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- May 11, 2013
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A general view shows the Paipai-1 drill site in Turkana, northern Kenya, in this February 13, 2013 file photo.
Octant Energy Corporation, the Canadian petroleum explorer and developer, says it has started arranging for a $10 million (Sh1.03 billion) financing deal to acquire three blocks in Kenya and one in Tanzania.
Octant said it expects to close the acquisition of the blocks from London-headquartered Afren plc by April 30.
The giant explorer in October 2015 entered into three agreements with subsidiaries of the debt-laden Afren to acquire Blocks L17/L18 in Lamu, Block 1 in Mandera-Lugh basin and another block in Tanga, Tanzania.
The transfer of the Production Sharing Contracts from Afren to Octant has, however, been subject to approvals by the governments of Kenya and Tanzania.
“The corporation is pleased to report that progress is being made in connection with the satisfaction of the conditions for completion of the proposed transactions,” Octant said in an update to investors on Friday. “The agreements to consummate the proposed transactions have a long stop date of April 30, 2017.”
The Lamu and Mandera blocks are valued at an estimated $4.5 million (about Sh465.26 million) each, while the Tanga block is valued at $1 million (about Sh103.39 million).
Octant said it has entered into a deal with Toronto-based fund manager Rosseau Asset Management to proceed with a financing of the $10 million through issuance of secured convertible debentures.
The funds will be in three tranches of $1 million (Sh1.03 billion) for Tanga assets, and $4.5 million each for Lamu and Mandera blocks.
The debentures – long-term securities with a fixed return secured by company's assets – will be converted into common shares at a price of $0.75 (Sh77.54) per piece for four years after the closing of the first tranche.
“The indebtedness under the Financing will bear interest at a rate of eight per cent per annum, payable annually in arrears on the anniversary date of the initial close through the issuance of common shares,” the company said.
Octant, however, refused to reassure investors that the financing for the two tranches for proposed acquisition of Lamu and Mandera blocks will be completed. Neither did it guarantee completion of the transaction for the two blocks.
"The position taken by Rosseau to support the efforts of Octant in its acquisitions speaks volumes about the quality of these assets,” Octant CEO and President Rick Schmitt said. “I look forward to moving these assets forward expeditiously in a meaningful way and positively enhancing the value for all interested parties including the people of Tanzania and Kenya.”
Oxfam Kenya and Kenya Civil Society Platform on Oil and Gas on April 1, 2016 listed Octant Energy among firms with subsidiaries in British Virgin Islands. The lobbies, in demanding audit of operations of 27 multinationals with stakes in Kenya’s 41 petroleum blocks, said subsidiaries in tax-haven jurisdictions could be used to avoid tax.
Afren fully owns blocks L17 and L18, while its stake in Mandera and Tanga blocks stands at 80 per cent and 74 per cent, respectively.
Afren is among explorers who have either scaled down their operations or are selling their blocks in Kenya since crude oil prices started falling in 2015.
They include Tower Resources of the UK will relinquished its 15 per cent stake in Block 2B in Mandera, and Pancontinental Oil of Australia which sold off 18.75 per cent stake in Block L10A and 25 per cent in Block L10B in Lamu.
Canadian explorer sets April 30 deadline for buying Lamu, Mandera oil blocks
