Royal Dutch Shell Plc  .com Rotating Header Image

Aidan Heavey: Out of Africa – Ireland’s oil baron has come a long way from County Kildare

The Independent: Aidan Heavey: Out of Africa – Ireland’s oil baron has come a long way from County Kildare

“it is clear that the scandal has highlighted accounting risk in the oil industry, and discrepancies between different companies’ accounting methods”

The Tullow boss was ‘a crap accountant’, he tells Tim Webb. But after pulling off two audacious deals, he has found his forte as an oilman

Posted 9 August 2004

Aidan Heavey admits that, as an Irish oilman travelling in places such as Gambia, he attracts his fair share of attention from the locals. “It can be a surprise,” the chief executive of the fast-growing Dublin- and London-listed Tullow Oil says. In an industry dominated by engineers and geologists, there also aren’t many former accountants who run oil companies.

Before founding Tullow, which has just doubled in size after buying Energy Africa in a $500m (£274m) reverse takeover, Heavey worked for the Irish accounting firm RJ Kidney & Co as an auditor. “I hated accounting. I was a crap accountant,” the 51-year-old says, with typical candour.

His fellow Irishman, Tullow’s finance director Tom Hickey, also used to be an accountant – for the now defunct Andersen, which audited the books of the collapsed US energy trader Enron. “I wasn’t as smart as Tom to join Andersen,” Heavey jokes. But in the week that oil prices hit new record highs, Tullow is looking pretty smart, with a market value of £755m. Having bought Energy Africa, it has more than doubled its production to 54,000 barrels a day overnight. Heavey admits the deal was a gamble. But he has a good track record of betting big – and winning.

Heavey founded Tullow in 1985, when he took a tip from a banker and acquired a licence to develop gas fields in Senegal. Like most other small exploration and production oil companies, it scooped up small fields neglected by the oil majors, hoping to sell them on at a profit. But it first got a taste of the big time 15 years later when it bought BP’s North Sea gas fields for £200m. The deal raised eyebrows, not least because Heavey had instructed a bank to look for deals worth around the £50m mark. “It was a huge deal for a tiny company,” he recalls. “We borrowed most of the money.”

Similarly, the purchase of Energy Africa will take the company on to the next level, he says. Energy Africa has fields in Gabon, Equatorial Guinea, Namibia and the Congo. Before the deal, most of Tullow’s assets were in the North Sea and Asia, so there is little overlap between the two portfolios. The acquisition, which was completed in June, doubles group reserves to 174 million barrels. Tullow is now the second largest independent in the UK, behind Cairn.

“We have a different business model now. Exploration is less important,” Heavey says. “It opens up a lot of new deals and doors, both exploration and production.”

Before buying Energy Africa, Tullow was a small, well-run exploration company, whose search for new oil and gas was funded by its North Sea production. Now it will generate far more cash (an estimated £270m a year on current production levels and current oil prices), but must sweat its newly acquired assets to restore its margins.

Heavey knows he risked scaring off shareholders. “The EA deal was a gamble in a different way to the BP deal. The gamble was that we had a dominant position in the southern North Sea. A lot of shareholders liked that. But we were diluting that exposure.” In the end, he says, the £123m share placing in May to help fund the purchase of Energy Africa was three times oversubscribed, so he need not have worried.

In many ways, it was a bizarre deal. Unusually for a takeover bid, the offer was pitched at a 5 per cent discount to Energy Africa’s market price. But the Johannesburg-listed company was languishing after a previous unsuccessful takeover attempt by its largest shareholder, the Malaysian oil company Petronas. Question marks hung over its production prospects. The board of Energy Africa criticised the Tullow offer, saying it undervalued the company, but in the absence of any other bidder the directors still recommended it to shareholders.

“They realised the company was in the doldrums,” Heavey says. “There was not a lot they could do. We were the only solution.” He insists their criticism of the offer was “complimentary”. “It was proof that they felt the assets were worth more. The Energy Africa directors are working very positively,” he adds.

Over the summer, Heavey has been busy reorganising the business to integrate Energy Africa; the results of his work will be announced next month. He insists there will be no job cuts. “We do not see any staff leaving the business.”

As a former accountant, Heavey has strong views on the controversial issue of the reporting of oil and gas reserves, which has landed Shell in so much trouble. Under existing rules, set by the the Securities and Exchange Commission, companies can book reserves as proven if they show the oil and gas can be taken out of the ground and sold at a profit, or “developed commercially”.

“It’s a grey area,” Heavey explains. “How do you define ‘commercial’? If I wanted, I could put out a development plan to show they [the reserves] are commercial. The SEC is a joke.”

The rules need to be overhauled, he says. Companies must drill test wells to show that the reserves are proven, but the SEC has granted an exception to deep-water drillers in the Gulf of Mexico, who need only provide seismic 3D images to book proven reserves. “The SEC has gone mad,” is Heavey’s response.

He does not directly criticise Sir Philip Watts, the former Shell chairman sacked after misleading investors about the company’s reserves. But it is clear that the scandal has highlighted accounting risk in the oil industry, and discrepancies between different companies’ accounting methods. “Until the grey areas are sorted out, it is difficult for shareholders. People would be very wary of a company that has assets in only one field where it is the only operator.”

Currently, oil companies’ reserve statements do not have to be included in their audited accounts. But Tullow, which carried out three audits of Energy Africa’s reserves before completing the deal, will voluntarily include all its reserves in its 2005 audited accounts.

Like all good chief executives who have just pulled off a big deal, Heavey insists: “Energy Africa won’t be the last. You have to mix original growth with acquisitions.” He does not give any clues where Tullow will strike next, but it is unlikely to be in England (“it has the largest political risk in the world” – witness Chancellor Gordon Brown’s 2001 hike in North Sea tax), or India (“worst for bureaucracy”). So, now the world knows: Tullow is coming.


Age: 51

Education: Clongowes Wood College, Co Kildare; degree in commerce from University College Dublin.


1978: qualified as an Associated Chartered Accountant.

1974-79: auditor at RJ Kidney & Co.

1979-81: financial controller at Aer Lingus.

1981-84: financial controller at Tullow Engineering.

1985: founded Tullow Oil.

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.