Katherine Roe, CEO at Wentworth Resources joined London South East to update investors on the proposed purchase of the Ruvuma gas development project in Tanzania from Scirocco Energy.
Katherine said she thought the deal, which will eventually pay out almost $16M when and if the Ruvuma field becomes successfully operational was a fair one for both parties. “We’ve worked well together to structure a deal which is right for Wentworth and right for Scirocco”.
“We do think that it is strategically perfect for Wentworth” said Katherine. “Ruvuma, available as a gas appraisal and development licence, is adjacent to our gas producing asset in Mnazi Bay in Tanzania. There has been a discovery, we do think it is potentially a world class asset in the same way we have with Mnazi Bay. We want to be able to use all our experience, sub surface and above ground, using our stakeholder relations to develop the asset.”
“We are a non-operated partner in Mnazi Bay and will become a non-operated partner in our working interest in Ruvuma, so we are used to working in that way and trying to add value to the JV. We are looking at similar volumes of gas to be produced, similar to the early days at Mnazi Bay certainly” added Katherine.
The bid process took two years and was far from plain sailing. The initial preferred bidder, was a private equity company who pulled out, leaving the way clear for Wentworth. “As a private equity company they can be more flexible how they finance a bid. We are in the public domain and must be very conscious of dilution for our existing shareholders, our funding capability, and we have ongoing capital requirements as well as a dividend” explained Katherine.
As to the structure of the deal: “From Wentworth’s perspective, we need to see that field developed and perform in line with the way that we have modelled it and our expectations, and the flip side to that is it only right that Scirocco shareholders get a share of that upside when it materialises. The deferred and contingent stage payments are designed to achieve that as the project derisks.”
And the loan arrangement with Scirocco? “Again that was important for both of us. We are lending Scirocco $6.25M, their share of cash calls throughout this work programme . That enables Scirocco to fund their cash calls, enables them to be able to meet their obligations and allows us to continue with the work programme without delays.”
“I think the shareholder dilution required to fund that work programme organically ‘by Scirocco] would be quite significant for existing shareholders. We have the cash and want to reinvest back into Tanzania in the domestic gas space, that is our core business.”
“It’s perhaps worth saying that we wouldn’t be any good at developing a gas field in another jurisdiction – this is our business, this is what we do well, and we can make this successful. It’s horses for courses.”
“One of the great things about our equity markets is that investors have choices, and you can choose to invest in a number of different things, depending on your appetite. So I think this is a good transaction for everybody”.
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