It seems to me that KEY are being too hasty with their announced intention to exit Tanzania. Indications are that there is growing interest in the area so why sell now when we could wait a bit longer and potentially become a producer in Tz, or barring that, get a better price for our assets in a proven area.
Thanks again to our friends over at stockopedia for finding this article:
East Africa sees momentum for more oil and gas sector deals By Paulina Lichwa in London
Recent activity in East Africa could spur further interest for newcomers and existing oil operators to increase their position in the region, according to sector players and participants interviewed by mergermarket.
Alongside further farm-in agreements, M&A is also likely, with companies like Orca Exploration [ORC/B:CN], Aminex [AEX:ID], Cove Energy [COV:LN], Dominion Petroleum [DPL:LN] and other Toronto, London and Australia-listed businesses seen as good acquisition targets. Some groups with an East African presence that could also be targets include Centric Energy [CTE:CN] and Lion Energy [LEO:CN], a sector analyst said.
Cairn Energy [CNE:LN], Premier Oil [PMO:LN] and Tullow Oil [TLW:LN] are rumored to be actively pursing acreage in the region at present, added a banker.
Sector majors and independents like BG Group, Statoil, ExxonMobil, Petronas, Anadarko, Africa Oil Corporation, Shell, ENI and Beach Energy (which itself could prove an attractive target) and several Asian oil companies could also look to increase their investments in the region, either acquisitively or through farm-ins, sector participants added.
Proven discoveries encourage new investments
East Africa is still seen to be a region significantly underdeveloped in oil and gas activities, compared to the Western part of the continent, an ex-Total sector executive acquainted with the region explained. However, the past success stories in the region are encouraging sector players to snap up assets and establish their positions, he added.
According to W. David Lyons, the chairman and chief executive of listed Orca Exploration, which has gas assets in Tanzania, the past 18 months have been especially active for regional investments.
Tullow Oils acquisition of Heritage Oils assets in partnership with CNOOC and Total in Uganda for some GBP 1.5bn (EUR 1.8bn) has become the price guideline for assets in the region, a UK-based sector analyst said. Also, successful drilling campaigns in the region, like the one by Anadarko in Mozambique, are encouraging investors to make further investments.
Anadarko this February announced the results of its first deepwater discovery offshore Mozambique, which industry sources said could be a multi-billion TCF discovery.
Anadarkos discovery is understood to have attracted BG Group to make its first big move in the region. BG has farmed into the assets of Ophir Energy in Tanzania, which are based southeast from Anadarkos Windjammer discovery. BG is planning its first exploration in the region towards the end of this year, its spokesperson told this news service.
Two other Tanzania-based players, Aminex and Orca Exploration, are also seen as attractive takeover targets in the short-to medium term. Again, both companies have neighboring assets.
Orcas CEO told this news service the company is hoping to double its size on the back of a drilling campaign planned for summer of next year.
Orca Exploration, which says it is the only gas producing company in Tanzania so far (it has been present in the country for 15 years and in production for six years), currently has 1,236 Bcf in Proved and Probable (2P) Gas Initially in Place in the Sogo Sogo project, with remaining recoverable 2P reserves of 689 Bcf, according to the companys website. The CEO said that every one out of two drilled wells in the region could be successful. The company is currently has a market cap of CAD 123.9m (EUR 95.4m). The analyst following said the company is undervalued at present, as the markets are not giving it credit for the exploration assets.
Orca could be a logical target for businesses seeking easy access to the region, a sector banker said. However, with the CEO holding more than a 25% stake, this would be a natural obstacle to any deal.
Aminex was also pointed out by two bankers as a potential target. UK and Irish-listed Aminex has a current market cap in the range of GBP 30.95m, with a share price of around 7.50p. Its brokerages equity house, however, said the companys net asset value would be reflected in a 26p per share price.
In the next year, the company might need to look to raise funds for the development of its Ruvuma license in Tanzania, it was said. A farm-out agreement could be a logical option, it was added. The company could not be reached for an immediate comment.
I think every single one of the majors that has already some acreage there [in East Africa] is looking for more opportunities to invest, said the first banker.
Dominion Petroleum, with assets in Central and Eastern Africa, was rumored in the press to be a takeover target for one of the majors given its relatively low share price. The companys current market cap stands at GBP 90.3m.
Cove Energy, with assets in Mozambique, was also mentioned as a takeover target by this news service in December last year. A banker close to the company said that it is just a matter of time and money for this deal to happen, claiming that as a junior, Cove could listen to good offers. The company has a GBP 199.8m market cap.
Still a risky play in an infrastructure game
However, as with any situation with big upsides, the risk associated with them is also high. People will be drilling dry holes there and it is especially difficult to drill in a region with very little data, said a second UK-based analyst.
Security and political risks on the east side of the continent are different than on the western part of Africa, but the major issues for the oil and gas companies in the region also include poor infrastructure and a lack of available rigs. That means that you might have issues to quickly monetise on your discovery, the second analyst continued.
You obviously have to take into consideration the history of the region. Mozambique was very poor in infrastructure but in Tanzania especially, you have already a lot of mining activities, especially in the north of the country, said a mining advisor. With majors like Barrick, the listed gold miner, the infrastructure there is a bit better, the advisor claimed.
Tullow and its partners are planning a pipeline to commercialize the Ugandan discovery, as reported.
Finally, Afren, the UK-listed Nigerian company, has shown its belief in the region, recently acquiring Toronto-listed Black Marlin Energy Holdings in a GBP 56m deal, said an analyst and the second banker.
I think this transaction shows that banks want to take this higher exploratory risk, a person that worked on the Afren transaction said.
Mozambique, Tanzania, Uganda, Kenya as well as Ethiopia are among the countries which should be increasing more developed over the next three to four years, the second analyst concluded.
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