Swala Oil and Gas (Tanzania) Plc has resolved to buy 40% of PAE PanAfrican Energy Corporation (PAEM) for up to $130 million.
The deal is for its subsidiary Swala (PAEM) Limited (SPL) which shareholders approved to buy the Orca Exploration Group Inc. (Orca ) wholly owned Mauritius subsidiary, PAE PanAfrican Energy Corporation (PAEM).
This is the very first joint venture of this magnitude between a foreign company and a Tanzanian listed company in the Oil & Gas Sector;
The resolution was issued following deliberations after the company’s Annual General Meeting 2018 held at the end of January.
PAEM owns 100% of PanAfrican Energy Tanzania Limited, the operator of the Songo Songo Field.
The deal spells lucrative prospects for Tanzanian shareholders and the country as a whole. As part of regulations of the Dar es Salaam Stock Exchange (DSE), a listed company must have part local ownership.
In this regard, Swala is 50% locally owned and so when the deal is complete, it will own 40% of PAEM which is equivalent to PAEM being 20% locally owned.
To close the deal, Swala proposes a two-step approach. In the first Transaction, it will acquired 7.93% interest in PAEM. $17m will be paid in cash and $3.97m in Preferred Shares on the DSE.
The second transaction Swala acquire up to 32.07% more of PAEM which will be done in tranches to maximize local investment.
In the second part of the transaction, the deal is to be sweetened with listing of preferred shares along with $50m worth of local mezzanine bonds been listed on the DSE as a greenshoe issue.
Positive impact
- Due to the local ownership of Swala, then a significant amount of funds will be retained in the country.
- Subject to Capital Markets and Securities Authority (CMSA) and DSE approvals, bonds to be listed on the DSE. Ownership of the bonds results in coupon payments that will bring much needed US dollars back into Tanzania.
- Listing of the bonds shows Swala’s commitment to the development of local capital markets.
- This is the first time that the Tanzanian pension and investment funds are invited to participate alongside international investors in these opportunities, allowing them to diversify their investments.
- Then there is the potential increase in tax receipts for Tanzania as a result of repatriation of funds.
A Lucrative Future
Swala is the first oil and gas company with a significant local ownership (50%) to be listed on an East African Stock Exchange.
Swala holds assets in the world class East African Rift System with a total net land package in excess of 14,000 km2 and a 7.93% interest in PAE PanAfrican Energy Corporation.
New discoveries have been announced by other industry participants in a number of licences along this trend that extends the multi-billion-barrel Albert Graben play (Lake Albert basin) into the eastern arm of the rift.
As such, Swala has an active operational and business development programme to continue to grow its presence in the hydrocarbon provinces of East Africa and globally
