Britannia U’s offer to pay $1.6Billion for Chevron’s 40% stakes in three acreages in eastern Nigeria has upset the calculations of most keen watchers of the sale, including fellow bidders, equity firms and the investment banking community.
The company bid with an equity financing partner and their joint offer is around $1 Billion higher than those from three other competing consortia, who made it to the final of the three month long process. “The prevailing industry opinion is that the assets would be good to go for $400Million” says an investment banker who has worked at the top of one of the country’s leading multinational operators. “The $200 Million to $250Million that the bidders put on top is to get them closer to winning the bid”. It’s a view that is widely shared by industry operatives we spoke to.
The acreages in question are Oil Mining Leases (OMLs) 52, 53 and 55, which contain proven oil and gas reserves of 555MMBOE, according to Chevron’s Information Memorandum, quoting the Nigerian Department of Petroleum Resources (DPR).
The last three standing in the race include Seplat/Amni Production, Niger Delta Petroleum/SAPETRO and Sahara/Septa, all Nigerian companies.
First E&P put in a bid for only OML 55, so did Belema Oil, a company linked to the host communities in the same acreage. Chevron, however, prefers bidders who want to take all.
It wasn’t clear, as of Tuesday, October 15, 2013, if Britannia U had been declared winner, but staff of the company were already celebrating. “We plan to drill three wells within six months of the approval of the sale”, one such employee, asking not to be named, revealed. ”We’d complete in two levels each. These six reservoirs will deliver for us 20,000BOPD. That will be enough to recover the money in one year”.
Britannia U was considered a dark horse at the beginning of the sale process. The company produces 5,000BOPD from the shallow water Ajapa marginal field, previously held by Chevron, but it is not perceived as a technically honed company. The possibility that Britannia U could win this highly contested bid has invited comparisons with ConocoPhillips’ sale of its Nigerian assets to Oando for $1.8Billion. Oando has struggled to raise the money. The conversation about this sale, in the last 48 hours, has centred around two things: whether Chevron cares at all if the winner goes bust after the sale, and whether it is important to Chevron that whoever wins has the wherewithal to optimally develop the assets.