SWALA FARMS OUT 25% OF LICENCE INTERESTS TO TATA PETRODYNE LIMITED
Swala Oil and Gas (Tanzania) Plc ("Swala" or "the Company") is pleased to announce that it has reached agreement with Tata Petrodyne Limited ("TPL"), a subsidiary of the multinational Tata Sons Limited, under which TPL shall farm into the Pangani and Kilosa-Kilombero licences in Tanzania. This allows Swala to remain committed to these licences and to secure funding for future exploration activities in a way that minimises the risk to its current shareholders.
Tata Sons Limited is the promoter of the major operating Tata companies and holds significant shareholdings in these companies, commonly referred to as the Tata Group. The Tata Group has a market capitalisation of approximately US$110 billion and represents over 8% of the total market capitalisation of the Bombay Stock Exchange.
In the oil and gas industry, a farm-out agreement is an agreement entered into by the owner of one or more licences (who ‘farms out’) and another company that wishes to acquire a percentage of ownership of that licence in exchange for providing services (and ‘farms in´). A farm-out agreement differs from a conventional transaction between two oil and gas lessees, because the primary consideration is the rendering of services, rather than the simple exchange of money.
The terms of the agreement with TPL:
On receipt of governmental approvals for the transfer of interest TPL will pay Swala the sum of US$5.7 million for a 25% equity interest in the Kilosa-Kilombero licence and a 25% equity interest in the Pangani licence as consideration towards the past costs incurred on the licences;
TPL will free carry Swala through the costs of the initial well on the Kilosa-Kilombero licence, up to a maximum of US$2.5 million (Swala estimates the gross cost of the well to be US$10.0 million);
TPL will free carry Swala through the costs of the initial well on the Pangani licence, up to a maximum of US$2.125 million (Swala estimates the gross cost of the well to be US$8.5 million); and
TPL will pay Swala up to a further US$1.0 million towards the cost of a second well following a commercial discovery in the initial well on the Kilosa-Kilombero licence. Costs incurred above this sum shall be shared by the partners in proportion to their equity.
Further details can be obtained through the link below