Tullow Oil engineers work at the oil rig at Ngamia One Well in Turkana County in 2012. FILE PHOTO |
NATION MEDIA GROUP
Swala Energy, an Australian firm
prospecting for oil and gas in western Kenya, could exit without
drilling a single well in the block as the impact of falling global
crude prices takes a toll on its operations.
The firm
said it had appointed UK’s FirstEnergy as a financial adviser in
preparation for a merger or complete sale of the company.
This
comes as falling global crude prices continue to impact negatively on
the upstream oil and gas sector, with some exploration firms having
already announced plans to reduce their budgets.
“Accordingly,
Swala board of directors has appointed FirstEnergy to manage a process
with the view of reviewing the company’s options to maximise the
long-term value of the company’s potential including a potential merger
or sale of the company,” reads a statement sent to the Australian
Securities Exchange.
CUTTING GLOBAL BUDGET
The
announcement comes barely a week after Tullow Oil Plc, which has made
discoveries in northern Kenya, said it was cutting its global
exploration budget by a third “to adapt to current market conditions.”
Swala
Energy is licensed to explore block 12B where it holds an equal stake
with Tullow Oil. It also has operations in Tanzania and Zambia.
In
October, the firm announced that it would drill the first well in the
block during the second half of this year, following successful
acquisition of data, which revealed 10 leads indicating a possible
presence of oil or gas. The new development could further delay
exploration activities in western Kenya.
The World Bank
had in the Global Economic Prospects report released earlier this month
warned that declining crude oil prices could discourage investment in
exploration and development, specifically for new undertakings.
The Australian company is also considering a similar action — a farm-down on its assets in the three countries it operates.
Swala
recently shelved a plan to raise Sh378 million that was partly meant to
finance its exploration programme in the country due to what it termed
as an unfavourable market brought about by the decline in prices of
crude oil currently below $50 a barrel.
Block 12B lies
within the Nyanza Rift Basin, which is part of the East African Rift
System where other discoveries of oil and gas have been made, making it a
prime target for acquisition.
“The completion of our
seismic survey programmes and the clear indication from them of a large
number of significant leads and prospects within our licences make this
an opportune time to review the company’s options to maximise value from
its portfolio ahead of the planned 2015 drilling campaign,” Chief
Executive David Mestres Ridge saidc
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