CORRECT:Tullow: Uganda OKs $1.5B Heritage Deal;Tullow Farmdown

7th Jul 2010 09:28

("Tullow: Uganda Govt OKs $1.5B Heritage Deal; Tullow Farmdown," at 0800 GMT, misstated the amount of the deposit in the fourth paragraph. The correct version follows:) LONDON (Dow Jones)--Independent oil and gas exploration and production company Tullow Oil PLC (TLW.LN) said Wednesday the Ugandan government had approved a $1.5 billion deal for it to acquire Heritage Oil PLC's (HOIL.LN) assets in Uganda and then sell a stake on to two other companies. The agreement had been delayed by a dispute over whether Heritage should pay capital gains tax to the government on the sale of its stake in two oil licenses in the Lake Albert oil fields. However, the deal is still conditional upon resolution of the tax issue and could include arbitration in London, Heritage said in a separate statement. Heritage had previously agreed in June to deposit 30% of the disputed tax sum with the Uganda Revenue Authority and had offered the government the option of arbitration in London. Heritage had calculated the 30% amount as $108 million. However, the Ugandan government said in a letter cited in Heritage's statement Wednesday that the 30% was about $121.5 million. The government is no longer ruling out the option of arbitration, although the method by which the tax issue will be resolved has yet to be decided, a spokesman for Heritage said. In the statement, Heritage said it has received advice that the disposal of assets is not taxable in Uganda. "Heritage's position, based on comprehensive advice from leading tax experts in Uganda, the U.K. and North America, is that the disposal of the assets is not taxable in Uganda. Heritage is considering the government's response and will update the market in due course," it said in the statement. Analysts at Evolution Securities said that Heritage thinks it probably has a good case in arbitration, but the price could be to lose the $121.5 million in the process. "The $121.5 million 'up front' tax is higher than the $108 million flagged in the annual general meeting statement and suggests two things: Uganda is not allowing costs to be deducted from the capital gains calculation, and the government is not confident of winning in the arbitration court," Evolution said in a research note. Tullow agreed in January to purchase Heritage's share in the licenses. The deal will briefly give Tullow 100% of the Lake Albert licenses, but it plans to quickly sell on a third of these licenses to Total SA (TOT) and China National Offshore Oil company (CEO). As of 0800 GMT, shares in Tullow were down 10 pence at 1075p and shares in Heritage were up 2p at 416p. -By Selina Williams, Dow Jones Newswires +44 207 842 9262; [email protected] (END) Dow Jones Newswires July 07, 2010 04:28 ET (08:28 GMT)