White Nile 'may be a watershed'

PHIL Edmonds, the former England cricketer and chief executive of controversial oil explorer White Nile, is claiming his company will turn on its head the way poor countries deal with Western operators in the hunt for new oilfields.

White Nile's shares have rocketed to value the company at £205m, despite it not having any physical assets, merely the hope it will strike it rich in Southern Sudan from a licence covering 67,000 sq km of desert.

Influential bear investor Tony Dye warned at the weekend that the boom in the number of oil company floats in recent weeks was a bubble set to burst, but Edmonds told the Evening Standard his company could become the new model for oil deals.

'It may be a watershed in the way resource-rich countries work out how to maximise the benefit for themselves,' he said.

Outlining details of the White Nile model, Edmonds said the national oil company set up by the provisional government in South Sudan would take a 50% stake in his cash shell through a reverse takeover.

The complex process of structuring the deal is the reason White Nile's shares have been suspended since 17 February at the firm's request. They are likely to remain so until the end of the month, pending confirmation of the deal. The announcement may be accompanied by a £15m fundraising at 150p.

In traditional production-sharing agreements, a government looks to lure supermajors such as BP by offering generous terms, which means it can be years before the first revenue flows into State coffers.

Under White Nile's model, Edmonds claims the South Sudanese will have more control over the speed and extent of the drilling programme and stand to gain directly from any increase in the listed entity's share price through its stake on the London Stock Exchange.

The provisional government's oil company, Nile Petroleum, is already planning a pipeline to Mombassa in Kenya which could cost $1.4bn (£778m) to build. In theory, some of the fund-raising could come through White Nile by placing all or some of this pipeline project into the firm.

Edmonds claims the model allows a government to 'crystallise' the value of its country's assets.

While his critics are likely to offer a wry smile, given the paper fortune he has already made from White Nile's roller-coaster debut, he has been contacted by ministers in two countries who are keen to set up similar London-listed ventures.