Oando today released this statement;
Oando Energy Resources Inc. (“Oando Energy Resources” or the “Company”) (TSX: OER), a company focused on oil and gas exploration and production in Nigeria, today announced that it has completed the acquisition of Medal Oil Company Limited (“Medal Oil”). The purchase price of US$5,000,000 was satisfied by the issuance of 3,491,082 units, each unit consisting of one common share of the Company and one-half of one warrant to purchase an additional common share at a price of C$ 2.00 per common share for a period of 24 months from the date on which the Company closes the acquisition of the Nigerian upstream oil and gas business of ConocoPhillips the (“CoP Acquisition”). Medal Oil holds a 5% interest in OML 131. Upon completion of the CoP Acquisition, OER will own a 100% interest in OML 131.
This deal basically gives Oando 100% control of OML 131 which is the asset acquired in the COP deal. Medal Oil owned held 5% interest in OML 131 out of which OER already acquired from ConocoPhiliips. Oando Nigeria earlier this month converted debt to equity taking its ownership of Oando Energy Resources to 93%. I am surprised Oando announced the deal was completed already when one part of the purchase consideration will be paid 24months after the completion of the COP deal. Oando’s share price was down 3.2% to N25.7 by mid day trading.
Oando released a flurry of tweets to explain the benefits of the deal.
| Oando_PLC Oando Energy Resources (OER), a company focused on oil and gas exploration and production in Nigeria… 17/07/2014 11:31 |
| Oando_PLC …has completed the acquisition of Medal Oil Company Limited #Oilandgas #Oando #Growth 17/07/2014 11:31 |
| Oando_PLC The purchase price of US$5,000,000 was satisfied by the issuance of 3,491,082 units… 17/07/2014 11:32 |
| Oando_PLC …with each unit consisting of one common share of the Company #Oilandgas #Oando #Growth 17/07/2014 11:32 |
| Oando_PLC Medal Oil holds a 5% interest in OML 131, and upon completion of the ConocoPhillips asset acquisition… 17/07/2014 12:11 |
| Oando_PLC …OER will own a 100% interest in OML 131 #Oilandgas #Oando #Growth 17/07/2014 12:11 |
Ugo,
Please re-read this deal again, most especially the part about warrants, I think you missed something there. The deal is complete and fully paid for as if today, what happens in 24months is owners of Medal oil will pay OER CAD$2.00 to buy each share of OER.
The warrant entitles the holder to buy OER shares at a fixed price in the future, unless the price of those shares exceed CAD$2 in the next 24months, those warrants may never be exercised. My thoughts, OER is not paying a cent more for these assets after today. By the way, I am not related in any way, shape or form to OANDO or its owners, I just read your blogs, thank you.
Hi Amos, Good point…Your description of the deal does make some sense. Basically, Oando gives Medal Oil Warrants to purchase additional shares in OER within 24months after the conclusion of the deal. It’s still a dilution for Oando though and the fact that a warrant has been issued may create a continent liability for Oando. Thanks for your insight…very useful.