Seplat to acquire ExxonMobil’s shallow water subsidiary

Nigerian independent oil and gas company, Seplat, is set to acquire the shallow-water affiliate of ExxonMobil, Mobil Producing Nigeria Unlimited.

The acquisition, announced yesterday, came at a time most International Oil Companies (IOCs) in Nigeria were divesting, retaining mainly their operations in the deep waters.

In the face of the move away from fossil fuel and portfolio ratification, ExxonMobil had last year divested in key Africa investment, selling an 80 per cent interest in a Ghanaian offshore block and proposing to offload its stake in the Doba oilfield in Chad.

Seplat Energy Plc, a leading Nigerian energy company listed on the Nigerian Stock Exchange and the London Stock Exchange, stated in a release that acquiring the entire share capital of Mobil Producing Nigeria Unlimited was awaiting a completion of the transaction, saying it was subject to Ministerial Consent and other required regulatory approvals.

Chief Financial Officer (COO) of the company, Emeka Onwuka, noted that the purchase price of the share was about $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 in 2020,” he said.

Onwuka said the development would bolster the company’s ability to drive increased growth, profitability and overall stakeholder prosperity.

The new deal is also projected to increase by 186 per cent oil production from 51 kboepd to 146 kboepd while increasing by 170 per cent 2P liquids reserves, from 241 MMbbl to 650 MMbbl.

There are also expectations that the move would increase by 14 per cent 2P gas reserves from 1,501 Bscf to 1,712 Bscf, plus significant undeveloped gas potential of 2,910 Bscf (JV: 7,275 Bscf).

Total 2P reserves are expected to move from 499 MMboe to 945 MMboe witnessing 89 per cent increase and other implications.

Onwuka noted that Seplat Energy would acquire the entire share capital of MPNU from Exxon Mobil Corporation, Delaware (USA Incorporated), with an effective date of January 1, 2021, for a consideration of $1,283 million, subject to lockbox, working capital and other adjustments at closing relative to the effective date.

He added that the $300 million in total extra contingent was payable over the period from January 1, 2022, to December 26, 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 move implies an attractive EV/2P metric of $2.9/boe, with significant gas upside potential.

The deal, Onwuka said, also consists of 40 per cent operating ownership of four oil-mining leases (OMLs 67, 68, 70, 104) and associated infrastructure in which NNPC owns 60 per cent partner.

The cash consideration payable under the transaction, according to him, 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 off take facility.

Also a global financing syndicate comprising Nigerian and international banks, as well as commodity-trading companies were also on the option.

Onwuka noted that the transaction was subject to customary closing conditions, including Ministerial Consent and regulatory approvals from the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Federal Competition and Consumer Protection Commission.

Reacting to the development, 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.”

The CEO of the company, Roger Brown, also noted that the 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,” he said.