Operations
Operating highlights include world-class discoveries in the Albert Basin, Uganda, and commencement of drilling of the Miran West-1 well in the Kurdistan Region of Iraq, which is now in the process of being tested.
Our considerable achievements in Uganda include continued drilling success in Block 3A, highlighted by Kingfisher-2 testing at a combined rate of 14,364 bopd, and successful drilling in block 1. Our discovery of the Buffalo-Giraffe field in Block 1, Uganda, is believed, by management, to be the largest onshore oil field discovered in Sub-Saharan Africa in the last 20 years. Exceptional results from Uganda drilling have established a gross resource of around 600 million barrels. This is above the volume considered necessary for major infrastructure development for the Albert basin. Our Albert basin results indicate the outstanding potential of this region. This could transform the company, especially as we continue with further exploration and development. Having operated in Uganda since 1997, Heritage, as operator with a 50% equity interest in blocks 1 and 3A, is strongly positioned to be a major participant in the future development of this world-class resource.
Another notable highlight of 2008 was the excellent progress made in the Kurdistan Region of Iraq, a highly prospective, and as yet under-developed, oil-prone region. The undiscovered potential of the region has been estimated at 40 billion barrels of oil and 60 trillion cubic feet of natural gas, ranking it as one of the most highly prospective untapped energy resource regions in the world. It is reported that the exploration success rate in Iraq has historically averaged over 80%. Heritage has been active in Kurdistan since 2004 and we are strongly committed to the region. We were the second of 21 companies that have been awarded production sharing contracts (PSC) by the Kurdistan Regional Government (KRG) since their petroleum law was passed in August 2007.
On March 25, 2009 we announced drilling of the Miran West-1 well had completed and had reached a total depth of 2,935 meters. The well encountered oil shows over an interval of 1,100 meters with excellent oil shows in the three principal known productive reservoir formations in the region. We are in the process of undertaking a series of drill stem tests over a gross interval of around 500 meters. The company believe our operations in this region also have the potential to transform the company.
London Listing
The company’s most significant corporate achievement of 2008 was the primary listing of our shares on the Main Market of the London Stock Exchange, which was completed at the end of March, a move that was overwhelmingly supported by our shareholders. This listing initiative was undertaken to increase liquidity, unlock additional value creation for shareholders and also to enhance the company‘s status and profile among European investors and within the international oil and gas sector as a whole.
The London listing, which was followed by the company‘s inclusion as a member of the prestigious FTSE 250 Index, was accompanied by a reorganization that saw the establishment of a new parent company, Heritage Oil, in Jersey. Given the geographic spread of Heritage‘s operational activities and licenses, we believed that it was appropriate for the company to be domiciled in the British Isles, where a substantial number of investors and the company‘s management reside. Also, as part of the corporate reorganization, the company‘s shares were effectively split on a ten-for-one basis. This was designed to further enhance trading volumes and liquidity of our shares for the benefit of all shareholders.
Financial
After the company‘s success in raising significant amounts of capital in 2007, no additional financing was required in 2008. Heritage finished the year with a strong balance sheet and cash to finance planned operations in 2009. Nevertheless, our recent exceptional success means that we now intend to accelerate work programmes in Uganda and Kurdistan. With this in mind, we made a decision to dispose of our non-core interests in Oman. Oman disposal proceeds of $28 million, plus $400,000 in working capital adjustments, are to be used to fund accelerated programmes in company’s core areas. In regard to financing large-scale infrastructure programmes in Uganda, I am pleased to report that we have been approached by a number of parties. Initial proposals involve terms that would significantly reduce our financing requirements.
