False news shock – Heritage Oil edition | FT Alphaville

False news shock – Heritage Oil edition

Here’s another example of false news shock – the tendency of erroneous news to move markets even though it has proved to be wrong. It concerns an exploration company called Heritage Oil, which has found a serious amount of oil in Kurdistan.

Shortly after 2.00pm BST on Wednesday its shares went into reverse:

The reason was a report on Reuters, which spread like wild fire round the City of London. Emphasis ours:
Contracts that semi-autonomous Kurdish authorities have signed with private oil firms are illegal until they are ratified by the Oil Ministry in Baghdad, the Iraqi government reaffirmed on Wednesday.

Oil Minister Hussain al-Shahristani also rejected paying firms that have developed the Taq Taq and Tawke oil fields in northern Iraq as part of contracts signed independently with the Kurdish Regional Government (KRG).

“These contracts need to be ratified by the Iraqi federal Oil Ministry. Till that time they are illegal,” government spokesman Ali al-Dabbagh told reporters at a news conference with Oil Minister Hussain al-Shahristani.

What Reuters did not mention, and which Bloomberg reporting from the same press conference did, were these vital comments, which cast things a completely different light:
“These exports are still not completely legal now; to become completely legal, they need to have the approval of the federal government in Baghdad,” Shahristani said. “We hope the oil law being discussed will allow this to happen.”

Needless to say, Heritage, which has just announced a $6bn merger deal with Turkey’s Genel, are hopping mad. Its PR people are phoning round and trying to undo the damage at the moment.

We will see if they have been successful when trading resumes in Heritage shares tomorrow morning.

For the record, shares in Heritage closed 63p lower at 540p, a fall of 10.5 per cent.

Reuters would like to us to point out that the following quote was including in their piece on Heritage Oil.

Dabbagh said he hoped new oil and gas laws — held up in parliament — will resolve the issue of oil deals.

Update II:
The above quote was not carried in the first version of the Reuters story (two pars accompanying the snap headline) but in Update I and II.

Related links:
Bearing the Brownt – FT Alphaville