Nigerian indigenous oil company, Seplat, has purchased ExxonMobil’s shallow water assets in Nigeria via the acquisition of the U.S. oil company’s Nigerian subsidiary Mobil Producing Nigeria Unlimited. The deal, however, does not include ExxonMobil’s deepwater assets in Nigeria.
It is the first major deal in that magnitude in the Nigerian oil and gas sector since the Petroleum Industry Act (PIA) was signed into law by the President of the Federal Republic of Nigeria on August 16th, 2021.
Industry observers have said that the Law, which effectively repealed the extant Petroleum Act 2004, created an array of provisions and innovations that will affect the private, public sector investments in the favour of Nigerians and stakeholders.
Chairman of Seplat Energy, Dr. Bryant (ABC) Orjiako, said: “This is a transformational acquisition for Seplat Energy that strengthens our partnership with the national oil company, the NNPC, and consummates the spirit of the newly enacted PIA.
“As a significantly larger business, with a stronger resource base and greatly enhanced capabilities, we will be better positioned to provide sustainable energy solutions that drive growth and profitability for the benefit of all our stakeholders, particularly our host communities and the wider Nigerian economy.
“We fully support the aims of the Federal Government’s “Decade of Gas”, and this acquisition will accelerate our development of Nigeria’s gas resources to help achieve a just transition for our rapidly growing country.”
In the deal Seplat is paying $1,283million for the acquisition, plus up to $300 million contingent consideration.
The transaction encompasses the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria, which is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations, producing 95 kboepd (W.I.) in 2020 (92% liquids).
ExxonMobil said the sale, which equally supports the Nigerian government’s efforts to grow its oil and gas operations, will allow it prioritize competitively advantaged investments in its strategic assets.
According to the president, ExxonMobil Upstream Oil and Gas, Liam Mallon, “We value the relationships we have spent decades building with the government and people of Nigeria, which will continue as we maximize the value from our deepwater operations.”
When finalized, the sale will include the Mobil Development Nigeria and Mobil Exploration Nigeria equity ownership of Mobil Producing Nigeria Unlimited, which holds a 40% stake in four oil mining licenses, including more than 90 shallow-water and onshore platforms and 300 producing wells.
However, ExxonMobil has said it would maintain a significant deepwater presence in Nigeria, including interests in the Erha, Usan and Bonga developments via Esso Exploration and Production Nigeria Limited and Esso Exploration and Production Nigeria (Deepwater) Limited.
Exxon also said that the sale will not result in any loss of employment to Nigerian staff or expatriates, and the deal is expected to actually close later in 2022, subject to regulatory and other approvals.
On the side of Seplat, based on 2020 pro forma working interest volumes for Seplat Energy and MPNU, the transaction will, for Seplat, deliver a 186% increase in production from 51 kboepd to 146 kboepd; a 170% increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl; a 14% increase in 2P gas reserves from 1,501 Bscf to 1,712 Bscf, plus significant undeveloped gas potential of 2,910 Bscf (JV: 7,275 Bscf) amd 89% increase in total 2P reserves from 499 MMboe to 945 Mmboe.
The deal includes offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability, Seplat said.
The transaction agreement also includes potential additional contingent consideration of up to $300 million in total, payable over the period January 1, 2022, to December 31, 2026, and contingent upon average Brent crude oil prices exceeding $70 per barrel and subject to MPNU’s average working interest production exceeding 60 kboepd (JV: 150 kboepd) in such calendar year.
Assets being acquired
The Mobil Producing Nigeria Unlimited (MPNU) portfolio primarily consists of a 40% operating ownership of four oil mining leases (OMLs 67, 68, 70, 104) and associated infrastructure (NNPC is the 60% partner); the Qua Iboe Terminal, one of Nigeria’s largest export facilities; and a 51% interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso.
Seplat said MPNU will operate as a standalone subsidiary of Seplat Energy upon closing and following receipt of requisite regulatory approvals. Existing cash and loans to fund ‘transformational’ deal
Seplat said that it is funding the deal through a combination of existing cash resources and credit facilities of Seplat Energy, and a new $550 million senior term loan facility and $275 million junior off-take facility; Global financing syndicate comprising Nigerian and international banks, as well as commodity trading companies.
Contingent payments, if materialized on Brent oil price annual average above $70/bbl, will be funded through share of net cash flows from operations, Seplat said.
CEO of Seplat Energy Roger Brown, said: “This transaction underpins Seplat Energy’s drive to be a leader in the growth of the indigenous independent energy sector in Nigeria. The acquisition is a perfect fit with our strategy to build a sustainable business and deliver energy transition in Nigeria.
“Our financial strength has enabled us to attract high-quality local and international capital providers to fund this transaction without diluting our existing shareholders and reflects our deliberate approach to capital allocation.
“We are determined to drive our growth through the extensive low-cost and low-risk production opportunities it delivers in the near term, whilst also developing longer-term opportunities to monetize our significant gas resources through domestic and export opportunities.”
By Chibisi Ohakah, Abuja (with Sunday Elom)
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