Heritage Oil acquires interest in Nigeria
A partially-owned subsidiary of upstream exploration and production company Heritage Oil has reached an agreement to acquire a 45 per cent participating interest in a producing oil mining lease in Nigeria, together with a 45 per cent interest in other assets under the joint operating agreement for OML 30.
A partially-owned subsidiary of upstream exploration and production company Heritage Oil has reached an agreement to acquire a 45 per cent participating interest in a producing oil mining lease in Nigeria, together with a 45 per cent interest in other assets under the joint operating agreement for OML 30.
The subsidiary, which is known as Shoreline Natural Resources and also part-owned by local Nigerian partner, Shoreline Power Company, made the acquisition for $850m, net of costs.
The proposed acquisition, which will provide Heritage with exposure to Nigeria, is classified as a reverse takeover and consequently the Heritage Shares will be suspended from July 2nd until further information on the deal is published.
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OML 30, which is located onshore in the delta in Nigeria, includes eight producing fields and associated infrastructure, and is currently averaging gross production of around 35,000 barrels of oil per day (bopd), increasing Heritage's net production from 605 bopd to around 11,350.
Heritage oil estimates that OML 30 has gross proved and probable reserves of 707m barrels of oil and 2.5trn cubic feet gross reserves of gas, and that net proved and probable reserves have increased 356% from 61m barrels to a management estimated 278.
The site is expected to be cash generative immediately following the acquisition and 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.
"Heritage believes there are many opportunities to develop the existing fields in OML 30 and increase production," the firm said.
"In the short term, refurbishing the gas lift system in producing wells and non-producing existing wells to be re-started is expected to increase and stabilise production. OML 30 includes over 200 wells, more than half of which are currently in production. Pipeline repairs should restore production from many wells that were vandalised during the period from 2006 to 2009.
"In the medium term, existing wells can be worked over to improve completions and install gas lift in wells without artificial lift. In the longer term, drilling will target additional reservoir intervals based on the significant number of proved drilling locations."
The acquisition will be financed by a $550m secured bridge finance facility provided by Standard Bank of South Africa, and an underwritten rights issue raising proceeds of up to $370m.
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