckingham’s associates say his days as a mercenary are behind him and that he is just a businessman with a nose for finding oil.

Whichever way the tax dispute is resolved, the Heritage’s payout from selling its assets to Tullow has made Buckingham a fabulously wealthy man. Some say it is brilliant business; others compare Buckingham to Tiny Rowland, the buccaneering businessman who made a fortune working for and with dictators across the continent.

Additional reporting from online sources