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 Adedapo Adesanya
Seplat Energy Plc will revive hundreds of Nigerian oil wells laying fallow after completing the acquisition of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil.
The company said it aims to lift oil output to about 200,000 barrels a day, a move that will help boost Nigeria’s oil production levels, as it aims to reach 2 million barrels per day next year.
The transaction, according to Seplat, “is transformative for Seplat Energy, more than doubling production and positioning the company to drive growth and profitability, whilst contributing significantly to Nigeria’s future prosperity.”
The completion of the Seplat-ExxonMobil deal has created Nigeria’s leading independent energy company, with the enlarged company having equity in 11 blocks (onshore and shallow water Nigeria); 48 producing oil and gas fields; 5 gas processing facilities; and 3 export terminals.
Recall that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October approved the deal as part of a series of approvals, while it blocked Shell’s asset sale of up to $2.4 billion to the Renaissance consortium.
The acquisition of the entire issued share capital of MPNU adds the following assets to the Seplat Group: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua Iboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (‘BRT’) NGL recovery plant; 9.6 per cent participating interest in the Aneman-Kpono field; and approximately 1,000 staff and 500 contractors will transition to the Seplat Group.
MPNU adds substantial reserves and production to Seplat Energy; 409 million barrels of oil equivalent (MMboe) 2P reserves and 670 MMboe 2P + 2C reserves and resources as at 30 June 2024 and 6M 2024 average daily production of 71.4 kboepd (thousand barrels of oil equivalent).
Business Post reports that Seplat will be part of the payment this year, and will defer some to next year,
Speaking on the transaction, the Chairman of Seplat Energy, Mr Udoma Udo Udoma commended President Bola Tinubu for supporting this transaction and appreciated the support and diligence of the various ministries and regulators for all the work to reach a successful conclusion.
“We are delighted to welcome the MPNU employees to Seplat Energy. We are excited to begin our journey in a new region of the country, and we look forward to replicating the positive impacts we have achieved within our communities in our current areas of operations.
“Seplat’s mission is to deliver value to all our stakeholders, and we treasure the good relationships we have developed with the government, regulators, communities and our staff.”
On his part, the chief executive of Seplat Energy, Mr Roger Brown, described the acquisition as a major milestone, adding, “I extend my thanks to the entire Seplat team for their hard work and perseverance to complete this transaction.
“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I welcome them to the Seplat Energy Group.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world-class basin, providing enormous potential for the Seplat Group. Our commitment is to invest to increase oil and gas production while reducing costs and emissions, maximising value for all our stakeholders.
“MPNU is a perfect fit with our strategy to build a sustainable business that can deliver affordable, accessible and reliable energy for Nigeria alongside attractive returns to our shareholders”.
By Adedapo Adesanya
The National Pension Commission (PenCom) is projected to close the year with over N22 trillion in pension assets impacted by challenges like inflation and monetary policies.
This is according to PenCom Director-General, Mrs Omolola Oloworaran, at a press conference in Abuja on Thursday.
She said as of October 2024, the Contributory Pension Scheme (CPS) had 10.53 million registered contributors and pension fund assets worth N21.92 trillion.
Speaking at the conference-themed Tech-driven Transformation Shaping the Pension Landscape, which showcased PenCom’s strategic commitment to innovation, she said that the numbers reflected the agency’s unwavering commitment to fund safety, prudent management, and sustainable growth.
She explained that the pension environment was impacted by the wider economic challenges facing the country, noting that the sector battled multi-year high inflation, Naira devaluation, and the lingering effects of unorthodox monetary policies by the Central Bank of Nigeria (CBN).
Business Post reports that the apex bank hiked interest rates by 875 basis points this year alone to tackle persistent inflation which peaked at 33.8 per cent as of October.
She said that these challenges eroded the real value of pension funds and impacted contributors’ purchasing power.
“To address these issues, the commission has initiated a comprehensive review of its investment regulations.
“It is focusing on diversifying pension fund investments into inflation-protected instruments, alternative assets, and foreign currency-denominated investments.
“The goal is to safeguard contributor savings and ensure resilience against future economic volatility,” she said.
She restated the commission’s commitment to expanding pension coverage, particularly through the advanced micro-pension plan designed to encourage participation from the informal sector using technology.
“This initiative will make it easier for everyday Nigerians to save for retirement, aligning with our vision of inclusive growth and financial stability for all.
“The backlog in retirement benefits for retirees of the Federal Government’s Ministries, Departments, and Agencies (MDAs) will soon be settled.
“The federal government recently disbursed N44 billion under the 2024 budget to settle approved pension rights.
“We are collaborating with the Federal Government to institutionalise a sustainable solution to ensure retirees receive their benefits promptly, eliminating delays,” Mrs Oloworaran said.
She said that PenCom’s technology-driven transformation aimed to make the CPS more accessible, reliable, and sustainable.
“From data management to seamless contributions and regulatory supervision, we are paving the way for a future where the pension industry serves all Nigerians effectively,” she said,
Mrs Oloworaran also said that the e-application portal for pension clearance certificates has replaced the manual processes and enhanced the ease of doing business in the sector.
“Since its deployment, 38,528 pension clearance certificates have been issued. This initiative ensures compliance and secures the future of Nigerians working in organisations that interact with the government,” she said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed flat on Thursday, December 12 after it ended the trading session with no single price gainer or loser.
As a result, the market capitalisation remained unchanged at N1.055 trillion as the NASD Unlisted Security Index (NSI) followed the same route, remaining at 3,012.50 points like the previous trading session.
However, the activity chart witnessed changes as the volume of securities traded at the bourse went down by 92.5 per cent to 447,905 units from the 5.9 million units transacted a day earlier.
In the same vein, the value of securities bought and sold by investors declined by 86.6 per cent to N3.02 million from the N22.5 million recorded in the preceding trading day.
But the number of deals carried out during the session remained unchanged at 21 deals, according to data obtained by Business Post.
When trading activities ended for the day, Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, Okitipupa Plc came next with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc was in third place with 297.5 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.
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