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Africa: Deal Flow Returns in Full In 2017

BP and TOTAL to finalise over $3Billion worth of acquisitions

Africa’s E&P deals, which sank into historic lows for most of 2016, picked up at the tail end of that year and have been on an upward trajectory in the first two months of 2017.

BP’s December 2016 deal with Komos in Northwest Africa involves $916Million if every condition is actualised. The British major is to acquire a 62% working interest, including operatorship, of Kosmos’ exploration blocks in Mauritania and a 32.49% effective working interest in Kosmos’ Senegal exploration blocks. BP will pay $162Million upfront, it will spend $221Million carrying Kosmos’ E&A activities in the blocks and $533Million in developing the gas field Tortue, discovered by Kosmos in 2014.

Rosneft, the Russian player, agreed to spend $1.125Billion to purchase a 30% interest in the theShorouk concession offshore Egypt, which contains the super-giant Zohr gas field, from the Italian firm ENI.

This followed BP’s November 2016 decision to grab10% interest in that sae Egyptian asset for $375MM.
So, whereas only $973MM had been spent on E&P deals in Africa between January and October 2016, BP alone was committed to spending $1.231Billion to farm into assets in Senegal, Mauritania and Egypt. And Rosneft is spending $1.125Billion.
The French major TOTAL started the new year by announcing its agreement with Tullow Oil to pay $900Million for 21.57% of Uganda’s Albert basin development project. This leaves Tullow with 11.73%.
In the space of two months, three European companies have committed to spend $3.316Billion to farm into assets in four countries.

Over 90% of this amount ($2.953Billion) is to acquire near term assets, comprising $553Million for the Tortue gas project in Mauritania, $1.5Billion for the Zohr development in Egypt and $900Million for the Albertine Basin oilfield development.
These purchases are expected to be concluded between the first and second quarters of 2017 with consent of the authorities in these countries.

Oando Sells Rig Company To Its Managers

Oando Plc has agreed to a Management buy-out of Oando Energy Services, the Plc’s subsidiary involved in rig contracting and oilfield services.

In effect, the management of Oando Energy Services are paying for 60% of the company, with Oando Plc holding 40%. It is not clear, as of the time of writing, how much the deal cost.

Oando Plc formally elected to become a pure E&P company in December 2015, proposing to sell significant equity in everything other than the hydrocarbon acreages it holds.

It specifically requested Shareholders to approve, on December 7, 2015, the sale of the entire Oando Energy Services (OES) Limited, a 16 year old subsidiary which owns and operates four swamp rigs, all of which are currently without work. Oando claims that it invested over $450Million in the acquisition refurbishment and upgrade of these idle rigs, including OES Passion, OES Integrity, OES Professionalism, OES Teamwork and OES Respect. Also up for sale were the oil service segments of OESL, which include Drilling and Completion Fluids Services as well as Drill Bits and Engineering Services.

OESL is the last of the non-acreage holding, non E&P licenced subsidiaries that Oando has sold. Oando Plc sold 51% of the voting rights and 60% of the economic rights of its filling station and petroleum products business to trading house Vitol and Helios Investment Partners for $276MMin 2015. In September 2016, it agreed to sell 49 per cent equity stake in its midstream subsidiary, Oando Gas and Power (OGP) Limited to a new major investor for $115.8Million to a Special Purpose Vehicle (SPV) owned by Helios Investment Partners LLP (Helios).

Much earlier, Oando sold out of the 10 Megawatt (MW) Alausa Power Limited (ALPL), the conception of a Power Purchasing Agreement between the company and the government of Lagos State, Nigeria’s economic powerhouse. The company s also sold its share of Akute Power Limited, a project company set up to develop and operate a 12.15MWIndependent Power Plant (4Nos. 3MW gas-fuelled engines) for Lagos Water Corporation.

BP in an Acquisition Binge across Africa

By Fred Akanni

Less than a month after it plunked down $375Million to take 10% of the massive Zohr (30Tcf of Gas in place) offshore Egypt, BP is back on the market, snapping up acreage in the Senegal Mauritania basin.

The European giant had earlier signed off on a sales and purchase agreement to lift 100% of the LNG produced by the ENI-operated Coral South Floating LNG facility, which is expected to be installed offshore Mozambique.The agreement covers the purchase of LNG for over 20 years.

Now BP says it is investing nearly $1Billion mostly in the form of a multi-year exploration and development carry to acquire a 62% interest and operatorship of Kosmos Energy operated offshore Blocks C-6, C-8, C-12 and C-13 in Mauritania and an effective 32.49% interest in the Saint-Louis Profond and Cayar Profond blocks in Senegal.

At a time of low prices, this is huge.

But while the investment in the Egyptian asset is clearly close to profit, the Senegal/Mauritania buy-in is a significant gamble.

Zohr, which was discovered by ENI in July 2015, is currently being developed for the Egyptian domestic gas market, and the government has been paying regularly, with good prices too, at least $4 per Mscf (thousand standard cubic feet).

Prospects in the Senegal/Mauritania basin have lately described by petroleum geoscientists as ‘The Promise of the Northwest African margin’. Kosmos has encountered what it describes as over 15Tcf of gas off Mauritania. Its next plan is to search for oil in deeper water outboard this discovery. And that is one place where BP comes in, with the cash. BP is also interested in the gas part of the value chain. ”The approximately 33,000 square kilometres of acreage covered by today’s agreements includes the Tortue field, estimated by Kosmos to contain more than 15Tcf of discovered gas resources.

The total acreage, by Kosmos’ estimates, could contain roughly 50Tcf of gas resource potential and in excess of 1Billion barrels of liquids resource potential.

“We believe our expertise in integrating the gas value chain, together with a talented exploration partner in Kosmos, along with the support of the Mauritanian and Senegalese governments brings together all the elements needed to create a new LNG hub in Africa, ” BP says in a release. “In order to reduce development time and drive capital efficiency, the partners plan to process and transport the gas from Tortue at a near shore LNG facility. The proposed complex could be expanded in phases to accommodate future gas discoveries.

Under the terms of the agreements, BP and Kosmos have also agreed that Kosmos will remain the technical operator for the exploration phase of the project and drill three new exploration wells beginning in 2017.


Panoro Takes Yinka Folawiyo To Court

Says “No” To New Aje Well… “The Norway based minnow has struggled to pay its cash calls”
Oslo listed explorer Panoro Energy has commenced dispute resolution proceedings with the OML 113 joint venture partners by filing a request for arbitration with the Secretariat of the International Chamber of Commerce. The proceedings are taking place in the English High Court.

“The dispute concerns the purported passing of resolutions by the joint venture partners with respect to a proposed new well to be drilled at Aje in OML 113, and a related cash call”, the company explains.
“While Panoro has the financial ability to fully meet the amount of this disputed cash call, the Company believes the drilling of any new well is pre-mature at this stage”.

OML 113 is operated by Folawiyo Aje Services Ltd (FASL), a wholly owned subsidiary of Yinka Folawiyo Petroleum. It is made up of consultants and staff from the JV partners, who include New Age Exploration Nigeria Limited, EER (Colobus) Nigeria Limited, Pan Petroleum (Panoro Energy) Aje Limited and PR Oil & Gas Nigeria Limited.

Panoro Energy didn’t make it clear which particular well it is opposed to the drilling of. The facts in the public domain have always been that the partners will drill two new wells, Aje 6 and 7, after commencement of commercial production.

Aje field commenced commercial production in May 2016 after the completion of Aje 4 and Aje 5. Partners interviewed by Africa Oil+Gas Report say that Panoro has struggled to pay its share of cash calls “for some time now.”

Panoro says in its press release also of a firm view that the decision to incur such additional capital expenditures at Aje unambiguously requires unanimous consent of joint venture partners, which as such has not been taken in accordance with the Joint Operating Agreement procedure.

Panoro will seek to recover all losses, costs, expenses, compensation and damages in law and equity caused directly or indirectly by the joint venture partners’ breach of their contractual and equitable obligations. Panoro will also continue to take all necessary action to retain its equity participation in OML 113 and to preserve shareholder value. 

South African Parliament Finally Passes Petroleum Bill

South Africa’s National Assembly has voted to pass the Mineral and Petroleum Resources Bill.
198 voted yes to 80 NO votes
The legislation, in debate at the assembly for close to 10 years, has been forwarded it to the National Council of Provinces NCP for approval.
President Jacob Zuma is expected to give his assent after the NCP’s nod.
Just when the law appeared close to final sign off by President Jacob Zuma, in mid-2014, it was challenged by both mining and oil companies for harbouring certain clauses,causing the legislation to be returned back to the parliament.
Mining companies were concerned that it might infringe global trade obligations and was unconstitutional, partly because it elevated the country’s Mining Charter -meant to redress imbalances of the nation’s past apartheid rule -to the status of legislation. The Mining Charter contains regulations and stipulates rules for white-owned companies to sell stakes to black businesses.The bill also gives wide-ranging powers to the mines minister to place certain minerals in a “value-addition” category requiring a portion of extracted resources to be processed domestically and not be exported in raw form

Vertex Assumes the Largest Share of First Hydrocarbon Nigeria (FHN)

Vertex, an Upstream Nigerian independent funded by African Capital Alliance (ACA), has taken 40% of First Hydrocarbon Nigeria FHN, in a new shareholding structure of the latter.

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Seplat Gets a New Shareholder

The French explorer Maurelet Prom (M&P), is about to sell all its shares to Petramina, the Indonesian state hydrocarbon company. M&P holds 21.37% in Seplat, Africa’s largest home grown E&P Company. Petramina has already bought about a quarter (24.53%) of M&P’s shares and hopes to purchase the remaining after an M&P board meeting has approved the purchase. The 24.53% was sold by  Pacifico, a fund controlled by Jean Francois Henin, chairman of M&P.

That block trade was completed for €4.20 ($4.68) per share, plus a €0.50 ($0.56) earn-out per share payable if, from January 1st 2017 (included) to December 31st2017 (included), the Brent price remains above $65 per barrel during all trading days within a period of ninety consecutive calendar days.

“Should Maurel & Prom’s Board of Directors deliver a favourable reasoned advice on the offer, following the conclusions of the report from the independent expert, Petramina has undertaken to file, to the French market authority, a voluntary tender offer on (i) all Maurel & Prom shares under the same conditions as those offered to Pacifico and on (ii) 2019 and 2021 convertible bonds at their par value plus accrued interests”, M&P says in a release. “The schedule of the operation is expected to be completed by the end of 2016”.

Petramina already owns producing property in Africa (it acquired ConocoPhillips’ interests in Algeria), but the M&P buy, of which Seplat is the largest pie, will be clearly the jewel in its African crown.

 Seplat operates four acreages (OMLs 4, 38, 41, and 53) in Nigeria and has non- operating interests in two others (OPL 283 and OML 55). At optimum, those assets deliver around 88,000Barrels of oil per day (BOPD) and 300Million standard cubic feet of gas (MMscf/d) gross. These translate to 37,750BOPD and 135MMscf/d net to Seplat.

 Maurel & Prom‘s Board of Directors has unanimously indicated that it supports the offer and has the intention to recommend the shareholders to tender their shares. In accordance with applicable regulation, Maurel & Prom’s Board of Directors will deliver its definitive reasoned opinion on the tender offer once it has obtained the fairness opinion from Ledouble, the independent expert it has appointed.

Eq Guinea Takes the Bid Round To Singapore

The Equatorial Guinea oil and gas licensing round, EG Ronda 2016, will be in Singapore in September as the Ministry of Mines and Hydrocarbons pushes forward on promoting available blocks.

The visit to Singapore will open opportunities for companies in South-East Asia and Australia to take part in the round. Gabriel Mbaga Obiang Lima, Equatorial Guinea’s Minister of Mines and Hydrocarbons, said Singapore’s position as a leading energy centre in South-East Asia makes it the ultimate venue for EG Ronda.

“We have considerable admiration for what Singapore has accomplished in becoming an important global energy hub,” said H.E the Minister. “It is a model for Equatorial Guinea’s long-term development and a reference point for oil and gas trading in South-East Asia. We look forward to having excellent discussions with organizations in the region.”

Lima will deliver a keynote presentation during the CWC LNG & Gas Series: 8th Asia Pacific Summit, to be held at the Grand Hyatt Hotel on September 20-23. The ministry’s press release claims that Equatorial Guinea has a large portfolio of gas projects in operation or under development, including EG LNG and the pioneering Fortuna FLNG development, expected to be the first of its kind in Africa.

EG Ronda 2016 was launched on June 6, 2016 at the Africa Oil & Power conference and will conclude on November 30, 2016. The MMH invites bids on all open acreage outside of blocks under direct negotiation.

MX Oil Takes Full Charge

AIM listed MX Oil has taken over Jacka Resources Nigeria Limited.

This is the final stage of an investment process which involves MX Oil’s right to take sole control of Jacka Resources’ equity in Oil Mining Lease (OML) 113, which holds the Aje Field offshore Nigeria. The deal is for a nominal sum. An official change in ownership still has to be approved by the country’s Department of Petroleum Resources.

Aje field commenced crude oil production in May 2016. The Field has an FPSO installed with a storage capacity of 750,000 barrels of oil and can accommodate 40,000 barrels per day of crude production.

Tanzania: Unusual Dispute around Petroleum Rights

Two partners in a Tanzanian licence are involved in very unusual dispute over payments of cash calls.

Ordinarily, the operator of the licence leads the other partners and spends the money on operations, while the non-operating partners pay their share of the cost, sometimes after the fact.

This means that more often than not, the operator is the most aggressive partner.

However, in thecase between  two Australian minnows: Swala Oil &Gas and Otto Energy, both of whom are partners in the Tanzanian onshore Pangani and Kilosa Kilombero acreages, anon operating partner is accusing the operator of laxity and not paying cash calls (ie. Agreed contribution for opex and capex) and is demanding to take over operatorship.

Otto Energy and Swala Oil&Gas each has 25% of the assets. Each of them initially had 50%, but had farmed down to other partners.

Otto Energy says it has issued i variousdispute notices toSwala Oil and Gas Tanzania, the Dar es Salam listed local subsidiary of the Australia listed Swala Oil and Gas.

These notices relate to: (1). defaults in relation to non payment by Swala Oil and Gas Tanzania of cash calls and associated interest accrued under the Joint Operating Agreements (JOAs); (2). claims by Otto Tanzania for payment of interest accruing under the JOAs as a result of Swala Oil and Gas Tanzania’s default samounting to approximately $360,000; and (3). the removal of Swala Oil and Gas Tanzania as operator of the Kilosa Kilombero licence area, following that company’s

“failure to satisfy the joint venture partners that it is not insolvent”. Otto contends that “the matters raised in these notices are unrelated to the current Federal Court proceedings brought by Otto Tanzania against Swala Energy Limited (In Administration)”

The company argues that “these steps are the most appropriate course of action to ensure that joint venture operations, including the drilling of the planned Kito-1 exploration well, are undertaken by a joint venture which has the financial and technical capability to ensure the efficient and safe completion of drilling. Otto Tanzania believes it is likely that the joint venture will be unable to progress the drilling of the Kito-1 well in 2016 until the joint venture disputes are resolved”.

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