Q&A with Tony Buckingham, CEO
What have been the highlights of 2008 so far?
2008 is proving to be an important year for Heritage Oil with our listing on the Main Market of the London Stock Exchange (“LSE”) on 31 March and the inclusion in the FTSE 250 Index on 23 June. In Uganda, since 2006, there have now been fourteen out of fourteen successful exploration and appraisal wells drilled in the basin. The Kingfisher-2 well in Block 3A in Uganda encountered hydrocarbons and oil flowed from three zones at 14,364 bopd, almost 50% better than the equivalent zones in Kingfisher-1. The Kingfisher-3 well spudded at the end of September and we are appraising the southern limits of the field and gathering critical reservoir data.
The prospects in Block 1, Uganda have been significantly derisked following drilling success in the northern part of Block 2. Our three well exploration programme started in September and is targetting the Warthog, Buffalo and Giraffe prospects. Drilling should be completed by the year end.
In the Kurdistan Region of Iraq we acquired 330 kilometres of 2D seismic which identified two very large anticlines potentially covering an area of nearly 600 square kilometres. We are planning to commence drilling in the first quarter of 2009.
Our portfolio has expanded with farm-ins in Tanzania where we are currently acquiring seismic data and expecting to commence drilling in the second half of 2009.
Why did you decide on a London listing?
We believed that the reorganisation and listing on the LSE were in the best interests of the Group. A number of significant advantages were indentified, which include:
- Investors on the LSE typically give high values for exploration companies in our peer group, especially those with high-impact drilling programmes;
- African exploration companies listed on the LSE typically trade at a much higher enterprise value to potential resource barrel ratio than on the TSX;
- The Company can be more readily peer group reviewed on the LSE;
- Increased research coverage and international awareness - on average, companies listed on the LSE are covered by more analysts than those listed on the TSX. We are already seeing this benefit as eight analysts currently cover us, compared to one in 2007;
- Increased liquidity on the LSE compared to the TSX. Heritage is now as liquid as its oil peers in the FTSE 250 Index.
What are the key components of your strategy?
We aim to generate growth in shareholder value by focusing on high impact international plays that provide multiple targets with the potential to discover substantial hydrocarbon reserves. The Group’s growth strategy is to acquire and invest in exploration and early development opportunities throughout the world, with a particular emphasis on its core areas of Africa, the Middle East and Russia, using our highly effective network of influential industry, political and institutional relationships.
What are the Company’s strengths?
The Company’s competitive strengths include:
- Our ability to secure a portfolio of high-impact international plays;
- Experienced and responsive management and technical teams with a proven track record of finding valuable oil discoveries;
- Our significant position in the Albert Basin of Uganda;
- Our diversified portfolio of assets;
- Our demonstrated success as a first-mover in acquiring assets in territories such as Uganda and the Kurdistan Region of Iraq;
- Our proven track record of creating value through asset sales.
What do you believe are the main near-term priorities for the Company?
In the near-term, the main priorities for the Group are to continue to drive the business forward by evaluating the prospects in Blocks 3A and 1 in the Albert Basin, Uganda, so we can exceed the reserves threshold required to justify investment in a development programme and an export pipeline. Additionally, we need to complete the high-impact exploration campaign in the Kurdistan Region of Iraq, as well as commence operations in exciting new territories where we have been awarded or farmed-in to licences.
What do you perceive as the major risks to the Company?
There are a number of risks which can affect any international exploration, development and production company, Hence effective risk management is critical to continuing to achieve our goals. The Group mitigates its risks by maintaining a portfolio of assets in a variety of stages of development in different countries. The Company continually assesses any risks to ensure that sufficient policies and procedures are in place.
How would you describe the culture at Heritage?
We have a highly responsive management system which encourages all staff to participate and build the Company. All key members of staff are motivated to continue to generate shareholder value. We have an enviable record of attracting and retaining experienced employees.
Finally, do you have a message for shareholders?
We have made tremendous progress since I was appointed CEO in October 2006. Due to the strong support of our shareholders, the dedication of our employees, our well defined strategy and our proven ability to discover valuable oil and gas reservoirs, we are convinced that we can realise our aspirations. Unforeseen events excluded, we believe that the Group will continue to be a fast growing exploration and production company.