American oil company sells stake in Kenya’s block in a bid to slash costs
An oil exploration site in Nakukulas village in Turkana County, Kenya on July 13, 2014. Lack of oversight and transparency are also likely to fuel conflict as competing forces seek to control the lucrative, but highly opaque Somalia's oil and gas sector. PHOTO | FILE
What you need to know:
- The firm said the plan would enable it to minimise risks and cut costs ahead of drilling of its first well in the first quarter of next year.
- A farm-down is a practice where a licensed explorer, having struck oil or gas, sells a share in its rights over the find to other firms to share investment cost.
An American company has appointed a transaction adviser in the sale of part of its interest in Kenya’s block 11A in order to cut costs.
The exploration firm, ERHC Energy has appointed Deloitte Corporate Finance LLC to guide in its sale of the block in northern Kenya.
The firm said the plan would enable it to minimise risks and cut costs ahead of drilling of its first well in the first quarter of next year.
“We continue to work with Deloitte Corporate Finance LLC on a further farm-down of our interest in the block,” said ERHC’s president and chief executive officer Peter Ntephe in a statement.
STRUCTURAL LEADS
A farm-down is a practice where a licensed explorer, having struck oil or gas, sells a share in its rights over the find to other firms to share investment cost.
The company currently holds a 35 per cent interest in the block, which is operated by CEPSA, an entity owned by Abu Dhabi’s sovereign wealth fund with a 55 per cent interest.
The firms recently completed data acquisition on the block where they reported encountering “more than a dozen structural leads” that will help in drilling and determination of the location of the first well.
The planned farm-down comes at a time when a number of international oil and gas firms operating in Kenya have announced plans to slash their exploration budgets as the impact of falling crude oil prices takes its toll on revenues.
Last month, Swala Energy of Australia said it was considering a farm-down on its assets in three countries including Kenya to raise cash to fund exploration and drilling.
Swala Energy is licensed to explore for oil and gas on block 12B in Kisumu, which it estimates could be having crude deposits amounting to 22 million barrels.
