Tullow opts to buy oil field stakes

TULLOW Oil is to exercise its right to buy 50% stakes in two oil fields in Uganda from Canadian exploration company, Heritage Oil.

Although Heritage had initially agreed to sell its stakes in two fields in the Lake Albert Rift Basin to Italian energy giant Eni for $1.5bn (€1.04bn) in November, Tullow held pre-emption rights, meaning it could match Eni’s bid if it wished.

The Irish-founded oil and gas exploration company, which now has its headquarters in London, announced yesterday, on its official pre-emption deadline, that it will now enter a sale and purchase agreement with Heritage Oil & Gas Ltd, a subsidiary of Heritage Oil, with the finalisation of the deal dependent on approval by Heritage’s shareholders and the Ugandan Government. Heritage is to hold an extraordinary general meeting for shareholders to vote on the matter next Monday.

A successful conclusion to the deal would give Tullow 100% ownership in all three blocks at Lake Albert where it has, in partnership with Heritage, invested more than $700m (€487m) and drilled 27 wells over the past six years.

It currently owns 100% of Block 2 and 50% of Blocks 1 and 3a – the two blocks Heritage is exiting.

Tullow’s payment will be provided by banking facilities already finalised with its core team of banks and this deal will make the Irish firm’s Ugandan development plans considerably more straightforward.

Tullow, being an upstream oil company (one that finds the oil) is seeking a downstream partner (that develops the finds) for its future plans in the country.

In a statement yesterday Tullow chief executive Aidan Heavey said the company remains committed to “retaining a material stake in Uganda and to continue to invest for the long-term.”

It is hoped that Tullow’s good relations with the Ugandan Government will copper-fasten the deal. The transaction will feature a cash payment of $1.35bn and a further deferred consideration (payable in either cash or assets) of $150m.

“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,” Mr Heavey added.