Prospectus re Admission to the Official List - Heritage Oil

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make necessary consequential amendments such that the bonds may be converted into or exchanged forOrdinary Shares; or (b) such amendments are made to the bonds such that the bonds may be convertedinto or exchanged for Ordinary Shares. The bonds included conversion features which in certaincircumstances could be settled in cash and so these features represent a derivative financial instrumentwhich is classified as a liability. The fair value of the liability component of the bonds net of issue costs wasestimated at $140,154,215. The fair value of derivative liability representing the bondholders conversionfeature was estimated at $17,866,517 on 16 February 2007. The difference between the $165.0 million dueon maturity and the initial liability component is accreted using the effective rate method and recorded asfinance costs in the income statement.In July 2007, a bondholder with U.S.$7 million of bonds gave notice of exercise of 70 bonds and received148,937 HOC Common Shares in August 2007. As a result of this conversion, a total amount of $8,944,487was transferred to share capital from convertible bonds, derivative liability component of convertible bondsand accrued liabilities.In October 2007, the Group received a loan of $9.45 million to refinance the corporate jet acquisition.Interest on the loan is variable at a rate of LIBOR plus 1.6%. The loan, which is secured on the corporatejet, is scheduled to be repaid by 20 consecutive quarterly instalments of principal. Each instalment equalsto $117,500 with the final instalment being $7,217,500. HOC provided a corporate guarantee to the lender.Year Ended 31 December 2006 Prepared in Accordance with IFRSOn 27 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 and a term offive years and one day. At the option of the holders, the bonds were convertible, in whole or in part, intoHOC Common Shares at a price of U.S.$18 per share at any time during the term of the bonds. HOC hadan option 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. On 17 January 2007, HOC gave notice that it had exercised its option to redeemthe 550 outstanding unsecured convertible bonds at 150 per cent. of par value for total proceeds of$82.5 million plus accrued interest which was paid on 28 March 2007.Fifty of the 600 unsecured convertible bonds, with a total par value of $5 million, were converted into277,778 HOC Common Shares at an exercise price of U.S.$18 per share subsequent to 31 December 2006.As a result of this conversion, a total amount of $7,104,327 was transferred to share capital fromconvertible bonds liability and derivative liability component of convertible bonds.Year Ended 31 December 2005 Prepared in Accordance with IFRSIn January 2005, HOC received a sterling denominated loan of £4.5 million to refinance the acquisition ofits technical services office at 34 Park Street, Mayfair, London W1K 2JD. Interest on the loan is fixed at6.515 per cent. for the first five years and then is variable at a rate of LIBOR plus 1.35 per cent. The loan,which is secured on the property, is scheduled to be repaid by 240 instalments of capital and interest atmonthly intervals, subject to a residual debt at the end of the term of the loan of $3.5 million(£1.86 million).Year Ended 31 December 2004 Prepared in Accordance with Canadian GAAPThe Group had no debt during 2004.10.3 Share CapitalNine-Month Period Ended 30 September 2007 Prepared in Accordance with IFRSDuring the nine-month period ended 30 September 2007, HOC issued 426,715 HOC Common Shares onconversion of convertible bonds and 32,000 HOC Common Shares on exercise of stock options(60,000 during the nine-month period ended 30 September 2006).Year Ended 31 December 2006 Prepared in Accordance with IFRSDuring 2006, HOC issued 143,333 HOC Common Shares on the exercise of options.158
Year Ended 31 December 2005 Prepared in Accordance with IFRSIn 2005, HOC issued 546,667 HOC Common Shares on the exercise of options.Pursuant to a Normal Course Issuer Bid in place between 4 November 2005 and 3 November 2006, HOCpurchased an aggregate of 135,100 HOC Common Shares under the Normal Course Issue Bid at anaverage price of $7.85 per share, which were cancelled.Year Ended 31 December 2004 Prepared in Accordance with Canadian GAAPDuring 2004, the HOC issued 462,334 HOC Common Shares: 442,334 by the exercise of options and20,000 by the exercise of warrants.A Normal Course Issuer Bid programme commenced on 4 November 2003, expired on 3 November 2004,and was replaced by a further Normal Course Issuer Bid programme that commenced on4 November 2004 and expired on 3 November 2005. In 2004, HOC did not acquire any HOCCommon Shares.From time to time, HOC believes that the buy-back of HOC Common Shares represents an appropriateuse of funds when it is the opinion of management that the market price of HOC Common Shares is at adiscount to the fair value of the shares.During 2004, HOC’s trading symbol was changed from HOC.A to HOC. At HOC’s Annual and SpecialGeneral Meeting on 23 June 2004, shareholders approved the removal of Class ‘‘B’’ HOC Common Sharesand agreed to redesignate Class ‘‘A’’ shares as HOC Common Shares.10.4 Cash FlowsNine-Month Periods Ended 30 September 2006 and 2007 Prepared in Accordance with IFRSThe following table sets forth the Group’s cash flows for the nine-month periods ended 30 September 2006and 2007:Nine-month periods ended30 September2006 2007$ $(Unaudited)Net cash flows used in operating activities ......................... (8,331,393) (7,212,661)Net cash used in investing activities .............................. (12,074,902) (53,535,576)Net cash from financing activities ............................... 57,356,469 75,080,072Cash provided by discontinued operations ......................... 1,009,595 —Foreign exchange gains on cash held in foreign currency .............. 308,481 701,730Net increase in cash and cash equivalents ......................... 38,268,250 15,033,565Cash and cash equivalents at the end of the period .................. 46,851,571 61,894,711The net cash outflow from operating activities in the nine-month period ended 30 September 2007 was$7,212,661, compared to $8,331,393 in the same period in the previous year. This increase was primarilydue to an increased loss from continuing operations.Net cash used in investing activities increased from $12,074,902 in the nine-month period ended30 September 2006 to $53,535,576 in the nine-month period ended 30 September 2007. Investing activitiesprincipally comprises property, plant and equipment capital expenditures.Net cash from financing activities increased to $75,080,072 in the nine-month period ended30 September 2007 primarily as a result of the issue of $165 million unsecured convertible bonds inFebruary 2007, offset by the redemption of the outstanding $55 million of the convertible bonds issued in2006 at a premium of 150 per cent. A total of $5 million of the $60 million convertible bonds issued in 2006were converted into equity prior to the issue of the redemption notice.159
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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 109 and 110: 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 and 142: On 2 October 2007, the Group execut
Page 143 and 144: of amplitude anomalies, further sup
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: 10. LIQUIDITY AND CAPITAL RESOURCES
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
Page 193 and 194: v) Liquidity riskLiquidity risk is
Page 195 and 196: ii) DerivativesDerivatives are reco
Page 197 and 198: 5 Other finance costsNine-month per
Page 199 and 200: Congo to the other partners in the
Page 201 and 202: No assets have been pledged as secu
Page 203 and 204: 31 December 30 September2005 2006 2
Page 205 and 206: 16 Trade and other payables31 Decem
Page 207 and 208: A reconciliation of the asset retir
Page 209 and 210: 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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Prospectus re Admission to the Official List - Heritage Oil

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