Tullow mired in Heritage's Ugandan row
Tullow Oil has been ordered to cease all its Ugandan activities until a major dispute between the country's government and Heritage Oil over unpaid taxes is resolved.
The Ugandan government's heavy-handed decree sent Tullow's share price tumbling 59p to 1,238p, wiping more than £500m off the company's value.
It also sliced £3.8m off the value of Tullow chief Aidan Heavey's stake in the group, which is now worth £79.2m.
Tullow last month paid Heritage £973m for its Ugandan assets, but the government is demanding Heritage pay capital gains tax on the sale.
Losing money: Aidan Heavey has seen £3.8m sliced of his stake in the group
Heritage is refusing to pay, arguing there is no precedent. But the Ugandans want the firm to pay up to £183.5m, which has been set aside pending any decision.
The dispute has been simmering since January, so it is unclear when it will be resolved. Tullow attempted to put a brave face on the hitch, insisting it would be resolved in 'a matter of weeks'.
Dougie Youngson, analyst at Arbuthnot Securities, said: 'There is absolutely nothing Tullow can do to move this along and that's why it's pretty foolhardy for Tullow to say this will be done in a few weeks. It won't be. This is going to arbitration and we have no idea how long this is going to take or what the outcome is going to be.'
He added the delays will ' massively curtail' Tullow's Ugandan interests.
The dispute has put on hold a previously agreed partnership in the country with the China National Offshore Oil Corporation and Total, which cannot be approved until the CGT issue is resolved.
Heritage's sale of its Ugandan assets mean it no longer has any interests in the country and it is understood it will continue to fight the demands.
Tullow has no get-out clause it can use to wriggle out of the Heritage deal, and has no way of forcing its former partner to cough up.
Youngson added: 'Heritage has no incentive for this to be resolved quickly.'
Shares in Heritage fell 14.4p to 305p, but its investors will receive a special dividend worth £315m on Friday from the Uganda sale to Tullow.
The problems were disclosed as Tullow announced first-half pretax profits rose to £85m from £33.7m a year ago. The interim dividend was unchanged at 2p.
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