Heritage Oil Plc (HOIL.L) said it will sell a part of its holding in a gas block in Iraq's autonomous Kurdistan region to Genel Energy Plc (GENL.L) and take a loan from Genel, for a total of $450 million in proceeds.
Heritage Oil will sell a 26 percent interest in the Miran Block and an interest in a related joint operating agreement to Genel for $156 million, which would increase Genel's holding in the Miran Block to 51 percent.
The $294 million loan provided by Genel to Heritage Oil can be repaid by transferring ownership of its unit Heritage Energy Middle East Ltd, which currently operates the Miran Block, to Genel.
As part of the acquisition, Genel will become joint operator of the Miran Block.
"We aim to build a material gas business alongside our existing oil business in the medium term," Tony Hayward, chief executive of Genel Energy, said.
Heritage Oil said it would use the proceeds from Tuesday's transactions with Genel, to partly fund its acquisition of a stake in a string of Nigerian oilfield assets, known as OML 30, which it announced last month.
The deal may mitigate against the needs for a fund raise, Singer Capital Markets said in a note.
Shares in the company jumped 13 percent to 190 pence on the London Stock Exchange at 0806 GMT on Tuesday. Genel's stock was down about 1 percent.