2009-09-21-2009-08-04

To buy subsidiary with interests in 2 producing oil fields in Kurdistan region of Iraq.

Heritage Oil Plc (London: HOIL; Toronto: HOC) plans to acquire Iraq-based Genel Energy International Ltd. from Turkey-based Genel Enerji SA in a deal valued at approximately US$2.55 billion in stock. Heritage will issue 286.3 million shares to Genel Enerji, valued at approximately US$8.91 each. Pro forma, Genel shareholders will own approximately 50% of the enlarged ordinary share capital of Heritage. Genel Energy International has interests in two producing oil fields in the Kurdistan region of Iraq, being the joint operator of Taq Taq Field holding a 55% working interest (44% participating interest) as well as having a 25% working interest in Tawke Field. Also, Genel Energy International owns 25% of the Miran license (the balance of which is owned by Heritage), 40% of the Duhok license, 40% of the Barbahar license and a 20% interest in the Chia Surkh license. Genel also owns the right to develop the Taq Taq petroleum refinery. This refinery in Kurdistan is primarily being built through the phased construction and operation of a 60,000-barrels-of-oil-per-day refinery in the vicinity of the Taq Taq and Miran oil fields. Construction is expected to be completed by 2012 with 40,000 barrels per day expected to be operational in 2011. Pro forma, the combined company will own a number of key licenses in Kurdistan where exports from the Taq Taq and Tawke fields. Production is transported by the main export pipeline to the Mediterranean port city of Ceyhan in Turkey and marketed by the State Oil Marketing Organization. Net production from the combined companies is currently approximately 30,000 barrels per day and is estimated to be around 43,000 barrels per day by year-end 2009. Heritage chief executive Tony Buckingham says, "We look forward to adding to Heritage Oil's world-class discoveries in Uganda by creating the leading Anglo-Turkish company with oil production and refining capacity in the Kurdistan region. We recognize the important role Turkey is playing in the region and are delighted that the KRG will be a significant long-term shareholder, thereby providing their endorsement and support to the enlarged group." Genel CEO Mehmet Sepil says, "We are delighted at this opportunity to create the leading integrated oil and gas company in the Kurdistan region. Cash flow from the sale of production from our Taq Taq and Tawke fields which is exported and sold in the domestic market is expected to generate significant cash flow for the benefit of all shareholders and deliver excellent value to all stakeholders, including the people of Iraq." At closing, the proposed executive board of the enlarged group will include Buckingham as executive chairman; Sepil as CEO; Mehmet Emin Karamehmet, currently chairman of Çukurova Group, who will be executive director; and Paul Atherton who will remain chief financial officer.