Economy
Seplat, ExxonMobil Deal Positive for Economy—Wood Mackenzie
Seplat Energy Plc on February 25 announced an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU), a subsidiary of ExxonMobil.
In its recent insight, Wood Mackenzie, a trusted intelligence provider that empowers decision-makers with unique insights on the world’s natural resources said in the energy transition era, both ExxonMobil and Seplat will be pleased with the deal, adding that the deal offers huge upside for oil as well as gas.
Also, Wood Mackenzie, the leading research and consultancy business for the global energy, power and renewable, resurface, chemicals, metals and mining industry, said because this deal is a corporate acquisition, the Nigerian National Petroleum Company (NNPC) Limited has no rights to pre-empt a deal under the Joint Operating Agreement (JOA), which governs the JV, rather than ministerial consent would be the only hurdle remaining, “although nothing can be taken for granted”.
MPNU has a 40 per cent operated interest in a Joint Venture with NNPC (60 per cent). The JV includes OMLs 67, 68, 70, 104, the Qua Iboe oil export terminal. MPNU also has a 51percent interest in the Bonny River NGL Recovery project.
Seplat has agreed to pay $1,283 million, plus contingent consideration of up to $300 million. The effective date is 1 January 2021 and completion is expected in H2 2022, pending ministerial approval. Seplat’s debt financing of $825 million is fully committed by a syndicate of Nigerian and African banks, and energy and commodity traders.
Implications: If it completes, the deal will be transformational for Seplat Energy. It is already the leading indigenous company in Nigeria, but this will triple its working interest production to over 140,000 boe/d. In total, Seplat will operate 15percent of Nigerian oil production.
Crucially, the deal diversifies its operations into shallow water, which is largely devoid of the thefts afflicting its onshore operations. Although this is Seplat’s first offshore acquisition, it will acquire all of MPNU’s Nigerian staff, thus allaying any concerns about its operational capabilities.
Valuation
Our equity-based valuation of MPNU – excluding the Qua Iboe terminal – is $870 million (discounted 10 per cent, January 2021, $50/bbl long-term).
However, at $70/bbl, we value the company at $1.678 billion. In the energy transition era, ExxonMobil will be pleased with this deal. But so will Seplat, as the deal offers huge upside for oil as well as gas.
The portfolio includes a massive 1.3 billion boe of contingent resources, 75 per cent of which is gas. Less than half of its 70 fields have been developed. Although the JV has been in production since the early 1970s, its maturity relates more to the extensive infrastructure than the reservoirs themselves. Yes, many fields are in decline, but they have also been under-invested for over 20 years.
Seplat has built a business turning around the Majors’ unwanted assets, a process it started in 2010. With the acquisition, its portfolio becomes very oil dominated. ExxonMobil refused to be drawn into the high-risk domestic gas market and had no exposure to NLNG. As a result, the acreage has the highest concentration of gas flaring in the country. Seplat, a listed company, will need to tackle this immediately.
Longer-term it will look to develop access into the domestic market in line with government policy, while there is also scope for LNG too. An FLNG project at Yoho on OML 104 was already under discussion before the deal.
That could now accelerate, while long-term supply to NLNG is another option.
There is also a possible upside from the Petroleum Industry Act (PIA) fiscal terms. Our analysis shows the JV portfolio would more than double in value if Seplat converts. However, this is far from certain, since it would have to relinquish up to 60percent of its acreage and much of the resource it has just acquired. A thorough review of its now extensive portfolio to identify the most advantaged barrels will be an urgent priority. The deadline for converting to the new fiscal terms is February 2023.
The deal is not without risks either. Seplat will have to find billions of dollars in the longer term to transform its portfolio and some rationalisation could follow. NNPC will of course be Seplat’s JV partner, and its ability to fund its 60 per cent equity longer term as it transitions to a limited liability company will be just as critical to the success of the deal.
ExxonMobil
ExxonMobil has been planning to sell its JV business for years, and its exit is overdue. The shallow water JV assets have long been non-core and are some of the highest-cost barrels in its global portfolio.
Although emissions were not a key driver for selling, the deal will help with its recently announced net-zero targets for scope 1 and 2 emissions.
The portfolio has an intensity of 48 kgCO2e/boe, more than double its global average.
It can now focus on renegotiating workable fiscal terms for its Nigerian deepwater assets like Erha and Usan. However, if that does not end successfully, a country exit could be on the cards, given its deepwater options in Guyana and Brazil.
No NNPC pre-emption
Because this is a corporate acquisition, NNPC has no right to pre-empt a deal under the Joint Operating Agreement (JOA), which governs the JV. This means that ministerial consent would be the only hurdle remaining, although nothing can be taken for granted.
Shell’s ongoing divestment of its subsidiary SPDC, similarly rules out pre-emption. If NNPC wants to acquire that portfolio, then it will have to out-bid the competition. If successful in raising up to $5 billion with Afrexim Bank it would have the firepower to do just that, and massively strengthen its position in the onshore delta.
By Modupe Gbadeyanka
To unlock about $50 billion in deep offshore investment, President Bola Tinubu has signed the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, stressing that the aim is “to make Nigeria Africa’s regional hub for deep offshore project execution.”
In a statement personally signed by him on Wednesday, the Nigerian leader disclosed that he approved the executive order to create a clear and predictable framework for the sector.
According to him, the approval has already attracted approximately $10 billion for the Bonga South West project.
He stated that for projects accessing the supplementary incentives, the Order requires activities to be performed in Nigeria, subject to clearly defined exceptions and Nigerian content requirements.
The President noted that this part was included because “I want the work to come home to Nigeria. I want our engineers involved, our fabrication yards working, Nigerian marine and technical service companies securing contracts, and our young people acquiring world-class skills.”
“For me, the real measure of $50 billion will be what Nigerians see from it: good jobs, stronger Nigerian businesses, greater production, more revenue for the Federation and capabilities built here at home. Our natural resources must work harder for our people,” he added.
Mr Tinubu stated that this order is the tenth major policy directive of his administration targeted specifically at the oil and gas sector.
“We have been deliberate about removing the constraints holding back investment, production and value creation.
“For too long, some of our biggest offshore opportunities have remained stalled. We cannot afford to leave that opportunity beneath our waters for another decade. Capital moves, countries compete for it, and investors committing billions of dollars over many years need certainty,” he disclosed.
According to him, “We are providing that certainty, with a clear window for existing deep offshore leases to reach Final Investment Decision by 31 December 2029 and qualify for the full standard incentive.”
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the red territory for a second consecutive session on Tuesday, August 11, declining by 1.81 per cent.
This pulled back the market capitalisation by N8.94 billion to N2.748 trillion from N2.798 trillion, and the NASD Security Index (NSI) dropped 84.44 points to 4,578.74 points from 4,663.18 points.
The market breadth index was at equilibrium yesterday, as there were four price gainers and four price losers.
On the red side, Central Securities Clearing System (CSCS) Plc depreciated by N12.86 to N116.88 per share from N129.74 per share, Afriland Properties Plc declined by N1.95 per cent to N22.00 per unit from N23.95 per unit, Food Concepts Plc weakened by 25 Kobo to N2.50 per share from N2.75 per share, and Geo-Fluids Plc lost 22 Kobo to sell at N2.05 per unit versus Monday’s N2.27 per unit.
On the green side, FrieslandCampina Wamco Nigeria Plc gained N11.50 to finish at N156.50 per share compared with the previous day’s N145.00 per share, Nitrox Industrial Gases Plc expanded by N2.11 to N23.36 per unit from N21.15 per unit, NASD Plc advanced by N1.90 to N36.00 per share from N34.10 per share, and Nipco Plc surged by 50 Kobo to N457.00 per unit from N456.50 per unit.
During the session, the volume of securities rose by 31.2 per cent to 1.5 million units from 1.1 million units, the value of securities improved by 315.9 per cent to N42.3 million from N10.2 million, and the number of deals skyrocketed by 45.7 per cent to 51 deals from Monday’s 35 deals.
Great Nigeria Insurance (GNI) Plc ended as the most active stock by value (year-to-date), with 3.4 billion units valued at N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 77.0 million units transacted for N5.5 billion.
GNI Plc also closed as the most active stock by volume (year-to-date), with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units traded for N415.7 million.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited tumbled by 0.73 per cent on Tuesday on the back of profit-taking by investors.
The consumer goods counter shed 0.96 per cent, and the banking space crashed by 0.46 per cent due to selling pressure. But the insurance index gained 0.24 per cent, and the energy segment improved by 0.03 per cent, while the industrial goods sector closed flat.
When the bourse closed for the session, the All-Share Index (ASI) gave up 1,806.18 points to 246,723.57 points from 248,529.75 points, and the market capitalisation depreciated by N1.166 trillion to N159.256 trillion from N160.422 trillion.
Thomas Wyatt lost 9.97 per cent to quote at N2.89, AVA Capital declined by 9.60 per cent to N8.95, International Energy Insurance dipped by 6.32 per cent to N4.00, International Breweries dropped 5.98 per cent to close at N11.00, and Guinea Insurance shed 5.13 per cent to 74 Kobo.
On the flip side, UPDC REIT gained 10.00 per cent to end at N14.85, FTN Cocoa appreciated by 9.88 per cent to N8.90, C&I Leasing surged by 8.26 per cent to N5.90, Sovereign Trust Insurance went up by 6.74 per cent to N1.90, and Regency Alliance climbed 6.33 per cent to 84 Kobo.
Yesterday, Fortis Global Insurance was the busiest equity, leading the activity chart with a turnover of 3.3 billion units worth N9.6 billion. Trans-Nationwide Express transacted 84.6 million units for N181.9 million, Access Holdings sold 66.1 million units valued at N1.9 billion, Consolidated Hallmark exchanged 54.3 million units worth N379.4 million, and Fidelity Bank traded 46.9 million units for N1.0 billion.
Investors bought and sold 3.9 billion units worth N32.4 billion in 45,608 deals compared with the 1.1 billion units valued at N27.0 billion traded in 59,185 deals a day earlier. This indicated that the number of deals retreated by 22.94 per cent, the trading volume increased by 254.55 per cent, and the trading value soared by 20.00 per cent.
