March 06, (THEWILL) – Recent developments in the Seplat/ExxonMobil share acquisition deal have confirmed fears that the transaction might hit the brick wall of the Nigerian National Petroleum Company Limited (NNPC). Coming on the heels of the newly enacted Petroleum Industry Law, analysts had warned that the NNPC as a limited liability company might throw in the “right of first recusal” clause to truncate the deal.
Seplat Energy Plc had announced an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited from ExxonMobil Corporation, Delaware for $1.28 billion. The announcement had excited industry watchers who saw the deal as one that would boost the local content policy and launch the Nigerian energy industry into a new frontier of development while creating a large number of jobs.
The transaction entails the acquisition of ExxonMobil Nigeria’s entire offshore shallow water business. According to the notice, ExxonMobil Nigeria’s shallow water business is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations, producing 95 kboepd in 2020 (92% liquids).
However, the announcement that the deal would only materialise on the successful issuance of ministerial consent revealed the huddle that awaited the transaction. But some stakeholders and industry watchers thought otherwise, arguing that the ministerial consent would be an easy sail for the deal.
The NNPC, has reportedly notified Mobil Producing Nigeria Unlimited of its intention to exercise a Right of Pre-emption on ExxonMobil’s planned sale of its entire asset in Nigeria’s onshore and shallow waters. The state-owned oil firm, which is the major shareholder in the Joint Ventures with ExxonMobil, may have exercised its right of first refusal on the assets as part of a new era which will focus solely on building the long term profitability of the now NNPC Ltd.
In a letter signed by Group Managing Director, Mele Kyari, and addressed to ExxonMobil, the NNPC reiterated its resolve to take over the ExxonMobil’s share of the assets, meaning that the whole process of sale and purchase agreement between ExxonMobil and Seplat Energy may have been discontinued.
It stated, “We are aware that you reached an agreement to divest from onshore and shallow waters JVs, clearly we are interested.”
Reports have quoted NNPC as having the right to exercise its Right of First Refusal which means that the expected ministerial consent is dead on arrival. “Apparently, the parties to the Seplat/ExxonMobil did not consider the implications of this in the newly enacted Petroleum Industry Law and that is what is playing out now,” said Ben Ekemennah, an energy expert.
TBI Africa, a Business Intelligence outfit, had reported late December 2021 that the acquisition plan of ExxonMobil’s 40 per cent interests in all the joint venture assets with the NNPC by Seplat Energy Plc, was experiencing hiccups as its partner in the transaction had pulled out.
“Seplat’s partner – Trident Energy, it was gathered, withdrew from the deal because its financier, Warburg Pincus, that backed it at the beginning of the business later developed cold feet about committing huge capital to African oil and gas, especially in a high-risk jurisdiction like Nigeria.
“Trident may also have deemed the execution risk too high, given the propensity of national oil company, NNPC, which is the senior partner in the assets to be acquired, to oppose the deal in the long run. NNPC holds 60 per cent in the joint venture oil assets in which ExxonMobil is divesting its 40 per cent interests. Therefore, NNPC has right of first refusal in the deal and may withdraw its approval at any point in the deal” TBI Africa said.
The RFR is reportedly contained in the Joint Operating Agreement (JOA) of the Joint Venture (JV), which represents NNPC’s position on the planned sale of the shares to Seplat Energy Plc. THEWILL gathered that a meeting of NNPC and ExxonMobil is scheduled for March 17 to discuss the new development.
There are fears that the same fate would befall the Shell’s ongoing divestment by its subsidiary, Shell Petroleum Development Company, which similarly had ruled out pre-emption.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
