Canadian oil explorer Africa Oil, which holds a 25 percent stake in Turkana exploration venture, has run out of cash to fund production in South Lokichar Basin, making it the latest blow to Kenya’s petrodollar dream.
The firm told investors on Tuesday that it is now looking for a strategic investor to help it implement a development plan for oil production in Turkana.
“The Company’s current working capital position may not provide it with sufficient capital resources to complete development activities being considered in the South Lokichar Basin (Kenya),” said Africa Oil.
The firm, however, maintained it is able to honour all its current financial obligations.
“The Company believes that its existing cash balances combined with anticipated funds flow from prime dividends will provide sufficient liquidity to meet its financing, operating and capex commitments as they fall due,” it said.
Africa Oil said in an update that talks with “interested parties” are continuing but refused to identify any potential suitors.
A deep-pocketed strategic partner would enable Africa Oil and Tullow to cushion their risks for the multibillion-shilling project that includes setting up a crude pipeline and processing facilities for the oilfields.
“Advanced discussions are ongoing with the interested parties. A successful farm-out is viewed by the company as a critical step towards the FID for Project Oil Kenya being achieved over the course of next year,” Africa Oil said in an update.
Consequently, Africa Oil says it will scale back its activities in Turkana until the investor comes on board.
“Regarding the South Lokichar Basin development, the Company will continue to minimize capital investment until a field development plan and strategic partner is approved,” Africa Oil which is separately battling a multibillion dispute with the taxman said in the update.
Tullow and its partners have been under pressure from Kenya to develop the Turkana oil wells that it expects to produce up to 120,000 barrels per day once production starts.
“To finance its future acquisition, exploration, development and operating costs, the Company may require financing from external sources, including issuance of new shares, issuance of debt or executing WI farmout or disposition arrangements,” Africa Oil said.
“There can be no assurance that such financing will be available to the Company or, if available, that it will be offered on terms acceptable to the Company.”
Kenya had set a December 2021 deadline for Tullow to present a comprehensive investment plan for oil production in Turkana or risk losing concession on two exploration fields in the area.
– Business Daily