Shares in Tullow Oil surged by 12 per cent when it resumed trading yesterday after the oil and gas exploration group said it had sealed the $500 million (€414 million) takeover of Energy Africa. Jane O'Sullivan, Markets Correspondent reports

More than 90 per cent of the South Africa-based company's shareholders have accepted Tullow's offer, paving the way for the creation of one of the largest oil firms operating in west African region.

Tullow shares, which were suspended at 86.5 pence sterling in March, closed 10.50 pence higher yesterday at 97 pence.

"The proposed transaction represents a major advance in Tullow's plans to become a sizeable independent exploration and production company," company chairman Mr Pat Plunkett said.

"Energy Africa is regarded as a well-managed company with solid production and exposure to some of the most exciting exploration and development projects in west Africa."

Meanwhile, Tullow also released 2003 results yesterday, showing that increased North Sea and west African production had driven turnover up by 18 per cent, to a record £132 million sterling (€195,000).

Operating profit before exploration activities was up by 41 per cent to £47 million, while operating cashflow rose by 35 per cent to £85 million.

However, earnings per share slipped by 18 per cent to 2.92 pence due to increased tax and the write-off of exploration costs.

Tullow took a charge of £12.7 million relating to the costs associated with unsuccessful exploration last year, up from £4.2 million a year earlier.

During the year, Tullow completed two major developments, drilled six exploration wells (in the UK, the Ivory Coast and South Asia) and was awarded six new licences, while production increased to more than 25,000 barrels of oil equivalent per day.

The company said the Espoir field, offshore of Ivory Coast, continued to benefit from strong oil pricing with sales last year averaging more than $27.50 (€22.70) per barrel.

The acquisition of Energy Africa will further strengthen Tullow Oil's presence in west Africa. Following the deal, the enlarged group will have an almost equal balance between oil and gas production and between UK and international producing assets.

With operations in 17 countries, it will have an annual operating cashflow of around £170 million.

The cash element of the offer will be funded partly by $300 million of new debt and partly by a placing of 130 million new shares at a price of 95 pence each to raise £120 million after expenses.

The placing has already been three times oversubscribed.

Analysts said the deal marked a significant scaling up of the company, both in terms of asset location and commodity exposure. Currently, the UK accounts for nearly 80 per cent of Tullow's turnover but this will fall to 50 per cent of the enlarged group.

Tullow also said yesterday that it had agreed to acquire from African Petroleum Investment its 50 per cent of EAGHL, a joint venture with Energy Africa, for a further $70 million.

Both acquisitions must be approved by Tullow shareholders at an extraordinary meeting on May 27th.