If the bid offer on the table were the only consideration for announcing the winner, Conoco Phillips would have announced Oando Plc as the new owners of its upstream assets in Nigeria.
With about $1.3Billion offer, the image conscious, integrated oil and gas company would have beaten the two other rivals: Transcorp/Midwestern Oil and Gas Consortium and Seplat Petroleum Development Limited in the race to acquire the American independent’s 20% stakes in the ENI operated Oil Mining Lease(OMLs) 60, 61 62 and 63, which deliver some 90-100,000 Barrels of Oil Per Day(BOPD) (gross) and also provide ENI’s share of gas for the Bonny based NLNG facility.
The bid committee is evaluating Oando’s ability to pay. Oando is so keen to win the asset it is prepared to sell 49% of its marketing subsidiary and the entire services (mainly rig supply) subsidiary. Transcorp/Midwestern and Seplat are bidding around $1.1-$1.15Billion each, making this the priciest auction of a single package of hydrocarbon property in the last decade.
“The assets are this expensive, not because of the upside potential”, says a source at the Department of Petroleum Resources, the Nigerian hydrocarbon regulatory agency, “but because it is guaranteed to deliver value for some time more”. These assets have been operated for upwards of 30 years “and you can reasonably forecast what it’d do in the next five years, with a company like ENI as operator”. A government official admits that this is not subject to the uncertainties brought on by the (state hydrocarbon company)NPDC, who, in spite of its dismal operating record, insisted on operating the assets from which Shell divested. “That action on its own brought down the values of those assets”.
The three entities are the survivors of a long queue of Nigerian independents who submitted bids for the assets once word was out that Conoco Phillips was leaving Nigeria. It was the kind of opportunity that Nigeria’s homegrown E&P companies have been waiting for; take over equity of IOCs who are moving out of the country’s oil and gas scene.
Oando has the most to gain from winning this bid. In spite of its claim that its E&P subsidiary is a leading African E&P company, it is the smallest producer of the three. The company has partaken in asset sale in Nigeria since 2003, but it has been left holding a leaking container. Oando’s net production of about 5,000BOPD comes from two out of ten licences; the ENI operated OML 125 in which it has 15% of the lone producing field, Abo, and the Energia operated Ebendo marginal field. Its plans to get Akepo field, in which it holds 30%, to production by Christmas 2012, doesn’t look likely to happen. The rest of the assets are not anywhere near production.
Oando’s last time out in an auction room was during the drawn out bid process for four onshore Nigerian acreages from which Shell, ENI and TOTAL divested between 2010 and 2012. It failed. This time around, its management is willing to bet almost the entire company.
