2nd UPDATE: Uganda Govt OKs Heritage Oil Asset Sale To Tullow

6th Jul 2010 15:18

(Adds Uganda Energy Minister comment) By Nicholas Bariyo and James Herron Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Shares in Heritage Oil Ltd. (HOIL.LN) rose sharply Tuesday as the Ugandan government gave its long-delayed approval to the sale of its Uganda assets to Tullow Oil PLC (TLW.LN). The government's approval also paves the way for France's Total SA (TOT) and China National Offshore Oil Company (CEO) to enter what could become a major new oil province, with more than a billion barrels of oil found in Uganda's Lake Albert region and further exploration potential. At 1358 GMT Heritage shares were up 9%, or 34 pence, at 412p. Tullow shares were up 4.2%, or 44p, to 1,085p. Following a meeting at Uganda's Ministry of Energy and Minerals, the development manager at Tullow Oil Uganda, Hans Meijers, and Heritage's Vice President of Exploration and Production, Brian Smith, told Dow Jones Newswires they had a letter approving the sale of the Heritage's Uganda assets for up to $1.5 billion. Uganda's Minister of Energy and Minerals, Hilary Onek, said the approval was given following the resolution of a long-running dispute between the government and Heritage over how much tax should be paid on the transaction. "We have approved the sale on condition that Heritage Oil deposits 30% of the [$404 million] assessed capital gains tax on the transaction with the Uganda Revenue Authority," Onek said. "We have also asked Heritage to seek a bank guarantee for the remaining 70% of the tax which the government can access on demand as the arbitration on the tax dispute continues," he added. Tullow agreed in January to purchase Heritage's half-share in two oil licenses for $1.35 billion in cash, plus up to $150 million extra dependent on certain conditions being met within two years. The deal will briefly give Tullow 100% of the three Lake Albert licenses, but it plans to quickly sell on a third of these licenses to both Total and Cnooc. Tullow can now continue with those plans, Onek said. Kalisa Kabagambe, Uganda's permanent secretary at the Ministry of Energy and Minerals, said the next round of government talks will now focus on the details of the joint venture between Tullow, Cnooc and Total, which will also require government approval. Despite the delay to the deal, 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," Tullow's Chief Financial Officer Ian 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. Heritage plans to use the proceeds of the sale to issue a special dividend of between 75 pence and 100 pence a share. The company also has significant oil discoveries in the Kurdish region of Iraq requiring further investment. -By Nicholas Bariyo, contributing to Dow Jones Newswires and James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; [email protected] (END) Dow Jones Newswires July 06, 2010 10:18 ET (14:18 GMT)