Atlantic Energy is in the process of raising a billion dollar ($1Billion) loan from Nigerian banks, in large part to fund its planned acquisition of a significant percentage of Shoreline Power’s equity in Shoreline Energy Resources.
Shoreline Energy Resources is the special purpose vehicle(SPV) with which Shoreline Power, a Nigerian energy and infrastructure company, and Heritage Oil Plc, the London listed independent, are about to acquire the 45% equity held by Shell, ENI and TOTAL in the Oil Mining Lease (OML) 30, onshore Niger Delta. NPDC, the operating arm of the state hydrocarbon company NNPC, will operate the acreage with 55%.
Heritage Oil is funding the entire $850Million acquisition on behalf of both itself and Shoreline Power. While Shoreline Power looks, on the surface, to hold 55% of the SPV, it indeed has far less equity. Heritage’s press release suggested it will be entitled to 30% of production, compared to its 20.25% working interest. This is a clear indication that it is carrying a lot of Shoreline Power’s funding obligations.
This is where Atlantic Energy comes in. The company is the designated technical and financing partner (service contractor)to NPDC in OML 30, as well as in four other acreages where Shell/ENI and TOTAL sold off their equities between 2010 and 2012(OMLs 26, 34, 40 and 42). For this effort, Atlantic Energy, which won the service contract on a discretionary basis and in what has been widely criticized as patronage circumstances lacking transparency, is lifting, currently, about 60% of the NPDC ‘s (read: The Nigerian government’s) share of the production in OMLs 26, 34 and 42. (OML 40 has no current production). This is about 33% of the overall equity oil and gas. This company is thus a high net-worth enterprise that can easily access Reserves Based Lending. Atlantic Energy expects to use part of the loan money to acquire about 45% of the 55% nominal shareholding that Shoreline Power currently holds in the SPV, in addition to funding Shoreline Power’s remaining 10% interest.
This would give Atlantic Energy equity on both sides: a 60% equity of NPDC’s 55% and a 22% equity in Shoreline Natural Resources.
It is also a future-looking deal; OML 30 is the most valued acreage in the ongoing Shell Nigeria led divestment. Current production is around 35,000BOPD, from such fields as Olomoro Oweh, Eriemu, Evwreni , Oriri, Uzare and Kokori. Any equity production accruable to Atlantic Energy via a company to company transaction is open to less scrutiny than a partnership deal with NPDC , which has already generated a lot of comments in the public and may not last beyond the tenure of the current minister of Petroleum.