12 things to know about Seplat’s $1.3 billion deal to take over Mobil Nigeria

Seplat Energy, Nigeria’s biggest quoted oil & gas company, agreed to purchase the shallow water business of Exxon Mobil’s Nigerian subsidiary known as Mobil Producing Nigeria Unlimited (MPNU) for about $1.3 billion.

It is the latest of similar transactions involving multinationals like Shell and Exxon offloading their onshore and shallow water assets in Nigeria to indigenous firms, in preference for deep water fields, after years of pollution and community issues, and in a bid to adopt cleaner energy.

Here are 12 quick things to know about the deal:

1. The deal could reach $1.6 billion on the expectation that $300 million could be added to the initial sum on certain conditions by the time the transaction is consummated.

2. The $300 million contingent consideration is payable between January 1 and December 31, 2026.

3. Exxon Mobil is not offloading its entire Nigerian assets but only its offshore operation in a joint venture held with NNPC, where it owns a 40 per cent stake.The company runs another unit in Nigeria called Esso Production Nigeria Limited with focus on deepwater activities.

4. The proposed acquisition marks the first of its kind since the Nigerian Government inked the Petroleum Industry Act into operation.

5. MPNU holds four oil mining leases comprising OMLs 67, 68, 70 and 104. It is the owner of the Qua Iboe Terminal, one of the largest export facilities in Africa’s biggest economy. It holds a 51 per cent stake in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso. These will be taken over by Seplat.

6. MPNU will function as an independent subsidiary of Seplat. But the latter, after getting regulatory approvals, will align MPNU with its overall strategic objectives and ESG goals.

7. Seplat’s current cash resources and borrowings will partly fund the purchase, while a yet-to-be-sourced $550 million senior term loan facility and a $275 million junior offtake facility make up the balance.

8. A consortium of local and offshore lenders together with commodity trading firms will finance the transaction.

9. Seplat, listed in Lagos as it is in London, will be mandated to re-apply for admission to the official list of the London Stock Exchange when the transaction is consummated because of the nature of the deal as a reverse takeover, according to UK listing rules.

10 . Seplat will pay $128 million according to the terms which will be paid back to the company should the contract be terminated by Seplat in certain circumstances.

11. The transaction is effective January 1, 2021 and will reach closure in the second half of this year.

12. The deal will boost Seplat’s production to 146,000 barrels of oil equivalent a day from 51,000. It also includes significant undeveloped gas potential.