Shares of foreign oil explorers in Kenya take a hit
The Ngamia 3 oil exploration site in Turkana County. Tullow Oil, which has had the best success rate in discovering oil in northern Kenya, has seen its share price fall by 72pc at the London Stock Exchange. PHOTO | FILE
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Oil prices have tumbled over the past 15 months from $110 a barrel in June 2014 to under $50 this week, raising fears that new finds may not pay off prospecting companies.
Shares of foreign companies exploring for oil in Kenya have taken huge hits over the past one year, hurt by low oil prices that have made it tougher for the companies to get new financing for their exploratory work.
Some of the companies with a presence in Kenya whose share valuations has tanked in the period include Africa Oil, Tullow, Afren, Erin Energy (formerly Camac), Pancontinental, BG Group and Taipan.
London-listed Tullow Oil, which has had the best success rate in discovering oil in northern Kenya and Uganda, has seen its share price fall by 72 per cent at the London Stock Exchange (LSE) to 205 pence (Sh327) over the past one year.
Africa Oil, its partner in Kenyan exploration and listed on the Toronto Stock Exchange, has also seen a price decline of 73 per cent to 1.84 Canadian dollars a share (Sh145) over the period.
“It has become more difficult for companies to find foreign investment as many investors who have been holding onto oil and gas sector shares over the last year are feeling some pain,” said consulting firm PricewaterhouseCoopers (PwC) in its Africa oil and gas review 2015 report released last month.
“Overall, industry activity on the continent has slowed given the reduced oil price. Exploration activity has been the hardest hit, though Kenya has seen marginal onshore success over the past year.”
Oil prices have tumbled over the past 15 months from $110 a barrel in June 2014 to under $50 this week, raising fears that new finds may not pay off prospecting companies.
Premier Oil’s share at the LSE has declined from 348 pence (Sh555) to 99 pence (Sh158), while Taipan’s share on the Toronto exchange has fallen from 43 Canadian cents (Sh34) to three cents (Sh2.40).
Erin’s share on the New York Stock exchange (NYSE) has fallen by 85 per cent to $3.71 a share over the period.
LSE listed BG Group, which operates four blocks in the Lamu basin, is 22 per cent down in share price at 967 pence (Sh1,542) over the past one year. London-listed Nigerian oil firm Afren has fared worse, delisting from the LSE last month after having gone into administration.
Afren had last year stated plans to drill exploratory wells at the Bur Wein in El Wak, Mandera County, and at Konton in Wajir County, both fall in Block-1 of the Mandera Basin.
According to PwC, the companies have also had to face up to the challenge of uncertain legislation, poor physical infrastructure, local content and skills shortage which raise the cost of doing business.
The low price of oil is however likely to see stronger players in the market, who can afford to wait out the price slump, consolidate some oil licences. “We expect that new licence and farm-in activity will likely increase.
This would give the strongest players access to new acreage, which they could then begin to evaluate seismically while waiting for the oil price to improve before commencing with exploration drilling,” said PwC.
The companies that have committed to continue with exploratory work have had to seek extra funding through tie-ups with bigger multinationals or strategic sale of equity.
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