2nd UPDATE: Heritage +6% As Tullow Expects OK For Uganda Deal

6th Jul 2010 10:00

(Adds share price moves, comment from Ugandan official.) By James Herron Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Shares in Heritage Oil Ltd. (HOIL.LN) rose almost 6% after Tullow Oil PLC (TLW.LN) said it believes it will receive approval from the Ugandan government Tuesday to purchase Heritage's Lake Albert oil licenses for up to $1.5 billion. Tullow representatives will meet with the Ugandan government later Tuesday, and the precise details of the government's position can't be known until then, Tullow's Chief Financial Officer Ian Springett told Dow Jones Newswires. The deal will be finalized after the Ugandan President Yoweri Museveni returns from a trip in Ethiopia Tuesday, said an official close to the president. All the paperwork is done, and only the endorsement of the president is now needed, the person said. Heritage was not immediately able to comment on whether approval for the sale was imminent. At 0849 GMT Heritage shares were up 5.2%, or 20 pence, at 398 pence. Tullow shares were up 3.1%, or 32 pence, at 1,073 pence. Tullow agreed in January to purchase Heritage's half-share in two oil licenses for up to $1.35 billion in cash plus up to $150 million extra dependent on certain conditions being met within two years. Tullow pre-empted a previous sale agreement with Italy's Eni SpA (E). The Heritage deal will briefly give Tullow 100% of the three Lake Albert licenses, but it has agreed to quickly sell on a third of these licenses to both Total SA (TOT) and China National Offshore Oil Company (CEO). The much-delayed deal has been awaiting approval for months due to a disagreement between Heritage and the Ugandan government over how much capital gains tax the company should pay on the proceeds of the sale. Its completion is crucial to the development of more than a billion barrels of oil discovered in Uganda's Lake Albert region. Despite the delay, Tullow still expects to produce first oil from the Lake Albert region, for consumption on the local market, by the end of 2011. By 2014 or 2015, Tullow expects to be producing more than 200,000 barrels a day of oil from the region, a portion of which will be exported to international markets. "Behind the scenes we have been working closely with Cnooc and Total to move things forward," Springett said. Tullow will disclose how the development of the project, which will require a 1,200 kilometer export pipeline and refinery, will be divided up between the partners. Tullow will focus on upstream operations around Lake Albert, he said. Tullow's drilling activities will increase in the second half of the year, said exploration director Angus McCoss. "We've got a program of high-impact wells, 15 of them in Ghana and Uganda," he said. September and October will be the most exciting period for Tullow this year, said Panmure Gordon analyst Peter Hitchens. "They will start to drill some big exploration wells around the coast" of West Africa, he said. The Owo-1 well currently drilling offshore Ghana is the most interesting prospect and will "make or break" Tullow's 1.4 billion barrels of oil equivalent reserve upside estimate for the Tweneboa field, said NCB Stockbrokers analyst Peter Hutton. -By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; [email protected] (Nicholas Bariyo in Kampala and Sarah Kent in London contributed to this story.) (END) Dow Jones Newswires July 06, 2010 05:00 ET (09:00 GMT)