Africa Oil, Petrobras $1.5bn Deal to Trigger M&A in Sub-Saharan Africa

February 29, 2020
Petrobras Oil

By Adedapo Adesanya

It has been predicted that the recent acquisition of 50 percent stake in the Brazilian oil company in Nigeria, Petrobras Oil and Gas B.V. (POGBV) by Africa Oil Corporation will cause a surge in mergers and acquisitions in the oil and gas sector in sub-Saharan Africa.

Earlier in the year, Africa Oil completed the acquisition of a 50 percent equity stake in POGBV in a deal worth $1.5 billion, with the total cash consideration being approximately $520 million. The deal saw Standard Bank Group as the sole advisor to Africa Oil, a Canadian group with exploration assets in East Africa and with this acquisition, production assets in Nigeria.

According to the transaction, Africa Oil would be entitled to 33,630 barrels per day out of POGBV’s underlying assets which produced an average of 442,000 barrels of oil per day in 2019.

The location, size and quality of the acquired assets makes this a transformative transaction for Africa Oil, at a time when further investment opportunities are expected across the region.

According to Mr Charlie Houston, the Oil and Gas Executive at Standard Bank Group, “This transaction has enabled Africa Oil to capitalise on its strong cash position and appetite for the African economy to be become a fully-fledged exploration and production company.

“Having cash-generative assets in the current phase of the commodity cycle is hugely beneficial and will provide Africa Oil with a sound platform for stability and future growth.”

On the part of Mr Dele Kuti, Global Head of Oil and Gas, Standard Bank Group, “The transaction is likely to precede several other large merger and acquisition deals in sub-Saharan Africa’s oil-producing and frontier oil & gas countries as US and other international oil companies rationalise their operations in the region and restructure their asset portfolios.

“We expect to see a surge in deal flow over the next two years as onshore/offshore assets in Nigeria and offshore assets in Angola come to market, among others.”

Standard Bank introduced Africa Oil to POGBV and the Nigerian market whilst it also helped guide the firm through a two-year process, and it expects to see strong interest from both international and local players as these assets become available.

“It is possible that domestic investors will partner with international oil and gas companies, many of which see the potential to unlock significant value in the region.

“As these assets come to market, the need for strategic advice and financing will increase significantly,” Mr Kuti added.

He further said that for Africa to capitalise on this opportunity to ignite sustainable economic growth, governments need to ensure that sound regulations and governance standards are in place. As the sector’s rise could transform the economy of many African countries.

“Access to finance, local knowledge and strategic advice will also be essential to unlocking the sector’s potential,” Mr Kuti said.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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