HERITAGE Oil, the British oil exploration firm led by former security adviser Tony Buckingham, yesterday announced a $370m (£237m) rights issue to fund its expansion into Nigeria.
The company, which yesterday posted a $6.7m loss in its interim results, will use the capital raised from the rights issue to bolster the $850m purchase of a 45 per cent stake in Nigerian Oil Mining Licence (OML) 30 – a licence for eight Nigerian oil fields.
The firm is leveraging the deal with a $550m bridging loan from Standard Bank on top of the rights issue.
The firm said the acquisition, which was announced at the end of June, would help transform it from an exploration business into a production outfit.
Buckingham said: “The sheer size and valuation of the oil fields, based on the recently issued independent reserves report, and the use of debt to fund a considerable portion of the purchase consideration make this transaction transformational.”
Heritage will buy the stake through a special purpose vehicle alongside Nigerian firm Shoreline Natural Resources. The idea needs approval from shareholders.
Heritage Oil’s $370m new rights issue
Q Why is Heritage Oil interested in buying the OML 30 oil fields??
A It will increase its role as an oil producer. The Oil Mining Licence (OML) 30 area consists of eight oil rich locations in Delta State, Nigeria. It will send the firm’s production capabilities soaring – boosting its current output of 567 barrels a day to about 11,320 barrels a day.
Q How has the $370m rights offering been structured?
A JP Morgan Cazenove will be underwriting the share offering as part of the $850m purchase. JP Morgan Chase Bank has provided a $215m bridge loan facility and the proceeds of the rights issue will be used to pay off this amount. Top JP deal maker Barry Weir has led the process, backed by Canaccord Genuity.
Q Who is selling their stake in OML 30?
A Heritage will buy the 45 per cent stake from Shell, Total and ENI. The other 55 per cent is owned by the Nigerian Petroleum Development Company, a subsidiary of the Nigerian National Petroleum Corporation.
Q Where and how could the deal get derailed ?
A Shareholders will vote on the proposal at a meeting on 30 August. The Nigerian government will also have to consent to the plan.