Scirocco Energy PLC (AIM:SCIR) told investors it could receive a US$5.5mln boon in the coming months if the Ruvuma project in Tanzania accelerates as currently predicted.
The company, in a statement, said that ARA Petroleum Tanzania (APT) – the operator and the acquirer of Scirocco’s interest in the asset – is continuing its advanced negotiations with the Tanzanian authorities over a gas sales deal which could bring forward the timeline to commercial production from Ruvuma.
Scirocco is already set to receive US$2.5mln of proceeds from ARA upon completion of the transaction – which, due to a fresh delay, is now due to happen between 30 June and 31 August, once certain tax clearance is approved by the government.
Further contingent payments were built into the transaction with ARA, including a US$3mln payment triggered at ‘final investment decision’, which Scirocco says could now come in the third quarter.
"We're pleased to have amended the long-stop date to allow additional time for completion of the divestment of our interest in the Ruvuma asset,” Scirocco chief executive Tom Reynolds said in a statement.
“While the process has taken longer than originally envisaged, we are encouraged by our dialogue with the relevant authorities in Tanzania and believe we are on track to complete within this new timeframe.
“Operational progress at Ruvuma points to the potential for an acceleration of the contingent elements of the gross consideration which would be transformational for Scirocco's balance sheet, albeit not guaranteed.
“Until completion, cash preservation remains a core priority for the team and we have taken proactive measures to reduce G&A and safeguard the company's existing cash reserves.”
Cash conservation, however, will impact the company’s ongoing investment plans, it cautioned.
Today, the company also said that the delay in completing the Ruvuma transaction has undermined its ability to support further acquisitions at its energy transition venture EAG.
It noted that a previously envisaged acquisition opportunity for an anaerobic digestion plant in Southwest England will not proceed at this time. The plan may be “resurrected” in the future, the company added.
Meanwhile, Scirocco also noted that in light of the situation, it has agreed that EAG should be able to explore alternative investment sources, either alongside or in addition to Scirocco's investment.
EAG now continues to screen a number of opportunities in its development pipeline, the company added.
Reynolds, meanwhile, commented: “As a result of the delays to completion of Ruvuma, it is regrettable that we cannot support further acquisitions by EAG at this time.
“EAG continues to assess a compelling pipeline of opportunities consistent with its growth strategy and our expectations of a much enhanced financial position within Scirocco later this year provides confidence that we can support EAG to execute value accretive deals in the second half of this year."