Tullow to Raise About 1 Billion Pounds in Share Sale

By Morwenna Coniam

Jan. 27 (Bloomberg) -- Tullow Oil Plc, the U.K. explorer with the most licenses in Africa, plans to sell as many as 80.4 million new shares to fund exploration and development in Uganda and Ghana.

“The placing should generate about 1 billion pounds ($1.61 billion) to the company,” Chief Executive Officer Aidan Heavey said by phone today. The shares fell as much as 5.6 percent in London trading, the steepest intraday decline since Sept. 18.

Tullow, which is engaged in a battle with Eni SpA for Ugandan assets being sold by Heritage Oil Plc, identified China National Offshore Oil Corp. and Total SA as the “top two bidders” to join it as partners in the east African nation.

The explorer wants to ensure sufficient capital to maintain a $500 million-a-year exploration program as well as developing its African assets, it said in a statement today. It plans to use some of the capital to conduct additional appraisal and development of Tweneboa and subsequent phases of the Jubilee field in Ghana. About 35 exploration wells are planned for this year.

Tullow slid as much as 68 pence to 1,148 pence. The shares were 4.7 percent lower at 1,159 pence as of 10:10 a.m. local time, valuing Tullow at 9.3 billion pounds.

Increased Spending

The placing will allow Tullow to “secure increased spending over the next three years or so,” Chief Financial Officer Ian Springett said on the same call. The explorer “should be done with equity” afterwards, he said.

Tullow plans an accelerated book-building process to be carried out by Bank of America-Merrill Lynch and RBS Hoare Govett Ltd. acting as joint global coordinators and bookrunners.

Tullow said in a separate trading statement that it has “never been in a better position to deliver growth.” It forecasts 990 million pounds of expenditure this year, up from 690 million in 2009, while net debt at the end of December stood at 720 million pounds.

Tullow yesterday said it signed an agreement to buy Heritage Oil’s 50 percent share in Blocks 1 and 3A in the Lake Albert Rift Basin, Uganda for up to $1.5 billion, in an attempt to block a rival offer by Eni. The deal is subject to approval by the government of Uganda, it said.

In addition to the sale agreement with Heritage, Tullow is seeking to bring in partners to help develop its Ugandan assets. Total and CNOOC will be “presenting what they can do to the government in the next few weeks,” Heavey said.

Total spokeswoman Phenelope Semavoine declined to comment on Uganda.

Additional Interests

Tullow will also use some of the capital raised in the share sale to buy additional interests in Uganda to retain a stake of up to 50 percent of its enlarged acreage position, it said in today’s statement.

Operations in Ghana and Uganda will take up around 60 percent of the anticipated 2010 capital outlay, Tullow said. The explorer plans 10 wells in Uganda and seven in Ghana this year.

An accelerated drilling and exploration program is planned on the Tweneboa field following its establishment as “a major oil and gas-condensate field with a combined hydrocarbon column of at least 350 metres,” Tullow said.

The Tweneboa field is located in the Deepwater Tano block, which is 49.95 percent held by Tullow. The deposit may yield almost as much oil as the nearby Jubilee field, which may hold as much as 1.8 billion barrels of crude, the company said in November.

To contact the reporter on this story: Morwenna Coniam in London at mconiam@bloomberg.net;