LONDON (AP) — Britain’s Tullow Oil PLC said Monday it will exercise its preemptive right to buy 50 percent of two Ugandan oil fields from Heritage Oil PLC for $1.5 billion, potentially blocking a bid by Italy’s Eni SpA.
Tullow and Heritage each own a half share in the two fields in the oil rich Lake Albert Basin and Heritage had agreed in November to sell the stake to Eni for up to $1.5 billion.
But under the terms of Tullow and Heritage’s joint exploration venture, Tullow had the right to preempt any offer for Heritage’s half by matching the price offered by any other bidder.
The Ugandan government will be the final arbiter after shareholders vote on the proposal at a meeting scheduled for Jan. 25.
Tullow said it has tapped its bankers to match Eni’s offer of $1.35 billion cash and a deferred payment of $150 million in either cash or an interest in a producing oil field.
“Tullow is committed to retaining a material stake in Uganda and to continue to invest for the long term,” the company said in a statement. “As we enter the development phase we are working closely with the Ugandan government to introduce a mutually beneficial partner with downstream expertise who is aligned with this long term approach.”
Tullow shares were up 1.9 percent at 1,364 pence on the London Stock Exchange.
Shares in state-owned Eni, which had hoped the acquisition would be part of its expansion in sub-Saharan Africa, were down 2.3 percent to €18.15 on Euronext.
Tullow and Heritage have invested over $700 million in the Lake Albert Rift basin over the past six years, drilling 27 wells to prove more than 700 million barrels of oil and identify over 1.5 billion barrels of potential oil yet to be explored.
“The basin will require much more investment to enhance the value and new partners with different skills are needed,” said Charles Stanley analyst Tony Shepard. “Hopefully, by pre-empting and becoming the majority owner Tullow can obtain a good farmout deal for the combined Ugandan assets and accelerate the basin-wide development plan best suited to government needs.”
Tullow has already pre-agreed a list of potential partners with the government and over the next three weeks it will select which partners to help construct a pipeline and associated infrastructure.