In First Major Post-PIA Deal, Seplat Acquires Mobil Producing Oil Assets in Nigeria

Seplat Energy on Thursday announced its acquisition of oil and gas assets belonging to Mobil Oil Producing Nigeria Unlimited (MPNU), in a deal seen as the first since the signing of the Petroleum Industry Act (PIA) by President Muhammadu Buhari in August last year. The deal is however subject to Ministerial Consent and other required regulatory approvals.

Seplat Energy Plc, a leading Nigerian energy company listed on the Nigerian Exchange Limited (NGX) and the London Stock Exchange (LSE), was expected to announce the agreement to acquire the entire share capital of Mobil, with the completion of the transaction subject to ministerial consent and other required regulatory approvals.

The statement from the company showed that Seplat Energy Offshore Limited, a wholly owned Nigerian subsidiary of Seplat Energy Plc, entered into a Sale and Purchase Agreement to acquire the entire share capital of MPNU for a purchase price of $1,283 million plus up to $300 million contingent consideration.

The transaction, according to statement, encompasses the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria, which it said is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations.

The transaction, it said, would create one of the largest independent energy companies on both the NGX and LSE and bolster Seplat Energy’s ability to drive increased growth, profitability and overall stakeholder prosperity. The deal would deliver 186 per cent increase in production from 51,000 bpd to 146,000 bpd or 170 per cent increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl.

In addition, it was expected to deliver a 14 per cent 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)

Furthermore, it was expected to increase by 89 per cent, the total 2P reserves from 499 MMboe to 945 MMboe and includes offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability.
In the oil industry, 2P reserves are the total of proven and probable reserves while probable reserves are less likely to be recovered than proven reserves.

Being the first transaction to be announced since the Nigerian government’s recently ratified PIA, the company stated that the deal would support Nigeria’s energy transition and objectives of the new Act.
Seplat Energy said it was fully committed to working with the Nigerian government to bring the strategically important national assets fully into Nigerian ownership alongside the national oil company, NNPC.
In addition, it noted that the development of the gas resources would support the government’s objective to achieve a pragmatic, progressive and just energy transition for Nigeria.

The transaction agreement also includes potential additional contingent consideration of up to $300 million in total, payable over the period 1 January 2022 to 31 December 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).

The deal primarily comprises a 40 per cent operating ownership of four oil mining leases (OMLs 67, 68, 70, 104) and associated infrastructure with NNPC being owner of the rest 60 per cent.

It includes the Qua Iboe Terminal, one of Nigeria’s largest export facilities as well as a 51 per cent interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso.

However, the contract does not include ExxonMobil’s deep-water assets in Nigeria.
According to statement, the cash consideration payable under the transaction will be funded 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 offtake facility.

 

Also included is a global financing syndicate comprising Nigerian and international banks, as well as commodity trading companies, while contingent payments, if materialised on Brent oil price annual average above $70/bbl, will be funded through share of net cash flows from operations.

Under the Sale and Purchase Agreement, Seplat Energy will pay a deposit of $128 million, which will be applied towards the purchase price on closing.

“If the transaction does not proceed, the deposit will be repaid to Seplat Energy where the agreement is terminated by Seplat Energy in certain circumstances.

“The Transaction does not require the approval of Seplat Energy’s shareholders and will not result in any changes to its Board. The Company currently expects the Transaction to close in H2 2022,” it stated.
Commenting on the deal, Chairman of Seplat Energy, Dr. Bryant 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.”
Also, Chief Executive Officer of the company, 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 monetise our significant gas resources through domestic and export opportunities.

“This is a win-win for both companies. Together, we will strengthen our focus on profitability and cash generation to reinvest in Nigeria’s energy development.

“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I look forward to welcoming them to the Seplat Energy family,” he stated.

For months, Mobil’s officials have been holding talks with several Nigerian companies to gauge their interest in the fields, followed with the opening of a “data room” – which provided technical information on the fields, such as seismic and production details – in Nigeria.

The discussions focused on a number of onshore fields ExxonMobil shares in joint ventures with Nigerian state oil firm, Nigerian National Petroleum Corporation (NNPC), including Oil Mining Leases (OMLs) 67, 68, 70 and 104.

 

Emmanuel Addeh in Abuja

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