Tullow gatecrashes Heritage's $1.5bn asset sale

18th Jan 2010 08:12

Tullow Oil has exercised a pre-emption right to snap up the Ugandan oil fields half-owned by partner Heritage Oil for $1.5bn.Italian state oil company Eni had agreed in November to buy Heritage's 50% stake in Blocks 1 and 3A for $1.35bn in cash and a deferred consideration of $150m.But Tullow had an option to pre-empt the sale of the Ugandan assets on the same terms and conditions as agreed between Heritage and Eni. The area in question, including the 100% Tullow-owned Block 2, could contain over 1bn barrels of oil. The Italians now have the option to scrap the sale and purchase agreement, but are yet to do so, and Heritage can accept a superior proposal from anyone before its shareholders' meeting to approve the disposal on 25 January.Final approval for the deal, expected to close within the first quarter of 2010, will be sought shortly from Ugandan government.Ratification may not be clear cut though as there have been reports of concerns that Tullow is controlling too much of the country's oil reserves.'The government will determine which transaction to approve in its role as final arbiter,' said Heritage, which will acquire 'financial flexibility' from the deal and be able to consider a special dividend of between 75p and 100p a share. Tullow boss Aidan Heavey said over $700m has been invested in the Lake Albert Rift basin by it and Heritage during the past six years. The 27 wells drilled have proved up over 700 million barrels of oil and identified over 1.5 billion barrels of potential yet to be explored.'The pre-emption of the Heritage transaction, and completion of Tullow's farmdown 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.'Jonathan Jackson at Killik Capital thinks today's news is positive for Tullow, 'given the proven attraction of the Ugandan assets and it should provide greater leverage in the group's ongoing discussions with a farm-out partner'. 'Given our positive long-term view on the oil price, we continue to be supportive of investments in the mid-cap oil exploration and production trio - Tullow, Cairn Energy and Premier Oil,' he says.