Heritage Oil Ltd, which in December 2007 signed an agreement for the exploration and production of oil and offshore gas in two areas off Malta totalling 18,999 square kilometres, said on Wednesday that it was in talks with an unnamed third party over a possible reverse takeover.
It is not known what effect, if any, the reverse merger will have on the ongoing explorations offshore Malta.
The Calgary-based oil and gas explorer and producer, which also has a Malta-based subsidiary, said no agreement has yet been reached and released no other details on the possible merger.
In addition to Malta, the company has other exploration projects in the Kurdistan region of Iraq, the Democratic Republic of Congo, Pakistan, Tanzania and Mali, as well as a producing property in Russia.
Trading in the company’s stock was halted in Toronto pending the news, and Heritage has requested a temporary suspension in trading of its shares on the London Stock Exchange.
The offshore areas granted by the government to Heritage are Area Two and Area Seven, located to the south and southeast of the island. The Norwegian company TGS Nopec previously held both areas under an exploration study agreement. The new contract with Heritage is a production-sharing contract and is for a term of 30 years.
The work programme for the first three years consists of carrying out a detailed seismic survey of the two areas. From the date of the signature of agreement, the company was obliged to start drilling at least one well within three years, or by December 2010.
The term of the contract is divided in two; the first six years allocated to exploration and the rest for development and production should oil and/or gas be discovered in commercial quantities. If petroleum is discovered, the company is bound to produce it as efficiently as possible in line with good oilfield practice. Heritage would retain part of the petroleum produced to recover its cost while the remaining part of production would be shared on a pre-agreed scale between the company and the government.
Should oil be discovered, the company will, after appraising the discovery, prepare a development plan for the government’s approval. Such a plan would consist of technical and engineering plans for development, a detailed economic, social and environmental impact study and a study on the government’s needs to develop and improve its capacity to monitor, supervise and carry out development and production related activities.
Last month Heritage said it had made a major oil discovery in the Kurdistan region of Iraq, with an oil-in-place estimate of between 2.3 to 4.2 billion barrels and a recovery factor expected between 50 and 70 per cent. Earlier in the year, Heritage sold its Eagle Energy (Oman) wholly owned subsidiary to RAK Petroleum Oman Ltd for US$28 million.