Seplat Energy Plc said it remains committed to purchasing Nigerian oil and gas assets from Exxon Mobil Corp by completing a deal that’s been held up by Nigeria for more than a year.
The Lagos and London-listed Company is hoping that President Bola Tinubu will adopt a different approach than his predecessor, who reversed an initial decision to approve the transaction.
“We’re still interested in the assets,” Seplat Chief Executive Officer Roger Brown said in an interview at the firm’s UK offices.
“We still like the company we’re buying. We think it’s a game changing operation,” he added.
Under the deal unveiled in February 2022, Seplat agreed to pay $1.3 billion for an Exxon unit that holds a 40% operating stake in four shallow-water licenses in a purchase that would almost quadruple the independent company’s oil output to more than 130,000 barrels per day.
If the transaction goes ahead, it will be one of the biggest divestments in Nigerian history since energy majors like Shell Plc started offloading unwanted assets in the late 2000s.
Former President Muhammadu Buhari, who doubled as Nigeria’s oil minister, endorsed the sale in August before swiftly rowing back after the country’s energy regulator rejected his approval.
Days before Buhari stepped down last month, Seplat announced it had extended the agreement with Exxon to allow more time to finalize the transaction.
The Nigerian National Petroleum Co. — which owns 60% of the permits — has opposed the sale and sued Exxon in Abuja, claiming it has the right to acquire the blocks itself from the US major.
The Seplat boss disagreed with the NNPC because his firm was purchasing a subsidiary rather than licenses.
“What we are buying are shares sold by US companies, so that is a completely different animal because we’re buying a company,” he said.”
A spokeswoman for Exxon declined to comment on the transaction, citing a court injunction and arbitration proceedings. Spokesmen for Tinubu didn’t respond to questions from Bloomberg News.
Early signals from the Tinubu administration appear promising for supporters of the deal.
Tinubu had met Exxon executives during his second week in office, saying on Twitter that the invitation demonstrated his government’s “efforts to secure the collaboration of critical players in the oil sector.”
Advisers also prepared a report for the president in the run-up to his inauguration recommending him to sell down NNPC’s positions in joint ventures to minority stakes and “close out” outstanding divestments in order to boost production.
The “hidden value” for Seplat in the Exxon deal is the natural gas in the blocks, according to Brown, whose firm is already one of the largest domestic suppliers of the fuel to Nigerian power plants.
Brown said it’s “most likely” that most of the gas in the licenses would be destined for export, either as a third-party source for Nigeria LNG Ltd. – an expanding venture whose shareholders include Shell and NNPC that is short of feedstock – or via a separate floating production facility.
However, Shell plc’s (SHEL) facility in Nigeria suffered a new oil spill. This resulted in contamination of farmland and a river, disrupting the livelihoods of fishermen and agricultural families in the Niger Delta.
On June 11, a leakage from the 180,000-barrel-per-day pipeline was detected at Eleme in Rivers State in south Nigeria.
Four days later, Shell Petroleum Development Company of Nigeria Limited confirmed the incident in an official statement.
The leakage, which lasted about a week, is being looked into by Nigerian officials and Shell’s local subsidiary. The volume of spillage has not yet been quantified.
Activists refer to this leak as a “major one” despite the fact that spills are common in the area, owing to vandalism and poor pipeline maintenance.
Over the years, Shell has fought several legal disputes centered on oil spillage in the Niger Delta, an area plagued by pollution, conflict, and corruption pertaining to the oil and gas sector.
The majority of leaks, according to Shell, are the result of crude oil theft and pipeline vandalism.
According to Idris Musa, the director-general of National Oil Spill Detection and Response Agency, although the leak has been contained, efforts to address the spill’s fallout at farms and the nearby Okulu River have stagnated.
Shell is one of the primary oil super majors, a group of U.S. and Europe-based big energy multinationals with operations across the world. Currently, Shell carries a Zack Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum Corporation EPM, NGL Energy Partners LP NGL and RGC Resources Inc. RGCO. While Evolution Petroleum sports a Zacks Rank #1 (Strong Buy), both NGL Energy Partners and RGC Resources carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum is an independent energy company. It was formed to acquire and develop oil and gas fields and apply both conventional and specialized technology to accelerate production, particularly in low-permeability reservoirs. EPM has witnessed an upward earnings estimate revision for 2023 and 2024 in the past 60 days.
NGL Energy Partners, headquartered in Tulsa, OK, is a limited partnership operating a vertically-integrated propane business with three operating segments — retail propane, wholesale supply and marketing, and midstream. NGL has witnessed an upward earnings estimate revision for 2024 in the past 30 days.
RGC Resources is a holding company that offers energy and associated products and services through its operational subsidiaries — Roanoke Gas Company and RGC Midstream, LLC. RGCO has thousands of customers through its natural gas distribution companies that serve the Roanoke Valley and Bluefield, Virginia and West Virginia areas. (BLOOMBERG)
