Tanzania: Firm Acquires Tanga Gas Block from Bankrupt Owner

Posted on : Friday , 6th November 2015

Canada-based oil and gas issuer Octant Energy Corporation has completed acquisition deals with subsidiary companies of troubled British explorer Afren for three assets in Tanzania and Kenya, the Toronto listed junior said on Monday.

The gas property in the country is an offshore and onshore block in Tanga, which Afren acquired in March 2011 after buying a 74 per cent stake from Petrodel that still has a 26 per cent interest in the project.

The block whose development is currently subject to regulatory approval lies to the south of the two properties Octant has acquired in Kenya, which were 100 per cent owned by Afren.

Afren, which was founded in 2004 as an exploration and production company focused on Africa, has been the first company in the UK to fall victim of slump in oil prices.  The company called in administrators in July after failing to tackle its huge debt pile and stem massive losses.

Most of its production was in Nigeria. Before going under, it had said US$200 million was required for its survival.

Earlier this year, Afren revealed pre-tax losses of US$1.95 billion that largely emanated from a US$900m impairment charge against falling oil prices and the write-off of its Barda Rash reserves in Kurdistan.

The loss compared with a US$140 million profit in the previous year. Revenue fell to US$946 million from US$1.64 billion.

“This portfolio that Octant has secured is pivotal in the future development of Kenya and Tanzania as they further move towards energy security and domestic growth in the countries. For me, being a part of East African growth and development again is a great opportunity and privilege,” chief executive officer Richard Schmitt said.

The Canadian company said the acquisition was important for the development of the assets, as it sees them being taken on by a team with extensive regional knowledge. Schmitt was head of Black Marlin Energy Holdings Limited when it was bought by Afren, which led to acquisition of two assets Octant has bought in Kenya.

In 2010, Afren paid US$101 million for Black Marlin, which held interests in various projects in Kenya, Seychelles, Madagascar, and Ethiopia. Another person Octant banks on to benefit from the three assets is executive chairman Christopher McLean.

Both men have a long term history in the region with experiences going back to the initial acquisition and finance of the current discoveries in Kenya and select assets in Tanzania over the last 7-10 years.

“I am encouraged to be working with assets I know well from my past experiences,” Schmitt added in a statement announcing the development.

According to Proactive Investors Limited, the financial details of the deal have not been disclosed. However, the market intelligence outfit says it is likely the acquisition value will see a significant discount, given that the assets are being picked up in an administrator’s fire sale.

The assets have seen considerable investment since Afren acquired them in 2010, with 3D seismic shot across the acreage. Whilst some data interpretation may be required, to all intents and purposes the acreage is “drill ready”, the UK firm said.

“An injection will be required to take the assets forward – Octant’s most recent accounts show the company had just shy of US$1million at the end of August – though given the team’s strong track record in East Africa the company is expected to find supportive backers,” Proactive Investors added.