Olusola Bello
Oil and Gas industry experts have commended the acquisition of the ExxonMobil assets by Seplat Energy, saying that will allow indigenous companies to develop better corporate governance structures, enable them to compete and be recognized globally, with the hope that they would get access to global funding opportunities.
Former managing director of Nigeria LNG Limited and also the immediate past President of Lagos Petroleum Club, Dr. I Ihetu, while reacting to this development said: “Good news for us. Let them cut their losses and flee. Good to know that investors were ready to fund the acquisition. The reason I continue to be optimistic is that we don’t know where the joker card would be played. A lot is going on under the radar.”
He said the challenge is for the new owners to bring in funding and strive to operate with best oil field practice.
In his own reaction, Abiola Ajayi, managing director of Emerald Mineral Resources said: “I think the acquisition by the Seplat consortium is a step in the right direction, it will deepen indigenous participation, permit indigenous companies to develop better corporate governance structures, allow them to compete and be recognized globally, hopefully, this should give them access to global funding opportunities.”
ExxonMobil in a press statement sent out weekend said, it has reached an agreement to sell its equity interest in Mobil Producing Nigeria Unlimited to Seplat Energy, a Nigerian independent oil and gas company, through its wholly-owned subsidiary Seplat Energy Offshore Limited.
In the same vein, Seplat Energy also issued a statement confirming the deal with the American oil giant but said it is still waiting for regulatory approval and ministerial consent on the matter.
“The Completion of the Transaction is subject is still however subject to Ministerial Consent and other required regulatory approvals.”
According to the President of ExxonMobil Upstream Oil and Gas,he stated: “This sale will allow us to prioritize competitively advantaged investments in our strategic assets, and it supports the Nigerian government’s efforts to grow its oil and gas operations.”
“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.
He said ExxonMobil will 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.
Seplat Energy Plc, said it is pleased to announce that it has entered into an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (“MPNU”) from Exxon Mobil Corporation, Delaware (“ExxonMobil”) (the “Transaction”). Completion of the Transaction is subject to Ministerial Consent and other required regulatory approvals.
Details of The Transaction
“Seplat Energy Offshore Limited, a wholly-owned Nigerian subsidiary of Seplat Energy Plc, has 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, subject to lockbox, working capital and other adjustments at closing relative to the effective date “
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)
The Transaction will create one of the largest independent energy companies on both the Nigerian and London Stock Exchanges, and bolster Seplat Energy’s ability to drive increased growth, profitability and overall stakeholder prosperity
Based on 2020 pro forma working interest volumes for Seplat Energy and MPNU, the transaction delivers:
. 186% increase in production from 51 kboepd to 146 kboepd o 170% increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl
o 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)
.89% increase in total 2P reserves from 499 MMboe to 945 MMboe[1]
· Includes offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability
· This is the first transaction to be announced since the Nigerian Government’s recently ratified Petroleum Industry Act (“PIA”), and supports its key objectives
• Seplat Energy is fully committed to working with the Nigerian Government to bring these strategically important national assets fully into Nigerian ownership alongside NNPC
• Development of MPNU’s gas resources will support the Federal Government’s objective to achieve a pragmatic, progressive and just energy transition for Nigeria
Seplat Energy will acquire the entire share capital of MPNU from Exxon Mobil Corporation, Delaware (USA Incorporated), with an effective date of 1 January 2021 for a consideration of $1,283 million, subject to lockbox, working capital and other adjustments at closing relative to the effective date
• 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) in such calendar year
• The consideration implies an attractive EV / 2P metric of $2.9/boe, with significant gas upside potential
A strong operating portfolio
The MPNU portfolio primarily consists of:
• The Qua Iboe Terminal, one of Nigeria’s largest export facilities
• 51% interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso
• It does not include ExxonMobil’s deep-water assets in Nigeria
• MPNU will operate as a standalone subsidiary of Seplat Energy and upon closing and following receipt of requisite regulatory approvals, Seplat Energy will align MPNU with its overall strategic goals and ESG objectives
Financing the Transaction
• 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
• Global financing syndicate comprising Nigerian and international banks, as well as commodity trading companies
• Contingent payments, if materialised on Brent oil price annual average above $70/bbl, will be funded through share of net cash flows from operations
Timetable and Conditions
The Transaction is subject to customary closing conditions for a transaction of this nature, including Ministerial Consent and regulatory approvals from the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Federal Competition and Consumer Protection Commission.
The Transaction is classified as a reverse takeover for the purposes of UK Listing Rules relating to the Company’s listing on the London Stock Exchange. Upon completion of the Transaction, Seplat Energy will need to re-apply for admission to the Official List. Accordingly, Seplat Energy will prepare a prospectus in respect of Seplat Energy as enlarged by MPNU in connection with the required reapplication for listing of such shares on the Official List and to trading on the London Stock Exchange’s Main Market for Standard-Listed securities.
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 will not result in any changes to the Board of Seplat Energy. The Company currently expects the Transaction to close in H2 2022.
Dr. Bryant (ABC) Orjiako, Chairman of Seplat Energy, 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.”
Roger Brown, CEO of Seplat Energy, 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.”
