Tullow to buy out Heritage oil firm
Jan 17, 2010
TULLOW Oil, the London-based firm exploring for oil and gas in Uganda, has offered to buy out its partner, Heritage Oil.
By Ibrahim Kasita
TULLOW Oil, the London-based firm exploring for oil and gas in Uganda, has offered to buy out its partner, Heritage Oil.
Two oil fields, blocks 1 and 3A in western Uganda, are jointly owned by Heritage and Tullow in a 50-50% joint venture.
Under the agreement signed between the two, Tullow has the first option to buy in case Heritage wants to sell – what is called pre-emptive right.
In a surprise move, however, Heritage in December entered into a deal to sell its stake to Italian oil giant Eni for $1.5b.
According to the deal, Eni would pay $1.35b upfront and a further $150m in cash or a stake in a producing oil field of a similar value within two years, subject to approval by the Ugandan Government.
The deadline for Tullow to exercise its pre-emptive right expired yesterday.
In a statement, the company announced that it secured the money to match Eni’s offer and will enter into a sale and purchase agreement with Heritage for the proposed oil fields.
“A syndicate of Tullow’s core relationship banks has provided the banking facilities required to enable Tullow to exercise its right of pre-emption,†the statement said.
The completion of the agreement is subject to certain conditions, including approval by Heritage shareholders at a meeting scheduled for January 25 and consent from the Ugandan Government.
Tullow, which is in the process of identifying a partner for another oil field in block 2, where it has a 100% stake, said the interested companies approved the deal.
“Parallel with exercising its pre-emption right, Tullow has been running a transparent farm-out process which has attracted a significant amount of interest from major international and national oil companies,†the statement said.
“The process is now well advanced and potential partners are supportive of the group’s decision to pre-empt.â€
The statement does not name the interested oil companies but sources said they included Franch Total, American giant ExxonMobil and the state-owned China National Oil Company.
“Tullow is committed to retaining a material stake in Uganda and to continue to invest for the long term,†Aidan Heavey, Tullow’s chief, commented yesterday.
“As we enter the development phase, we are working closely with the Ugandan government to introduce a mutually beneficial partner with downstream expertise who is aligned with this long term approach.â€
Buying out Heritage and taking on board a bigger partner will enable the company to take care of the whole production chain, including the pipeline and refinery, Heavey further said.
But informed sources in the oil sector said reaching the final deal could take time should the Italians offer a higher price, an option that is legally available to them.
Over the last six years, Tullow and Heritage have invested over $700m in the Lake Albert Rift basin.
They drilled 27 wells to prove over 700 million barrels of oil and identify over 1.5 billion barrels of potential yet to be explored, the statement said.
Tullow’s offer comes just days after Italian foreign minister Franco Frattini visited Uganda and told President Yoweri Museveni that Eni is ready to invest billions of dollars in the Ugandan oil industry.
It also comes at a time when a visiting Libyan delegation has expressed interest in building an oil refinery in Uganda.
The Libyan government owns a 2% stake in Eni and has announced that it plans to buy up to 10%, which would make it the second biggest shareholder after the Italian government.
Energy experts reckon that refining the oil locally could be cheaper than exporting it as crude considering the waxy nature of Uganda’s oil.
TULLOW Oil, the London-based firm exploring for oil and gas in Uganda, has offered to buy out its partner, Heritage Oil.
Two oil fields, blocks 1 and 3A in western Uganda, are jointly owned by Heritage and Tullow in a 50-50% joint venture.
Under the agreement signed between the two, Tullow has the first option to buy in case Heritage wants to sell – what is called pre-emptive right.
In a surprise move, however, Heritage in December entered into a deal to sell its stake to Italian oil giant Eni for $1.5b.
According to the deal, Eni would pay $1.35b upfront and a further $150m in cash or a stake in a producing oil field of a similar value within two years, subject to approval by the Ugandan Government.
The deadline for Tullow to exercise its pre-emptive right expired yesterday.
In a statement, the company announced that it secured the money to match Eni’s offer and will enter into a sale and purchase agreement with Heritage for the proposed oil fields.
“A syndicate of Tullow’s core relationship banks has provided the banking facilities required to enable Tullow to exercise its right of pre-emption,†the statement said.
The completion of the agreement is subject to certain conditions, including approval by Heritage shareholders at a meeting scheduled for January 25 and consent from the Ugandan Government.
Tullow, which is in the process of identifying a partner for another oil field in block 2, where it has a 100% stake, said the interested companies approved the deal.
“Parallel with exercising its pre-emption right, Tullow has been running a transparent farm-out process which has attracted a significant amount of interest from major international and national oil companies,†the statement said.
“The process is now well advanced and potential partners are supportive of the group’s decision to pre-empt.â€
The statement does not name the interested oil companies but sources said they included Franch Total, American giant ExxonMobil and the state-owned China National Oil Company.
“Tullow is committed to retaining a material stake in Uganda and to continue to invest for the long term,†Aidan Heavey, Tullow’s chief, commented yesterday.
“As we enter the development phase, we are working closely with the Ugandan government to introduce a mutually beneficial partner with downstream expertise who is aligned with this long term approach.â€
Buying out Heritage and taking on board a bigger partner will enable the company to take care of the whole production chain, including the pipeline and refinery, Heavey further said.
But informed sources in the oil sector said reaching the final deal could take time should the Italians offer a higher price, an option that is legally available to them.
Over the last six years, Tullow and Heritage have invested over $700m in the Lake Albert Rift basin.
They drilled 27 wells to prove over 700 million barrels of oil and identify over 1.5 billion barrels of potential yet to be explored, the statement said.
Tullow’s offer comes just days after Italian foreign minister Franco Frattini visited Uganda and told President Yoweri Museveni that Eni is ready to invest billions of dollars in the Ugandan oil industry.
It also comes at a time when a visiting Libyan delegation has expressed interest in building an oil refinery in Uganda.
The Libyan government owns a 2% stake in Eni and has announced that it plans to buy up to 10%, which would make it the second biggest shareholder after the Italian government.
Energy experts reckon that refining the oil locally could be cheaper than exporting it as crude considering the waxy nature of Uganda’s oil.