Annual General Meeting 2015 Swala Oil & Gas (Tanzania) plc A presentation by the Swala CEO Dr. David Mestres Ridge
Agenda An overview of world oil An overview of world gas The oil price collapse, 2014-2015 The Swala Licences Pangani Kilosa-Kilombero Growth opportunities within East Africa Page 2
Oil production history 1965-2014 Source: Statistical review of world energy, 2015 at bp.com Page 3
The top 10 oil producers in 2014 China Russian Federation USA Canada Mexico Saudi Arabia UAE Iran Iraq Kuwait Source: Statistical review of world energy, 2015 at bp.com Page 4
The top 10 oil producers in Africa in 2014 Source: Statistical review of world energy, 2015 at bp.com Page 5
East African Oil Uganda (> 4bn barrels) Kenya(> 600 million barrels) Page 6
Agenda An overview of world oil An overview of world gas The oil price collapse, 2014-2015 The Swala Licences Pangani Kilosa-Kilombero Growth opportunities within East Africa Page 7
Gas production history 1970-2014 Source: Statistical review of world energy, 2015 at bp.com Page 8
The top 10 gas producers in 2014 Algeria China Indonesia Qatar Iran Saudi Arabia USA Canada Norway Russian Federation Source: Statistical review of world energy, 2015 at bp.com Page 9
The top gas producers in Africa in 2014 Source: Statistical review of world energy, 2015 at bp.com Page 10
Gas prices Source: to 2014, Statistical review of world energy, 2015 at bp.com; 2015-2019, Economist Intelligence Unit Economic and Commodity forecast, July 2015. Page 11
Natural gas major trade, 2014 (bcm) Source: Statistical review of world energy, 2015 at bp.com Page 12
East African Gas Tanzania (> 55 TCF) Mozambique (> 60 TCF) Page 13
Agenda An overview of world oil An overview of world gas The oil price collapse, 2014-2015 The Swala Licences Pangani Kilosa-Kilombero Growth opportunities within East Africa Page 14
The story of 2015: the collapse of oil prices Page 15
Oil prices affect oil exploration shares Page 16
Share Price (GB pence) And shares recover with oil 1,600 1,400 1,200 1,000 800 600 400 200 0 Page 17
Effects of the collapse in prices Some positive: Reduction in fuel prices Reduction in gas prices if linked to oil prices Reduction in state subsidies (as an example, in 2013/2014 Egypt spent $13.2bn subsidising fuel) Some negative: Political instability (e.g. Russia, Venezuela); Employment (Forbes estimates 75,000 redundancies so far in the oil and gas industry); Cancelling projects (Goldman Sachs estimates $1 trillion of investments are at risk); Share price volatility. Supply and demand: cancel projects and you remove future production. That in turn leads to higher prices in the future. Page 18
What are the implications for East Africa? From Bloomberg (September 16, 2015) : From Ghana to Angola, the end of the oil boom is destabilizing economies in Africa as revenue slumps and currencies tank. Nigeria, Africa s biggest oil producer, has imposed foreign-exchange restrictions to stabilize the naira, Angola has cut its budget by about a quarter and Ghana was forced to take almost $1 billion in emergency loans from the International Monetary Fund to bolster reserves. [ ] These big oil-based investments are not feasible, [said] Aly-Khan Satchu, the chief executive officer of Rich Management Ltd., Current price structures preclude these big ticket investments. From IHS (October 8, 2015) : Tanzania and Uganda rank unfavorably [in terms of risk] due to a higher government take, regulatory uncertainty, and concerns with investors. The authorities should keep in mind that oil and gas exploration is a global game. Therefore, investors have the choice to invest wherever they see fit. Likely effects under the current price / fiscal conditions? Delays to LNG projects? we are already seeing that in Mozambique. Slow down of projects as companies struggle to accomodate to the new low oil price? we are already seeing that here and in Kenya. Reduction in local employment if companies are losing workers elsewhere and are under profit constraints. Focus on the onshore, lower-cost projects at the expense of the larger CAPEX offshore projects (the gas projects). Invest elsewhere if the currently poor fiscal terms continue. Page 19
The TPL farm-in: a vote of confidence Farm out to Tata Petrodyne Limited TPL confirmed on 8 th October TPL will farm in to the two licences Pangani and Kilosa-Kilombero Terms of the deal TPL to pay Swala $5.7 million towards our past costs; TPL to pay certain costs in respect of the period February to October 2015; TPL to pay Swala s costs for one exploration well in Kilombero (capped at $2.5 million); TPL to pay Swala s costs for one exploration well in Pangani (capped at $2.1 million); If there is a successful discovery in Kilombero, TPL will pay another $1 million towards a second exploration well. Swala shall retain some funds and shall use others to repay part of its debt to the parent company. Deal allows Swala to reduce its cash requirements no need to raise equity in a difficult market. Magnitude of the agreement indicates confidence in Swala s assets.
Agenda An overview of world oil An overview of world gas The oil price collapse, 2014-2015 The Swala Licences Pangani Kilosa-Kilombero Growth opportunities within East Africa Page 21
Pangani: Licence Overview Current Licence Interests Pangani Location Map Swala Oil & Gas (Tanzania) plc 25% (Operator) Tata Petrodyne Limited 25% Otto Energy Tanzania Limited 50% 2016 remaining work commitment One exploration well. Drilling locations currently under review for JV approval. Swala share carried by Tata Petrodyne Limited. Work commitments completed to date Reprocessing of Getech Magnetic and satellite data. Completed 2012 Gravity & Magnetic surveys, with geochemical and field study work. Completed 200kms of 2D seismic over the entire licence in 2013. Completed a further 200kms 2D seismic over the Moshi Basin in 2014. Page 22
Pangani- Moshi Basin Lead A Subtle shallowing towards the East The high may continue to develop into a bounding fault towards the South. Page 23
Agenda An overview of world oil An overview of world gas The oil price collapse, 2014-2015 The Swala Licences Pangani Kilosa-Kilombero Growth opportunities within East Africa Page 24
Kilosa-Kilombero: Licence Overview Current Licence Interests Kilosa-Kilombero Location Map Swala Oil & Gas (Tanzania) plc 25% (Operator) Tata Petrodyne Limited 25% Otto Energy Tanzania Limited 50% 2016 remaining work commitment One exploration well. Drilling locations currently under review for JV approval. Swala share carried by Tata Petrodyne Limited. Work commitments completed to date Reprocessing of Getech Magnetic data. Completed 2012 Gravity & Magnetic surveys, with geochemical and field study work. Completed 373kms of 2D seismic over the entire licence in 2013. Completed a further 430kms 2D seismic over the Kilombero Basin in 2014. Page 25
Kilombero Lokichar String of Pearls Kilosa-Kilombero Lokichar Basin (Kenya) Page 26
Robust structure at Kito Robust roll-over structure into basement footwall No evidence of crestal faulting or trap breach Possible brightening over crest. Page 27
Kito amplitude anomalies to structure Size of Kito relative to Dar es Salaam, for comparison. Page 28
Additional prospectivity in Kilosa-Kilombero Kidatu Basin: Ngaza Lead Extensional structure with significant regional uplift, potentially uplifted Karoo Large closure mapped over Kidatu Line 8 Kidatu-3 was shot to confirm closure of the structure to the South Areal extent of 40-50 km 2 Currently under review Page 29
Activity summary EIA completed 2015 2016 2017 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Pangani weather window Kilombero weather window Fully-funded through two wells. Page 30
Agenda An overview of world oil An overview of world gas The oil price collapse, 2014-2015 The Swala Licences Pangani Kilosa-Kilombero Growth opportunities within East Africa Page 31
General observations Limited number of direct opportunities in Tanzania Zanzibar licencing round Delays in promoting licence rounds in Tanzania impedes proper corporate growth Grow elsewhere - elsewhere in the EAC - within the EAC (and Tanzania) through corporate deals - Outside the EAC? Page 32
Thank you for listening