Heritage Oil is set to spend $850 million (£541 million) on Nigerian assets to extend its footprint across Africa. Alongside Nigerian partner, Shoreline Power, the oil and gas company will buy a 45 percent interest in the OML 30 fields from Shell, Total and Eni. Chief Executive for Heritage Oil, Tony Buckingham, described the deal as “transformational” for the company.
Buckingham himself owns almost a third of Heritage Oil and said, “Heritage is very excited to be participating in the development of OML 30 and entering at an attractive valuation.”
“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,” he continued.
The acquisition will give Heritage Oil firm footing in Nigeria - Africa’s largest oil producer. The bid is classified as a reverse takeover and subsequently Heritage Oil shares will be suspended from 2nd July until further information about the deal is published.
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Heritage Oil has spoken out about opportunities the acquisition will bring to the company. “Heritage believes there are many opportunities to develop the existing fields in OML 30 and increase production," the firm confirmed.
“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.”
OML 30, which has over 200 wells, currently averages gross production of around 35,000 barrels of oil per day (bopd), increasing Heritage Oil’s net production from 605 bopd to around 11,350 bopd. Management estimates that the assets contain proved and probably gas reserves of 707 million barrels of oil and 2.5 trillion cubic feet gross reserves of gas.
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. The remaining 55 percent of the asset is held by the Nigerian National Petroleum Corporation (NNPC), whose subsidiary Nigerian Petroleum Development Company will take over as operator of OML 30 from Shell.