Monday, 6 August 2012

Quest for Nigerian Oil assets: Heritage Oil launches $370m rights issue

Heritage Oil has launched a $370m (£237m) rights issue to raise finance for its entry into the Nigerian oil industry. The fully underwritten rights issue will provide the backing for Heritage and its Nigerian partner, Shoreline Power, to buy a 45pc share of an onshore oil producing block called OML 30 from oil majors Shell, Total and ENI for $850m. The remaining stake is owned by the Nigerian National Petroleum Corporation. The rest of the deal will be funded by $550m in bridge finance loans from Standard Bank of South Africa and JP Morgan. The FTSE 250 group also said it could raise additional capital via a bond or placing of ordinary shares.
The acquisition will see Heritage, which is led by chief executive Tony Buckingham radically increase its net production from 567 barrels of oil per day (bpd) to 11,320 bpd. It will also provide a more than five-fold increase in its "proven and probable" reserves to 408m barrels. OML 30 has proved and probable reserves of 1.1bn barrels of oil, worth up to $3.8bn. It is producing 35,000 bpd, but there is the potential to increase production in the short term by improving the existing infrastructure.
News of the rights issue came as Heritage unveiled a net loss of $52.2m in the six months to June 30, compared with a loss of $11.4m in the same period last year, as costs jumped. Heritage - which has interests in Russia, Kurdistan and Tanzania - said operating costs rose 21pc to $1.6m and production tax climbed from $1.5m to $2.2m, while acquisition costs of $18.1m and an $18.4m write-down of assets in Mali all hurt the bottom line. This offset a 35pc rise in oil production to 567 bpd at a 4pc higher average price of $39.9 per barrel. Petroleum revenues rose to $2.85m in the first half from $2.85m.
 Heritage ended the half with a cash balance of $34.6m, down from $310.9m at the start of the year. This excludes costs of $407m related to a tax dispute in Uganda. The company remains in dispute over tax claims for $435m by Uganda’s government following the sale of oil blocks in the African country in 2010.

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