Bloomberg News

SouthWest Energy of Ethiopia to Raise $100 Million in Equity

December 05, 2012

SouthWest Energy Ltd., an Ethiopian oil and gas exploration company, said it plans to raise $100 million via a private placement in the first quarter of 2013 to help finance a three-well drilling program in the Ogaden basin.

The company has pushed back the date for sinking the first well to the third quarter, from the first half, as it analyzes data and decides on one of 15 possible targets in blocks 9, 9a and 13, Chairman Tewodros Ashenafi said in an interview. SouthWest may also try to sell a stake in the fields, he said.

“Potentially, we will go out to raise money from selected private equity players,” Tewodros, 43, said in an interview yesterday in Rwanda’s capital, Kigali. The company may also seek a partner to bring “international resources and technical additions,” he said.

Landlocked Ethiopia, sub-Saharan Africa’s seventh-biggest economy, produces no oil or gas and relies on coffee and other agricultural exports for annual foreign-exchange earnings of about $3 billion. While only 18 exploratory wells have been drilled in the country, investment is accelerating now that explorers have discovered oil and gas in East Africa, spurring interest in a previously overlooked region, he said.

Mozambique and Tanzania have large-scale natural gas deposits, while Uganda is scheduled to start pumping its first crude by 2014 and Kenya announced an oil discovery in March.

‘Interesting’

“East Africa has become very interesting,” Tewodros said. “The trend is moving from Mozambique, Tanzania, Uganda, now Kenya, and I think next will be Ethiopia, which had been ignored as an oil- and gas-potential country,” he said.

Tullow Oil Plc (TLW), based in London, and Canada’s Africa Oil Corp. (AOI) in March announced they struck oil in Turkana, a northern region in neighboring Kenya. The companies hired China’s BGP Inc. to survey similar terrain across the border in Ethiopia’s South Omo Block.

Tullow will start drilling its “first exploration well” in South Omo next month, the Addis Ababa-based Reporter newspaper said on Dec. 1, citing people it didn’t identify.

SouthWest, which is based in Ethiopia’s capital, Addis Ababa, and registered in Hong Kong, also has the rights to a block in the Gambella region and it plans to buy more exploration acreage outside of Ethiopia in other East Africa nations either next year or in 2014, he said.

The company recorded no security incidents while surveying the Somali-bordering Ogaden basin, logging 1 million man-hours, he said. The Ogaden National Liberation Front has fought a low- level insurgency in the area since 1984 seeking greater autonomy. In April 2007, the banned group attacked a site operated by China’s Zhongyuan Petroleum Exploration Bureau, killing nine Chinese workers and 65 Ethiopians.

Peace talks between the ONLF and Ethiopia’s government stalled in October.

To contact the reporter on this story: Sarah McGregor in Kigali at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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