(Reuters) - Heritage Oil Plc HOIL.L HOC.TO will sell part of a gas block and borrow money from Genel Energy Plc (GENL.L) to raise $450 million, easing concerns about how it will fund oilfield purchases in Nigeria.
Heritage Oil shares jumped 18 percent after the company said it will sell a 26 percent stake in Miran Block in Iraq's autonomous Kurdistan region to Genel and will take a $294 million loan from the company.
The cash will partly fund Heritage Oil's acquisition of a stake in Nigeria's OML 30 oilfield assets announced last month.
"Miran sale price is attractive, but the cash is more welcome," RBC Capital Markets' Al Stanton said.
Heritage Oil earlier planned to fund a portion of the OML 30 deal through a rights issue.
"There is no need to proceed with the rights (issue) and any capital raising is dropped," Heritage Oil Chief Financial Officer Paul Atherton told Reuters on Tuesday.
The company will sell the Miran Block stake and an interest in a related joint operating agreement for $156 million, which would increase Genel's holding in the block to 51 percent.
Heritage Oil can repay the loan by transferring ownership of its unit Heritage Energy Middle East Ltd, which currently operates the Miran Block, to Genel.
"After we've completed the acquisition of OML 30 ... either party has the right to exercise this option, and we would expect to complete the same, by way of cancelling the loan in exchange for the remaining rights in Miran," Atherton said.
Heritage Oil, which also operates in Tanzania and Russia, will have no presence in Kurdistan after exiting Miran Block.
Conceptual engineering design studies have focused on the potential for early production of between 80 million and 180 million standard cubic feet per day (MMscfd) at Miran for local markets beginning in 2013 , according to Heritage Oil's website.
This will be followed by an appraisal and full development of between 560 and 750 MMscfd in 2015 for gas export.
Genel's primary assets are oil and gas licenses in Kurdistan and has an interest in six production sharing contracts with the Kurdistan Regional Government.
"We aim to build a material gas business alongside our existing oil business in the medium term," Genel Energy Chief Executive Tony Hayward said.
Heritage Oil shares were up nearly 18 percent at 197.98 pence on the London Stock Exchange at 1353 GMT on Tuesday. They rose 17 percent to C$3.05 on the Toronto Stock Exchange.
Genel's stock was down marginally on the London Stock Exchange.
(This story corrects paragraph four to show Al Stanton is from RBC Capital Markets, not BMO Capital Markets)
Reporting by Brenton Cordeiro in Bangalore,; Editing by Joyjeet Das