Heritage Oil widens pre-tax losses from continuing operations

FTSE 250-listed oil and gas exploration company Heritage Oil disappointed investors on Tuesday after posting wider full year pre-tax losses from continuing operations for the full year ended December 31st 2012.

FTSE 250-listed oil and gas exploration company Heritage Oil disappointed investors on Tuesday after posting wider full year pre-tax losses from continuing operations for the full year ended December 31st 2012.

The group reported a loss after tax from continuing operations of $182.3m (2011: loss of $63.0m), largely as a result of increased finance costs, the impairment of intangible exploration assets, and acquisition expenses.

The operating loss for the period soared to $137.6m from $44.4m the previous year, driven chiefly by petroleum expenses.

However, the company was able to deliver an overall net profit of $28.6m, compared to a net loss of $66.9m in 2011, driven by the sale of its interests in Kurdistan, as well as productive acquisitions in Nigeria, and extended acreage in Tanzania.

Basic earnings and diluted earnings per share were $0.11, compared to the basic and diluted loss per share of $0.25 in 2011.

Revenue was generated from petroleum production in Russia, which decreased slightly over the course of the year. Petroleum revenue from the Zapadno Chumpasskoye Field in Russia dropped by $0.2m to $8.8m in 2012 from $9.03m one year earlier.

The group reported that production from the Zapadno Chumpasskoye Field had decreased from an average daily production of 673 barrels of oil per day (bopd) in 2011 to 607 bopd in 2012, primarily due to "natural decline and a mechanical problem occurring on well 363", which the group said had since been repaired.

Operational developmentsIn November 2012, Heritage said it had completed the acquisition of a 45% stake in a producing oil mining license in OML 30, Nigeria, through Shoreline Natural Resources, together with a 45% interest in other assets owned under a joint operating agreement for OML 30.

Shoreline is a special purpose Nigerian company formed between a subsidiary of Heritage and a Nigerian partner, Shoreline Power, which acquired the 45% of OML 30.

The group reported that production from OML 30 had been incorporated within the group's results with effect from November 1st. Average daily production, net to Heritage's economic interest of 12,350 barrels of oil per day (bopd) was generated from OML 30 in Nigeria for November and December 2012, it reported. Since the acquisition of an interest in OML 30, revenues net to Heritage of $234.5m had been generated, the group added.

The group also exited Kurdistan and Mali and entered new regions of Papua New Guinea whilst extending its acreage in Tanzania.

Tony Buckingham, Chief Executive Officer of Heritage Oil, commented: "2012 has been a momentous year in the evolution of Heritage. We have enhanced our portfolio through corporate activity, securing a step change in production, reserves and cash flow and selling our gas interests in Kurdistan at an attractive valuation."

He added: "Our transformation includes entry into new regions of Nigeria and Papua New Guinea and extending our acreage in Tanzania. The Company now has significant producing assets and an enlarged exploration portfolio, providing more balance with both geographic and operational diversification."

Heritage Oil's share price was down 2.59% to 165.80p at 11:50 on Tuesday.

MF

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