Indigenous oil and gas producer, Seplat Petroleum, is getting ready for another bout of scramble for assets being divested by foreign major and independent explorers even though the firm is still embroiled in legal fight over the legality of its last acquisition deals. The company which actually founded on brownfield assets divested by oil majors in the country stated that it has started pooling funds together in preparation for competitive bids for undisclosed assets. The sketchy nature of the assets on target places Chevron Nigerian Limited and Afren as possible clients of the asset hungry Seplat which is listed on the Nigerian Stock Exchange and London Stock Exchange respectively.
So far, Shell Petroleum Development Company (SPDC) Nigeria Limited and CNL operated joint ventures have remained the key sources of assets that have sustained the indigenous producer which hinges its growth plans on accretive acquisitions, a strategy that have been the focus of other indigenous producers that are equally desperate for asset growth.
After its initial acquisition of the 45 percent operating interests divested by Shell, Total and Eni in three oil blocks, Seplat has missed many opportunities for more assets as competition toughened up from other indigenous peers including Oando Plc. Its last clinch came from controversial deal with Chevron on two oil blocks in a deal still contested by Brittania-U Nigeria Limited which claimed to have been leading in the bid process with the strongest bundle offer for the assets.
The indigenous Brittania-U promoted by Africa’s toughest woman in upstream petroleum industry, Mrs Uju Ifejika, is still driving legal proceeding in Nigeria and United States to reverse the sale of the Chevron’s 40 percent operating stake to Seplat. Chevron stated recently that it would be divesting more Nigerian stakes, and Seplat’s scramble for acquisition funds give rise to speculations that the two companies might be plotting more deals. Otherwise, speculations also support revival of Seplat’s offer to acquire distressed Afren Plc, a London listed multinational independent explorer with strong Nigerian ownership content.
Earlier this year, SEPLAT had been in talks with Afren, the embattled Africafocused oil and gas company with stakes in operations of some Nigerian firms, over a potential takeover offer. Those talks ended in February after Afren said no “satisfactory” offer had been tabled, but SEPLAT said at the time it reserved the right to make a bid for Afren within six months. It is not clear whether Seplat is racing to take the advantage before the deadline closes out.
In announcing its fund mobilization for acquisition, Seplat said it has recommenced negotiations to acquire an asset in Nigeria that had previously faced delays, adding it has reached an agreement to release the funds from an escrow account which was set up with a consortium to make a potential acquisition. The company said the escrow account was originally set up with the consortium in order to look for opportunities to buy assets from oil and gas companies operating in the region. Under the agreement, SEPLAT has agreed to release $408 million of the total $453 million held in the escrow account. “There have been material delays with the underlying acquisition, prompting SEPLAT to reach agreement with the consortium for release of the escrow amount,” it said in a statement.
The remaining $45 million will remain as a deposit in the escrow account as negotiations about acquiring the unnamed asset have recommenced. “Certain recent events have led to the restart of negotiations by the consortium to secure the asset, and SEPLAT continues to work with them,” it said. Following the release of the $408 million from the existing escrow account, SEPLAT has placed $29 million of those funds into a new escrow account pending the final terms of the acquisition. Following the amendments and money transfers, SEPLAT has access to $368 million of the $453 million that was originally held in the escrow account.
If no acquisition is made, the funds held in the escrow account will be returned to SEPLAT, but if the company chooses not to progress with the acquisition, it will need to pay $20 million to the other consortium members but the remaining funds in the escrow account would be released back to SEPLAT. SEPLAT has also agreed to pay a portion of previously incurred consortium costs related to the potential acquisition, totalling $11 million. That will be paid in two instalments, with the first $3.5 million being paid immediately and the remaining balance to be paid on a deferred basis, it said.