Prospectus re Admission to the Official List - Heritage Oil

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Factors associated with operating in developing countries, political and regulatory instabilityCertain of the Group’s interests are located in developing countries, some of which have historicallyexperienced periods of civil unrest, terrorism, violence and war, as well as political and economicinstability.Wherever it operates the Group assesses all the significant operational challenges involved and plansaccordingly. These challenges include technical, operational, logistical, social, environmental and political,and the Group draws upon the experience of its management and staff to address these issues.Additionally, risks are mitigated by forming strategic alliances in certain territories as well as employinglocal labour.Oil and gas sales volumes and pricesBoth oil and gas prices are unstable and are subject to fluctuation and subject to various factors beyond theGroup’s control.The Group can use derivative instruments to mitigate against its exposure to volatility in oil prices.However, during the years ended 31 December 2005, 31 December 2006 and the nine-month period ended30 September 2007 the Group did not enter into any hedging arrangements.Reliance on key employeesThe recruitment and retention of skilled personnel has become a key issue for the oil and gas industry, withsignificant competition existing for skilled personnel. Skilled personnel are required in the areas ofexploration and development, operations, engineering, business development, oil and gas marketing,finance and accounting.The Company attracts staff by a combination of providing an excellent working environment andchallenging and satisfying work, with a competitive remuneration package. The Company is therefore ableto attract and retain high quality staff. The Group has a number of strategies in place for reinforcing itscapabilities, including training and developing local skills and for example has entered into a number ofscholarship schemes in Uganda.4. OPERATIONAL PERFORMANCEProducing assetsOil and gas revenue was generated from the Group’s 10 per cent. working interest in the Bukha field, inBlock 8, Oman, during the years ended 31 December 2005 and 2006 and the nine-month period ended30 September 2007. The Bukha field produces gas, for which the Group derives no revenue, condensateand LPG. The Group’s average net share of liquids (condensate and LPG) has varied from between 140and 172 bopd during the period under review. The development of the West Bukha field in Block 8, Omancontinues to advance. Field development is ongoing and production from the West Bukha field is expectedby management to commence in the third quarter of 2008.Crude oil production from the Zapadno Chumpasskoye field in Russia commenced on 14 May 2007 andaveraged 362 bopd in the four months ended 30 September 2007. Production averaged 342 bopd inFebruary 2008.Exploration and appraisal assetsThe Group has experienced considerable exploration success in Uganda and work programmes have beenaccelerated following the discovery of a new hydrocarbon system in the Albert Basin. This discoveryincludes the Kingfisher-1 discovery well that was completed in March 2007, which production tested atrates of approximately 13,900 bopd. 3D and 2D seismic programmes have identified a number of targets inBlocks 3A and 1, for which multi-well drilling programmes are planned to commence in the first half of2008. The Kingfisher appraisal drilling programme is scheduled to commence in the first half of 2008.Management expects this land rig to have the capability to reach the depth of the primary target horizonnot reached by previous Kingfisher drilling.A 2D seismic survey is also being carried out on in Block 1, Uganda, where relatively shallow structureshave been identified with associated amplitude anomalies. Oil is known to have migrated into Block 1, asevidenced by the active oil seep located within the block at Paraa. This oil seep together with the presence140
of amplitude anomalies, further supports the potential presence of hydrocarbons within the block. Anexploration drilling programme is scheduled to commence in or after the summer of 2008, concentrated onthe shallower targets in the southern part of the block.In October 2007, the Group announced that it had executed a PSC with the KRG over the Miran Block inthe southern part of the KRI. The Group has also entered into a separate strategic agreement with theKRG to establish a 50/50 joint venture company which shall build, own and operate an oil refinery in thevicinity of the Miran Block. The refinery, which should have a capacity of 20,000 bopd, is scheduled to beoperational to design specification within approximately two years of the signing of the agreement.New projectsOver the last six months the Group has expanded its portfolio by obtaining the right to acquire a75 per cent. interest in two exploration licences in Mali, a 60 per cent. working interest in an explorationlicence in Pakistan and a 100 per cent. interest in two licences offshore to Malta. The Group has beenappointed as operator of these licences.5. RESULTS OF CONTINUING OPERATIONS FOR THE GROUP FOR THE NINE-MONTHPERIOD ENDED 30 SEPTEMBER 2006 AND 2007 PREPARED IN ACCORDANCE WITH IFRS5.1 Group ResultsThe following table sets forth the Group’s results for the nine-month periods ended 30 September 2006and 2007 prepared in accordance with IFRS.Nine-month periods ended30 September2006 2007$ $(Unaudited)RevenuePetroleum and natural gas .................................... 2,984,091 2,843,053Drilling services ............................................ 2,491,339 —5,475,430 2,843,053ExpensesPetroleum and natural gas operating ............................. 516,868 1,814,335Drilling rig operating ........................................ 1,912,123 38,360General and administrative .................................... 5,446,010 31,331,031Foreign exchange losses (gains) ................................. 449,507 (76,493)Depletion, depreciation and amortisation .......................... 948,477 1,306,131Exploration expenditure ...................................... 3,373,024 4,937,595Impairment of property, plant and equipment ...................... — 1,799,76212,646,009 41,150,721Gain on disposal of subsidiaries ................................ — 1,077,132Finance income (costs)Interest income ............................................ 985,353 1,243,305Loss on redemption of convertible bonds .......................... — (7,155,622)Loss on derivative liability relating to convertible bonds ............... (5,483,503) (17,350,077)Other finance costs ......................................... (3,266,497) (7,052,903)Unrealised gain on other financial assets .......................... — 63,351(7,764,647) (30,251,946)Loss from continuing operations ................................ (14,935,226) (67,482,482)Income from discontinued operations ............................ 2,417,316 —Net loss for the period attributable to equity holders of the Corporation . . . (12,517,910) (67,482,482)141
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This document comprises a prospectu
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SUMMARY INFORMATIONThis summary mus
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Summary Consolidated Income Stateme
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Summary Consolidated Cash Flow Stat
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Production from the Zapadno Chumpas
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Given the geographic spread of the
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RISK FACTORSAny investment in the O
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wells may change as a result of low
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which could have a materially adver
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Failure to obtain additional financ
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contractual or pricing terms, both
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years. In addition, since December
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UgandaUganda is among the poorest c
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Market Price of the Ordinary Shares
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DIRECTORS, CORPORATE SECRETARY, SEN
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EXPECTED TIMETABLE OF PRINCIPAL EVE
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CurrenciesAll references in this do
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PART I—INFORMATION ON THE GROUPOV
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Strong management and technical tea
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the availability of existing infras
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In 2005, the Group acquired a 95 pe
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The Group acquired a 10 per cent. i
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The Group is the operator and has a
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exploration wells. The total estima
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The Group has also entered into a s
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Pakistan has current proved hydroca
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operational by drawing up an Enviro
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Mr. Buckingham has never had any as
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Date2007 ........ On 18 January 200
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(3) One common share of Heritage Ho
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(f) General Sir Michael WilkesGener
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Remuneration CommitteeThe Remunerat
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Goldsworth House, Denton Way, Golds
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ResourcesA summary of the gross Con
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The post tax Net Present Value (NPV
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RPS EnergyHeritage Oil - Competent
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Page 91 and 92: RPS EnergyHeritage Oil - Competent
Page 135 and 136: Summary Consolidated Balance Sheets
Page 137 and 138: Summary Consolidated Balance Sheets
Page 139 and 140: locks during the first three and a
Page 141: On 2 October 2007, the Group execut
Page 145 and 146: The increase in operating expenses
Page 147 and 148: 5.11 Discontinued OperationsThe res
Page 149 and 150: 6. RESULTS OF CONTINUING OPERATIONS
Page 151 and 152: 6.7 Foreign Exchange LossesThere wa
Page 153 and 154: 6.14 Capital ExpendituresThe follow
Page 155 and 156: 7.3 Petroleum and Natural Gas Reven
Page 157 and 158: 7.14 Capital ExpendituresAdditions
Page 159 and 160: 10. LIQUIDITY AND CAPITAL RESOURCES
Page 161 and 162: Year Ended 31 December 2005 Prepare
Page 163 and 164: Intangible E&E assets related to ea
Page 165 and 166: 11.2 The year ended 31 December 200
Page 167 and 168: (c) Reconciliation of loss for the
Page 169 and 170: Year Ended 31 December 2004 Prepare
Page 171 and 172: PART VII—FINANCIAL INFORMATIONA.
Page 173 and 174: DeclarationFor the purposes of Pros
Page 175 and 176: HERITAGE OIL LIMITEDNOTES TO BALANC
Page 177 and 178: AUDITED AND UNAUDITED FINANCIAL INF
Page 179 and 180: HERITAGE OIL CORPORATIONCONSOLIDATE
Page 181 and 182: HERITAGE OIL CORPORATIONCONSOLIDATE
Page 183 and 184: HERITAGE OIL CORPORATIONNOTES TO CO
Page 185 and 186: Intangible E&E assets related to ea
Page 187 and 188: k) InvestmentsThe Group classifies
Page 189 and 190: usually when legal title passes to
Page 191 and 192: iii) IFRIC 12, ‘‘Service conces
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v) Liquidity riskLiquidity risk is
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ii) DerivativesDerivatives are reco
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5 Other finance costsNine-month per
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Congo to the other partners in the
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No assets have been pledged as secu
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31 December 30 September2005 2006 2
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16 Trade and other payables31 Decem
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A reconciliation of the asset retir
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21 Loss per shareThe following tabl
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25 Commitments and contingenciesHer
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In November 2007, the Group farmed-
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Reconciliation of loss for the year
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At the end of the last reporting pe
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Reconciliation of cash flow stateme
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At 31 December 2006, this has resul
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AUDITED FINANCIAL STATEMENTS RELATI
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AUDITORS’ REPORT TO THE SHAREHOLD
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HERITAGE OIL CORPORATIONCONSOLIDATE
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HERITAGE OIL CORPORATIONNOTES TO CO
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effective as hedges, both at incept
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A ceiling test was undertaken at De
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6. Share capital:(a) Authorized:Unl
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fair value of stock options are amo
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C. PRO FORMA FINANCIAL INFORMATION
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PRO FORMA NET ASSET STATEMENTThe fo
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Production assumptionsProduction du
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Macroeconomic assumptionsThe Direct
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Accordingly, the Illustrative Proje
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Arrangement AgreementPursuant to th
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PART X—ADDITIONAL INFORMATION1. R
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(ii) no share or loan capital of th
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(j)In Alberta, the principal jurisd
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nominal amount has been paid up of
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instrument of transfer (in the case
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up on all the shares conferring tha
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(B) may be a director or other offi
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and is in default for a period of 1
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(c)have sufficient moneys, assets o
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(e)against surrender of the Exchang
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e, to the extent that the same is r
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(g)(ii) by arranging for the credit
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(b) rights, options or warrants oth
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any provision of provincial, territ
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7.5 None of the major shareholders
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Position stillDirector/Senior Manag
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employment or terminates his or her
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All rights of a holder of Exchangea
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agreement of this nature. These cir
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to change. Where the Company pays a
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As part of an agreement reached in
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(x) Foreign Property Information Re
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19. DOCUMENTS AVAILABLE FOR INSPECT
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declared and unpaid dividends on ea
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‘‘DTR’’‘‘DutchCo’’
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‘‘ISIN’’‘‘ITA’’‘
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anniversary of the Effective Date a
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‘‘Support Agreement’’‘‘
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emaining quantities recovered will
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