Swala Energy completes farm out deal with Tata of India

Swala Energy has finalised the farm out deal with India’s Tata Petrodyne (TPL) for its oil Kilosa-Kilombero and Pangani licences, the Dar es Salaam Stock Exchange (DSE) listed company has said.

The two properties are in the East African Rift System (EARS) in which the Lake Albert area of Uganda where over two billion barrels of oil have been found is also located.

The assignment gives the subsidiary of the multinational Tata Sons Limited a 25 per cent stake in the two properties.

“Upon completion of the transaction, the equity in the licences shall be: Swala 25 per cent; Tata Petrodyne 25 per cent; Otto Energy 50 per cent,” Swala said in statement.

In mining and drilling jargon, farm out means the assignment of part or all of an oil, natural gas or mineral interest to a third party. The interest may be in any agreed-upon form, such as exploration blocks or drilling acreage.

The third party, called the "farmee," pays the farmor a sum of money up front for the interest and also commits to spending money to perform a specific activity related to the interest, such as operating oil exploration blocks, funding expenditures, testing or drilling. 

Income generated from the farmee's activities partly goes to the farmor and partly to the farmee in percentages determined by the agreement.


“The parties shall now proceed to payment of the reimbursable past costs of US$5.7 million, due within five working days from completion, and to the transfer of licence working interest to TPL,” Swala Energy said.

Swala Oil and Gas (Tanzania) reached the farm out agreement with Tata Petrodyne (TPL) in June this year.

Under the deal, TPL will free carry Swala Tanzania through the costs of the initial well on the Kilosa-Kilombero licence, up to a maximum of US$2.5 million. It will also free carry Swala Tanzania through the costs of the initial well on the Pangani licence, up to a maximum of US$2.125 million.

Swala Energy Limited was registered in the British Virgin Islands in September 2010. Three years later, the company converted into a public Australian company listed on the Australia Stock Exchange (ASX).

On August 11, 2014, it became the second company to be listed on the DSE’s Enterprise Growth Market (EGM) segment after Maendeleo Commercial Bank. The main objective of the EGM is to enable small and medium sized enterprises to access the capital market for their long term growth capital raising.

DSE reports show that the company has 99,954,467 listed shares at the bourse. On Friday, none of them were traded and for quite some time their price has remained flat at 500/- each.

"We are grateful to the authorities and regulators for their assistance and prompt handling of the approval process for our farm-in application, which allows TPL to join us on these two licences,” the CEO of Swala, Dr David Mestres Ridge, noted in a comment on the finalization of the farm out deal.

 “Knowing that reimbursement of the past costs incurred by the company is being made and having an international exploration company such as TPL as a participant in an exciting location in the East Africa Rift system allows us to now focus on preparations for the 2016 drilling campaign”.

The deal went through after getting the final nod from the Fair Competition Commission.

On August 5, the company announced that it had received a no objection notice from the Ministry of Energy and Mines to the farm out of 50 per cent of its interests in the Kilosa-Kilombero and Pangani licences to TPL.

With the receipt of consents from the Tanzanian Petroleum Development Corporation, the Tanzanian Revenue Authority and now from the Ministry of Energy and Mines, the company has been awaiting only the FCC consent.
Source: The Guardian, reported from Dar es Salaam, Tanzania
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