With the green light now given by the Federal Government, Oando plc, Nigeria’s leading indigenous energy group listed on both the Nigerian and Johannesburg Stock Exchanges, is poised to seal the acquisition of the Nigerian assets of United States oil major ConocoPhillips, which will boost its oil production to about 50,000 barrels per day (bpd).
With its output set to skyrocket from about 5,000 bpd to the new record high, Oando now joins the class of independents such as United Kingdom-listed Afren and Seplat Petroleum Development Company.
Oando Energy Resources (OER), the upstream business of Oando plc, yesterday announced the receipt of the consent of the minister of petroleum resources for the acquisition of the Nigerian upstream oil and gas business of ConocoPhillips for a total cash consideration of $1.65 billion subject to customary adjustments.
Confirming this in a statement by Ainojie ‘Alex’ Irune, head of corporate communication, Oando plc, the company said though it had successfully acquired all funds required to complete its acquisition of the assets, closing of the ConocoPhillips acquisition had remained subject to the satisfaction of certain closing conditions, including government and regulatory approval, and the consent of the minister of petroleum resources.
On December 20, 2012, Oando had announced that OER had entered into agreements with ConocoPhillips to acquire its entire business interests in Nigeria.
The acquisition of ConocoPhillips’ Nigerian upstream oil and gas business is expected to position OER as one of the leading indigenous independent exploration and production (E&P) players in the country, as measured by total reserves and production.
“We are delighted to receive the approval of the Honourable Minister of Petroleum Resources for the completion of our acquisition,” said Wale Tinubu, group chief executive, Oando plc and chairman, OER.
“It has been a long journey, wherein we kept faith with our strategy and executed every milestone diligently. This acquisition satisfies our criteria for assets in production, as well as excellent appraisal and exploration prospects. We will work hand-in-hand with the management team of ConocoPhillips to immediately complete the acquisition,” Tinubu said.
OER, which is listed on the Toronto Stock Exchange, had in its latest extensions in May said the outside date for completion of the proposed acquisition of ConocoPhillips’ assets had been extended to June 30, 2014 from April 30, 2014.
The extension was to enable the companies to satisfy all closing conditions, including the anticipated consent of the minister of petroleum resources. The company had on January 31, 2014 said it had completed all the financials for the closure of the acquisition and was awaiting the ministerial consent.
Oando plans to hold the shareholder meeting on February 18.
OER and ConocoPhillips agreed to extend the outside date for completion of the acquisition from January 31 to February 28. It was later moved to March 31, April 30, and then to June 30.
“Oando should be congratulated for being able to build on their portfolio. For the industry it demonstrates that the policy of capacity building in terms of indigenous participation in the upstream is yielding some dividends and we are beginning to see it,” said Emmanuel Usanga, a senior industry professional.
OER believes that the ConocoPhillips acquisition represents a ‘game-changing’ opportunity for the company and its shareholders, with a 20-percent working interest in the Nigerian Agip Oil Company JV, which includes 41 discovered oil and gas fields with remaining oil and gas recovery, about 40 identified prospects and leads, 12 production stations, about 1,490 km of crude oil, natural gas liquids and natural gas pipelines, three gas processing plants, the Brass River Oil Terminal, the Kwale-Okpai 480 MW combined cycle gas-fired power plant, and associated infrastructure.
There are about 36,000 barrels of oil equivalent per day (boepd) based on average production between January and December 2013, according to ConocoPhillips. There are also about 211 million barrels of oil equivalent (MMboe) of proved plus probable reserves, 484 MMboe of best estimate economic contingent resources, and about 239 MMboe of risked prospective resources, according to a report dated December 31, 2013, prepared by OER’s independent resource and reserve auditors, Petrenel.
The deal comprises the indirect acquisition of all of the shares of Phillips Oil Company Nigeria Limited, Phillips Deepwater Exploration Nigeria Limited and Conoco Exploration and Production Nigeria Limited.
Pade Durotoye, OER chief executive officer, had in December 2012 described the transaction as “a transformational step forward” for the company, adding that it was in keeping with their overall strategy to grow their portfolio of Nigeria-based assets by focusing on those opportunities that deliver high quality growth in reserves and production.
“Our management team is familiar with the assets contained in this proposed transaction and, we believe, possesses the regional experience and technical expertise necessary to capture and unlock their future value for our shareholders,” he said.
The company had paid an initial deposit of $450 million, and has received additional funds through debt commitment letters from financial institutions ($815 million), private placement of shares ($200 million), and the recent sale of its EHGC asset to Seven Energy for $250 million.
Ministerial consent is the mandatory final approval of all oil and gas acquisitions by the minister of petroleum resources as required by the Petroleum Act of 1969, which states that “prior consent of the minister of petroleum resources is obtained before the assignment of any right, power or interest in an oil prospecting licence or oil mining lease”.
The Act stipulates that the Federal Ministry of Petroleum Resources must conduct due diligence to ensure ownership is being transferred to a company that is of good reputation, has sufficient knowledge, experience and financial resources to work the licence or lease and in all other respects is acceptable to the Federal Government. Consent of the minister may only be granted where the minister is satisfied that the above conditions have been fully met.
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