Swala Energy secures Sh200m to fund search for oil in Kisumu t

Tullow Oil engineers work at the oil rig at Ngamia One Well in Turkana County in 2012. FILE PHOTO |  NATION MEDIA GROUP

In Summary

• Swala Energy will spend the cash on its operations in Kenya and Tanzania at a time when crude prices have nosedived.

By IMMACULATE KARAMBU
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An Australian company exploring for oil in Kisumu has secured Sh202.5 million ($2.25 million) from Magna Equities, a New York-based investment firm.

Swala Energy says the money will be used to finance its work in Kenya and Tanzania where it holds exploration licences.

Together with its partner Tullow Oil, Swala Energy has set a target to drill the first well in block 12B in Kisumu, 300 kilometres south of the country’s maiden oil discovery at Ngamia in Turkana.

ADVANCE ITS WORK

“The funding agreement will enable Swala to further advance its work requirements on its current licences, complete the current work programme and fund general and administrative costs.

“The work on the current licences will include the preparation for drilling of blocks 12B, Pangani and Kilombero,” a notice to the Australian Stock Exchange reads.

The funding comes at a time when there is looming uncertainty on the fate of exploration programmes as the prices of crude oil fall below the minimum thresholds that various international oil and gas companies consider favourable for profitable operations.

In November, Swala Energy suspended a plan to raise Sh378 million ($5 million Australian dollars) through a rights issue due to what it said was an unfavourable market. The money was to fund exploration in Kenya and Tanzania.

SCALE DOWN OPERATIONS

In the recent months, other oil and gas companies including those operating locally have announced plans to scale down exploration activity with the falling crude oil prices that have come down by half since June, edging towards $60 per barrel.

“The agreement with Magna gives Swala certainty and clarity to the terms of funding which the board felt the equity market was unable to provide at this time. The funding provides Swala with stability at an important time in the company’s stage of development as we continue discussions with a potential farm-in partner,” Swala chief executive David Mestres Ridge said.