Canadian oil firm, Africa oil suffer Sh22billion assets hit
A Canadian oil and gas company, Africa oil has booked a non-cash impairment charge of Sh22billion ($170.6 million) on its Kenyan assets due to concerns about the country’s oil production.
Africa Oil and its joint venture partners, including British explorer Tullow Oil, sought to develop commercial oil production in Turkana’s Blocks 10BB and 13T.
The country first announced the discovery of oil in March 2012.
“Africa Oil recognised a non-cash impairment to its Kenyan intangible exploration assets of $170.6 million (Sh21.69billion) (2021: nil) due to continuing delays and uncertainties to the farm out process and the path to the final investment decision (“FID”) for project oil Kenya” Africa Oil said when it released its fourth-quarter financial results for 2022.
In 2021, the Canadian company and its partners initiated a farm-out process for the Lokichar basin project oil Kenya.
“Discussions with the interested parties have taken longer than expected and there is no guarantee that the company can successfully conclude a farm out to new strategic partner(s) on favourable terms. As a result of this delay the Company has recognised an impairment to its carrying value for project oil Kenya,” Africa Oil said.
A farm-out agreement is whereby a third party agrees to acquire an interest in an upstream oil and gas asset (licence or other forms of concession) from one or more of the current owners in return for performing certain work obligations, such as the acquisition of seismic, the drilling of a well or wells, the reimbursement for past costs or a mix of any of these.
Tullow’s deadline to present a comprehensive investment plan for oil production in Turkana or risk losing concession on two exploration fields in the area elapsed.
Tullow said it expected to recover 585 million barrels of oil from the project over the full life of the field.
