Seplat Energy to become major global oil player with MPNU acquisition, say analysts

Subject to minister’s consent, regulatory approval

THE UNFOLD ING OF INFOR MATION THAT SEPLAT ENER GY, A WHOLLY OWNED NIGERIAN SUB SIDIARY OF SEPLAT EN ERGY Plc, has entered into a Sale and Purchase Agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from Exxon Mobil Corporation, Delaware, for a purchase price of $1.28 billion, plus up to $300 million contingent consideration, which is subject to lockbox, working capital and other adjustments, has caught the attention of some analysts who have tried to flesh out the implication of the deal.

Oil and gas industry analysts have specifically noted the potential of the deal to propel Seplat into one of the largest international exploration and production (E&Ps) companies by production and reserves. Although Seplat has not offered much detail on the assets’ financing cash flow (FCF) or proforma debt levels and development/production outlook, these analysts say they would expect leverage to grow materially, which could present a challenge at lower oil Oil and gas sector analysts at FBNQuest Capital Limited, said, “Prior to this announcement, we had expected a significantly higher ticket size and, as such, underlines the real desire for international oil companies (IOCs) to exit onshore and shallow water assets. Strategically, the deal makes sense for Seplat as MPNU assets have significant gas upside potential, with undeveloped resources of 2,910bscf.”

However, in a disclosure filed to the Nigerian stock exchange on Friday, Seplat Energies said the completion of the transaction is subject to Ministerial Consent and other required regulatory approvals. It noted that 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).

Furthermore, the transaction will be financed solely by cash through a combination of existing cash resources and a new $550 million senior term loan facility and a $275 million junior offtake facility. Contingent payments, if materialised, will be funded through net cash flows from operations.

For Seplat, the immediate impact of the deal is significant. Based on MPNU’s production figures in 2020, Seplat’s working interest production will increase by 95,000 barrels of oil equivalent per day (boepd).

Speaking on the transaction, 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 monetise 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,” he said.