Delay on the part of the Nigerian government has forced one of the world’s biggest energy company, Vitol, to pull out of an acquisition talk involving two Nigerian oil fields. Vitol was among a consortium interested in buying the Nigerian oil fields from Brazil’s Petrobras but the former has now backed out of the deal.
Vitol is not the only company from the consortium to quit, according to a report. Delonex Energy also pulled out of the deal. The Nigerian oil fields are owned by Petrobras, which is willing to sell, with the deal almost at the conclusion stage.
Nairametrics had reported last month that back in May 2017, Petrobras decided to divest from as much as $21 billion worth of assets. The decision was made following a dramatic increase in the company’s debt to the tune of $100 billion. This led Petrobras to place some of its assets on sale, including its stake in Petrobras Africa.
Reasons Vitol pulled out of deal
It was learnt that the Brazilian and Nigerian governments contributed to the exit of Vitol from the deal. Both governments were blamed for delaying the deal by not approving necessary clearances.
Also, the report quoted a source, who disclosed that Vitol’s inability to get physical oil cargoes from the deal further encouraged the company to pull out. It was stated that it wasn’t a core business for Vitol.
“At the end of the day, it was a non-core business for Vitol, so they walked away,” one source said.
The deal goes on
According to the other company that makes up the consortium, Africa Oil, the deal would be unhindered by Vitol’s withdrawal. Africa Oil has reiterated its commitment to go ahead to seal the $1.5 billion deal.
With the exit of Vitol and Delonex Energy, Africa Oil said it had entered into an agreement with BTG Pactual (Brazil’s largest independent investment bank) to obtain a $250 million loan facility, while it would fund the rest.
Note that BTG also owns 50% of Petrobras Africa, whose core assets are stakes in offshore fields that produce Nigerian oil grades Agbami, Egina and Akpo.
Speaking about Africa Oil’s intention to sign the deal despite the exit of Vitol and Delonex Energy, Chief Executive of Africa Oil, Keith Hill, said, “We remain committed to completing this acquisition and look forward to working with Petrobras and all stakeholders to accomplish that goal.”
What you need to know
Petrobras is not only selling its Nigerian oil fields. The company is selling other assets to make up the debt. Petrobras has reached an agreement to sell a $2.9 billion worth of assets to Equinor AXA, a Norwegian company. The company is also contemplating selling off its natural gas pipeline which is 4,500 kilometres long, and valued at $9 billion.
Petrobras’ stake in Petrobras Africa is also among the list of assets that were scheduled for divestment. The other two partners in the African operation (i.e., Helios Investment Partners and Banco BTG Pactual) initially mulled selling their stakes as well but changed their minds along the line.
In 2013, Banco BTG paid $1.5 billion for 50% in Petrobras Africa. Afterwards, Helios Investment Partners came onboard. Things were going well until 2016 when a Brazilian lawmaker disclosed that Banco BTG actually paid less money for its 50% share.
According to the revelation, private consultants valued the share at $2.7 billion instead of $1.5 billion. Meanwhile, the Brazilian bank insisted that it acquired the stakes through transparent means.