Kisumu oil explorer finalises sale of stake to Spanish firm
Oil exploration in Turkana. Swala Energy has sold a stake in a block in Nyanza. Photo/FILE
What you need to know:
The Swala Energy sale to the Spanish exploration and production firm began in March this year, but needed the consent of the government and the Competition Authority of Kenya.
Oil explorer Swala Energy has completed the sale of a 25 per cent stake in Nyanza’s block 12B to Spain-based Cepsa after receiving government approvals.
Though the full price of the stake was not disclosed, a statement from Swala Energy said the costs it had incurred to the tune of Sh1.3 billion ($15 million) would be met by Cepsa as the first two wells are drilled.
Block 12B is located in Kisumu County in what is described as Nyanza Rift and is part of the East African Rift System (EARS).
The area is about 300 kilometres south of the Ngamia oil discovery and is described as an offshoot of the main eastern branch of EARS.
Other recent transactions have raked in billions of shillings.
The London Stock Exchange-listed Tower Resources, for instance, bought a 15 per cent stake worth Sh4.3 billion in Kenya’s Block 2B from Lion Petroleum Corporation, a subsidiary of Taipan Resources, which is drilling for oil in Mandera.
The Swala Energy sale to the Spanish exploration and production firm began in March this year, but needed the consent of the government and the Competition Authority of Kenya.
With Cepsa getting 25 per cent, Swala retains 25 per cent while the other 50 per cent remains with Tullow Oil.
Tullow Oil is the operator of the block, but the date of the first drilling is yet to be set. “Swala will retain a 25 per cent net working interest in Block 12B; Cepsa will own a 25 per cent net working interest and Tullow Oil will hold the remaining 50 per cent net working interest and continue to act as the joint venture operator,” said the company in the statement.
Cepsa is owned by Abu Dhabi sovereign wealth fund.
The transactions comes just when the Treasury has proposed in the Finance Bill 2014-15 to start imposing income tax on net gains from such transactions, instead of just the 10 per cent withholding tax that was imposed by former minister Njeru Githae.
Swala CEO David Mestres Ridge said the new agreement would allow the company to focus on growth.
“Completion of this farm-in agreement will now allow the company to focus its resources on existing operated assets and the continued growth of the company’s portfolio,” said Mr Ridge in a statement.
In the transaction, Swala will incur its part of the cost in the first two exploratory wells paid by Cepsa.
“As part of the farm-out agreement Swala will have its past costs repaid and be free-carried through the first two exploration wells if Cepsa decides to participate, up to a maximum of $7.5 million (Sh660 million) for each one,” said the statement.
The agreement on the payment of costs for the wells was arrived upon by the time the first announcement on the transaction was made in March.
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