cracking news for Heritage shareholders, not so good for Oxford & Highbridge Capital

2 mins. to read

UPDATE – 200p hit. About Time. Another 200p to go and we might get excited.

Heritage announced the surprise sale this morning of 26% of its stake in the key Kurdistan Miran block for some $156m and which, including the provision of an additional loan by Genel Energy of $294m, values the block at $450m (around 120p per share – remember, the market had ascribed no value to this at the current market cap).

It looks like TB was loathe to dilute himself in Hoil with the proposed rights issue and placing and also wants to show that there is value in Miran to industry players if not to the London market. Scalping the shorters of his company I guess is cream on the cornflakes for an ex Mercenary!

This is a cracking deal and Oxford & Highbridge must be quaking in their boots this morning (see prior blog post here, particularly last comment “you vill lose” – ). Minus the need for a rights issue then the ‘massaging’ lower of the share price to profit from this is a fruitless (and now expensive) exercise…

Any price south of 200p is an utter steal.

Deal highlights –

– In addition, Genel Energy will provide a bilateral loan of $294 million to Heritage, secured on Heritage’s shares in HEME as well as HEME’s remaining working interest in the Miran Block.

– Either party to the Loan can elect that, subject to receipt of approval from Heritage’s shareholders, the Loan is repaid through the transfer to Genel Energy of Heritage’s entire holding of shares in HEME rather than in cash.

– Both the Acquisition and the Loan will be funded and serviced from the Company’s existing cash resources; Genel Energy will become joint operator of the Miran Block.

– Acquisition allows Genel Energy to increase its interest in the Miran Block a commercial gas discovery, from a 25% working interest to a 51% working interest, 38.5% working interest post KRG back-in right.

– It progresses Genel Energy’s strategy of consolidating the leading position in the Kurdistan Region of Iraq

– It leverages Genel Energy’s strong operating and development experience in a region where the Company has extensive geological knowledge

– A competent person’s report prepared by RPS Energy Consultants Limited as at March 31, 2012 for Heritage, estimates that the block contains mean Gas In Place of 10.5 Tcf, or trillion cubic feet, with mean contingent and risked prospective resources of 3.75tcf of gas and 161 mmboe, or million barrels of oil equivalent, of liquids

– Together with the Company’s recent acquisition of a 44% interest in the Bina Bawi gas discovery, it allows Genel Energy to create a material gas position in the Kurdistan Region

– Assuming joint operatorship of the Miran Block will allow the Company to take the lead in driving the development of the Miran Block forward to meet the growing needs of the domestic and Turkish markets.

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