Heritage given green light in Tullow deal

BRITISH oil explorer Heritage Oil today tempered the prospect of five-month delays at its latest well in its Iraqi operations with news it has the backing of the Ugandan government in the sale of two oil fields to Tullow Oil.

The Miran West-2 appraisal well in Kurdistan will need to be deepened to 4,600 metres from its current 2,627 metres in order to explore its potential.

Heritage said the well, which spudded on 26 November, encountered hydro-carbon bearing intervals but is being drilled within a part of the Miran West structure where the fracture network is less developed.

As a result, no hydrocarbons were flow tested to the surface from the well.

It now needs to explore further in order to assess the potential in the underlying Jurassic and Triassic structures. These targets were identified through additional seismic data Heritage acquired earlier this year.

"These exploration targets have the potential to contain substantial volumes of additional hydrocarbons," a company statement read, before adding that drilling will take a further four to five months.

Looking ahead, plans for the drilling of the Miran East-1 exploration well are progressing and Heritage it looking to contract a rig later this year.

Chief executive Tony Buckingham said: "The further hydrocarbon potential in the deeper targets in the Miran structure has the potential to increase resources significantly.

"We look forward to undertaking a testing programme when drilling has been completed."

Richard Griffith, analyst at Evo Securities, said: "The company has highlighted further structures in the Jurassic and Triassic levels (previously not mapped) which could add significant value and will drill these over the next four-five months.

"If consistent with the region these are likely to be targeting billions of additional Oil In Place. At present there is no change to our recommendation or target price."

In addition the group, which focuses on Africa, the Middle East and Russia, said it has received the backing of the Ugandan government in the sale of its interest in Block 1 and Block 3A to Tullow Oil.

The deal follows Tullow’s decision to exercise its right of pre-emption to acquire Heritage's 50 per cent interest in the Ugandan blocks in January for a handsome $1.5bn.

The FTSE 100 major plans to introduce China's CNOOC and oil major Total as equal partners once the deal is closed.

Heritage has now received a letter from the government stating that it supports Heritage’s sale and transfer of the assets and that it will conclude its review of the deal within eight weeks.

Heritage expects to close the transaction to be completed shortly after.