An Australian exploration firm that is prospecting for oil in Nyanza has opened to Kenyan investors its initial public offering (IPO), which is set to be floated on the Dar-es-Salaam Stock Exchange.
Swala Energy has said the IPO, which targets to raise between $2 million (Sh172 million) to $3 million (Sh258 million), will open in March.
The Australian firm will be selling a stake in Swala Oil & Gas (Tanzania) Limited on the Dar exchange.
Chief executive David Mestres Ridge said Swala Energy’s IPO will be open to Kenyans and other investors from the East Africa Community (EAC) region but added that finer details will be known once the prospectus is out.
“It is (open to) Tanzania and the rest of the EAC, but with Tanzanian precedence,” Dr Ridge told the Business Daily.
The prospectus is awaiting final approval from the Capital Markets and Securities Authority (CMSA), the industry regulator in Tanzania.
Zan Securities Ltd, a Tanzanian broker that is part of the transaction team, said that it had chosen Kingdom Securities, Co-operative Bank’s subsidiary as its local partner for the upcoming IPO.
Kingdom Securities said that there is already some interest but it expects momentum to build up once the CMSA gives the go-ahead.
“There have been enquiries about the issue i.e. size, amount and about the company Swala. Once we receive all the information and approvals are issued we will approach prospective investors on this end to try and marshal support,” said Kingdom Securities head of international business and research Henry Nyoike.
Swala is selling a stake in its subsidiary Swala Oil & Gas Tanzania (SOGT) Limited in which it has a 65.13 per cent stake.
Swala Trust has a 9.3 per cent stake, Erncon Holdings (9.83 per cent) while other shareholders own the remaining 15.73 per cent stake. The firm has said that the IPO is meant to raise cash to improve its working capital, buy more exploration licences and to carry out seismic surveys, which are needed to identify the best spots to drill wells.
These activities are planned for this year both in Tanzania and in Kenya where it owns a 50 per cent interest in Block 12B located in Nyanza. The other half belongs to UK-based Tullow Oil.
Petroleum analysts say that IPOs, rights issues and selling of stakes to other firms is expected at the exploration stage since banks do not lend at this stage due to the high levels of risk involved.
Analysts, however, add that they expect more capital raising and interest to come from larger firms who are showing interest after recent discoveries in the region.
“We expect a heightened level of interest from large independents to super majors trying to get a foothold into this region given the exceptional results to date. Not surprisingly, we understand there to be interest in Swala Energy’s Block 12B, however, note that post the recent placement, Swala Energy are fully funded to cover their share of seismic costs,” said a note on Swala by Foster Stockbroking of Australia.
Tullow Oil has drilled seven successive oil wells that have shown that Kenya could have as much as $1 billion barrels.
Tullow’s findings have given other firms confidence to speed up exploration in the region.
Camac Energy, a Houston-based explorer, said that it will use a part of the $270 million (Sh23 billion) it raised through a private placement to carry out seismic surveys on four blocks it owns in the Lamu Basin.
“Camac intends to quicken the initial tests in an effort to start test exploration following successful discovery of commercial oil deposits by UK-based Tullow Oil,” said the firm.