Shares in Heritage Oil tumbled by nearly 6 per cent yesterday as the oil explorer that specialises in treacherous terrain lost a tax row in Uganda that will cost it some $404m (£260m).
The company – run by former mercenary Tony Buckingham – said it would appeal the ruling by a tribunal in the east African country that it was liable to pay capital gains tax on the sale of $1.45bn of assets to Tullow Oil last year.
Shares in Heritage, which started arbitration proceedings in London in May, fell by 9.6p to 160.4p, even though analysts had expected yesterday's ruling.
Heritage said its earnings from the asset sale should not be subject to capital gains tax because the sale of two oil blocks in western Uganda was executed outside the country.
Paul Atherton, chief financial officer at Heritage, said: "Given the publicity that this case has generated in Uganda, it was always going to be difficult for the tribunal to rule against government."
"We instigated arbitration in London... as we consider this to be the appropriate avenue and that process is ongoing. We will continue to vigorously pursue all legal forums open to us against this fundamentally flawed ruling," he added.
Asa Mugenyi, the chairman of Uganda's Tax Appeals Tribunal, said: "We dismissed the appeal by Heritage... they should pay the taxes."