LONDON, UNITED KINGDOM--(Marketwire - July 2, 2012) -

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS. THE SECURITIES REFERRED TO HEREIN ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. A CIRCULAR AND PROSPECTUS WILL BE PUBLISHED BY THE COMPANY IN DUE COURSE IN CONNECTION WITH THE PROPOSED ACQUISITION AND RIGHTS ISSUE. FOLLOWING PUBLICATION, COPIES OF THE CIRCULAR AND PROSPECTUS WILL BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE AND FROM 34 PARK STREET, LONDON, W1K 2JD

Heritage Oil Plc (News - Market indicators)(LSE:HOIL), an independent upstream exploration and production company, announces that Shoreline Natural Resources Limited ("Shoreline"), a special purpose private Nigerian company formed between a subsidiary of Heritage and a local Nigerian partner, Shoreline Power Company Limited ("Shoreline Power"), has reached agreement to acquire, by way of assignment, a 45% participating interest in a producing oil mining lease in Nigeria ("OML 30"), together with a 45% interest in other assets under the joint operating agreement for OML 30 (the "Acquisition Assets"), for a total cash consideration of US$850 million, net of costs (the "Proposed Acquisition"). The vendors of the Acquisition Assets are The Shell Petroleum Development Company of Nigeria Limited ("Shell"), Total E&P Nigeria Limited ("Total") and Nigerian Agip Oil Company Limited ("ENI" and together with Shell and Total, the "Vendors") who each own participating interests of 30%, 10% and 5% in the Acquisition Assets, respectively. The remaining 55% participating interest is held by the Nigerian National Petroleum Corporation ("NNPC").

Highlights

• OML 30, located onshore in the delta in Nigeria, includes eight producing fields and associated infrastructure, including a segment of the 850,000 bopd capacity Trans Forcados pipeline
• The Proposed Acquisition represents a significant opportunity for Heritage to achieve a material change in production and reserves
  • OML 30 is currently averaging gross production of c.35,000 bopd, increasing Heritage's net production from 605 bopd to c.11,350 bopd
  • Management estimates that OML 30 has gross proved and probable reserves of 707 mmbbls of oil and 2.5 Tcf gross reserves of gas
  • Net proved and probable reserves increase 356% from 61 mmbbls to a management estimated 278 mmbbls
  • Potential to ramp up production of OML 30 in the short term by refurbishing and maintaining existing infrastructure
• Cash consideration of US$850 million, net of costs, for Shoreline to purchase a 45% participating interest in OML 30 and related assets under the corresponding joint operating agreement
  • OML 30 expected to be cash generative immediately following completion of the Proposed Acquisition ("Completion")
• Shoreline will be one of the leading indigenous companies producing in Nigeria
  • Combines Shoreline Power's energy and infrastructure operating expertise and respected network of relationships within Nigeria with Heritage's strong technical team with relevant geographic expertise
  • Shoreline and Heritage will work to develop close relationships with local communities and other stakeholders
• The Proposed Acquisition provides Heritage with exposure to Nigeria, which is reported to contain the second largest proved reserves in Africa(1), and provides further growth opportunities in a prolific hydrocarbon region
• The Proposed Acquisition will further diversify Heritage's portfolio, balancing exploration with production, while extending Heritage's geographic footprint within its core areas of Africa and the Middle East
• The Proposed Acquisition is classified as a reverse takeover and consequently the Heritage Shares (as defined below) will be suspended with effect from Monday 2 July 2012 until further information on the Proposed Acquisition is published

Analyst Conference Call

There will be a conference call for analysts at 9:00am, on Monday 2 July, to be hosted by Paul Atherton, Chief Financial Officer. For further information, contact Stephanie Power at FTI Consulting on + 44 (0) 20 7269 7277 or heritageoil.sc@fticonsulting.com.

Rationale for Proposed Acquisition

Material increase in Heritage's production and reserves profile

When completed, the Proposed Acquisition will result in a material change in production and reserves. Net production is expected to increase to c.11,350 bopd from 605 bopd, based on the relative financial contribution by Heritage to Shoreline. Heritage also expects to achieve a 356% increase in net proved and probable reserves from 61 mmbbls to a management estimate of 278 mmbbls.

It is expected that OML 30 will be cash generative immediately following Completion. Heritage intends to use this cash flow to develop and explore the lease area and its existing portfolio as well as pursuing additional value generating opportunities.

Realising existing potential and future upside

Heritage believes there are many opportunities to develop the existing fields in OML 30 and increase production. In the short term, refurbishing the gas lift system in producing wells and non-producing existing wells to be re-started is expected to increase and stabilise production. OML 30 includes over 200 wells, more than half of which are currently in production. Pipeline repairs should restore production from many wells that were vandalised during the period from 2006 to 2009. In the medium term, existing wells can be worked over to improve completions and install gas lift in wells without artificial lift. In the longer term, drilling will target additional reservoir intervals based on the significant number of proved drilling locations. Plans include drilling of over 200 new wells and restoring approximately 60 wells to production with a focus on horizontal drilling. The lease also contains deeper exploration targets already identified on 3D seismic. Higher gas prices in the future may result in the development of estimated gross reserves of 2.5 Tcf of gas.

Partnership with Shoreline Power to create a leading indigenous producer

Shoreline is structured to meet the criteria required to be classified under Nigerian law as an indigenous Nigerian company. Shoreline Power and its affiliates comprise a leading energy and infrastructure group based in Nigeria and operating in several African countries. Shoreline Power has, over the years, built a strong and respected network of relationships in the Nigerian oil and gas community. Combined with Heritage's strong technical team with relevant geographic expertise, the Company believes this partnership will establish Shoreline as one of the leading indigenous companies in the oil industry in Nigeria. Shoreline's integration within the oil industry in Nigeria is expected to be reinforced through an advisory board which will look to include influential stakeholders.

Exposure to Nigeria

Nigeria has proved reserves of 37.2 bnbbls, the largest in Sub-Saharan Africa, the second largest in Africa and the tenth largest in the world². It is the largest African producer with 2.5 mmbbls per day(2) and has well-established infrastructure from over 50 years of oil production. The country has a large number of discovered but undeveloped fields with significant upside potential. The Proposed Acquisition and partnership with Shoreline Power enhances Heritage's profile in the country and creates a platform for further growth in this prolific hydrocarbon region.

Creating a diversified exploration and production company

When completed, the Proposed Acquisition will create an exploration and production oil and gas company with a listing on the Premium Listing segment of the Official List of the United Kingdom Listing Authority ("UKLA"). The Company will have a significant portfolio of geographically diverse assets with access to international capital markets. Heritage will continue to focus on bringing its development assets into production and pursuing additional high-impact exploration opportunities. 

Structure of the Proposed Acquisition

Heritage, together with its Nigerian partner, Shoreline Power, has established Shoreline, a special purpose private Nigerian company, which on 29 June 2012, entered into an agreement with Shell, Total and ENI (the "Acquisition Agreement") to acquire a 45% participating interest in OML 30, a producing oil mining lease in Nigeria, together with a 45% interest in other assets under the joint operating agreement for OML 30, which includes a segment of the Trans Forcados pipeline, for a total cash consideration of US$850 million, net of costs.

Shoreline is structured to meet the criteria required under Nigerian law to be classified as an indigenous Nigerian company, with 55% of its equity interest held by Shoreline Power, a leading local energy and infrastructure company, and the remaining 45% held by Heritage (through a wholly-owned subsidiary). The economic rights of Heritage and Shoreline Power in Shoreline differ from the equity division and are reflected by the dividend entitlements set out in the Shoreline shareholders' agreement, which will initially reflect the respective capital contributions of Shoreline Power and Heritage to Shoreline. 

The Proposed Acquisition and certain terms related to the payment and financing of the consideration payable in respect of the Proposed Acquisition are subject to the approval of the Company's shareholders, which approval will be sought at an extraordinary general meeting of the Company expected to be held in August 2012 (the "EGM"). A shareholder circular convening the EGM and seeking the necessary approvals (the "Circular") will be published by the Company in due course alongside a prospectus (the "Prospectus") containing the required disclosure in respect of: (i) the admission of new shares to be issued by Heritage in connection with the financing of the Proposed Acquisition, as described below, to the Premium Listing segment of the Official List of the UKLA and to trading on the Main Market of the London Stock Exchange ("LSE"); and (ii) the admission of the existing share capital of Heritage, as enlarged by the Proposed Acquisition to the Premium Listing segment of the Official List of the UKLA and to trading on the Main Market of the LSE, at Completion ("Admission").

The Proposed Acquisition will be financed by a US$550 million secured bridge finance facility (the "Standard Bank Bridge Facility") provided by Standard Bank of South Africa ("Standard Bank"), and an underwritten rights issue ("Rights Issue") raising proceeds of up to US$370 million (as such amount may be reduced by the proceeds of any capital raising prior to the launch of the Rights Issue). The Company and J.P. Morgan Securities Ltd. ("JPMSL") have entered into a standby underwriting commitment under which the Company agrees to conduct, and JPMSL agrees to underwrite, an equity raising of up to US$370 million (as such amount may be reduced by the proceeds of any capital raising prior to the launch of the Rights Issue) by the Company. The standby underwriting commitment contemplates a further underwriting agreement being entered into in respect of the Rights Issue prior to the publication of the Circular and Prospectus. JPMSL is acting as sole sponsor, joint global coordinator and joint bookrunner in respect of the Rights Issue and any such capital raising. Standard Bank Plc is acting as joint global coordinator and joint bookrunner in respect of the Rights Issue and any such capital raising. Canaccord Genuity Limited ("Canaccord") has undertaken to underwrite 27% of the amount to be raised under the Rights Issue and is acting as lead manager in respect of the Rights Issue and any such capital raising. The proceeds of the Rights Issue will be applied toward the payment of: (i) a deposit of US$85 million (the "Deposit"); (ii) up to US$215 million, being the balance of the consideration (less the Deposit) not financed by the Standard Bank Bridge Facility; and (iii) the estimated costs associated with the Proposed Acquisition (US$70 million). The Deposit is initially being financed from the Company's existing cash resources and, on signing of the Acquisition Agreement, a portion of the Deposit representing 1% of the market capitalisation of Heritage, as is permitted under the Listing Rules of the UKLA, was paid to the Vendors. The balance of the Deposit was paid into an escrow account on signing of the Acquisition Agreement, where it will be held until shareholder approval in respect of the payment terms applicable to such balance amount is obtained at the EGM, following which the entire Deposit will be non-refundable in certain circumstances. If shareholder approval is not obtained at the EGM, the balance of the Deposit held in escrow will be returned to Shoreline and subsequently repaid to the Company.

In order for the Company to have certainty of funds available during the period between the signing of the Acquisition Agreement and the receipt of the Rights Issue proceeds, the Company has entered into a bridge facility provided by JPM Chase Bank N.A. under which US$215 million will be made available to Heritage, and on-lent to Shoreline (the "JPM Bridge Facility"). The JPM Bridge Facility and the Standard Bank Bridge Facility are initially secured by assets of Shoreline and certain asset guarantees and share pledges of Heritage and its subsidiaries (the "Heritage Group"); however, following satisfaction of certain release conditions, including Completion, there will be no recourse to the Heritage Group under the Standard Bank Bridge Facility. Following Completion, Shoreline plans to refinance the Standard Bank Bridge Facility by implementing a long-term lending facility in respect of, and secured by, its interest in OML 30, arranged by Standard Bank.

The Proposed Acquisition is classified as a reverse takeover under the Listing Rules of the UKLA. Consequently, with effect from Monday 2 July 2012, listing of the ordinary shares in the capital of the Company ("Ordinary Shares") and of Heritage Oil Corporation's exchangeable shares (together with the Ordinary Shares, the "Heritage Shares") on the Official List of the UKLA and trading of the Heritage Shares on the Main Market of the LSE will be suspended until such time as Heritage has published sufficient information in the public domain to allow Heritage to assess the impact of the Proposed Acquisition on its financial position and inform investors accordingly. The Company is seeking to publish such information as would be sufficient to allow the suspension to be lifted as soon as is practicable, and currently expects this to be at the time of publication of the Circular and Prospectus, which will be posted to shareholders as soon as is practicable following the date of this Announcement.

The Proposed Acquisition is conditional on, amongst other things: (i) approval by shareholders of the Company of the relevant resolutions at the EGM; (ii) confirmation from the UKLA that the Ordinary Shares will be admitted to the Official List of the UKLA at Completion or as soon as practicable thereafter; and (iii) the consent of the Nigerian Minister of Petroleum Resources to the Proposed Acquisition. For the purposes of the condition set out at (ii) above, it is expected that such confirmation shall be treated as having been given where the Company and the UKLA have taken all steps necessary for Admission and where the Company has not received any indication that Admission will not take place. Subject to the satisfaction of all the conditions set out in the Acquisition Agreement, the Acquisition is expected to complete by no later than 130 days from the date of the Acquisition Agreement.

Each of Anthony Buckingham, CEO of Heritage, and Albion Energy Limited, who together hold 33.0% of Heritage, has irrevocably undertaken to Heritage and the Vendors to vote in favour of all the resolutions at the EGM.

J.P. Morgan Limited is acting as sole financial adviser in respect of the Proposed Acquisition.

Information on OML 30

OML 30 is located onshore in the delta in Nigeria, less than 50 kilometres east of Warri in Southern Nigeria. The lease covers 1,097 square kilometres and includes eight main producing fields with oil and gas contained in numerous stacked reservoirs, and the Acquisition Assets include a 45% interest in the segment of the Trans Forcados pipeline between the Eriemu manifold and the Forcados River manifold (the "OML 30 Trans Forcados Pipeline Segment"). Based on current information provided by the Vendors, crude production from OML 30 is averaging c.35,000 bopd and Heritage management, based on due diligence to date, estimates gross proved and probable reserves of 707 mmbbls.

The fields in OML 30 include extensive infrastructure, including nine flow stations with a combined capacity in excess of 400,000 bopd, pipelines, gas lift compression and gas compressors for artificial gas lift. The Acquisition Assets also include a 45% interest in the OML 30 Trans Forcados Pipeline Segment, which pipeline has a capacity of 850,000 bopd and transports liquids from OML 30 and several other blocks, generating tariff revenue from third parties. Production from OML 30 is transported by the Trans Forcados pipeline to the Forcados export terminal and sold at a premium to Brent Crude. 

The OML 30 lease extends to June 2019 and, based on current Nigerian law, Heritage expects it to be renewed thereafter.

Following Completion, the operatorship of OML 30 will transfer from Shell to the Nigerian Petroleum Development Company, a subsidiary of NNPC.

Tony Buckingham, Chief Executive Officer of Heritage, commented:

"The acquisition of OML 30 is transformational for Heritage, providing a material change in production and reserves whilst pursuing our strategy of generating shareholder value. As part of Heritage's diversified portfolio of exploration, appraisal and development assets, OML 30 is expected to provide significant production and cash flow, thereby de-risking Heritage's financial profile, and our technical expertise will provide a comparative advantage in creating additional value.

Heritage is very excited to be participating in the development of OML 30 and entering at an attractive valuation. We look forward to continuing to build local relationships and partnerships with the communities in the delta region and creating a platform to build a substantial presence in Nigeria."

Notes to Editors

Shoreline Power

• Shoreline Power is a subsidiary of Shoreline Energy International Limited ("SEI"), a leading private Nigerian energy and infrastructure company. SEI was founded in 1997 and has offices in Lagos, where it has its headquarters, and London.
• SEI has operations across Sub-Saharan Africa and a portfolio of 16 operating companies with over 3,000 employees.
• SEI has interests in the infrastructure, construction, energy, investments and energy trading, and telecommunications sectors.
• Shoreline Power is led by Mr. Kola Karim, who is also the CEO of SEI.
• For further information please refer to www.shoreline-power.com

Heritage

• Heritage is listed on the Main Market of the LSE and is a constituent of the FTSE 250 Index. The trading symbol is HOIL. Heritage has a further listing on the Toronto Stock Exchange (News - Market indicators).
• Heritage is an independent upstream exploration and production company engaged in the exploration for, and the development, production and acquisition of, oil and gas in its core areas of Africa, the Middle East and Russia. 
• Heritage has an exploration, appraisal and development asset in the Kurdistan Region of Iraq, exploration assets in Malta, Tanzania, Mali, Pakistan, Libya and the Democratic Republic of Congo and a producing property in Russia. 
• All dollars are US$ unless otherwise stated.
• For further information please refer to our website, www.heritageoilplc.com

This press release is not for distribution to United States Newswire Services or for dissemination in the United States.

J.P. Morgan Limited, which conducts its UK investment banking business as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as Sole Financial Adviser to Heritage and for no one else in connection with the Proposed Acquisition and will not be responsible to anyone other than Heritage for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

J.P. Morgan Securities Ltd., which conducts its UK investment banking business as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as Sole Sponsor to Heritage in connection with the matters set out in this announcement, and Joint Global Coordinator and Joint Bookrunner in connection with the Rights Issue and any other capital raising as set out in this announcement to Heritage and for no one else and will not be responsible to anyone other than Heritage for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement. For the purposes of this announcement, references to "J.P. Morgan Cazenove" are to both J.P. Morgan Limited and/or J.P. Morgan Securities Ltd., as appropriate.

Standard Bank Plc is authorised and regulated in the United Kingdom by the Financial Services Authority and is entered in the FSA's register (register number 124823). Standard Bank Plc is acting as Joint Global Coordinator and Joint Bookrunner to Heritage and for no one else in connection with the Rights Issue and any other capital raising as set out in this announcement and will not be responsible to anyone other than Heritage for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Canaccord Genuity Limited is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as Lead Manager to Heritage and for no one else in connection with the Rights Issue and any other capital raising as set out in this announcement and will not be responsible to anyone other than Heritage for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

If you would prefer to receive press releases via email please contact Jeanny So (jeanny@chfir.com) and specify "Heritage press releases" in the subject line.

Certain information in this announcement is based on management estimates. Such estimates have been made in good faith and represent the genuine belief of applicable members of management. Those management members believe that such estimates are founded on reasonable grounds. However, by their nature, estimates may not be correct or complete. Accordingly, no representation or warranty (express or implied) is given that such estimates are correct or complete. No representation or warranty (express or implied) is given that such estimates are so founded. None of the Company, J.P. Morgan Cazenove, Standard Bank Group or Canaccord undertake any obligation to correct or complete any estimate whether as a result of being aware of information (new or otherwise), future events or otherwise.

Overseas Shareholders

The participation in the Rights Issue by persons who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Such persons should inform themselves about and observe any applicable requirements. Further details in relation to overseas shareholders will be contained in the Prospectus.

Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies involved in the Proposed Acquisition and the Rights Issue disclaim any responsibility or liability for the violation of such restrictions by any person.

This announcement has been prepared for the purposes of complying with English law and the Listing Rules of the United Kingdom Financial Services Authority and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

Unless otherwise determined by Heritage, and permitted by applicable law and regulation, the shares to be issued in connection with the Rights Issue will not be issued directly to shareholders in and will not be capable of acceptance in or from any jurisdiction where to do so would constitute a breach of securities laws in that jurisdiction. Copies of this announcement are not being, and must not be, mailed or otherwise forwarded, distributed or sent in, into or from any jurisdiction where to do so would constitute a breach of securities laws in that jurisdiction. Persons receiving this announcement (including custodians, nominees and trustees) should observe these restrictions and should not send or distribute this announcement in, into or from any such jurisdictions.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION:

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements include, but are not limited to, statements with regard to the outcome of the Proposed Acquisition, future production and grades, projections for sales growth, estimated revenues, reserves and resources, targets for cost savings, the construction cost of new projects, projected capital expenditures, the timing of new projects, future cash flow and debt levels, the outlook for the prices of hydrocarbons, the outlook for economic recovery and trends in the trading environment, statements about cost synergies, revenue benefits or integration costs and capacity and may be (but are not necessarily) identified by the use of words such as "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "aims", "plans", "predicts", "continues", "assumes", "positioned", "will", or "should" and other similar expressions that are predictions of or indicate future events and future trends or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts and include statements regarding the Company's intentions, beliefs or current expectations. An investor should not place undue reliance on forward-looking statements because, by their nature, they involve known and unknown risks, uncertainties and other factors and relate to events and depend on circumstances that may or may not occur in the future that are in many cases beyond the control of the Company. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements. In particular, there is no assurance that the conditions precedent to Completion will be satisfied or waived.

Any forward-looking statements in this announcement reflect the Company's view with respect to future events as at the date of this announcement and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. None of the Company, J.P. Morgan Cazenove, Standard Bank Group or Canaccord undertake any obligation publicly to release the results of any revisions or up-dates to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.

Subject to certain exceptions, neither this announcement nor any copy of it may be taken or transmitted into the United States of America, its territories or possessions or distributed, directly or indirectly, in or into the United States of America, its territories or possessions. Neither this announcement nor any copy of it may be taken or transmitted into Australia, Japan or South Africa or to any securities analyst or other person in any of those jurisdictions. Any failure to comply with this restriction may constitute a violation of United States, Australian, South African or Japanese securities law. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The securities referred to herein have not been and will not be registered under the US Securities Act of 1933 (the "Securities Act"), and may not be offered or sold in the United States absent an exemption from, or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of any securities of Heritage in the United States. The securities referred to herein have not been and will not be registered under the applicable securities laws of Australia, South Africa or Japan and, subject to certain exceptions, may not be offered or sold within Australia, South Africa or Japan or to any national, resident or citizen of Australia, South Africa or Japan.

This announcement constitutes an advertisement within the meaning of the Prospectus Rules of the United Kingdom Financial Services Authority and is not a prospectus and has been prepared solely in connection with the Proposed Acquisition. A circular will be published by Heritage in due course in connection with the Proposed Acquisition. Copies of the circular will be available, following publication, from the Company's registered office and from 34 Park Street, London, W1K 2JD.

Important Information

This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, exchange, or transfer any securities of Heritage. The value of the Heritage Shares can go down as well as up and past performance cannot be relied on as a guide to future performance.

(1) BP Statistical Review 2012

(2) BP Statistical Review 2012