Heritage Oil to sell interest in Miran Block to Genel

Heritage Oil, an independent upstream exploration and production company, has said its wholly owned subsidiary, Heritage Energy Middle East (HEME), has signed binding agreements with Genel Energy for the sale of a 26 per cent interest in the production sharing contract relating to the Miran Block in the Kurdistan Region of Iraq.

In addition, a corresponding interest in the related joint operating agreement will also be sold to Genel for cash a total consideration of $156m plus a $294m exchangeable loan which will be provided by Genel to Heritage on completion of the sale.

The sale, which values the the entire interest held by HEME at $450m, is set to be completed on or before August 22nd.

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Following completion of the sale, Heritage, through its interest in HEME, will hold a 49% interest in the Miran production sharing contract and Genel will hold the remaining 51%. According to the terms of the agreement, Genel and HEME will act as joint operators in relation to the Miran Block, operating pursuant to an amended Miran joint operating agreement to reflect the new joint operatorship structure.

The loan will carry an interest rate of 8% and will have a fixed term ending either 15 months after the date of completion of a previously announced acquisition by Heritage of an interest in OML 30 in Nigeria, or February 6th 2014, whichever is earlier.

Following the election of either Heritage or Genel, and subsequent to the approval by shareholders, repayment will be made through the transfer of the entire issued share capital of HEME to Genel, which would then hold a 100% interest in the Miran production sharing contract and Miran joint operating agreement.

The combined proceeds of the sale and the loan will be used to partially fund the proposed acquisition of OML 30, as well as to continue the exploration, appraisal and development of the company's existing portfolio, fund further potential acquisitions and as general working capital.

Lastly, Heritage Oil indicates that, if the sale is completed and the loan is drawn down on or prior to 22 August 2012 (tomorrow), then the proposed rights issue described in the prospectus issued by Heritage on 6 August 2012 and which was meant to be undertaken in connection with the proposed acquisition of OML 30 will no longer be required. Neither would any of the potential advance capital raisings described in the prospectus be needed.

NR