Investors are rushing to acquire shares in Kenya’s oil exploration areas from small companies following recent hydrocarbon discoveries headlined by Tullow Oil’s success.

Junior prospectors under pressure to fund well drilling and other activities are increasingly being tempted by offers from better endowed rivals, sparking a wave of acquisitions worth $250 million in a region previously considered a backwater of exploration.

Nairobi-based Hydrocarbons Management Consultants said the smaller explorers were being targeted by firms seeking to reposition themselves in Kenya’s upstream oil segment.

“They have to sell part of their exploration rights to raise funds for expediting compliance with work programmes agreed on with Ministry of Energy,” said Hydrocarbons lead consultant Robert Shisoka. Kenya’s status as a destination for investment has been raised by discovery of oil and gas in various wells.

Swala Energy has completed farm out (partial sale) of a 25 per cent interest in block 12B in western Kenya to Compañía Española de Petróleos (Cepsa) of Spain.

The sale followed approval by the Competition Authority of Kenya and left Swala with 25 per cent of the shares and Tullow Oil with a 50 per cent stake. Cepsa committed to drill two wells at a cost of up to $15 million.

Swala’s chief executive officer David Mestres Ridge said the farm-in agreement would enable the Australian firm to grow its portfolio.

Cepsa had in February this year acquired a 55 per cent stake in block 11A in northwestern Kenya where ERHC Energy of the US (35 per cent) and National Oil Corporation of Kenya (10 per cent) are the other partners.

READ: Farm-outs increase as oil companies seek funds for drilling

Imara Energy Corporation, Rift Energy Corporation and FAR Ltd are among companies seeking a new partners or raising money to fund exploration and avoid their acreage being repossessed by the Ministry of Energy.

Imara Energy of Canada is offering a convertible debenture — priority debt that can be swapped for shares — of up to $15 million. The proceeds will be used for exploration of block L2 in the Lamu Basin, which requires $7.9 million this year and in Morocco.

The debenture will be converted into Imara Energy shares that can be traded at the United Kingdom main board standard listed Pubco.

Rift Energy wants to sell part of its equity in onshore area L19 near Mombasa while FAR Ltd and Pancontinental Oil and Gas are seeking a partner in drilling a well in the L6 offshore block.

The well is expected to cost FAR and Pancontinental, both listed on Australia Stock Exchange, about $80 million.

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Privately owned Rift Energy of Canada, which owns Block L19, is obliged by a 2012 agreement with the government to spend $5 million on acquisition of seismic data by the end of this year. In March, it started carrying out two dimensional (2D) seismic survey covering 680 kilometres to map hydrocarbon deposits in the area.

Rift Energy vice president of operations Tom Guidish said the data derived from the three month exercise would help build an inventory of prospects for drilling.

It would then be required to spend $20 million on the block for every two years that the licence is renewed.

He said in a brochure issued to potential investors that the block’s proximity to the Mombasa port provided a ready outlet for any oil and gas discovered, lowering the economic threshold for success.

FAR and Pancontinental want to sell part of their interest in L6 before drilling of a well next year. FAR’s executive director and commercial manager Ben Clube said the target partner should be willing to contribute equity, share past expenses of $21 million and fund well drilling.

The area has features similar to block L10A where BG Group and Pancontinental discovered oil and gas in Sunbird well this year.

In February, Milio International Ltd of Dubai acquired 60 per cent of the onshore part of area L6 after agreeing to spend up to $30 million on future exploration work.

FAR retained a 24 per cent stake in the acreage leaving Pancontinental and its wholly owned subsidiary, Afrex, with a combined 16 per cent interest.