Swala Energy Limited, an African-focused oil and gas company, reported the signing of a binding farm-out agreement for a 25 percent working interest in Block 12B (Kenya) with the Farmee, an international integrated oil and gas company, that will see Swala free carried through two exploration wells.
Dr. David Mestres Ridge (CEO) said, “We are very pleased to welcome a company of the Farmee’s financial and technical standing to the 12B joint venture. The Board believes the farm-out is the most cost-effective and least dilutive way to strengthen the Company’s balance sheet in anticipation of the forthcoming activity both in Block 12B and in our other assets.
The principal terms of the farm-out agreement are that the Farmee will: pay Swala’s past costs; pay all of Swala’s costs associated with the planned 217 miles (350 kilometers) 2D seismic survey up to a cap of $2.7 million (net to Swala’s working interest);pay all of Swala’s costs associated with the drilling of a first exploration well up to a cap of $7.5 million (net to Swala’s working interest), subject to positive results from the 12B seismic survey; pay all of Swala’s costs associated with the drilling of a second exploration well up to a cap of $7.5 million (net to Swala’s working interest), subject to positive results from the first exploration well and pay all of Swala’s costs associated with any work programme agreed to by a majority vote under the Production Sharing Agreement (PSA) in excess of the work commitment under the PSA.
Completion of the farm-out is subject to certain conditions including the consent of the Kenyan Government and the Competition Authority of Kenya, until which point the Farmee has requested confidentiality. Upon completion of the transaction Swala will retain a 25 percent net working interest in Block 12B, the Farmee will own a 25 percent net working interest and Tullow Oil (LSE: TLW) will hold a 50 percent net working interest and continue to act as the Operator.
“This will allow the Company to focus its energies and resources on existing operated assets and the continued growth of the Company’s portfolio”, said Dr.David.
Source: RigZone Edited by Kenya Engineer