Tullow soars on African oil takeovers

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The Independent Online

Tullow Oil transformed itself into the UK's biggest independent exploration and production company yesterday after the $570m (£320m) acquisition of two West African oil companies.

Tullow Oil transformed itself into the UK's biggest independent exploration and production company yesterday after the $570m (£320m) acquisition of two West African oil companies.

The Dublin-based but London-listed company is paying $500m for Energy Africa and a further $70m to buy out the 50 per cent interest which Energy Africa did not own in a joint venture called EAGHL.

Together, the two deals will virtually double the size of Tullow, giving it output of 54 million barrels a day, reserves of 175 million barrels and 15 exploration wells, concentrated mainly in West Africa and the southern North Sea.

This will make Tullow the biggest of the UK's fast-growing band of independent oil companies by production. In terms of value, however, it will still lag a long way behind Cairn Energy, which has seen its share price double in the last three months and is now worth about £1.6bn.

Tullow is financing the deal with extra debt facilities and the issue of 235 million new shares. Based on last night's closing price of 97p, up 10.5p or 12 per cent, Tullow is valued at £596m.

Shareholders controlling just over 90 per cent of Energy Africa's shares have accepted the Tullow offer irrevocably, even though it was pitched at a slight discount to the company's share price on the Johannesburg stock exchange.

Petronas, Malaysia's national oil company, which controls 65 per cent of Energy Africa, is taking cash for its shares. A small group of African investors, led by the well-known entrepreneur Sam Dessou, which owns a further 25 per cent of Energy Africa, is taking payment in the form of Tullow shares. The partner in EAGHL, African Petroleum Investment, is also taking Tullow shares.

In addition Tullow yesterday placed 130 million new shares at 95p each to help fund the acquisition. The placing, which will raise £120m net of expenses, was three times subscribed.

Following completion of the two deals, half of Tullow's production will be in West Africa and half in the North Sea and its portfolio will be dominated by oil, whereas previously it was mainly a gas producer.

Aiden Heavey, Tullow's chief executive, said the group had the capacity to pursue more acquisitions although it expected to grow strongly through exploration. In particular, he highlighted exploration blocks in Morocco and Mauritania.

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