Heritage Exercises Option to Redeem Convertible Bonds

Heritage Oil Corporation on Wednesday announced that it has exercised its option to redeem all outstanding convertible bonds in issue at that date.

On March 27, 2006, Heritage issued 600 unsecured senior convertible bonds each with a par value of US$100,000 for aggregate proceeds of US$60,000,000. The bonds are convertible, in whole or in part, into Common Shares at a price of US$18.00 per share and bear a coupon rate of 10% per annum and a term of five years and one day. The Company may redeem, in whole or part, the bonds for cash at any time on or before March 28, 2007 at 150% of par value.

To date 50 bonds worth US$5,000,000 have been exercised and the Company has given notice to the existing bondholders that the remaining 550 bonds worth US$55,000,000 will be redeemed on or before March 28, 2007 at 150% of par value. Conversion rights of the outstanding bonds have ceased with immediate effect.

Management is currently evaluating a number of financing opportunities available to Heritage to finance the bond redemption.

CEO Tony Buckingham stated "The redemption of the convertible bonds should reduce the dilution to existing shareholders following the recent increase in shareholder values due to operational success in Uganda, Russia and Oman. We are in discussions with a number of advisers and institutions who are considering financing Heritage on more attractive terms than the existing bond."

Heritage is an international oil and gas corporation with a producing property in the Sultanate of Oman, a development property in Russia and exploration projects in the Republic of Uganda and the Democratic Republic of Congo. The Company is also pursuing opportunities in the Kurdistan region of Iraq and in other regions of Iraq.


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