Our SP is in upward trend lately and poised to move up further as we await further positive news. What have we achieved so far ? What are the Pros and Cons of investing with Swala ?
* 12-B Farmout to CEPSA
After a little longer than expected wait, we finally know our mystery partner in 12B, CEPSA who are going to pay back all of Swala's past costs, sponsor Swala's share of costs for 2-D seismic and two optional wells. This deal is one of the best any Junior Oil & Gas explorers can hope for as it de-risks the financial exposure of Swala and we get to LOSE NOTHING on Failure and GAIN EVERYTHING on Success. Agreed, it is optional wells but if CEPSA do not participate they lose 25% interest and Swala gets back the W.I to 50% and can work out on other options. Future looks indeed very bright for Swala in 12B as we now have Technically superior Tullow and Financially strong CEPSA to support us. Do not forget, Swala had 100% ownership of 12B before Tullow farmed-in for 50% along with Operator-ship and CEPSA joined us for further 25% farm-in covering us financially. Picking up the future hot-spots of Oil exploration has been one of the greatest strengths of Swala Team and I believe, the same would happen in future with Zambia and Tanzania. CEPSA are financially very strong and have a political background as it is 100% owned by Abu-Dhabi Government sponsored IPIC. Now, we have hot-spot area for Oil and Gas exploration, an Operator who has been very successful in EARS region (Tullow) and a partner (CEPSA) who is going to fund all of our past and future costs but some of us still complain. IMO, it is a COMPANY MAKING deal and a major milestone for Swala
* Block 44 Award in Zambia
New country entry has been one of the objectives of Swala and with award of Block 44 in Zambia, we have expanded our land holdings and most importantly in hot-spot of EARS. With 83.18% W.I and Operator-ship, I believe we will have good farm-out in future
* 2-D Seismic in Tanzania and Kenya
It had been a very successful 2-D seismic campaign so far though all results are preliminary. A brief of our 2-D seismic results,
Kilosa Basin:
Possible presence of large-scale structures along the edges of the basin. Sedimentary fill potentially reaching 10,000m in places.
Kidatu Basin:
Preliminary processed data indicate the presence of large-scale structures along the edges of the basin together with a major intra-basin high identified on dip and strike lines. The structure may be as large as 30 to 60 square kilometres.
Kilombero Basin:
Initial results show a large structural high adjacent to the basin bounding fault that extends over a distance of 9km and is about 4km wide. Initial results also suggest the presence of a thick, Neogene-age basin with a maximum depth to basement in excess of 3,000m. The age of the sediments recorded (based on low seismic velocities) appears to be similar to that of sediments observed in the now proven oil basins of Lokichar (Kenya) and Lake Albert (Uganda). Dip lines across the basin suggest the presence of both structural traps and traps against the main basin-bounding fault with possible Direct Hydrocarbon Indicators (DHIs or "Flat Spots") observed at several levels at the crest.
Moshi Basin:
Seismic survey suggests that the basin is fault-bounded, some 25km wide, and with basin fill of between 2,000 and 3,000m. Basin fill of this magnitude is encouraging for hydrocarbon generation from any source rocks present, given the high heat flows in the area.
Mvungwe Basin:
Initial results suggest that the basin is shallower, at less than 1,000m deep, and contains sediments of probable Neogene age. Shallow basins such as this may be quite productive with the right heat flows (the Pakwach basin in Uganda's Lake Albert, where six discoveries have been made to date, has a depth of some 900m)
12B:
Presence of large-scale faulted structures across the entire basin, together with the presence of shallow volcanics, a feature of the East African Rift System. Initial result suggests Neogene basin with possible 3,000 metres of sedimentary fill.
What excites me more is the possibility of 4 Neogene basins out of 6 basins processed for 2-D seismic. Neogene deposits are significant for many reasons and is simply explained by our CEO as below,
Below are the strengths of Swala that I believe would lay the foundation for us to be OIL Producers of Future,
--> Basins in hot-spot exploration area of EARS with excellent initial 2-D seismic results and very good partners (Tullow, Otto and CEPSA)
--> Four potential Neogene basins out of 6 basins processed for 2-D seismic
--> Management Team who have proved their worth in the past in value creation for Shareholders and ticking all the boxes they have committed in IPO
--> Management Team holds significant % of the shares and is one of the key reasons to believe in the team as they believe in Future of the Company
--> Kito prospect with 12.5/39.3/110.5 mmstb (net to Swala) on Low/Best/High estimates
--> Kilombero basin is believed to be analogue to Lokichar basin and Albert Graben and initial seismic results resemble the proven oil basins in EARS
--> Management and Technical Team believe, they have better prospective structures than Kito in Kilombero basin
--> Block 44 award in Zambia
--> Financially de-risked with major UPSIDE potential in 12B
--> Possible 3 drills in late 2015 (one each in 12B, Kilombero and Pangani basins)
--> All our land holdings are ONSHORE basins and one of the major advantages Swala hold over its peers
* DOWNs:
When there are UPs there will be DOWNs and such is everything in Life. Swala has its own risks and below are some that I see,
--> Though, we are financially covered in 12B, we need to spend more in Tanzania and Zambia for 2-D seismic and possible drill next year. We have 32.5% W.I in K-K & Pangani and will further reduce (~26%), if Tanzanian Government elects to participate (20% interest). It would be difficult to farm-out as we have very less W.I and Operator-ship and we would need more money to progress in Tanzania. Agreed, less W.I would mean less costs, but still it would take multi-millions for seismic and drilling. We might have to raise CR or farm-out 10-15% W.I when we near our drill
--> Swala went back to below 20c when escrowed shares were released to the Market (~21.5 million shares). We have ~ 45.3 million shares to be escrowed in April 2015. I believe we would have a pull back in SP when we near escrow shares next year, but by how much only time will tell
--> Major let down in Eyasi started the down trend in SP and still hurts some LT holders. Though, we are let down by JV at the last moment, Management team could have been more proactive and averted the situation. It is a good wake-up call to the Management team and hopefully, we would resolve the issues with TPDC and land Eyasi license with trust-worthy JV partner in future
--> Exploration always comes with financial risk and Swala are no exception to it. We do not have any Proven resources yet and are not financially strong. We would need to be successful in our drilling campaign if we are to Thrive in Future. If we fail, more CRs and more dilution which could hurt SP on long term
--> Political risks associated in dealing with Government Officials and Governing bodies of Tanzania, Kenya and Zambia
* Personal Opinion:
I have invested in Swala because I truly believe in future of the company and IMO, Swala are one of the most exciting Junior Oil & Gas explorers listed in ASX. Considering the land acreages we hold Vs Financial risk, I believe it is worth investing and with little luck in drilling campaign and success in even one of our 3 drills, we could fly high and de-risk ourselves financially with any commercial Oil discovery. I am here for LT and not worried about UPs and DOWNs in SP as true value of Swala will be realised when we near our drilling. We have many positive news in the near future for SP appreciation and may have some more random surprises. I have a dream about future of Swala that could change our Lives forever and hope Management makes it happen (some dreams do come true). Good luck to all and these are my opinions only, please DYOR.!
SWE Price at posting:
28.0¢ Sentiment: None Disclosure: Unspecified
