Nigerian oil company Seplat has agreed to buy ExxonMobil's shallow water assets in Nigeria via the acquisition of the U.S. oil company's Nigerian subsidiary Mobil Producing Nigeria Unlimited ("MPNU"), in what Seplat said was a transformational acquisition for the company. Seplat will pay $1,28 billion for the acquisition.
“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),” Seplat said.
"This sale will allow us to prioritize competitively advantaged investments in our strategic assets, and it supports the Nigerian government’s efforts to grow its oil and gas operations,” said Liam Mallon, president, ExxonMobil Upstream Oil and Gas. “We value the relationships we have spent decades building with the government and people of Nigeria, which will continue as we maximize the value from our deepwater operations.”
When finalized, the sale will include the Mobil Development Nigeria and Mobil Exploration Nigeria equity ownership of Mobil Producing Nigeria Unlimited, which holds a 40% stake in four oil mining licenses, including more than 90 shallow-water and onshore platforms and 300 producing wells.
ExxonMobil said it would maintain a significant deepwater presence in Nigeria, including interests in the Erha, Usan and Bonga developments via Esso Exploration and Production Nigeria Limited and Esso Exploration and Production Nigeria (Deepwater) Limited.
The sale will not result in any loss of employment and is expected to close later this year subject to regulatory and other approvals, Exxon said.
Based on 2020 pro forma working interest volumes for Seplat Energy and MPNU, the transaction will, for Seplat, deliver a 186% increase in production from 51 kboepd to 146 kboepd; a 170% increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl; a 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) amd 89% increase in total 2P reserves from 499 MMboe to 945 Mmboe.
The deal includes offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability, Seplat said.
Seplat Energy said it would buys the entire share capital of MPNU from Exxon, with an effective date of January 1, 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 January 1, 2022, to December 31, 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.
Assets being acquired
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; and a 51% interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso.
The deal does not include ExxonMobil's deepwater assets in Nigeria
MPNU will operate as a standalone subsidiary of Seplat Energy upon closing and following receipt of requisite regulatory approvals.
Existing cash and loans to fund 'transformational' deal
Seplat said that it would fund the deal 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 offtake facility; Global financing syndicate comprising Nigerian and international banks, as well as commodity trading companies. Contingent payments, if materialized on Brent oil price annual average above $70/bbl, will be funded through share of net cash flows from operations, Seplat said.
Dr. Bryant (ABC) Orjiako, Chairman of Seplat Energy, said: "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."
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 monetize 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 I look forward to welcoming them to the Seplat Energy family."