Heritage Oil has jumped nearly 7% after the Ugandan government gave conditional approval for its $1.5bn sale of assets to Tullow Oil.
There has been a delay in the deal going through after a dispute between Heritage and the Ugandan government about what tax should be paid. The government was holding out for $360m but now it appears the move will get the go-ahead once Heritage pays 30%, with the remaining 70% in the form of a bank guarantee which would be redeemable after an arbitration process. RBS analyst Phil Corbett said:
Reuters quotes Energy Minister Hilary Onek as saying the deal will be fully endorsed after Heritage has deposited 30% of the disputed capital gains tax with Uganda's Treasury (Heritage has effectively already committed to this in an earlier statement). However, Onek implies that the remaining 70% has to be 'given' to government via a bank guarantee which would be redeemable (to Heritage) upon the completion of an arbitration process.
At first glance, this appears to be an effort by the Ugandan government to ensure Heritage puts the remaining 70% into escrow while the arbitration process is ongoing. Obviously would restrict Heritage's access to the cash while process is ongoing, but may still be an acceptable to Heritage given its strong belief there is no capital gains tax to pay and a need to break the deadlock.
The news has lifted Heritage 26.4p to 404.4p, while Tullow has climbed 41p to £10.82. Tullow also gave a positive update on its operations, including confirming that the Jubilee well in Ghana was on course to deliver its first oil in November or December this year.
