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Heritage Oil has launched a $370m rights issue to help fund its move into Nigeria, as the London-listed explorer’s interim loss widened more than fivefold.
The FTSE 250 company last month agreed to pay $850m for a 45 per cent stake in a cache of Nigerian oilfields – Heritage’s first significant deal in the oil-rich country.
Heritage, founded by former mercenary and security adviser Tony Buckingham, on Monday said that the $370m rights issue – which is yet to be priced – would help fund the Nigerian deal, with the remainder supplemented by a $550m bridging loan from Standard Bank of South Africa.
The Nigerian assets, called OML 30, were bought from Shell, Total and ENI, and boost Heritage’s net production from 605 barrels a day to 11,500 b/d. The Nigerian state holds OML 30’s remaining 55 per cent controlling stake.
“OML 30 is expected to provide significant production and be cash flow generative immediately, thereby de-risking Heritage’s financial profile,” said Mr Buckingham, chief executive, who owns a third of the group.
News of the rights issue came as Heritage reported a year-on-year widening of its losses from $9.7m to $50m in the six months to June 30.
The group, whose shares have lost almost 40 per cent of their value over the past year, reported revenues up from $2.9m to $4.1m, but cut back on its cash expenditure, which fell from $52.7m to $36.1m. The loss per share widened from 4 cents to 20 cents.
Until its move into Nigeria, Heritage had been primarily focused on exploration in areas such as Kurdistan, Malta, Libya and Tanzania, operating only a small production facility in Russia.
Heritage said that the deal in Nigeria – a country thought to have the biggest oil reserves in sub-Saharan Africa – would enable it to boost production from the OML 30 sites from 35,000 b/d to 145,000 b/d by 2018.
The Nigeria deal is classified as a reverse takeover, and therefore Heritage shares have been suspended at 123p since July 2.
The group’s net cash position fell from $311m to $34.6m over the past six months, as Heritage awaited the outcome of a decision on whether it must pay capital gains tax on the $1.45bn sale of its Ugandan assets in 2010. Some $400m are being held in escrow pending the outcome.
In June, Heritage survived a revolt over pay and bonus awards for senior executives after a substantial number of shareholders voted to reject its remuneration report.
● Texas-based Noble Energy on Monday agreed a deal to buy stakes in licences operated by Falkland Oil & Gas around the Falkland Islands.
The farm-out agreement covers Falkland Oil & Gas’s 40,000 sq km position to the south-east of the islands, and marks the first time that a US explorer has dipped a toe into the region.