far assets in east is worth more

Pancontinental Expects Higher Price for Kenya Stake on Gas Find

Sept. 13 (Bloomberg) -- Pancontinental Oil & Gas NL, an Australian explorer focused on East Africa, said it plans to sell a stake in one of its Kenyan blocks by early next year and is discussing a partnership with several companies.

A natural gas discovery at an adjacent field, announced by Pancontinental and its partners three days ago, may make its interest in Kenya’s L6 block more valuable, Chief Executive Officer Barry Rushworth said in a phone interview from the U.K. Perth-based Pancontinental owns 40 percent of the L6 block in the Lamu Basin off Kenya, while FAR Ltd. holds the remainder.

“We’ve made a discovery, and we’d expect a better price now that a hydrocarbon system has been proven,” Rushworth said yesterday. “We’re talking to some companies who are looking at it seriously. There’s quite a lot of competition for acreage, and the big companies are jockeying for position.”

Apache Corp., Tullow Oil Plc, Origin Energy Ltd. and Pancontinental discovered the first natural gas off Kenya at a well in block L8, the companies said Sept. 10. That adds to discoveries in East Africa, which has become one of the most active exploration areas since Anadarko Petroleum Corp. and Eni SpA made the decade’s biggest gas find off Mozambique.

While Pancontinental surged 91 percent in Sydney after the discovery was reported, the shares tumbled 47 percent yesterday as the companies said that they failed to find oil and gas at a deeper, secondary target in the L8 block. Some investors may have misinterpreted the results, Pancontinental’s CEO said.

More Work

“It would be very rare to prove commerciality with a first discovery well,” Rushworth said. “There’s still plenty of work to do. We’ve really just started to scratch the surface of Kenya, and this is a great first effort.”

Kenyan Energy Minister Kiraitu Murungi told reporters in Nairobi earlier this week that the amount of gas that was found isn’t sufficient itself to be considered commercial.

The partners may drill another well in L8 next year, depending on the availability of a rig, said Rushworth, whose company holds 15 percent of that license. The Mbawa-1 well off Kenya encountered 52 net meters (171 feet) of gas after drilling 2,553 meters down, the companies said Sept. 10.

Pancontinental, which also has oil and gas holdings in Namibia and Australia and about A$47 million ($49 million) in cash, is considering listing its shares in London or Toronto as well as Sydney, Rushworth said. The company hasn’t made a decision on whether to go ahead with a dual listing, he said.

The Australian company rose as much as 8 percent today to 13.5 cents as of 10:36 a.m. Sydney time.