New share placing raises €1bn funds for Tullow Oil
TULLOW Oil, the Irish-founded explorer, raised £925m (€1.06bn) in a share placing with institutional investors to fund exploration and development in Uganda and Ghana.
The company yesterday sold 80.4 million new shares, or 10pc of the total, at a 5pc discount to the previous day's closing price to institutional investors after hiring Bank of America-Merrill Lynch and RBS Hoare Govett to act as joint global co-ordinators and bookrunners.
Tullow needs the money to fund further exploration while also developing wells in Ghana. The explorer is also seeking to buy a stake in oil wells in Uganda being sold by partner Heritage Oil and which Tullow has an option to buy.
Tullow yesterday identified China National Offshore Oil and Total as the "top two bidders" to join it as partners in the east African nation but the government in Uganda makes the final decision on whether Tullow or rival Eni will buy the stake and who will develop it.
Company executives yesterday emphasised that Tullow wanted to remain an exploration company and planned to spend $500m (€354.5m) every year on exploration, it said.
The move was criticised by some analysts. "We believe that Tullow is raising too much money and that this is diluting the exploration upside for shareholders," said Panmure Gordon analyst Peter Hitchens.
"The company now looks overcapitalised and this could look worse should the Ugandan government not approve the company's pre-emption on the Heritage Oil assets."
The share placing will allow Tullow to "secure increased spending over the next three years or so", chief financial officer Ian Springett said before the sale was completed.
Tullow said in a separate trading statement yesterday that it had "never been in a better position to deliver growth".
It forecast £990m (€1.14bn) of expenditure this year, up from £690m (€792m) in 2009, while net debt at the end of December stood at £720m (€826m).