Tanzania Firm 'to Buy into Songo Songo Operator'
Tanzania-listed firm Swala Oil & Gas said January 2 2018 it has agreed to buy an up to 40% interest in the company that owns the country’s longest-established gas producing field, Songo Songo.
Swala said it will pay up to US$130mn to Canada’s Orca Exploration, for an up to 40% stake in the latter’s wholly-owned Mauritius subsidiary, PanAfrican Energy Corporation (PAEC). Swala described this as “the first major deal between a foreign company and a Tanzanian-listed company in the oil and gas sector” adding that it follows completion of the first tranche of $25mn financing from international investors – arranged by London-based boutique bank Exotix in the form of a US bond offering – for Swala. Orca announced in August that talks had begun with Swala, but had not updated the market at time of press.
Orca said November 15 that Songo Songo gross gas sales in the first nine months of 2017 were 4% lower year on year at just 42.7mn ft3/d, largely because state utility Tanesco was taking less gas. Orca further said then that Songo Songo had capacity to produce 155mn ft3/d as at September 30 2017 which it was looking to expand to 180mn ft3/d with the tie-in of a new well, SS-12. But it said that pipeline infrastructure limits output to 102mn ft3/d.
Of the first $40mn to be invested, $16.3m will be paid by issuing Swala shares to Orca, subject to shareholder approval, and cash if not approved.
Swala CEO David Mestres Ridge said: “It is the first time that US dollar-linked bonds shall be listed on the Dar es Salaam Stock Exchange (DSE); and it is the first time that the Tanzanian pension and investment funds are invited to participate alongside international investors in these opportunities. This arrangement ultimately results in benefits of more than 20% of Orca’s Tanzania business being indirectly owned by Tanzanian shareholders and bondholders, providing an alternative mechanism for local participation alongside traditional listings on the DSE.” A further $24mn shall be satisfied by Swala assuming through its share ownership a pro-rata share of the obligations under a World Bank-IFC loan secured by PAEM, added Swala.
Orca recorded a net loss of $30,000 in 3Q2017, but net 9M 2017 income of $2.2mn – the latter double its 9M 2016 figure. Songo Songo is its primary asset.
In west Africa meanwhile, Victoria Oil & Gas said January 2 it has agreed with Bowleven, both UK-listed, to extend talks on a possible farm-in by Bowleven to VOG’s Bomono [gas] exploration licence in Cameroon that would otherwise have ended December 31 2017.
Songo Songo gas field, in shallow water to the south of the Tanzanian capital (Map credit: Swala)