ExxonMobil’s $1.6 Billion Asset Sale To Seplat Has Been Canceled By NNPC

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Exxonmobil-Seplat Transaction Not An Asset Sale Makes The Difference
Exxonmobil-Seplat Transaction Not An Asset Sale Makes The Difference

The Nigerian National Petroleum Company Ltd has chosen to exercise its right of first refusal as stipulated in the JV’s Joint Operating Agreement (JOA) + details of NNPC’s position on the planned sale of ExxonMobil shares to SEPLAT Energy Plc.

The NNPC has informed Mobil Producing Nigeria Unlimited of its intention to exercise its Right of Pre-emption on ExxonMobil’s planned sale of its entire asset in Nigeria’s onshore and shallow waters.

Recall ExxonMobil and SEPLAT Energy recently announced a sales agreement in which SEPLAT will purchase ExxonMobil’s entire stake in MPNU, subject to regulatory approval.

The decision by NNPC effectively means that the sales agreement between SEPLAT and ExxonMobil has been shattered.

The right of pre-emption gives parties in a joint venture the legal right to be the first to be considered for any planned sale or takeover of assets in the JVs if either party decides to trade them off.

The NNPC reiterated its intention to take over ExxonMobil’s share of the assets in a letter seen by Daily Trust, signed by Group Managing Director Mele Kyari and addressed to ExxonMobil.

The terms of the joint venture JOA would require the NNPC to fully match the winning bid’s offer.

The winning bidder, Seplat Energy, put up $1.583 billion for the deal to acquire the entire share capital of MPNU plus contingent consideration, noting that the asset transfer will be delayed pending the minister’s approval.

This means that the state-owned oil company cannot pay less than $1.583 billion if it exercises its right of first refusal.

The NNPC also stated in the letter that it had transformed from a corporation to a profit-driven company and that it now has the capacity to buy ExxonMobil’s share in joint ventures.

‘The Seplat-ExxonMobil deal offers significant upside for the oil and gas industry.’

Wood Mackenzie, a trusted intelligence provider with unique insights on the world’s natural resources, recently stated that in the energy transition era, both the ExxonMobil and Seplat deals offer significant upside for both oil and gas.

On February 25, Seplat Energy Plc announced an agreement to acquire the entire share capital of ExxonMobil subsidiary Mobil Producing Nigeria Unlimited (MPNU).

According to Wood Mackenzie, 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, and ministerial approval would be the only remaining hurdle, “although nothing can be taken for granted.”

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MPNU has a 40% operating stake in a joint venture with NNPC (60per cent). The joint venture includes OMLs 67, 68, 70, and 104, as well as the Qua Iboe oil export terminal. MPNU also owns a 51% stake in the Bonny River NGL Recovery project.

Seplat has agreed to pay $1,283 million plus up to $300 million in contingent consideration. The effective date is January 1, 2021, with completion expected in H2 2022, subject to ministerial approval.

A syndicate of Nigerian and African banks, as well as energy and commodity traders, has fully committed $825 million in debt financing to Seplat.

When completed, the transaction will be game changer for Seplat Energy. It is already Nigeria’s leading indigenous company, but this will more than triple its working interest production to over 140,000 boe/d. Seplat will operate 15% of Nigerian oil production in total.

Wood Mackenzie adds that the deal is important because it diversifies its operations into shallow water, which is largely free of the thefts that plague its onshore operations.

Despite the fact that this is Seplat’s first offshore acquisition, it will acquire all of MPNU’s Nigerian staff, assuaging any concerns about the company’s operational capabilities.

“Seplat has built a business by repurposing the Majors’ unwanted assets, a process that began in 2010.” With the acquisition, its portfolio is now heavily dominated by oil. ExxonMobil refused to enter the high-risk domestic gas market and had no NLNG exposure. As a result, the acreage has the country’s highest concentration of gas flaring. Seplat, as a publicly traded company, must address this immediately,” Wood Mackenzie added.

They stated that in the long run, it would seek to develop access into the domestic market in accordance with government policy, while there is also room for LNG. Before the deal, an FLNG project at Yoho on OML 104 was already being discussed. This could now pick up speed, while long-term NLNG supply is another option.