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Seplat and ExxonMobil Deal Positive for Economy, Says Wood Mackenzie

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seplate to announce financial results on July 29, 2020

Seplat Energy Plc on February 25 announced an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU), a subsidiary of ExxonMobil.

In its recent insight, Wood Mackenzie, a trusted intelligence provider that empowers decision-makers with unique insights on the world’s natural resources said in the energy transition era, both ExxonMobil and Seplat will be pleased with the deal, adding that the deal offers huge upside for oil as well as gas.

Also, Wood Mackenzie, the leading research and consultancy business for the global energy, power and renewable, resurface, chemicals, metals and mining industry, said because this deal is a corporate acquisition, NNPC has no rights to pre-empt a deal under the Joint Operating Agreement (JOA), which governs the JV, rather that ministerial consent would be the only hurdle remaining, “although nothing can be taken for granted”.

MPNU has a 40percent operated interest in a Joint Venture with NNPC (60percent). The JV includes OMLs 67, 68, 70, 104, the Qua Iboe oil export terminal. MPNU also has a 51percent interest in the Bonny River NGL Recovery project.

Seplat has agreed to pay $1,283 million plus a contingent consideration of up to $300 million. The effective date is 1 January 2021 and completion is expected in H2 2022, pending ministerial approval. Seplat’s debt financing of $825 million is fully committed by a syndicate of Nigerian and African banks, and energy and commodity traders.

Implications: If it completes, the deal will be transformational for Seplat Energy. It is already the leading indigenous company in Nigeria, but this will triple its working interest production to over 140,000 boe/d. In total, Seplat will operate 15percent of Nigerian oil production.

Crucially, the deal diversifies its operations into shallow water, which is largely devoid of the thefts afflicting its onshore operations. Although this is Seplat’s first offshore acquisition, it will acquire all of MPNU’s Nigerian staff, thus allaying any concerns about its operational capabilities.

Valuation

Our equity-based valuation of MPNU – excluding the Qua Iboe terminal – is $870 million (discounted 10percent, January 2021, $50/bbl long-term). However, at $70/bbl, we value the company at $1.678billion. In the energy transition era, ExxonMobil will be pleased with this deal. But so will Seplat, as the deal offers huge upside for oil as well as gas.

The portfolio includes a massive 1.3 billion boe of contingent resources, 75percent of which is gas. Less than half of its 70 fields have been developed. Although the JV has been in production since the early 1970s, its maturity relates more to the extensive infrastructure than the reservoirs themselves. Yes, many fields are in decline, but they have also been under-invested for over 20 years.

Seplat has built a business turning around the Majors’ unwanted assets, a process it started in 2010. With the acquisition, its portfolio becomes very oil dominated. ExxonMobil refused to be drawn into the high risk domestic gas market, and had no exposure to NLNG. As a result the acreage has the highest concentration of gas flaring in the country. Seplat, a listed company, will need to tackle this immediately.

Longer-term it will look to develop access into the domestic market in line with government policy, while there is also scope for LNG too. An FLNG project at Yoho on OML 104 was already under discussion before the deal. That could now accelerate, while long-term supply to NLNG is another option.

There is also possible upside from the Petroleum Industry Act (PIA) fiscal terms. Our analysis shows the JV portfolio would more than double in value if Seplat converts. However, this is far from certain, since it would have to relinquish up to 60percent of its acreage and much of the resource it has just acquired. A thorough review of its now extensive portfolio to identify the most advantaged barrels will be an urgent priority. The deadline for converting to the new fiscal terms is February 2023.

The deal is not without risks either. Seplat will have to find billions of dollars in the longer term to transform its portfolio and some rationalisation could follow. NNPC will of course be Seplat’s JV partner, and its ability to fund its 60percent equity longer term as it transitions to a limited liability company will be just as critical to the success of the deal.

ExxonMobil

ExxonMobil has been planning to sell its JV business for years, and its exit is overdue. The shallow water JV assets have long been non-core and are some of the highest-cost barrels in its global portfolio.

Although emissions were not a key driver for selling, the deal will help with its recently announced net-zero targets for scope 1 and 2 emissions. The portfolio has an intensity of 48 kgCO2e/boe, more than double its global average.

It can now focus on renegotiating workable fiscal terms for its Nigerian deepwater assets like Erha and Usan. However, if that does not end successfully, a country exit could be on the cards, given its deepwater options in Guyana and Brazil.

No NNPC pre-emption

Because this is a corporate acquisition, NNPC has no rights to pre-empt a deal under the Joint Operating Agreement (JOA), which governs the JV. This means that ministerial consent would be the only hurdle remaining, although nothing can be taken for granted.

Shell’s ongoing divestment of its subsidiary SPDC, similarly rules out pre-emption. If NNPC wants to acquire that portfolio, then it will have to out-bid the competition. If successful in raising up to $5 billion with Afrexim Bank it would have the firepower to do just that, and massively strengthen its position in the onshore delta.

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Toyota Marks 25th Anniversary of Sienna, Lauches Limited Edition

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Toyota

Toyota launches Sienna 2023 to celebrate the model’s first quarter-century of popularity with a limited edition to mark its 25th Anniversary.

The ultra-sporty XSE model, on which the Toyota 25th Anniversary Edition is based, features dark 20-inch split-5-spoke wheels, bolder front and rear bumpers, black-painted caps, and a sport-tuned suspension that is exclusive to the XSE. The XSE Plus Package adds roof rails, Premium Audio with JBL speakers and GPS, wireless charging, and a 1500-watt converter to the Sienna 25th Anniversary Edition, which is available in front-wheel drive or all-wheel drive.

The Sienna 25th Anniversary Edition is available in Celestial Silver and Wind Chill Pearl, both of which are appropriate for the occasion. The two exterior colors are accented by special black badging and exterior trim, including mirror caps and shark fin antenna.

The external mirrors with memory, auto-dimming, puddle lights, power-fold, and reverse-tilt down function are among the amenities added to this celebratory model from the Limited grade.

The Limited additionally includes heated and ventilated front seats with memory, as well as black leather-trimmed seating with silver-colored stitching.

Onboard comfort is enhanced by the Limited’s memory steering column and second-row seats with ottomans, while lighted door sills greet front passengers.

A customized black key fob cover with silver-colored stitching bears a “25th Anniversary” logo, and special “25th Anniversary” floormats pamper the feet.

Also, the Toyota Audio systems in the 2023 Sienna provide a plethora of connectivity and entertainment options, with something for everyone. The LE grade’s base Toyota Audio system comes with a 9-inch touchscreen, six speakers, Android AutoTM, Apple CarPlay, and Amazon Alexa compatibility, seven USB media ports, hands-free phone capability, and music streaming via Bluetooth wireless technology, SiriusXM with a 3-month Platinum Plan trial subscription, Safety Connect with a 1-year trial, and Wi-Fi Connect with up to 3 GB within a one-month trial.

When minivans initially became popular in the 1980s and 1990s, Toyota first imported its rear-drive Van and then the more market-friendly Previa. Meanwhile, Toyota was working on a far more focused entry, the Sienna, which debuted in 1998.

The Sienna has shown to be right on target for the market, evolving to a degree of family car perfection with each design iteration.

Toyota as a brand has retained a great lead in car sales globally despite chip shortages. Investors King explained that in 2021 Toyota surged by 10.1 percent, beating its German counterpart, Volkswagen, and Electric Vehicle, Tesla to having the highest sales record in the world.

Investors King gathered that maintaining the top sales record for two years in a row, Toyota Motor Co. stated that it sold 10.5 million vehicles in 2021, including those by affiliates Daihatsu Motors and Hino Motors. That is 5 percent fewer than the number sold in 2020, its lowest sales figures in 10 years, and more than 8.88 million vehicles delivered by Volkswagen AG within the same year.

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Dangote Seeks Over N300 Billion To Complete Refinery

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Aliko Dangote - Investors King

Business tycoon, Aliko Dangote has finalized plans to seek over N300 Billion ($750 million)  through bonds to complete his refinery project in Lagos State.

Investors King gathered that the refinery project was supposed to be finished in 2019, but funding issues and the COVID-19 pandemic threw a wrench in the works, forcing the deadline to be moved back to 2023.

Dangote sought to raise $750 million from the Nigerian bond market with Dangote Oil Refining Company Limited and Dangote Fertiliser Limited, both Dangote Industries Limited companies, serving as co-obligors under the proposed programme, according to Fitch Ratings.

In order to prevent another extension and complete the refinery project next year, a portion of the funds will be used to cover the $1.1 billion needed to complete the refinery project while the remainder will come from either a Dangote Cement asset sale or the refinery project itself, equity sales.

“If the transaction is not successful, or should completion costs overrun or market conditions in the cement or urea sector deteriorate materially, we do not believe that DIL’s existing creditors would have further lending capacity.

“We believe that further asset sales, either in cement, or stakes in the projects, would be the more likely options to address funding of the refinery,” Fitch’s report reads.

About nine months ago, recall that Dangote opted to increase the workforce of his refinery by 17,000. Investors King reported that “the project currently employs 29,000 Nigerians and 11,000 foreigners at the 650,000 barrels-per-day world’s largest single refinery project located in the Ibeju Lekki area of Lagos. This is a ratio of around three Nigerians to one expatriate presently, which will increase local talent with the new additions.”

Speaking in a broadcast, Investors King quoted Dangote saying “When we started the project, we were supposed to bring a lot of foreign workers, but as we speak today, we have less than 11,000 expatriates. We have almost about 29,000 Nigerian workers that are getting massive training. We are also creating a lot of capacity in the country, which will be of great help for future oil projects in Nigeria, most especially with the opening up of the oil industry through the new Petroleum Industry Act….”

As a matter of fact, the idea of a successful Dangote Refinery project has been the expectation of both citizens of Nigeria and the Government, because,  it will help bring a stop to the importation of crude oil.

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Merger and Acquisition

Access Holdings Plc to Acquire Majority Stake in First Guarantee Pension Limited

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Herbert Wigwe - Investors King

Access Holdings Plc has agreed with First Guarantee Pension Limited to acquire a majority stake in the company in its drive to transform from a narrow banking business into a financial service company.

The leading financial institution stated in a press release obtained by Investors King on Thursday.

According to Access Bank, the transaction is in line with its strategy to evolve into a full-blown financial services company and gain relevant market share across Africa, global monetary centres and beyond banking verticals.

Speaking on the firm’s push to change the banking landscape, Dr. Herbert Wigwe, Group Chief Executive Officer, Access Corporation said “This transaction is a natural evolution for us. Over the last 20 years, we set our sights on and delivered ambitious plans to transform the African financial services landscape focusing on banking and have created the African leading Bank and largest bank by customer base.

“This large customer base both on the wholesale and retail segments makes the pension business a natural fit for the Corporation given its objective of ecosystem optimisation. We will leverage our well-established culture of strong corporate governance, risk management, cutting-edge technology, and digital capabilities to deliver high standards of professionalism in the management of pension assets to the benefit of our stakeholders.”

The firm added that the National Pension Commission and the Central Bank of Nigeria have given their no objection to the transaction.

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