Breaking new ground – Private Equity News
Acquisition and merger deals sweep Kenya’s oil industry (The East African, 3 August 2013)
Kenya’s recent successes in oil exploration are triggering a new round of mergers and acquisitions in the lucrative but high-risk business as the new finds reshape company strategies. Junior exploration firms — companies that do exploration in the hope that a positive find will tempt shareholders to invest more in them or make them an acquisition target — are expected to become prime targets for multinationals seeking a foothold in the country before commercial production of crude oil and natural gas starts.
Over the past three months, at least four deals have been closed and another three are expected in the coming months, making this the busiest year in Kenya’s exploration business.
The country’s risk profile has been greatly reduced by last week’s announcement by Tullow Oil and partner Africa Oil that their find was commercially viable as well as the discovery of gas by Apache Corporation in offshore exploration area L 8 in September last year. Tullow estimates it has discovered about 300 million barrels of oil.
Elsewhere in Kenya, in the Anza Basin in Block 10A, the Paipai-1 well was drilled in March and encountered light hydrocarbon shows while drilling. The well has been suspended and will be tested in the future.
Interest in offshore exploration in Kenya is likely to be raised as Anadarko Petroleum Corporation has high expectations of making a discovery in the Kiboko well being drilled in exploration area L11B in the Lamu basin.
The discoveries confirm the existence of hydrocarbon deposits and offer a deeper understanding of the region’s geological features as well as reducing the risks of hitting dry wells by multinationals.
“A new wave of mergers and acquisitions is in the offing as relatively smaller explorers with large acreage in Kenya are becoming targets for financially well-endowed firms. They have to sell part of their exploration rights to raise funds to expedite well drilling to comply with work programmes agreed upon with the Ministry of Energy,” said Robert Shisoka, a consultant at Hydrocarbons Management Ltd.
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