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Tuesday, March 11, 2014
Swala Energy has signed a binding agreement to farm out a 25% working interest in Block 12B in Kenya with an unnamed “international integrated oil and gas firm.” The deal gives Swala a free carry through two exploration wells.
The principal terms of the farm-out agreement are that the farmee will pay Swala’s past costs and pay all of Swala’s costs associated with the planned 350 km 2D seismic survey up to a cap of $2.7 million. It also calls for the farmee to pay all of Swala’s costs associated with the drilling of a first exploration well up to a cap of $7.5 million, subject to positive results from the 12B seismic survey. It will give Swala a free carry through the second well, subject to positive results from the first well.
Swala’s new partner will also pay all of its costs associated with any work program agreed to by a majority vote under the 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% net working interest in Block 12B, the farmee will own a 25% net working interest and Tullow Oil will hold a 50% net working interest and continue to act as the operator.
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. This will allow the company to focus its energies and resources on existing
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