Prospectus re Admission to the Official List - Heritage Oil

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these barrels would be subject to the PSC arrangements in Blocks 3A and 1 and result in net entitlementreserves that reflect those arrangements.In October 2007, the Group executed a PSC with the KRI government over the Miran Block, which coversan area of 1,105 square km and is located only 55 km from the Kirkuk oilfield. The Group also enteredinto a separate strategic agreement with the KRG to establish a 50/50 joint venture company which shallbuild, own and operate an oil refinery in the vicinity of the licence.In addition, the Group has been awarded or farmed into licences in Mali, Pakistan and Malta andmanagement continue to pursue other opportunities in accordance with the acquisition criteria set out in‘‘Strategy’’ in section 5 of this Part I below.3. SUMMARY OF GROUP RESERVES AND RESOURCESRPS has certified that as of 30 September 2007, the Group’s net working interest and entitlement reservesand value, using money of the day prices, discounted at 10 per cent., were as follows:Net Working Net NetInterest Entitlement PresentReserves Reserves ValueMMboe MMboe $MillionsProved ............................................. 25.5 24.2 30.3Probable Additional ................................... 40.3 37.9 229.3Total Proved + Probable ................................ 65.8 62.1 259.6Total Proved + Probable + Possible ....................... 171.5 163.9 824.1RPS has certified that the Group had a 50 per cent. working interest share of the mean risked workinginterest prospective resources from Blocks 3A and 1 in Uganda of 462 MMboe (923 MMboe gross) as at30 September 2007. The Government of Uganda has a back-in right which could, if exercised, reduce theGroup’s working interest to 42.5 per cent. In the event that these resources were to mature into reservesthese barrels would be subject to the PSC arrangements in Blocks 3A and 1 and result in net entitlementreserves that reflect those arrangements.4. GROUP STRENGTHS AND COMPETITIVE ADVANTAGESThe Directors believe that the Group has a number of key strengths and competitive advantages that areimportant to the continued success of the business.The Group believes that its key strengths are as follows:Ability to secure a portfolio of high-impact international playsThe Group has a track-record of delivering growth in shareholder value through its strategy of focusing onhigh-impact international plays containing multiple targets with the potential to discover large reserves ofoil. The Group’s current focus areas are the Lake Albert region in Uganda and the DRC, the KRI andWest Siberia where it has sourced and secured properties as a result of a number of factors.The Group adopts a methodology for appraising potential opportunities centred around the appreciationand management of technical and political risk. This approach, together with the experience of theGroup’s management and technical teams, has enabled the Group to identify and be amongst the firstinternational oil companies to hold interests in territories such as Uganda, the eastern DRC and in recenttimes, the KRI.The Group has a proven track-record in sourcing deals, and has demonstrated its first-mover advantage inacquiring many of its assets resulting from the hands-on approach, flexibility and speed of the Group’smanagement team. The Group’s management team has demonstrated its ability to make substantial oildiscoveries and its flat and lean structure has enabled the Group to enjoy first-mover advantage in many ofits deals and to take advantage of interesting opportunities, such as the KRI and the Albert Basinin Uganda.34
Strong management and technical teamsThe Group’s management and technical team has a track-record of finding attractive oil discoveries,including the hydrocarbon system in the Albert Basin in Uganda and the M’Boundi field in the Congo.The Group leverages off a highly effective network of influential industry, political and institutionalrelationships. These relationships enable the Group to form strategic alliances which reduce resourcecommitments and lower exploration and development risk, as well as give the Company accessto properties.Diversified portfolio of assetsThe Group has built a diversified portfolio of assets by geography, product and development stage.Geographically the Company’s portfolio is spread between the Group’s core areas of focus of Africa, theMiddle East and Russia. In addition, the Group may from time to time invest in additional opportunisticplays, outside of these core geographies, if management believe that individual plays will enhanceshareholder value. Examples of investments in such opportunities include the Group’s recently acquiredinterests in Malta and Pakistan.As detailed in section 6 of this Part I, the Group’s portfolio contains a spread of existing production,reserves and resources between oil, gas, condensate and LPG.Furthermore, the Group’s assets are well spread across the development cycle. The Group currently hasproducing assets in Oman and the Zapadno Chumpasskoye licence in Western Siberia, a developmentproperty in Oman, together with exploration and appraisal properties in Uganda, the KRI, the DRC,Malta, Mali and Pakistan.Presence in the Albert Basin in UgandaThe Albert Basin in Uganda is considered by management to have the potential to contain significantquantities of oil. Assets in the Albert Basin in Uganda are controlled by the Group and Tullow, with theGroup partnered with Tullow on Blocks 3A and 1. Eight successful exploration and appraisal wells havebeen drilled in the basin since the beginning of 2006 with each of these wells having encountered oilbearingreservoirs. Of these, two wells tested at over 12,000 bopd. Further information is provided insection 6 of this Part I.First production is targeted by management to commence in the medium term, with potential productionestimated to be in excess of 100,000 bopd in the medium term.An additional benefit of the Group’s presence in the Albert Basin is the proximity of its interests inBlocks 1 and 2 on Lake Albert in the DRC to the adjacent Blocks 3A and 1 on the Ugandan side of theDRC/Uganda border. The potential exists for both assets to benefit from the proposed construction of aninternational export pipeline from Lake Albert to Mombasa on the east coast of Kenya.First-mover advantage in KurdistanThe Group was one of the first international oil companies to be awarded a PSC in the KRI. The Groupexecuted a PSC with the KRG over the Miran Block in the KRI on 2 October 2007. The Group has beenappointed operator.The Group has also entered into a separate strategic agreement with the KRG to establish a 50/50 jointventure company which shall build, own and operate an oil refinery in the vicinity of the Miran Block. Therefinery, which should have a capacity of 20,000 bopd, is scheduled to be operational to designspecification within approximately two years of the signing of the agreement.Historic track-record of creating value and generating cash to finance new developmentsHistorically, the Group has sold certain assets, notably in the Republic of Congo to create value forshareholders and generate cash which has been used to finance the development of other oil and gas assetsin the core areas. Further detail is provided in ‘‘History and Development’’ in section 9 of this Part I.Strong financial positionThe Directors believe that the Group has a strong financial position as a result of the proceeds from thecompletion of the private placement of $165.0 million of convertible bonds in February 2007 and theprimary equity fundraising of Cdn$181.5 million completed in November 2007.The Group intends to use the net proceeds of its recent equity fundraising to fund exploration anddevelopment activities, potential strategic acquisitions, as well as for general working capital purposes.35
Page 1 and 2: This document comprises a prospectu
Page 3 and 4: SUMMARY INFORMATIONThis summary mus
Page 5 and 6: Summary Consolidated Income Stateme
Page 7 and 8: Summary Consolidated Cash Flow Stat
Page 9 and 10: Production from the Zapadno Chumpas
Page 11 and 12: Given the geographic spread of the
Page 13 and 14: RISK FACTORSAny investment in the O
Page 15 and 16: wells may change as a result of low
Page 17 and 18: which could have a materially adver
Page 19 and 20: Failure to obtain additional financ
Page 21 and 22: contractual or pricing terms, both
Page 23 and 24: years. In addition, since December
Page 25 and 26: UgandaUganda is among the poorest c
Page 27 and 28: Market Price of the Ordinary Shares
Page 29 and 30: DIRECTORS, CORPORATE SECRETARY, SEN
Page 31 and 32: EXPECTED TIMETABLE OF PRINCIPAL EVE
Page 33 and 34: CurrenciesAll references in this do
Page 35: PART I—INFORMATION ON THE GROUPOV
Page 39 and 40: the availability of existing infras
Page 41 and 42: In 2005, the Group acquired a 95 pe
Page 43 and 44: The Group acquired a 10 per cent. i
Page 45 and 46: The Group is the operator and has a
Page 47 and 48: exploration wells. The total estima
Page 49 and 50: The Group has also entered into a s
Page 51 and 52: Pakistan has current proved hydroca
Page 53 and 54: operational by drawing up an Enviro
Page 55 and 56: Mr. Buckingham has never had any as
Page 57 and 58: Date2007 ........ On 18 January 200
Page 59 and 60: (3) One common share of Heritage Ho
Page 61 and 62: (f) General Sir Michael WilkesGener
Page 63 and 64: Remuneration CommitteeThe Remunerat
Page 65 and 66: Goldsworth House, Denton Way, Golds
Page 67 and 68: ResourcesA summary of the gross Con
Page 69 and 70: The post tax Net Present Value (NPV
Page 71 and 72: RPS EnergyHeritage Oil - Competent
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RPS EnergyHeritage Oil - Competent
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Summary Consolidated Balance Sheets
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Summary Consolidated Balance Sheets
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locks during the first three and a
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On 2 October 2007, the Group execut
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of amplitude anomalies, further sup
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The increase in operating expenses
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5.11 Discontinued OperationsThe res
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6. RESULTS OF CONTINUING OPERATIONS
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6.7 Foreign Exchange LossesThere wa
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6.14 Capital ExpendituresThe follow
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7.3 Petroleum and Natural Gas Reven
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7.14 Capital ExpendituresAdditions
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10. LIQUIDITY AND CAPITAL RESOURCES
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Year Ended 31 December 2005 Prepare
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Intangible E&E assets related to ea
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11.2 The year ended 31 December 200
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(c) Reconciliation of loss for the
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Year Ended 31 December 2004 Prepare
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PART VII—FINANCIAL INFORMATIONA.
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DeclarationFor the purposes of Pros
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HERITAGE OIL LIMITEDNOTES TO BALANC
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AUDITED AND UNAUDITED FINANCIAL INF
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HERITAGE OIL CORPORATIONCONSOLIDATE
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HERITAGE OIL CORPORATIONNOTES TO CO
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Intangible E&E assets related to ea
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k) InvestmentsThe Group classifies
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usually when legal title passes to
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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 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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