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Troubled Nigerian Oil Firm, Seven Energy, to Sell Assets

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Crude Oil
  • Troubled Nigerian Oil Firm, Seven Energy, to Sell Assets

After several defaults on its debt-servicing obligations, Seven Energy, an indigenous oil and gas exploration, development, production and distribution group, has entered into a transaction for a comprehensive capital restructuring, part of which is to sell most of its assets.

The group, which operates in Nigeria through its wholly-owned subsidiaries, Septa Energy Nigerian and Accugas, is headquartered in Lagos and London.

It said parties to the agreed transaction included certain members of the group; a United Kingdom oil and gas company, Savannah Petroleum Plc; lenders under the $24.1m term loan facility and lenders under the $25m term loan facility provided to, among others, Seven Energy Finance Limited, its wholly-owned subsidiary.

Others are the holder of the 10.50 per cent Senior Secured Notes issued by the company; and an ad hoc group of holders of the 10.25 per cent Senior Secured Notes issued by the company holding approximately 40 per cent of the total principal amount of the SSNs.

Seven Energy, in a statement on Wednesday, said Savannah Petroleum would acquire “substantially all of the valuable assets of the group, including, at its option, the Strategic Alliance Agreement, which are to be transferred to Savannah, its subsidiaries, or an entity to be nominated by Savannah, subject to completion of a financial restructuring of the group in accordance with the term sheets.”

It said new capital would be provided by Savannah with funding available for, among other things, operational working capital and the liquidity needs of the target group; cash consideration to be paid to selected creditors, including the SSN noteholders, and costs associated with the agreed transaction.

As part of the agreement, the SSN noteholders will receive their pro rata share of $52.5m in newly-issued equity in Savannah and an $87.5m cash payment, in consideration for the discharge of all $318.2m SSNs and release of claims against the entities being acquired by Savannah.

It said in addition to the SSN consideration, the SSN noteholders shall also be offered the right to subscribe, on a pro rata basis to their holdings of the SSNs, for $25m worth of newly-issued equity in Savannah for a total cash consideration of $20m.

Savannah said in a statement that the transaction would involve the acquisition of Seven Energy’s 40 per cent participating interest in Uquo oil and gas field; 62.5 per cent interest in Universal Energy Resources Limited, which holds a 51 per cent participating interest in Stubb Creek oil and gas field; and an interest in Accugas Limited midstream business, a 260km gas pipeline network and associated gas processing infrastructure, potentially in conjunction with certain third-party investors.

Seven Energy said it had continued to engage alongside Savannah in discussions with other financial creditors (including the lenders under the $375m term loan facility in favour of Accugas) as regards amendments to their financing arrangements with the group with a view to agreeing with the detailed steps required for implementation of the agreed transaction.

The group said it had continued to engage in commercial discussions with the Nigerian National Petroleum Corporation and the Nigerian Petroleum Development Company with a view to reaching an agreement on the terms under which the notice of intention to terminate the SAA would be withdrawn.

On February 7, 2017, it announced that it had received notice from the NPDC, a subsidiary of the NNPC, of its intention to terminate the SAA between it and Seven Exploration & Production Limited relating to the Oil Mining Leases 4, 38 and 41.

“While discussions are still ongoing, and there can be no certainty that a satisfactory resolution will be reached, Seven Energy anticipates that reinstatement of the SAA, which is held by Seven Exploration & Production Limited, will require a substantial front end cash payment with respect to accrued legacy costs and a working capital injection,” it said on Wednesday.

According to the statement, Savannah and Seven Energy have agreed that the agreed transaction will proceed on the basis that the SAA is not acquired by Savannah.

“However, were a resolution to be reached in relation to the reinstatement of the SAA, Savannah would have the right to acquire the SAA. It should be noted that Savannah will not be acquiring Seven Exploration & Production Limited as part of the agreed transaction.”

Seven Energy said Savannah had agreed to provide it with a “super senior” interim revolving credit facility of up to $20m in order for it to continue to operate its business until the successful completion of the transaction.

It said, “The provision of such funding, which is available to be utilised in three tranches, is subject to certain conditions, including consent of the Accugas lenders to the granting by certain group companies of security interests in connection with the facility.

“If the agreed transaction is not implemented, and in the absence of continued forbearance and liquidity support from the group’s financial creditors, certain key group companies are likely to have to enter into insolvency processes.”

Seven Energy, which has been grappling with severe liquidity challenge, has announced its inability to make the interest payment due October 11, 2017 on two notes issued by Seven Energy Finance Limited.

In April, it announced that it had requested a standstill from its lenders under the $385m Accugas term facility dated June 23, 2015, and had not made payments of interest and principal due on March 31, 2017.

On April 11, the group failed to pay the interest due on the $300m, 10 ¼ per cent SSN due 2021 and the $100m, 10 ½ per cent notes due 2021, and did not satisfy the conditions for the payment-in-kind interest.

“The 30-day grace period for payment of interest under the SSNs and the 10½ per cent notes expired on May 11, 2017, which represents an event of default under the terms of the SSNs and the 10½ per cent notes,” the group said.

It said its liquidity was severely affected by a range of external factors, including loss of material cash flow from its Strategic Alliance Agreement since February 2016 because of recurrent militant activity that resulted in the closure of Forcados export terminal, and a significant backlog of unpaid invoices relating to the supply of gas to federal and state-owned power stations.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Manufacturing Firms Borrowed N570bn from Banks in 2020 – CBN

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Steel Manufacture At Evraz Plc West-Siberian Metallurgical Plant

Manufacturing firms borrowed a total of N570bn from Nigerian banks last year amid the economic fallout of the COVID-19 pandemic.

Banks’ credit to the manufacturing sector rose to N3.19tn as of December 2020 from N2.62tn at the end of 2019, according to the sectoral analysis of banks’ credit by the Central Bank of Nigeria.

The sector received the second biggest share of the credit from the banks after the oil and gas sector, which got N5.18tn as of December.

“The manufacturing sector, which is the engine of sustainable growth, is still struggling with the debilitating impact of the pandemic and is yet to recuperate,” the Director-General, Manufacturers Association of Nigeria, Mr Segun Ajayi-Kadir, said in January.

MAN, in a January report, revealed that most manufacturers said commercial banks’ lending rates were discouraging productivity in the sector.

The report said 71 per cent of Chief Executive Officers interviewed “disagreed that the rate at which commercial banks lend to manufacturers encourages productivity in the sector.”

It said the cost of borrowing in the country remained at double digits even amidst the reforms meant to culminate in lower rates to engender the country’s economic recovery process.

The report said, “Special single digit loans offered by development banks are still hard to leverage as conditionalities to assess the loans through commercial banks are often overwhelming and laden with additional charges that will eventually make the interest rate double digit.

“Seven per cent of respondents were, however, of the opinion that the rate at which commercial banks lend to manufacturers encourages productivity in the sector while the remaining 22 per cent were not sure of the impact of the rate of lending on productivity in the manufacturing sector.”

The report showed that 64 per cent of respondent disagreed that the size of commercial bank loan to manufacturing sector had encouraged manufacturing productivity.

It said the very high presence of the government in the money market, particularly through the sale of treasury bills, had been crowding out the private sector from the market.

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Economy

Nigeria Earns Extra N318.4 Billion as Crude Oil Hits $67/Barrel

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Buhari

FG Generates Additional Income of N318.4 Billion as Crude Oil Hits $67/Barrel

The Federal Government earned an additional N318.36 billion in February following the surge in crude oil price above $60 per barrel.

Brent crude oil, against which Nigerian oil is priced, average $60 throughout the month of February.

In March, it rose to $67 per barrel.

According to the Minister of Finance, Budget and National Planning, Zainab Ahmed, Nigeria’s crude oil price was retained at $40 per barrel for 2021.

However, she said the nation is presently producing below its 2.5 million barrel per day capacity at 1.7mbpd. This, she said includes 300,000bpd condensates.

“Although Nigeria’s total production capacity is 2.5mbpd, current crude production is about 1.7mbpd, including about 300,000bpd of condensates, which indicates compliance with OPEC quota,” the finance minister stated.

Going by the number, Nigeria is producing 1.4mbpd of crude oil without condensates, but with an additional $20 revenue when compared to the $40 per barrel benchmark for the year. It means the Federal Government realised an additional income of N318.360 billion or $20 X 1.4mbpd X 30days in the month of February.

Crude oil jumped to $68.54 per barrel on Friday following OPEC+’s decision to role-over production cuts.

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Economy

Nigeria, Morocco sign MOUs on Hydrocarbons, Others

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The Federal Government and the Kingdom of Morocco have signed five strategic Memoranda of Understanding that will foster Nigerian-Morocco bilateral collaboration and promote the development of hydrocarbons, agriculture, and commerce in both countries.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, led the Nigerian delegation to the agreement signing ceremony on Tuesday at Marrakech, Morocco, while the Chief Executive Officer of OCP Africa, Mr Anouar Jamali, signed for the Kingdom of Morocco, according to a statement by the Nigerian Content Development and Monitoring Board.

Under the agreement between OCP, NSIA and the Nigerian National Petroleum Corporation, Nigeria will import phosphate from the Kingdom of Morocco and use it to produce blended fertiliser for the local market and export.

The statement said Nigeria would also produce ammonia and export to Morocco.

“As part of the project, the Nigerian Government plans to establish an ammonia plant at Akwa Ibom State,” it said.

The Executive Secretary of NCDMB, Mr Simbi Wabote, and the Group Managing Director of NNPC, Mallam Mele Kyari, were part of the delegation and they confirmed that their organisations would take equity in the ammonia plant when the Final Investment Decision would be taken, the statement said.

Sylva said the project would broaden economic opportunities for the two nations and improve the wellbeing of the people.

He added that the project would also positively impact agriculture, stimulate the growth of gas-based industries and lead to massive job creation.

He said the President, Major General Muhammadu Buhari (retd.), had mandated the Ministry of Petroleum Resources and it agencies and other government agencies to give maximum support for the project.

“He mandated me to ensure that at least the first phase of this project is commissioned before the expiration of his second term in office in 2023,” he added.

According to the statement, the MOUs were for the support of the second phase of the Presidential Fertiliser Initiative; Shareholders Agreement for the creation of the joint venture company to develop the multipurpose industrial platform and MOU for equity investment by the NNPC in the joint venture and support of the gas.

Other agreements are term sheet for gas sales and aggregation agreement and MOU for land acquisition and administrative facilitation to the establishment of the multipurpose industrial platform for gas sales and aggregation agreement.

The NCDMB boss described the bilateral agreement as significant to the Nigerian economy as it would accelerate Nigeria’s gas monetisation programme through establishment of the ammonia plant in the country.

The agreement would also improve Nigeria’s per capita fertiliser application through importation of phosphate derivatives from Morocco, he added.

Wabote challenged the relevant parties to focus on accelerating the FID, assuring them that the NCDMB would take equity investment for long-term sustainability of the project.

He canvassed for the setting up of a project management oversight structure to ensure project requirements and timelines are met.

“There is also need to determine manpower needs for construction and operations phase of the project and develop training programmes that will create the workforce pool from Nigeria and Morocco and design collaboration framework between research centres in Nigeria and Morocco to develop technology solutions for maintaining the ISBL and OSBL units of the Ammonia complex,” he said.

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