The Shell Petroleum Development Company of Nigeria Limited (SPDC), a subsidiary of Royal Dutch Shell plc (Shell) (NYSE: RDS.A) (NYSE: RDS.B), has completed the assignment of its 30% interest in oil mining lease (OML) 18 and related facilities in the Eastern Niger Delta. Its interests in OML18 were assigned to Eroton Exploration & Production Company Limited. Total cash proceeds for Shell amount to $737 million.
This divestment is part of the strategic review of SPDC’s onshore portfolio and is in line with the Federal Government of Nigeria’s aim of developing Nigerian companies in the country’s upstream oil and gas business.
Mart Resources Limited, Midwestern Oil and Gas Limited and Suntrust Oil and Gas Limited are the members of the Eroton consortium.
Afreximbank acted as the sole mandated lead arranger, as well as lender and facility agent, to raise the trade-backed $663 million SRBL required to close the asset sale.
Other participants included Diamond Bank Plc, Fidelity Bank Plc, Africa FINANCE Corporation (modelling bank), Ecobank Nigeria Plc, Zenith Bank Plc, FSDH Merchant Bank, and Shell Western Supply and Trading acting as lenders.
Eroton, an indigenous Nigerian company, incorporated as a special purpose vehicle by Mart Western Energy Limited, in 2014, won the bid for the acquisition of the oil block when Shell offered four oil block as well as the Nembe Creek Trunk Line (NCTL), which it put up for sale following a 2013 review of its business in the country.
The $663 million funding deal, which was completed on September 23, 2014, was structured as a seven-year facility, while the oil block licence will expire in five years.
However, a bespoke insurance tool was said to have been used to cover the risk in the event of non-renewal by the federal government, thus improving the borrowing capacity of the oil assets.
Afreximbank also used a standby letter of credit (LC) to backstop the payment obligations of the buyer to the sellers while the sale of the assets awaited the consent of the Minister of Petroleum Resources.
The overall ticket size was $1.2billion, and the acquisition was FINANCED through debt and equity and required the participation of Standard Chartered Bank as escrow agent in relation to the equity and loan components.
The acquisition of OML 18 by Eroton was one of four asset sales under Shell’s latest asset disposal programmes in Nigeria.
Others included the sale of OML 29 and the Nembe Creek pipeline to the Aiteo group for $2.562 billion; OML 24 to Pan Ocean Corporation Nigeria Limited for $900 million; and OML 25 to Crestar for $453 million.
However, NNPC has halted the sale of OML 25 to Crestar, resulting in a lawsuit instituted by Crestar challenging the action.