British oil firm Heritage Oil Plc (HOIL.L) on Monday said it has agreed to buy, along with its local Nigerian partner, certain oil assets in Nigeria from Royal Dutch Shell Plc (RDS-A: Quote,RDSA.L,RDSB.L,RDS-B: Quote), Total SA (TOT: Quote,TTFNF.PK,TTA.L) and ENI SpA (E: Quote) for $850 million.
Heritage said the proposed acquisition will give it entry to Nigeria, which reportedly contain the second largest proved reserves in Africa.
Shoreline Natural Resources Limited, a special purpose private Nigerian company formed by Heritage and its Nigerian partner Shoreline Power Co. Ltd, will buy a 45 percent participating stake in OML 30, a producing oil mining lease. The deal also includes a 45 percent interest in other assets under the joint operating agreement for OML 30, which includes a segment of the Trans Forcados pipeline.
Heritage will buy the assets from the Nigerian units of Shell, Total and Eni, who each own participating interests of 30 percent, 10 percent and 5 percent, respectively, in the acquiring assets. The remaining 55 percent participating interest is held by the Nigerian National Petroleum Corp.
Heritage expects the acquisition to be cash generative immediately following the completion. Heritage intends to use this cash flow to develop and explore the lease area and its existing portfolio as well as pursuing additional value generating opportunities.
OML 30, located onshore in the delta in Nigeria, includes eight producing fields and associated infrastructure, including a segment of the 850 thousand barrels oil per day or bopd capacity Trans Forcados pipeline. The mine is currently averaging gross production of about 35 thousand bopd.
The company noted that the transaction, when completed, will result in a material change in production and reserves. Net production would increase to around 11,350 bopd from 605 bopd, and Heritage also expects to achieve a 356 percent increase in net proved and probable reserves to a management estimate of 278 mmbbls from 61 mmbbls.
The company noted that the deal is a reverse takeover and consequently its shares will be suspended with effect from today until further information on the transaction is published.
Heritage's Chief Executive Officer Tony Buckingham said, "As part of Heritage's diversified portfolio of exploration, appraisal and development assets, OML 30 is expected to provide significant production and cash flow, thereby de-risking Heritage's financial profile, and our technical expertise will provide a comparative advantage in creating additional value."
Heritage shares closed Friday's regular trading session at 123 pence, up 6.20 pence or 5.31 percent in London.
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by RTT Staff Writer
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