Tullow to raise £120m for takeover

TULLOW OIL will hope to raise £120 million through a rights issue to help fund the £319m acquisition of Energy Africa.

The takeover, first announced in March, is the largest in Tullow's history and will be funded through the rights issue, debt and internal cash.

Tullow said yesterday that shareholders accounting for just over 90% of Energy Africa's shares have agreed to the deal, which will make the Irish firm one of the largest exploration firms operating in west Africa. Tullow said that the enlarged group would also have a production capacity of over 50,000 barrels of oil equivalent per day.

Shares in Tullow, traded on the London stock market, soared by 12% on the news helped by a bumper set of annual results.

"The proposed acquisition of Energy Africa by Tullow will create a formidable independent oil and gas company with core areas in west Africa and the UK," said Tullow chief executive Aidan Heavey said in a statement. Once the takeover is completed, it is expected to double Tullow's turnover and give it £170m inannual cash.

This is the largest takeover undertaken by Tullow since it acquired assets in the North Sea from BP four years ago a move that has transformed the company from a tiny player into the last of the independent major firms.

Tullow said Energy Africa had proven and probable oil and gas reserves of 57.9 million barrels of oil equivalent (boe) at the end of 2003 and produced 8.1 million that year.

Capetown-based Energy Africa has operations in most countries in north and west African. Tullow itself holds exploration licences in India, Pakistan and eastern Europe in addition to its North Sea fields.

The company also announced that turnover for 2003 jumped from £112m to £132m, helped by increased gas and oil output at its British operations, where production was 20% ahead.

Operating profit soared 41% to £47m, though at pre-tax level profit growth was ahead at a slower pace, increasing by £4m to £26m.

Earnings per share were down from 3.56p to 2.59p. This was due to higher taxes and increased exploration costs.

The dividend for the year will be held at 1p, but the company said it would look to increase this as soon as possible.

Shares in Tullow ended the day up 10p the first since trading was suspended in March when the acquisition was first announced at 96p.