Wentworth sees gas driving Tanzanian prosperity
Tanzania-focused London-listed producer Wentworth Resources broke a string of financial and operational records for first half of the year owing to strong operational performance and rising demand as the country began recovery from COVID-19.
Adjusted earnings net of tax, interest and exploration expenses (Ebitdax) rose 75% to $7.0mn, from $4.0mn last year. It is on track to meet its raised guidance of 70-80mn ft³/d for the year, CEO Katherine Roe told NGW September 15.
It has one asset, the Mnazi Bay onshore field, of which it owns 32%, with Indonesia’s Maurel & Prom operator (48%) and the state Tanzania Petroleum Development Co (TPDC, 20%) its partner and an offtaker.
Much will depend on the weather and on demand for the rest of the year, but she said that the second half of a year tended to see less hydro in the mix, so this could be a record year too. Daily production of 110mn ft³/day in March also set a new record and shows what is possible.
Revenues were up 40% at a record $11.7mn as the economy recovers from COVID-19. With the money flowing in, the company is debt free with $21mn cash and it will pay an interim dividend of $1.32mn. This is up 10% on the year and will bring the annual total to $5.12mn.
“I am very pleased: these were strong financial results based on strong operational results, meaning higher dividends,” Roe told NGW. “Demand is coming through: the growth curve is shallow but heading the right way.”
The extra output resulted in part from the decision taken with the operator to continue last year’s well workover in a deeper horizon, despite the COVID-19 outbreak. The well had been working since 2015. The company is not planning to drill more wells at this stage, she said. Its results statement said capex for the rest of the year would be low.
The gas sales and purchase agreement stipulates a fixed price, meaning both sides are insulated from the highs and lows of the outside world. But there is an annual US inflationary escalator in the contract that has risen from 2.5% to 5% this year.
Tanesco also paid off in August over half its outstanding balance and the parties have agreed a schedule for the repayment of the remainder. There was also a take-or-pay clause and the sellers issued Tanesco an invoice, since paid, for untaken quantities. TPDC is always up to date with its payments and Roe says these facts show that Tanzania is a good place to do business.
Mnazi Bay gas and ESG
The company already has one of the lowest carbon intensity metrics among its AIM-listed peers, which remains at 1.3kg CO2 equivalent/barrel of oil equivalent production but it plans to work on lowering it: “It is our priority for our sustainability work this year,” she said. Operating expenses are already low at $0.48/’000 ft³.
Wentworth though has its eye on more than producing gas profitably: Roe is very keen for the fuel to lift the country out of energy poverty using gas, as long as that can be done in a way that satisfies its shareholders.
This ties in neatly with the new president’s policy of universal access to energy and turning the country into east Africa’s energy hub, supplying also its neighbours. The current mothballing of the Mozambique LNG project has revived interest in its own potential off-shore projects, operated by Anglo-Dutch Shell and Norwegian Equinor. Subject to negotiation, a fifth of the gas reserves could be reserved for the domestic market, for which power generation would be a possible home.
At the moment Wentworth and partners supply about 30% of the gas-fired power demand, which is half the national power demand; another 30% comes from hydro, making the country 80% relatively low carbon anyway. From about 1.75 GW capacity today, the government is eyeing 5 GW by 2025 and universal access – for which no CCGT figure is available – by 2030.
Roe also sees gas playing a role in national health and social conditions. While carbon dioxide emissions may have caused irregular and violent weather patterns, it is inhaling particulates from domestic cooking that is a real killer today. Not only that, but the collecting and the burning of the biomass is women’s work in Tanzania and this is labour intensive.
It therefore holds back women’s career opportunities and other chances for a better life, Roe said. Not only city-dwellers but also agricultural workers were entitled to electricity or gas. And while a lot of companies “rightly focused on the 'environmental' part of ESG, we are also concerned with the 'social' element,” she said.
Cooking stoves that run on compressed natural gas are among the possibilities the company is considering as part of its future business development in the country. ”We are fully supportive of the need to move away from carbon,” she says, “but also of the idea of a Just Transition. We should not apply the same logic that we apply in Europe, to regions where people lack basic amenities like lighting and refrigeration.”