Seplat Energy  set to expand its footprint in Nigeria’s energy space with acquisition of  Mobil Producing Nigeria Unlimited

UGO AMADI

 

The recent announcement that Seplat Energy, a Nigerian independent oil and gas company has entered into an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Delaware is indicative that the company  is  committed to driving sustainable economic development, better future for the citizens and ensuring the nation lives up to the global expectation in the energy transition programme.

 

Also, despite some challenges and unpredictable operational environment experienced by  many  sectors of the Nigerian economy , Seplat Energy has continued to initiate transformational innovation  and investment drive which invariably complements  the Federal Government’s policies on gas development, job creation and industrialization, and overall development of the country.

 

The latest acquisition which transaction is expected to close later this year pending regulatory approvals will see Seplat Energy expanding its footprint  in the nation’s oil and gas sector as well as position it as a clear indigenous leader in the energy sector.

 

Significantly, the deal entails that Seplat Energy Offshore Limited, a wholly owned Nigerian subsidiary of Seplat Energy Plc, entered into a Sale and Purchase Agreement to acquire the entire share capital of MPNU for a purchase price of $1,283 million plus up to $300 million 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 kboepd (W.I.) in 2020  (92% liquids)

 

On the  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 kboepd  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[1], includes offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability.

 

Supporting Nigeria’s energy transition and objectives of the Petroleum Industry Act

 

This is the first transaction to be announced since the Nigerian Government’s recently ratified Petroleum Industry Act (“PIA”), and supports its key objectives.

 

Seplat Energy is fully committed to working with the Federal Government to bring these strategically important national assets fully into Nigerian ownership alongside NNPC.

 

Development of MPNU’s gas resources will also support the Government’s objective to achieve a pragmatic, progressive and just energy transition for Nigeria.

 

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 $300 million 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 $550 million senior term loan facility and $275 million junior off-take 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.

 

Timetable and Conditions: The Transaction is subject to customary closing conditions for a transaction of this nature, including Ministerial Consent and regulatory approvals from the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Federal Competition and Consumer Protection Commission.

 

The Transaction is classified as a reverse takeover for the purposes of UK Listing Rules relating to the Company’s listing on the London Stock Exchange. Upon completion of the Transaction, Seplat Energy will need to re-apply for admission to the Official List.

 

Accordingly, Seplat Energy will prepare a prospectus in respect of Seplat Energy as enlarged by MPNU in connection with the required reapplication for listing of such shares on the Official List and to trading on the London Stock Exchange’s Main Market for Standard-Listed securities.

 

 

 

Under the Sale and Purchase Agreement, Seplat Energy will pay a deposit of $128 million, which will be applied towards the purchase price on closing. If the Transaction does not proceed, the deposit will be repaid to Seplat Energy where the agreement is terminated by Seplat Energy in certain circumstances.

 

The Transaction will not result in any changes to the Board of Seplat Energy. The Company currently expects the Transaction to close in H2 2022.

 

According to Dr. Bryant (ABC) Orjiako, Chairman of Seplat Energy, “This is a transformational acquisition for Seplat Energy that strengthens our partnership with the national oil company, the NNPC, and consummates the spirit of the newly enacted PIA.

 

“As a significantly larger business, with a stronger resource base and greatly enhanced capabilities, we will be better positioned to provide sustainable energy solutions that drive growth and profitability for the benefit of all our stakeholders, particularly our host communities and the wider Nigerian economy.

 

“We fully support the aims of the Federal Government’s “Decade of Gas”, and this acquisition will accelerate our development of Nigeria’s gas resources to help achieve a just transition for our rapidly growing country.”

 

Also reacting to the deal, Mr. Roger Brown, CEO of Seplat Energy, said: “This transaction underpins Seplat Energy’s drive to be a leader in the growth of the indigenous independent energy sector in Nigeria.

 

“The acquisition is a perfect fit with our strategy to build a sustainable business and deliver energy transition in Nigeria. Our financial strength has enabled us to attract high quality local and international capital providers to fund this transaction without diluting our existing shareholders and reflects our deliberate approach to capital allocation.

 

“We are determined to drive our growth through the extensive low-cost and low-risk production opportunities it delivers in the near term, whilst also developing longer-term opportunities to monetise our significant gas resources through domestic and export opportunities.

 

“This is a win-win for both companies. Together, we will strengthen our focus on profitability and cash generation to reinvest in Nigeria’s energy development”.

 

MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and the person responsible for  the release of this announcement on behalf of Seplat Energy is Emeka Onwuka, CFO Seplat Energy Plc.

 

It would be recalled that Seplat is the leading supplier of natural gas to the domestic market and is helping to address a major obstacle facing the Nigerian economy today – access to reliable, affordable power.

 

As Nigeria’s leading indigenous Oil and Gas Company, Brown said Seplat is committed to delivering positive impact through its operations. ‘’We have built strong relationships with our key local communities, promoting trust and confidence amongst our various stakeholders, ultimately resulting in a stable operating environment that facilitates the creation of shared value”.

Seplat, he added is  improving profitability, maintaining strict cost control and implementing the most appropriate technologies whilst creating value for all stakeholders.

 

The company remains committed to its mission of sustainably delivering profitable, diversified energy solutions through operational excellence, skilled workforce and effective partnership, as well as identified its fast-growing gas business as a strong catalyst for sustainable development in Nigeria.