A botched sale in Tanzania has seen Swala Oil and Gas dispute Orca Energy’s accounting process, leading to threats of legal action.
Swala bought a 7.93% stake in PanAfrican Energy (PAEM) under a deal from the end of 2017, while Orca has the remaining 92.07%. Swala had planned to buy up to 40% in PAEM but dropped this in 2019.
PAEM owns PanAfrican Energy Tanzania (PAET), which began producing from the Songo Songo field in 2004.
Swala has alleged that PAET’s accounts have not been consolidated within PAEM’s. Rather, PAET’s accounts are reported direct into Orca’s accounts, the company said.
PAEM failed to provide accurate accounting of PAET from 2018 to 2021, Swala said.
Swala said that as a result of this its audited accounts for the financial years 2018-20 “may not reflect the true position of the investment in PAEM”.
There is also uncertainty over its 2021 accounts, Swala said, but it is working with its auditors “to narrow this uncertainty in the light of the new facts”.
Orca disputed the statement from Swala. Orca said Swala’s statement “appears to contain inaccurate and misleading statements” on PAEM and PAET.
As a result, “Orca is working closely with its legal and other advisors and intends to take any steps necessary or appropriate to address the situation, including pursuing any legal remedies available to the corporation.”
Orca said it did not plan to provide additional insight on the issue.
In an operational update in July, Orca noted Swala had failed to make payments under the original 2017 agreement. Swala bought the stake in PAEM with some cash and some preferred shares. The shares should pay a quarterly dividend but Orca said it had not received any of these.
Swala is supposed to buy back these preference shares or return shares in PAEM. Orca is pursuing enforcement of this redemption agreement.
Further compounding problems on the issue is a complaint from Tanzania’s Fair Competition Commission (FCC) on Swala’s purchase of the 7.93% stake in PAEM.
The FCC complained that Swala and Orca had failed to notify it of the planned deal. The regulator went on to say it would issue provisional findings on the case in due course and that the companies would get the chance to respond.
Despite these regulatory issues, Orca is pushing ahead with work. The company recently awarded a 3D seismic shoot to African Geophysical Services (AGS). It aims to complete seismic on Songo Songo by the end of the year.