Annual General Meeting 31 st January 2018 Swalaoilandgas.com - - PowerPoint PPT Presentation

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Annual General Meeting 31 st January 2018 Swalaoilandgas.com - - PowerPoint PPT Presentation

Annual General Meeting 31 st January 2018 Swalaoilandgas.com Disclaimer This presentation contains forward -looking statements that are subject to risk factors associated with oil, gas and related businesses. It is believed that the expectations


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Annual General Meeting

31st January 2018 Swalaoilandgas.com

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Disclaimer

This presentation contains forward -looking statements that are subject to risk factors associated with oil, gas and related businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including, but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delays or advancements, approvals and cost estimates. All references to dollars, cents or $ in this presentation are to United States currency, unless otherwise stated. References to “Swala” are references to Swala Oil & Gas (Tanzania) plc or its applicable subsidiaries. Unless

  • therwise noted, all references to reserves and resources figures are as at 30 January 2018 and represent Swala’s

share. Any geological, reserves and resources information in this presentation is based on, and fairly represents, information and supporting documentation prepared by, or under the supervision of, Mr. Neil Taylor. Mr. Taylor is an employee of Swala Oil & Gas (Tanzania) plc and has over 30 years of experience in the oil and gas business with internationally renowned E&P companies including British Petroleum (1981-1992) and Woodside Energy (1992-2007). Any geological, reserves and resources information in this presentation has been issued with the prior written consent of Mr. Taylor in the form and context in which it appears.

Page 2 Swalaoilandgas.com

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The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters – Resolutions 12 and 13 Conclusions

Swalaoilandgas.com

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Kilosa-Kilombero Licence (Swala 75%)

Kilosa-Kilombero Location Map

Kilombero basin

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  • Swala is licence operator with 75% equity.
  • Late 2013 identified the Kito Prospect.
  • Late 2014 further work on Kito plus identified a number
  • f other leads and prospects.
  • Late 2015, farmed down to Tata Petrodyne Limited

(“TPL”) for $5.7 million in past costs and a carry through the first exploration well (capped at $2.5 million).

  • If the first well is successful, TPL will pay a further $1

million towards Swala’s costs for a second exploration well.

  • 2016-2017: Prepared to drill but permits not received in

time.

  • Extension to 2019 currently under application.

Swalaoilandgas.com

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Sizeable Prospect with Six Additional Leads

Page 5 Swalaoilandgas.com

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Kito – a significant potential resource

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KILOMBERO BASIN LOW BEST MEDIUM Kito Basal Sandstone 31 mmstb 97 mmstb 293 mmstb Kito Sequence 1 Sandstone 24.2 mmstb 87 mmstb 254 mmstb Kito Shallow 11.2 mmstb 48.8 mmstb 169 mmstb Lead A 3 mmstb 7 mmstb 10 mmstb Lead B 6 mmstb 14 mmstb 20 mmstb Lead D 19.5 mmstb 45.5 mmstb 65 mmstb Lead F 14.4 mmstb 33.6 mmstb 48 mmstb NET TO SWALA LOW BEST MEDIUM Kito Basal Sandstone 18.6 mmstb 58.2 mmstb 175.8 mmstb Kito Sequence 1 Sandstone 14.52 mmstb 52.2 mmstb 152.4 mmstb Kito Shallow 6.72 mmstb 29.28 mmstb 101.4 mmstb Lead A 1.8 mmstb 4.2 mmstb 6 mmstb Lead B 3.6 mmstb 8.4 mmstb 12 mmstb Lead D 11.7 mmstb 27.3 mmstb 39 mmstb Lead F 8.64 mmstb 20.16 mmstb 28.8 mmstb

Swalaoilandgas.com

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The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters – Resolutions 12 and 13 2018 Kilombero Activity Timeline

Swalaoilandgas.com

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The Transaction

  • Swala has right to buy up to 40% of PAE PanAfrican Energy

Corporation (“PAEM”) for up to $130 million.

  • PAEM owns 100% of PanAfrican Energy Tanzania Limited, the
  • perator of the Songo Songo Field.
  • First transaction
  • Acquired 7.93% interest in PAEM;
  • Consideration of $17MM in cash and $3.97MM in Preferred

Shares (subject to shareholder approval).

  • Second transaction
  • Acquisition in tranches to maximise local investment
  • Possibility of acquiring up to 32.07% more of PAEM;
  • Local mezzanine bonds to be listed on the DSE, $50MM

(greenshoe issue) plus Preferred Shares for difference.

Swalaoilandgas.com

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A farm-in to Songo Songo?

Swalaoilandgas.com Page 9

Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS)

100% 100% 100% Other Projects Other Projects 100%

SWALA OIL & GAS (TANZANIA) PLC (TANZANIA)

SWALA (PAEM) LIMITED (UNITED KINGDOM)

PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY)

SONGO SONGO PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) ? LOAN WITH THE IFC A transaction limited to Songo Songo meant that Swala would miss out on potential

  • pportunities being explored within PAET.
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A transaction with PanAfrican Energy Tanzania Ltd?

Swalaoilandgas.com Page 10

Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS)

100% 100% 100% Other Projects Other Projects 100%

SWALA OIL & GAS (TANZANIA) PLC (TANZANIA)

SWALA (PAEM) LIMITED (UNITED KINGDOM)

PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY)

SONGO SONGO PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) ? LOAN WITH THE IFC A transaction with PAET allowed Swala to indirectly benefit from potential opportunities being explored within PAET but raised issues

  • f seniority of debt with the pre-exisiting IFC

facility.

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?

Optimal: a transaction with PAEM

Swalaoilandgas.com Page 11

Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS)

100% 100% 100% Other Projects Other Projects 100%

SWALA OIL & GAS (TANZANIA) PLC (TANZANIA)

SWALA (PAEM) LIMITED (UNITED KINGDOM)

PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY)

SONGO SONGO PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) A transaction with PAEM allowed Swala to indirectly benefit from potential opportunities being explored within PAET and PAEM without any issues of seniority of debt with the pre- exisiting IFC facility in PAET. LOAN WITH THE IFC

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How the Cash Consideration is Structured

Swalaoilandgas.com Page 12

Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS)

100% 100% 92.07% Other Projects Other Projects 100%

SWALA OIL & GAS (TANZANIA) PLC (TANZANIA)

SWALA (PAEM) LIMITED (UNITED KINGDOM)

PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY)

SONGO SONGO PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS)

Tranche 1 – has acquired a 7.93% interest in PAEM: International Funds (144A) Resolution 8 Resolution 15 Tranche 2-3: EAC Mezzanine Bonds Resolution 10 Resolution 11

7.93%

A proportion payable in Preferred Shares subject to Shareholder approval.

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Local participation as a complement to DSE listings

Swalaoilandgas.com Page 13

Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS) 100% 100% Other Projects Other Projects 100% Swala Oil & Gas (Tanzania) plc Swala (PAEM) Limited PANAFRICAN ENERGY TANZANIA LIMITED PAE PANAFRICAN ENERGY CORPORATION Positive and commercial alternative to DSE listings. On completion, Swala (50% locally

  • wned) will own 40% of PAEM,

equivalent to PAEM being 20% locally

  • wned.

100% 100% SONGO SONGO 92.07% 7.93%

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Returning cashflow to Tanzania through local bonds

Swalaoilandgas.com Page 14

Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS)

Other Projects Other Projects 100%

SWALA OIL & GAS (TANZANIA) PLC (TANZANIA)

SWALA (PAEM) LIMITED (UNITED KINGDOM) PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) SONGO SONGO

PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY)

Interest Payments (14.5%, USD-linked)

Positive impact in funds retained in country and on the country’s call on its foreign currency account. Ownership of the bonds results in coupon payments bringing USD back into Tanzania;

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Additional positive impact of local ownership

  • First Joint Venture of this magnitude between a foreign

company and a Tanzanian-listed company in the Oil & Gas Sector;

  • Subject to CMSA and DSE appprovals, bonds to be listed on

the DSE, underlying the parties’ commitment to the development of local capital markets;

  • First USD-linked bonds denominated in TZS shillings. The

USD-linkage provides holders with an inbuilt currency hedge;

  • 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;

  • Potentially increased tax receipts for Tanzania as a result of

repatriation of funds. Swala will pay more taxes as a result of the already-taxed cashflow being repatriated to Tanzania.

Swalaoilandgas.com Page 15

Tanzanian investors on Songo Song Island on a pre-investment due diligence visit.

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The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters – Resolutions 12 and 13 2018 Kilombero Activity Timeline

Swalaoilandgas.com

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Location of the Songo-Songo Field

  • Songo Songo connected to

Songas terminal via 25-km gas line.

  • Connected to Dar es Salaam

through 207km 36” gas line.

Page 17 Swalaoilandgas.com

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The Songo Songo gas to power project

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1991 PAET agreement with GoT and TPDC to evaluate economic feasibility of Songo Songo 1992 World Bank involvement. 1994 Formal negotiations begin. 1996 MoF calls in Economic and Legal Advisory Services Unit of Commonwealth Secretariat (ELAS) for independent review of project

  • agreements. (1997: ELAS reports that

the deal is on balance fair to Tanzania and the investors). 2001 Project agreements signed. 2004 First shipment of gas.

Swalaoilandgas.com

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Significant benefits to Government of Tanzania

TPDC TPDC, PAET and the GoT under Production Sharing Agreement Industrials

Government of Tanzania (41.24%) UK (37.80%) Norway (16.20%) BancABC (4.76%) GoT (76%) (taxes, royalties and profit- sharing) Investor (24%)

PROTECTED GAS ADDITIONAL GAS

Swalaoilandgas.com

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  • Ca. 90% of Project value has gone to GoT (end 2017)

Page 20 Swalaoilandgas.com

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Significant additional economic benefits

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  • An estimated $5.0 billion saved by replacing Heavy Fuel

Oil with gas.

  • Power, with the lowest cost Independent Power
  • Producer. “Songas is clearly the least-cost privately-
  • wned supply option in Tanzania.” World Bank Report.
  • Provision of energy for industry – a crucial part of the

Industrialisation Plan and employing an estimated 10,000 Tanzanians. $2.7MM (5% of PAET profits) into local CSR: Early childhood development, Songo Songo Island primary/secondary schools scholarships, English Language Learning centre, Health and Sports…

Swalaoilandgas.com

Significant CSR $5 billion economic rent

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Developing downstream gas markets

  • PanAfrican has financed and built a low pressure gas

distribution network around Dar es Salaam (in excess of 50 kms).

  • Diversified customer base (37 customers including power

plants, textiles, beverages and glass).

  • Prices to the industrial customers are generally set by

reference to Platts HFO Arab Gulf (24-29% discount).

  • PanAfrican commenced the sale of CNG for use by hotels,

industries and vehicles at the end of 2009 – slow growing but high value market.

  • Aim to grow the industrial sales market.

Investment in PAEM offers Swala aligned access to these

  • pportunities.

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The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters – Resolutions 12 and 13 2018 Kilombero Activity Timeline

Swalaoilandgas.com

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Songo Songo Reserves and Resources

End of Licence Net indirect SOGTL (40%.) $/mcf 1P 146 bcf 0.48 2P 166 bcf 0.42 3P 183 bcf 0.38 Songo Songo W. Net indirect SOGTL (40%) P90 21 bcf P50 140 bcf P10 256 bcf To end of Field Net indirect SOGTL (40% ) 1P 111 bcf 2P 141 bcf 3P 175 bcf

Source: McDaniels and Associates Consultants Limited

Page 24 Swalaoilandgas.com

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NNGIP opens up additional export

Page 25 Swalaoilandgas.com TEGETA UBUNGO KINYEREZI SOMANGAFUNGU MW100 MW112 MW990 (in 4 phases) MW520 (in 2 phases) MNAZI BAY SONGO SONGO SONGAS MW178

  • 36” Pipeline Mnazi Bay to Dar

es Salaam financed by China Exim Bank.

  • The NNGIP has capacity of 785

MMscfd – currently running at less than 10% capacity.

Modified, after TPDC.

2 x 70 mmscfd processing plants at Songo Songo (140 mmscfd) 105 mmscfd 3 x 70 mmscfd processing plants at Mnazi Bay (210 mmscfd)

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Gross Field Production and Customers

Future 1P production profile (Swala Estimates).

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NNGIP Capacity

Swalaoilandgas.com

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Gross Field Production, TPDC and PAET

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NNGIP Capacity

Swalaoilandgas.com

Future 1P production profile (Swala Estimates).

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Gross Field Production with indirect Swala benefit

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NNGIP Capacity

Swalaoilandgas.com

Future 1P production profile (Swala Estimates).

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Capacity to supply growing industrial demand for gas

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NNGIP Capacity

Swalaoilandgas.com

Future 1P production profile (Swala Estimates).

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The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters – Resolutions 12 and 13 2018 Kilombero Activity Timeline

Swalaoilandgas.com

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Stocks respond to events in liquid markets

Aminex Plc – 2.9bn shares traded.

Page 31 Swalaoilandgas.com

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The DSE is still an illiquid market

Swala– < 20,000 shares traded.

Page 32 Swalaoilandgas.com

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Illiquidity is not helped by pre-emption rights

JAN FEB MAR APR MAY JUN JUL AUG SEP

Prepare prospectus Reporting Accountants Report and Legal Due Diligence First offer to Shareholders under pre-emption rights Second offer to Shareholders under pre-emption rights The pre-emption process can easily add another four- five months to any fund-raising process – this is inefficient and endangers the Company if it cannot respond promptly to cash requirements. Update prospectus Reporting Accountants Report and Legal Due Diligence updated PROCESS STARTED OFFER OPEN TO NEW SHAREHOLDERS Swalaoilandgas.com Page 33

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Resolutions 12 and 13

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Resolution 12: To approve the Company’s dual listing on an OECD Exchange.

  • We need liquidity, and we need access to funds;
  • Does not move the primary listing from the DSE but opens a secondary listing elsewhere;
  • Potentially London, with the benefit of broad O&G peer group;
  • Timing to be discussed but aim for listing in 3Q 2018.

Resolution 13: To disapply the pre-emption rights associated with the issuance of new shares.

  • The delay and costs incurred by setting up pre-emption have to be weighed against market liquidity;
  • Propose to disapply pre-emption rights BUT to retain an obligation to make any public offer of shares available for participation to

current shareholders (e.g. as part of a listing, or any subsequent equity raise) to the extent that is practicable within the timeframes;

  • This applies from the 2017 AGM to the 2018 AGM, at which time the resolution shall expire and shall be re-submitted to shareholders

for consideration. Swalaoilandgas.com

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The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters – Resolutions 12 and 13 2018 Kilombero Activity Timeline

Swalaoilandgas.com

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2018 Kilombero Activity Timeline

Page 36 Swalaoilandgas.com

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Rig LOI Contracts in place Mobilisation Drill

Licence extension due

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Swala Oil & Gas (Tanzania) plc David Mestres Ridge (CEO) david.mestres@swalaoilandgas.com www.swalaoilandgas.com

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THANK YOU FOR LISTENING

Swalaoilandgas.com