UPDATE: Uganda Govt OKs Heritage Oil Asset Sale To Tullow

6th Jul 2010 14:19

(Adds share price move, background.) By Nicholas Bariyo and James Herron Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Uganda's government has approved Heritage Oil Ltd.'s (HOIL.LN) sale of its Uganda assets to Tullow Oil PLC (TLW.LN) and the entrance of Total SA (TOT) and China National Offshore Oil Company (CEO) into a partnership with Tullow to develop oil discoveries, officials at Tullow and Heritage said Tuesday. The completion of these transactions will be an important step in the development of what could become a major new oil province, with more than a billion barrels of oil found in Uganda's Lake Albert region already and potential for further discoveries. 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 transactions. Shares in Heritage rose more than 6% earlier Tuesday morning after Tullow revealed it expected to receive approval from the Ugandan government. At 1306 GMT Heritage shares were up 5.9%, or 22 pence, to 400p. Tullow shares were up 3.7%, or 39p, at 1080p. The much-delayed transaction 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. Details of Heritage's tax settlement have not yet been released. The companies said they will issue more detailed statements regarding the approval later. 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 has agreed to quickly sell on a third of these licenses to both Total and Cnooc. 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," 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 09:19 ET (13:19 GMT)