Annual General Meeting 31 st January 2018
Disclaimer This presentation contains forward -looking statements that are subject to risk factors associated with oil, gas and related businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including, but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delays or advancements, approvals and cost estimates. All references to dollars, cents or $ in this presentation are to United States currency, unless otherwise stated. References to Swala are references to Swala Oil & Gas (Tanzania) plc or its applicable subsidiaries. Unless otherwise noted, all references to reserves and resources figures are as at 30 January 2018 and represent Swala s share. Any geological, reserves and resources information in this presentation is based on, and fairly represents, information and supporting documentation prepared by, or under the supervision of, Mr. Neil Taylor. Mr. Taylor is an employee of Swala Oil & Gas (Tanzania) plc and has over 30 years of experience in the oil and gas business with internationally renowned E&P companies including British Petroleum (1981-1992) and Woodside Energy (1992-2007). Any geological, reserves and resources information in this presentation has been issued with the prior written consent of Mr. Taylor in the form and context in which it appears. Page 2
The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters Resolutions 12 and 13 Conclusions Page 3
Kilosa-Kilombero Licence (Swala 75%) Swala is licence operator with 75% equity. Kilosa-Kilombero Location Map Late 2013 identified the Kito Prospect. Late 2014 further work on Kito plus identified a number of other leads and prospects. Late 2015, farmed down to Tata Petrodyne Limited ( TPL ) for $5.7 million in past costs and a carry through the first exploration well (capped at $2.5 million). If the first well is successful, TPL will pay a further $1 million towards Swala s costs for a second exploration well. 2016-2017: Prepared to drill but permits not received in time. Kilombero basin Extension to 2019 currently under application. Page 4
Sizeable Prospect with Six Additional Leads Page 5
Kito a significant potential resource KILOMBERO BASIN LOW BEST MEDIUM Kito Basal Sandstone 31 mmstb 97 mmstb 293 mmstb Kito Sequence 1 Sandstone 24.2 mmstb 87 mmstb 254 mmstb Kito Shallow 11.2 mmstb 48.8 mmstb 169 mmstb Lead A 3 mmstb 7 mmstb 10 mmstb Lead B 6 mmstb 14 mmstb 20 mmstb Lead D 19.5 mmstb 45.5 mmstb 65 mmstb Lead F 14.4 mmstb 33.6 mmstb 48 mmstb NET TO SWALA LOW BEST MEDIUM Kito Basal Sandstone 18.6 mmstb 58.2 mmstb 175.8 mmstb Kito Sequence 1 Sandstone 14.52 mmstb 52.2 mmstb 152.4 mmstb Kito Shallow 6.72 mmstb 29.28 mmstb 101.4 mmstb Lead A 1.8 mmstb 4.2 mmstb 6 mmstb Lead B 3.6 mmstb 8.4 mmstb 12 mmstb Lead D 11.7 mmstb 27.3 mmstb 39 mmstb Lead F 8.64 mmstb 20.16 mmstb 28.8 mmstb Page 6
The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters Resolutions 12 and 13 2018 Kilombero Activity Timeline Page 7
The Transaction Swala has right to buy up to 40% of PAE PanAfrican Energy Corporation ( PAEM ) for up to $130 million. PAEM owns of PanAfrican Energy Tanzania Limited, the operator of the Songo Songo Field. First transaction Acquired 7.93% interest in PAEM; Consideration of $17MM in cash and $3.97MM in Preferred Shares (subject to shareholder approval). Second transaction Acquisition in tranches to maximise local investment Possibility of acquiring up to 32.07% more of PAEM; Local mezzanine bonds to be listed on the DSE, $50MM (greenshoe issue) plus Preferred Shares for difference. Page 8
A farm-in to Songo Songo? Other Projects Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS) PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) SWALA OIL & GAS (TANZANIA) PLC (TANZANIA) SWALA (PAEM) LIMITED (UNITED KINGDOM) Other Projects PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY) SONGO SONGO LOAN WITH THE IFC? A transaction limited to Songo Songo meant that Swala would miss out on potential opportunities being explored within PAET. Page 9
A transaction with PanAfrican Energy Tanzania Ltd? Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS) SWALA OIL & GAS (TANZANIA) PLC (TANZANIA) Other Projects PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) SWALA (PAEM) LIMITED (UNITED KINGDOM) Other Projects PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY) LOAN WITH THE IFC? SONGO SONGO A transaction with PAET allowed Swala to indirectly benefit from potential opportunities being explored within PAET but raised issues of seniority of debt with the pre-exisiting IFC facility. Page 10
Optimal: a transaction with PAEM Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS) SWALA OIL & GAS (TANZANIA) PLC (TANZANIA) Other Projects PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS)? SWALA (PAEM) LIMITED (UNITED KINGDOM) Other Projects PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY) LOAN WITH THE IFC SONGO SONGO A transaction with PAEM allowed Swala to indirectly benefit from potential opportunities being explored within PAET and PAEM without any issues of seniority of debt with the preexisiting IFC facility in PAET. Page 11
How the Cash Consideration is Structured Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS) SWALA OIL & GAS (TANZANIA) PLC (TANZANIA) 92.07% Other Projects PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) 7.93% SWALA (PAEM) LIMITED (UNITED KINGDOM) Other Projects PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY) Tranche 1 has acquired a 7.93% interest in PAEM: Tranche 2-3: International Funds (144A) EAC Mezzanine Bonds SONGO SONGO Resolution 8 Resolution 15 Resolution 10 Resolution 11 A proportion payable in Preferred Shares subject to Shareholder approval. Page 12
Local participation as a complement to DSE listings Other Projects Other Projects Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS) 92.07% PAE PANAFRICAN ENERGY CORPORATION PANAFRICAN ENERGY TANZANIA LIMITED SONGO SONGO 7.93% Swala Oil & Gas (Tanzania) plc Swala (PAEM) Limited Positive and commercial alternative to DSE listings. On completion, Swala (50% locally owned) will own 40% of PAEM, equivalent to PAEM being 20% locally owned. Page 13
Returning cashflow to Tanzania through local bonds Other Projects Orca Exploration Group Inc. (BRITISH VIRGIN ISLANDS) PAE PANAFRICAN ENERGY CORPORATION (MAURITIUS) SWALA OIL & GAS (TANZANIA) PLC (TANZANIA) SWALA (PAEM) LIMITED (UNITED KINGDOM) Other Projects PANAFRICAN ENERGY TANZANIA LIMITED (JERSEY) Interest Payments (14.5%, USD-linked) Positive impact in funds retained in country and on the country s call on its foreign currency account. Ownership of the bonds results in coupon payments bringing USD back into Tanzania; SONGO SONGO Page 14
Additional positive impact of local ownership First Joint Venture of this magnitude between a foreign company and a Tanzanian-listed company in the Oil & Gas Sector; Subject to CMSA and DSE appprovals, bonds to be listed on the DSE, underlying the parties commitment to the development of local capital markets; First USD-linked bonds denominated in TZS shillings. The USD-linkage provides holders with an inbuilt currency hedge; First time that the Tanzanian pension and investment funds are invited to participate alongside international investors in these opportunities, allowing them to diversify their investments; Potentially increased tax receipts for Tanzania as a result of repatriation of funds. Swala will pay more taxes as a result of the already-taxed cashflow being repatriated to Tanzania. Tanzanian investors on Songo Song Island on a pre-investment due diligence visit. Page 15
The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters Resolutions 12 and 13 2018 Kilombero Activity Timeline Page 16
Location of the Songo-Songo Field Songo Songo connected to Songas terminal via 25-km gas line. Connected to Dar es Salaam through 207km 36 gas line. Page 17
The Songo Songo gas to power project 1991 PAET agreement with GoT and TPDC to evaluate economic feasibility of Songo Songo 1992 World Bank involvement. 1994 Formal negotiations begin. 1996 MoF calls in Economic and Legal Advisory Services Unit of Commonwealth Secretariat (ELAS) for independent review of project agreements. (1997: ELAS reports that the deal is on balance fair to Tanzania and the investors). 2001 Project agreements signed. 2004 First shipment of gas. Page 18
Significant benefits to Government of Tanzania BancABC (4.76%) Norway (16.20%) PROTECTED GAS UK (37.80%) Government of Tanzania (41.24%) TPDC ADDITIONAL GAS TPDC, PAET and the GoT under Production Sharing Agreement Industrials Investor (24%) GoT (76%) (taxes, royalties and profitsharing) Page 19
Ca. 90% of Project value has gone to GoT (end 2017) Page 20
Significant additional economic benefits $5 billion economic rent An estimated $5.0 billion saved by replacing Heavy Fuel Oil with gas. Power, with the lowest cost Independent Power Producer. Songas is clearly the least-cost privatelyowned supply option in Tanzania. World Bank Report. Provision of energy for industry a crucial part of the Industrialisation Plan and employing an estimated 10,000 Tanzanians. Significant CSR $2.7MM (5% of PAET profits) into local CSR: Early childhood development, Songo Songo Island primary/secondary schools scholarships, English Language Learning centre, Health and Sports Page 21
Developing downstream gas markets PanAfrican has financed and built a low pressure gas distribution network around Dar es Salaam (in excess of 50 kms). Diversified customer base (37 customers including power plants, textiles, beverages and glass). Prices to the industrial customers are generally set by reference to Platts HFO Arab Gulf (24-29% discount). PanAfrican commenced the sale of CNG for use by hotels, industries and vehicles at the end of 2009 slow growing but high value market. Aim to grow the industrial sales market. Investment in PAEM offers Swala aligned access to these opportunities. Page 22
The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters Resolutions 12 and 13 2018 Kilombero Activity Timeline Page 23
Songo Songo Reserves and Resources Songo Songo W. P90 Net indirect SOGTL (40%) 21 bcf P50 P10 140 bcf 256 bcf End of Licence Net indirect SOGTL (40%.) $/mcf 1P 146 bcf 0.48 To end of Field 1P Net indirect SOGTL (40% ) 111 bcf 2P 166 bcf 0.42 3P 183 bcf 0.38 2P 3P 141 bcf 175 bcf Source: McDaniels and Associates Consultants Limited Page 24
NNGIP opens up additional export 36 Pipeline Mnazi Bay to Dar es Salaam financed by China Exim Bank. The NNGIP has capacity of 785 MMscfd currently running at less than 10% capacity. TEGETA MW100 UBUNGO MW112 KINYEREZI MW990 (in 4 phases) SONGAS MW178 2 x 70 mmscfd processing plants at Songo Songo (140 mmscfd) 105 mmscfd SOMANGAFUNGU MW520 (in 2 phases) Modified, after TPDC. Page 25 3 x 70 mmscfd processing plants at Mnazi Bay (210 mmscfd) SONGO SONGO MNAZI BAY
Gross Field Production and Customers NNGIP Capacity Future 1P production profile (Swala Estimates). Page 26
Gross Field Production, TPDC and PAET NNGIP Capacity Future 1P production profile (Swala Estimates). Page 27
Gross Field Production with indirect Swala benefit NNGIP Capacity Future 1P production profile (Swala Estimates). Page 28
Capacity to supply growing industrial demand for gas NNGIP Capacity Future 1P production profile (Swala Estimates). Page 29
The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters Resolutions 12 and 13 2018 Kilombero Activity Timeline Page 30
Aminex Plc 2.9bn shares traded. Stocks respond to events in liquid markets Page 31
Swala < 20,000 shares traded. The DSE is still an illiquid market Page 32
Illiquidity is not helped by pre-emption rights JAN FEB MAR APR MAY JUN JUL AUG SEP Prepare prospectus Reporting Accountants Report and Legal Due Diligence First offer to Shareholders under pre-emption rights Second offer to Shareholders under pre-emption rights Update prospectus PROCESS STARTED Reporting Accountants Report and Legal Due Diligence updated OFFER OPEN TO NEW SHAREHOLDERS The pre-emption process can easily add another four- five months to any fund-raising process this is inefficient and endangers the Company if it cannot respond promptly to cash requirements. Page 33
Resolutions 12 and 13 Resolution 12: To approve the Company s dual listing on an OECD Exchange. We need liquidity, and we need access to funds; Does not move the primary listing from the DSE but opens a secondary listing elsewhere; Potentially London, with the benefit of broad O&G peer group; Timing to be discussed but aim for listing in 3Q 2018. Resolution 13: To disapply the pre-emption rights associated with the issuance of new shares. The delay and costs incurred by setting up pre-emption have to be weighed against market liquidity; Propose to disapply pre-emption rights BUT to retain an obligation to make any public offer of shares available for participation to current shareholders (e.g. as part of a listing, or any subsequent equity raise) to the extent that is practicable within the timeframes; This applies from the 2017 AGM to the 2018 AGM, at which time the resolution shall expire and shall be re-submitted to shareholders for consideration. Page 34
The Kilosa-Kilombero Licence Acquisition of an interest in PAE PanAfrican Energy Corporation Indirect exposure to the Songo Songo Field About the field Field Production and Reserves Share Matters Resolutions 12 and 13 2018 Kilombero Activity Timeline Page 35
2018 Kilombero Activity Timeline Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Rig LOI Contracts in place Mobilisation Drill Licence extension due Page 36
THANK YOU FOR LISTENING Swala Oil & Gas (Tanzania) plc David Mestres Ridge (CEO) david.mestres@swalaoilandgas.com www.swalaoilandgas.com Page 37