Seplat seals the deal to take over ExxonMobil’s shallow water assets in Nigeria

Nigerian oil and gas company Seplat Energy has inked an agreement to acquire ExxonMobil’s subsidiary holding the company’s shallow water assets off Nigeria in a bid to drive its growth strategy, forge a sustainable business, and achieve energy transition goals.

The agreement comes following Seplat’s confirmation of press speculations in November 2021 related to negotiations to acquire ExxonMobil’s Nigerian shallow water business.

In a statement on Friday, Seplat informed that it had entered into an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited from ExxonMobil – with an effective date of 1 January 2021 – for a purchase price of $1.28 billion.

The 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 company further explains that this transaction encompasses the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria with a highly skilled local operating team and a track record of safe operations, producing 95 kboepd in 2020 out of which 92 per cent were liquids.

Roger Brown, CEO of Seplat Energy, commented: “The acquisition is a perfect fit with our strategy to build a sustainable business and deliver energy transition in Nigeria. 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.”

Seplat reveals that the cash consideration payable under the transaction will be funded through a combination of existing cash resources and credit facilities of the company along with a new $550 million senior term loan facility and $275 million junior offtake facility.

Global financing syndicate comprising Nigerian and international banks, as well as commodity trading companies will also play a role in the funding of this transaction, while contingent payments – if materialised on Brent oil price annual average above $70/bbl – will be funded through a share of net cash flows from operations.

Furthermore, Seplat anticipates that the transaction will create one of the largest independent energy companies on both the Nigerian and London Stock Exchanges while bolstering the firm’s ability to drive increased growth, profitability and overall stakeholder prosperity.

Moreover, the transaction is expected to deliver a 186 per cent increase in production from 51 kboepd to 146 kboepd; a 170 per cent increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl; a 14 per cent increase in 2P gas reserves, from 1,501 Bscf to 1,712 Bscf, along with a significant undeveloped gas potential of 2,910 Bscf (JV: 7,275 Bscf).

In addition, the acquisition of ExxonMobil’s shallow water assets in Nigeria is expected to bring an 89 per cent increase in total 2P reserves, from 499 MMboe to 945 MMboe, adding offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability.

Seplat says that this transaction is the first one to be announced since the Nigerian Government recently ratified the Petroleum Industry Act (PIA) and supports the objectives of this act and Nigeria’s energy transition.  

Mobil Producing Nigeria Unlimited’s portfolio includes a 40 per cent operating ownership of four oil mining leases – OMLs 67, 68, 70, 104 – and associated infrastructure with NNPC as a partner, holding 60 per cent interest.  

Additionally, the asset portfolio entails the Qua Iboe Terminal, one of Nigeria’s largest export facilities and a 51 per cent interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso. However, it does not include ExxonMobil’s deepwater assets in Nigeria.

Upon the closing of the transaction following the receipt of required regulatory approvals, MPNU will operate as a standalone subsidiary of Seplat Energy and it will be aligned with the firm’s overall strategic goals and ESG objectives.

Dr. Bryant (ABC) Orjiako, Chairman of Seplat Energy, remarked: “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.”

The company confirms that 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.

Under the Sale and Purchase Agreement (SPA), the firm will pay a deposit of $128 million, which will be applied towards the purchase price on closing, although, if the transaction does not proceed, the deposit will be repaid to Seplat. The transaction is expected to close in the second half of 2022.

“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,” concluded Orjiako.