Tony Buckingham (pictured), Chief Executive Officer, commented:
"This independent report, assessing OML 30 and certain existing assets, highlights the strength of our current portfolio and the transformational nature of the proposed acquisition of OML 30 which creates shareholder value and is cash generative upon completion. The economic valuation of between US$3.4 billion and US$4.1 billion given for the current 2P reserves at OML 30 and our assets in Russia underlines the significant opportunity we have to create substantial value for shareholders.
"There is considerable upside in OML 30 which has not been assessed in the CPR, notably gas in the licence, estimated by management at 2.5 TCF, as well as undeveloped reservoirs and behind pipe reserves in some of the developed reservoirs that have not currently been targeted with new wells.
"These additional resources could provide further significant upside which has not been quantified in the CPR. Also, significant value exists for the Contingent and Prospective resources within the Miran Field that has not been estimated in this report due to the classification as resources."
The gross reserves and the net reserves attributable to Heritage are given in Table 1 and Table 2.
The post-tax Net Present Values of Heritage's reserves in OML 30 and Zapadno Chumpasskoye at a 10% discount rate are tabulated in Table 3, including an alternative valuation for OML 30 with a different Income Tax scenario based on Heritage's view of pending legislation (the "Alternative Income Tax Scenario"). The Alternative Income Tax Scenario uses tax rates based on a proposed Petroleum Industry Bill that differ from the current Nigerian income tax rates for petroleum production, where, following the five-year period beginning in the 2012 tax year, a variable tax rate of between 70 and 80% (based on Shoreline's interest in production) is assumed instead of a flat rate of 85%.
With regards to OML 30, under the terms of the shareholders' agreement and option agreement in respect of Shoreline Natural Resources Limited ("Shoreline"), the private limited Nigerian company established by Heritage (through a wholly-owned subsidiary) and Shoreline Power Company Limited ("Shoreline Power"), Shoreline Power has an option to acquire a 30% participating interest in Shoreline for a term of six months from the date of the OML 30 acquisition agreement, for a consideration of 30% of the OML 30 net acquisition cost and expenses (the "Option").
If the Option is exercised, the Heritage Group's Net Entitlement Reserves and Net Present Value with respect to OML 30 will be reduced by 30% from those shown in Tables 1 and 3.
A summary of the Miran Field's contingent and prospective resources are given in Table 4 and Table 5 below.
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