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April 30, 2013 8:51 pm
Heritage, alongside local partner Shoreline Power, announced plans to buy a 45 per cent interest in the OML 30 licence area last July with ambitions to increase production across its sites from 35,000 barrels of oil a day towards 150,000 by 2018.
But since completion of the deal in November, gross production in the block has averaged just over 20,000 bopd.
Tony Buckingham, chief executive, said that most fields were now working after a series of meetings between workers and the operating company, while repairs to a failed manifold in a gas compression system used to improve recovery rates were expected to be completed by the end of May.
New gas compressors were also on order to improve output from the previously neglected fields, he said, which should result in improved output in the second half on this year.
Last August Heritage cancelled a proposed $370m rights issue planned to help pay for its stakes in the oilfields from Royal Dutch Shell, Total of France and Eni of Italy, after raising $450m from the sale of assets in the Kurdistan region of northern Iraq to Genel Energy.
The Nigerian state continues to hold a 55 per cent controlling stake in OML 30, operated by state-controlled Nigerian Petroleum Development Company.
Mr Buckingham added that there had been no evidence of bunkering on the licence’s pipelines system since acquisition, in spite of the common occurrence of the illegal tapping of pipes in the country.
He argued that new wells and investment in improved extraction techniques had potential to raise gross production on the licence to 300,000 bopd – more than the 280,000 peak level achieved by Shell in 1971.
Acquisition costs of $72m incurred in the year to December widened Heritage’s pre-tax losses from $62m to $182m. However, a $211m gain booked on disposals pushed its post-tax loss of $69m into profit of $29m. Heritage ended the year with net debt of $472m.
Its shares fell 4 per cent to 163.2p on Monday.
What’s a little profit or loss for a company that has made a virtue of rewarding shareholders through flipping exploration assets before they reach full-scale production? Heritage’s decision to reverse out of Kurdistan came just two years after its sale for $1.45bn to fellow explorer Tullow Oil of its interest in blocks in western Uganda, which allowed it to pay a special dividend of 100p. An exploration move into Papua New Guinea provides some prospective new frontier froth to the stock. But, like other London-listed E&P peers such as Tullow and Cairn Energy, Heritage now looks set to be judged on its delivery of its production as much as its exploration.
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