Prospectus re Admission to the Official List - Heritage Oil

another oil and gas interest in the Congo to the Group for $7 million. The purchaser exercised its optionon 30 June 2004.In 2003, the Group acquired a 33 per cent. interest in Pipelay and Naturalay Technologies and on24 September 2004, acquired an additional 31.7 per cent. interest. Pipelay is a technology company whosepurpose is to hold and market technology relating to the Buoyant Drum Lay System. Patent protection forthe design has been secured and is held in Pipelay’s sister company, Naturalay Technologies. This systemcomprises a vessel, with a large drum floating in a moon pool.Year Ended 31 December 2005In 2005, the Group acquired a 95 per cent. equity interest in ChumpassNefteDobycha, a Russian companywhose sole asset is the Zapadno Chumpasskoye licence, an exploration and production permit previouslyheld by TNK-BP. The licence, which expires on 7 September 2024, is located in West Siberia in the provinceof Khanty-Mansiysk. A total of nine wells had been drilled on the licence prior to the acquisition by theGroup. The licence is located in an extremely hydrocarbon-rich province close to well-developedinfrastructure; a federal oil pipeline runs through the licence to which the Group has certain access rightsand there is railway access nearby.Year Ended 31 December 2006In March, 2006, HOC issued 600 unsecured convertible bonds each with a par value of $100,000 foraggregate proceeds of $60 million. The bonds had a coupon rate of 10 per cent. per annum, a term of fiveyears and one day and were convertible into HOC Common Shares at a price of $18 per share. HOC hadthe right to redeem, in whole or part, the bonds for cash at any time on or before 28 March 2007 at150 per cent. of par value. A total of 50 of the unsecured convertible bonds, with a total par value of$5 million, were converted into HOC Common Shares at an exercise price of $18 per share subsequent to31 December 2006.The Group signed a PSC in the DRC in the summer of 2006 for a 39.5 per cent. interest in Blocks 1 and2 in the prospective Albert Basin. Blocks 1 and 2 cover in excess of 6,000 square km over the onshore andoffshore acreage in the DRC part of the Albert Basin that extends into neighbouring Uganda.The Kingfisher deviated well in Block 3A in Uganda spudded in August 2006 and drilled to a total depth of3,195 metres. Four intervals were tested successfully in the Kingfisher well, resulting in an overallcumulative flow rate of 13,893 bopd through a one inch choke. Drilling and testing were completed inMarch 2007.In the last quarter of 2006, the Group entered into an agreement with TISE Holding Company to establisha jointly owned company, TISE-Heritage Neftegas, to appraise and jointly acquire oil and gasopportunities in Russia and internationally. Shareholders of TISE Holding Company include Concord,Zarubejneft, Zarubejneftegas (a wholly-owned Gazprom subsidiary), Technopromexport andZarubejstroymontaj.In November 2006, Heritage Congo was sold to Afren for a consideration of $21 million, plus 1.5 millionAfren warrants, with a term of five years and an exercise price of £0.60 per share. Heritage Congo held a14 per cent. interest in the Noumbi permit, in the Congo.Period ended 30 September 2007On 18 January 2007, the Group finalised the statement of adjustments relating to the sale of its25 per cent. working interest in the Kouakouala A and 30 per cent. working interest in the Kouakouala Blicence in the Congo to the other partners in the licences, Maurel et Prom and Burren Energy, for thefollowing consideration: cash of $6,052,515; and an overriding royalty of 15 per cent. over a 30 per cent. working interest in the Kouakouala B licencein relation to the Mengo field. The Mengo field is not currently in production.On 9 March 2007, the Group disposed of its 65 per cent. equity interests in Pipelay and NaturalayTechnologies to Grove Holdings Limited for consideration of 605,000 common shares in SeaDragon.SeaDragon, founded in 2006, is building two semi-submersible rigs.138