Seplat Energy Plc has announced an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Delaware for $1.28 billion.
This was disclosed in a notice published by the Nigerian Exchange Limited (NGX) on February 24, 2022. The transaction is reminiscent of the $1.5 billion ConocoPhillips Nigerian operation by Oando in 2014.
The transaction entails the acquisition of ExxonMobil Nigeria’s entire offshore shallow water business. According to the notice, ExxonMobil Nigeria’s shallow water business 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 (92% liquids).
Key details of the transaction
- Seplat Energy Offshore Limited, which is a wholly owned Nigerian subsidiary of Seplat Energy Plc, will 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.
- According to Seplat, 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 completion of the Transaction is subject to Ministerial Consent and other required regulatory approvals.
How will Seplat pay for it?
- Seplat says it will fund the acquisition via a combination of debt and cash on its balance sheet.
- It claims it will utilize existing cash resources and credit facilities of Seplat Energy, and a new $550 million senior term loan facility and $275 million junior offtake facility.
- It expects funding from 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.
- Seplat has over N309 billion of debt inclusive of cash of N112 billion as of its 2021 third quarter results.
What Seplat is buying from Mobil
- A 40% operating ownership of four oil mining leases (OMLs 67, 68, 70, 104) and associated infrastructure (NNPC is the 60% partner)
- 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 claims that the transaction will give rise to one of the largest independent energy companies on both the Nigerian and London Stock Exchanges, and in addition, support “Seplat Energy’s ability to drive increased growth, profitability and overall stakeholder prosperity”.
Other value proposition for this transaction
According to Seplat the transaction also provides the following value proposition.
- The volumes for Seplat Energy and MPNU, the transaction delivers: 186% increase in production from 51 kboepd to 146 kboepd.
- 170% increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl.
- 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.
- Includes offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability.
What the people are saying
Commenting on the transaction, the Chairman of Seplat Energy Plc, Dr. Bryant (ABC) Orjiako, explained that this development would strengthen partnerships between the company and NNPC, as well as “consummate the spirit of the newly enacted PIA”.
- He said, “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”.
- Speaking on the benefit this transaction would bring the country, he said, “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.”
- Also commenting on the transaction, CEO of Seplat Energy Plc, Roger Brown said, “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”. “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”, he added.
Seplat share price
Seplat topped the gained 7.49% on Thursday to close at N859.90 per share, as investors with probable prior knowledge of the transaction reacted positively. The share price has gained 10% today already.