'Double digit' companies interested in farm-in

Hi all, I found this interview with DMR from 19th of March. The original article can be found here: http://www.tanzaniatoday.co.tz/news/swala-seeks-partners-to-fund-drilling-stage-in-search-for-oil. I've highlighted some of the parts that I think are particularly interesting.

What are the plans for the licences you operate in Tanzania?
ANSWER: We will be farming down both Pangani and Kilosa-Kilombero licences and the process is being run by the UK-based First Energy, a brokerage company with experience in energy deals. We have about double digit companies interested to come-in. By the end of March, we hope the process will finish and then we will know who the potential partners are.
We will also see whether we farm down both licences or one licence to cover our drilling costs.

What does ‘farming down’ mean exactly?
ANSWER: Farming down is where you trade some equity in your project for funding. It’s an alternative way of raising money by selling shares. Farming down allows you to retain position in the assets and at the same time allows someone else to come in and pay for your costs.
It is important to note that we are doing this to reduce the risk associated with drilling cost, that’s why people farm down.

I’m aware that Swala owns 50 per cent in each of the two licences. How much shareholding are you going to retain if the process ends successfully?
ANSWER: We are still working on the basis but at the end of it we will retain 25 per cent. You have to be very careful when you have an asset to ensure that you don’t go down to a so low level that people start to question whether you want to stay or not. If you have say five per cent, people will question that way. So, we consider 25 per cent because it is a balance between staying in the assets and being too exposed to the costs and risks.

For shareholders at Swala, how does it matter to them? Is it a strategic decision?
ANSWER: First of all, farming down doesn’t dilute the shareholders. It has actually better values for investors than raising equity. You have seen share price movement over the last year at disallowed and if you go to the market and try to raise some equity, it will involve some levels of dilution. However, farming down does it without dilution.

There are reports that some oil projects are being cancelled following fears created by the drop of oil prices in the world market while you are also involved in oil exploration. Will this affect your plans?
ANSWER: This cycle in oil prices is quite normal. I remember in 1999 when I was working for Total, the oil price was $9 per barrel and one media described the situation as the end of oil. It then slowly recovered to $30 and later on shot up to $180.

Cheers