UK-BASED OIL explorer Heritage Oil agreed to merge with Genel Energy International, a unit of Turkeys Cukurova Group CUKRO.UL, to create an oil producer focused on Iraqi Kurdistan worth around US$5.5bn.
Heritage's founder and chief executive, former mercenary Tony Buckingham, is betting that years of wrangling between Baghdad and Kurdish leaders over oil revenue sharing is nearly over, enabling Genel's producing fields to fund his undeveloped assets. Heritage said on Tuesday the deal, which is currently non-binding, would be structured as a takeover of Genel by Heritage. Heritage will pay with shares and Cukurova, controlled by one of Turkey's richest men, Mehmet Emin Karamehmet, will end up with around 50 percent of the enlarged group. Heritage's shares, which had been suspended while it was in merger talks, were up 4.1 per cent at 609-1/2 pence at 1226 GMT, valuing the company at around US$2.5bn.
The shares have tripled in value since the beginning of the year on a big oil find in Kurdistan and positive drilling results at its Ugandan fields. Genel is worth around $3.3 billion to 3.6 billion, Heritage Chief Financial Officer Paul Atherton told reporters on a conference call, adding he expects the enlarged group to be included in the FTSE 100 index of the UK's largest listed companies .SXEP."We consider that this acquisition can transform Heritage into being a regional player," he said.
Analysts said the deal made strategic sense.
