Heritage Oil Bigs Up Its Latest Acquisition

Published in Company Comment on 19 July 2012

Heritage Oil (LSE: HOIL) releases a significant upgrade to its reserves, due to a proposed acquisition in Nigeria.

Heritage Oil (LSE: HOIL), the FTSE 250-listed oil exploration and production company, today released the latest independent assessment of its reserves.

The main highlight is OML 30 in Nigeria, where Heritage is in the process of acquiring a 45% stake for $850m from the likes of Royal Dutch Shell (LSE: RDSB), Total (NYSE: TOT.US) and Eni (NYSE: E.US). Because of the size of this deal, shares in Heritage are currently suspended until it publishes full details of the transaction.

Heritage said gross 'Proved plus Probable' reserves came to 1,114 million barrels, which was 58% higher than their estimate set out in the acquisition announcement a few weeks ago. Proved plus Probable net entitlement reserves to Heritage are 396 million barrels of oil.

OML 30 is already producing 35,000 barrels of oil a day, of which just over 10,000 would be attributable to Heritage.

The same report also listed 65 million barrels of Proved plus Probable net entitlement reserves in Russia, and a resource statement for Kurdistan where it has discovered a mixture of oil, condensate and gas.

Tony Buckingham, Heritage's CEO said:

"This independent report ... highlights the strength of our current portfolio and the transformational nature of the proposed acquisition of OML 30 which creates shareholder value and is cash generative upon completion. The economic valuation of between US$3.4 billion and US$4.1 billion given for the current 2P reserves at OML 30 and our assets in Russia underlines the significant opportunity we have to create substantial value for shareholders.

There is considerable upside in OML 30 which has not been assessed in the CPR, notably gas in the licence, estimated by management at 2.5 TCF, as well as undeveloped reservoirs and behind pipe reserves in some of the developed reservoirs that have not currently been targeted with new wells. Also, significant value exists for the Contingent and Prospective resources within the Miran Field that has not been estimated in this report due to the classification as resources."

Heritage shares were 123p before trading was suspended valuing the company at £317m. Should the acquisition of OML 30 go through, it will be funded by a $550m bank facility and a rights issue that will raise up to $370m.

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> Stuart does not own any of the shares listed above.

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Comments

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Cisk999 19 Jul 2012 , 1:05pm

From memory OML30 was a field acquired by ENI from Burren Energy. Now if only the ex-Burren management could work the same wonders on their new(ish) vehicle, Bayfield Energy. So far, the ride has been rocky, to say the least.

zeeshan12 18 Mar 2013 , 7:39am

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