April 30, 2009 / 7:30 AM / 9 years ago

UPDATE 2-Heritage Oil '08 loss narrows, production up 26 pct

* ‘08 production 450 bopd vs 356 bopd a year ago

* FY net loss narrows to $41.3 mln from 83.2 mln (Adds details, analysts’ comments; updates share movement)

April 30 (Reuters) - Independent oil producer Heritage Oil Ltd HOC.TO HOIL.L posted a narrower loss for 2008 on lower expenses and said its net production rose 26 percent from the previous year.

Heritage Oil, which focuses on Africa, the Middle East and Russia, said it was currently testing the Miran West-1 well in the Kurdistan Region of Iraq and planned to start a further exploration and appraisal drilling in Block 1, Uganda in the second half.

The company said results from Uganda drilling produced a gross resource of about 600 million barrels, while the undiscovered potential of the Kurdistan region was estimated at 40 billion barrels of oil and 60 trillion cubic feet of natural gas.

Panmure Gordon, which has a “buy” rating and a price target of 500 pence on the company’s stock, said it believed that the drilling programme can add significant shareholder value.

For the year ended Dec. 31, the company’s net loss narrowed by 50 percent to $41.3 million, while petroleum and natural gas revenue grew 38 percent to $5.1 million.

Exploration costs fell 85 percent to $0.8 million, while net production for the year rose 26 percent to 450 barrels of oil per day (bopd), Heritage said.

The company said it had agreed to pay $35 million to Kurdistan Regional Government (KRG) in Iraq from future production revenue, to get out of a commitment to build a mini-refinery. Heritage’s financial commitment on the project was $140 million.

The company’s cash position of $91 million at end-December was $91 million.

Brokerage Ambrian, which retained its “buy” stance on the shares, said: “Given the quality of Heritage’s two key assets in Uganda and Kurdistan, we would also not be surprised if Heritage became the subject of a takeover in the next 12 months by a larger company.”

Heritage Oil shares were up 0.25 pence at 376.75 pence at 1008 GMT on the London Stock Exchange. (Reporting by Tresa Sherin Morera in Bangalore; Editing by Gopakumar Warrier, Jarshad Kakkrakandy)

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