Seplat Energy’s entry into an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from Exxon Mobil Corporation, Delaware (ExxonMobil) is set apart from previous sales and purchases of assets between majors operating in Nigeria and their homegrown counterparts.
As indicated in the Africa Oil+Gas Report’s November 2021 edition, this is an entire acquisition of a company, MPNU, and not merely of equity stakes of ExxonMobil in the OMLs operated by the US major.
For this reason, it is different from the routine sale and purchase of assets of majors by Nigerian minnows in the last 15 years and is the first major takeover of a major oil company by a Nigerian independent.
The closest thing to this transaction, in recent history, is the sale of Eland Oil & Gas to Seplat, in the year before the pandemic hit.
And it is not over yet. “Completion of the Transaction is subject to Ministerial Consent and other required regulatory approvals”, according to the dual listed company, Africa’s largest homegrown independent.
Seplat Energy itself has summarized the transaction as follows:
- Seplat Energy Offshore Limited, a wholly owned Nigerian subsidiary of Seplat Energy Plc, has entered into a Sale and Purchase Agreement to acquire the entire share capital of MPNU for a purchase price of $1,283Million plus up to $300Million contingent consideration, subject to lockbox, working capital and other adjustments at closing relative to the effective date
- 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 95,000Barrels of Oil Equivalent (BOE) per day working interest in 2020 (92% liquids)
The company also talks of transformational impact
- The Transaction will create one of the largest independent energy companies on both the Nigerian and London Stock Exchanges, and bolster Seplat Energy’s ability to drive increased growth, profitability and overall stakeholder prosperity
- Based on 2020 pro forma working interest volumes for Seplat Energy and MPNU, the transaction delivers:
- 186% increase in production from 51 kboepd to 146,000BOEPD o 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
Details of the Transaction
- Seplat Energy will acquire the entire share capital of MPNU from Exxon Mobil Corporation, Delaware (USA Incorporated), with an effective date of 1 January 2021 for a consideration of $1,283 million, subject to lockbox, working capital and other adjustments at closing relative to the effective date
- The Transaction agreement also includes potential additional contingent consideration of up to $300Million in total, payable over the period 1 January 2022 to 31 December 2026, and contingent upon average Brent crude oil prices exceeding $70 per barrel and subject to MPNU’s average working interest production exceeding 60 kboepd (JV: 150 kboepd) in such calendar year
- The consideration implies an attractive EV / 2P metric of $2.9/boe, with significant gas upside potential
A strong operating portfolio
The MPNU portfolio primarily consists of:
- 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 Energy will align MPNU with its overall strategic goals and ESG objectives
Financing the Transaction
- The cash consideration payable under the Transaction will be funded through a combination of existing cash resources and credit facilities of Seplat Energy, and a new $550Million senior term loan facility and $275 million junior offtake facility
- 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.