Shares in Heritage Oil advanced by over 20 per cent after the frontier energy explorer revealed that it had finally managed to monetise its Miran gas discovery in the Kurdish region of Northern Iraq. Heritage will initially sell a 26 per cent stake in the Miran block to Ankara-based Genel Energy for $156m (£98.7m).
Following formal completion of the sale, Heritage will receive another $294m in the form of an exchangeable loan from Genel, which will be repaid through the transfer of the remaining Heritage stake in the Miran block, effectively handing full control to Genel.
The deal was conducted in this manner to make sure that it went through before the 22nd of this month, thereby eliminating the need for a $370m rights issue that was to fund Heritage’s joint venture share of the acquisition of a series of oilfields in the Niger delta announced in July.
The $450m sale price means that Heritage effectively doubled its money on its Kurdistan investments, and given that development costs have been estimated at around $2bn, it’s probably better that Genel foots the bill. The sale also means that Heritage won’t require additional capital, nor will shareholders be faced with a potential dilution of their holdings.
