Swalas Response

SWALA ISSUES
OTTO WITH NOTICE
OF WITHDRAWAL
29 March 2017
Swala Oil & Gas (Tanzania) plc (“Swala” or “the Company”) advises that it has exercised its option under the Kilosa-Kilombero Joint Operating Agreement (the “JOA”) to require Otto Energy (Tanzania) Pty Ltd (“Otto”) to withdraw from the JOA and the Kilosa-Kilombero production Sharing Agreement (the “PSA”).
Otto’s Participating Interest is to be apportioned between the remaining parties to the JOA not in default in proportion to their current Participating Interests. As the other co-venturer , Tata Petrodyne Limited, remains in default the new Participating Interests effective from the 26^th March 2017 are
:Swala Oil & Gas (Tanzania) plc
75% and Operator
Tata Petrodyne Limited
25%
In accordance with the provisions of the JOA Otto remains liable for the costs of transferring its Participating Interest and for its Participating Interest share of the Kito-1 exploration drilling programme
(estimated at US$5.5 million net to Otto) , together with accrued defaults of US$0.4 million
.
With the Kito well, scheduled for drilling in 3Q 2017, targeting best contingent resources net to Swala of a combined 110
mmbbls over two distinct horizons.
Dr. David Mestres Ridge (Swala CEO), said: “Notwithstanding Swala's efforts during 2016, Otto has steadfastly refused to fulfil
its obligations under the JOA and to pay the sums it owed in order to remain on the Kilosa-Kilombero licence. Regrettably, but in the best interests of the Joint Venture and to ensure the successful drilling programme scheduled for 2017, Swala was forced to exercise its option to require Otto to withdraw from the JOA and the PSA on the 26th March 2017. On the 28th March 2017, Otto issued Swala with a Dispute Notice, under which a Dispute Resolution mechanism that starts with a meeting of Senior Executives is invoked. Swala considers the content of the Dispute Notice to be inapplicable and premature under the JOA, and shall not engage in further public discussion of this matter. Whilst this dispute is clarified the Joint Venture shall continue working with the Tanzania Petroleum Development Corporation and the Government of Tanzania to complete the Kito-1 drilling as planned in 3Q 2017."

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