Fitch Ratings has said it views Seplat Energy plc’s (B-/positive) completion of the acquisition of Mobil Producing Nigeria Unlimited (MPNU) as beneficial for the former’s business profile.
Seplat announced the completion of the acquisition of MNPU assets on December 12, 2024 for cash of $800 million, including a $128 million deposit it paid in 2022.
The transaction was funded by a $350 million drawdown of the revolving credit facility, a new $300 million advanced payment facility with ExxonMobil, and $22 million of cash.
“The reported pro forma leverage as of June 2024 remained low at 0.7x versus Seplat’sstandalone 0.8x. Fitch estimates that Seplat will maintain a conservative financial profile with Earnings Before Interest, Taxes Depreciation, and Amortisation (EBITDA) net leverage below 2.0x through to 2026, even though we expect higher capex, dividends, and moderation of oil and gas prices,” the ratings agency said in a report.
The acquisition, it pointed out, strengthens Seplat’s business profile due to diversification into offshore operations as well as the addition of 71,400 barrels of oil equivalent per day (boed) in hydrocarbons production, and 409 million barrels of oil equivalent (mmboe) of 2P reserves, of which 80 per cent are oil reserves.
According to Fitch, the combined production totalled around 120,000 boed, and 2P reserves reached 887 mmboe, indicating a 2P reserve life of around 20 years pro forma as of June 2024.
“Seplat maintains adequate liquidity despite the full drawdown of the Revolving Credit Facility (RCF) facility due in June 2025 with pro forma cash balance of $284 million at end-9M24. The RCF’s maturity will be automatically extended to December 2026 once the company refinances its $650 million senior notes due in April 2026.
“Seplat plans to complete the refinancing of notes ahead of June 2025, most likely in 1Q25. Fitch also assumes that Seplat will maintain a sufficient cash buffer in case of any delays with notes refinancing,” it said.
However, it stressed that Seplat is yet to announce its investment plans together with its joint venture partner owned by Nigerian National Petroleum Company Limited (NNPC).
“However, Fitch expects a material step up in capex to maximise output from the acquired assets. Since 2021, MNPU has invested only around $58 million in total capex, and as a result its working interest production reduced by around 25 per cent compared to 2020,” Fitch observed.
The completion of the acquisition has created Nigeria’s leading independent energy company, with the enlarged company having equity in 11 blocks (onshore and shallow water Nigeria), 48 producing oil and gas fields, five gas processing facilities, and three export terminals.
The acquisition of the entire issued share capital of MPNU adds the following assets to the SeplatGroup: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua lboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (‘BRT) NGL recovery plant: 9.6 per cent participating interest in the Aneman-Kponofield; and approximately 1,000 staff and 500 contractors will transition to the Seplat Group.
Senator Udoma Udo Udoma, Chairman of Seplat Energy, said: “Seplat Energy sincerely thanks President Bola Ahmed Tinubu, for supporting this transaction, and appreciates the support and diligence of the various ministries and regulators for all the work to reach a successful conclusion.
“We are delighted to welcome the MPNU employees to Seplat Energy.
“We are excited to begin our journey in a new region of the country, and we look forward to replicating the positive impacts we have achieved within our communities in our current areas of operations.
“Seplat’s mission is to deliver value to all our stakeholders, and we treasure the good relationships we have developed with the Government, regulators, communities and our staff.”
Roger Brown, Chief Executive Officer of SeplatEnergy, said: “Today we have achieved a major milestone in the history of Seplat Energy and I extend my thanks to the entire Seplat team for their hard work and perseverance to complete this transaction.
“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I welcome them to the SeplatEnergy Group.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world class basin, providing enormous potential for the Seplat Group.
“Our commitment is to invest to increase oil and gas production while reducing costs and emissions, maximising value for all our stakeholders.
“MPNU is a perfect fit with our strategy to build a sustainable business that can deliver affordable, accessible and reliable energy for Nigeria alongside attractive returns to our shareholders”.
Explaining the process of integration, Brown said Mobil is excellent and has been well known over the years to have an excellent, well trained and safe operation staff.
“So it will run as a separate subsidiary of Seplat. It will join our excos and will be linked into Seplat. We will do that certainly for a lot of 2025 to make sure that we stabilize the workforce and then take our time to be very clear of what we are going to do at some point in the future,
“There will be more of an alignment and we are very excited because there is a lot of commonality around here. I think the cultures are good and similar. I think the outlook of the staff is similar, and I think the skill sets are interchangeable between the two, but not initially. So you run it separately, Seplat itself today has its operations around assets.
“So we have our western assets, we have the eastern assets etc. So it is not similar from what we do today, but in terms of a real long term integration, we are going to take our time to do that”.
Mr Samson Ezugworie, Chief Operating Officer, said Seplat is excited to have Mobil on board.
He said, “In terms of the assets and these dimensions, the opportunities and the value it brings to the group, I will say this acquisition is a world class asset. If you look back in history, the asset has produced nearly 7 billion barrels and the view as of today is that we still have in the ground as much value and as much volume as we have produced. So that’s on one side. On the second side, we have currently over 600 wells drilled across the assets in four blocks, and currently only about 200 of those wells are producing.
“So in terms of production growth, there is a lot of value in those wells, called the idle wells, and our primary focus in the short term is to rejuvenate these wells through rigorous interventions. And that should offer expenses that will be our first focus, and that will also offer us opportunity to all opportunities. One is to ramble protection immediately, and secondly it also gives us some solution time to mature reconstructing, because we need to jack up rigs to go into these fields and begin to drill”.
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