Nigeria has projected to meet an aspiration of over 2 million barrels a day crude production by 2025.
The advancing production capacity of the indigenous producers could serve as a lead for the country whose production capacity has declined significantly due to several factors.
The minister of state for petroleum resources (Oil), Senator Heineken Lokpobiri, has expressed optimism saying the country remains committed to meeting its 2025 crude oil production target of 2.06 million barrels per day (including condensates), as outlined in its Appropriation Bill.
This shows a strong commitment to growing the nation’s Economy and energy industry, which has been experiencing Revenue shortfalls in recent years.
As of October 2024, Nigeria’s crude oil production is at about 1.43 million barrels per day (bpd), which is a modest improvement but still less than the 1.5 million bpd OPEC quota.
This quota, extended through 2025, is part of a larger initiative to keep prices stable in a volatile global market. Nigeria’s government goals, however, go much beyond OPEC’s limit.
The government has set a national output target of 2 million barrels per day by 2025, with aspirations to reach 4 million barrels per day by 2030. This ambitious strategy aligns with president Bola Tinubu’s goal of making Nigeria a $1 trillion economy.
Following through on this goal is crucial for Nigeria as oil revenue continues to be a major economic driver, contributing significantly to both Government Revenue and foreign exchange earnings.
These goals are also essential for stabilising the country’s economy, which still depends mostly on oil earnings to fund vital industries like healthcare and infrastructure.
However, accomplishing these objectives will necessitate large infrastructural investments, more robust anti-oil theft enforcement, and increased operational effectiveness in the oil industry.
The increased production limitations that OPEC has set for its member countries represent a careful balancing act between sustaining global oil prices and satisfying domestic demand.
Pipeline theft, vandalism, and deteriorating infrastructure have made it difficult for Nigeria to continuously achieve its quota.
However, indigenous companies are increasingly demanding to acquire more assets to shore up production.
This is a as assets Sale and Purchase Agreement (SPA) between Seplat Energy Plc and Mobil Producing Nigeria Unlimited (MPNU) is about closing officially.
Seplat disclosed that whereas the deal was previously for an initial $1.28 billion, the final consideration has now been put at $800 million, based in its prospectus released recently.
A listed company publishes its prospectus, a legal document that contains details about its business, finances, and shareholding structure, to provide investors with information about a security or investment offering.
In October, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) approved the sale of ExxonMobil’s onshore oil and gas assets in Nigeria to the local company Seplat Energy, more than two years after the deal was first signed in February 2022.
Seplat Energy Plc, in the document informing the investing public of the new assets, following the conclusion of the deal, announced that it also received an approval from the Financial Conduct Authority (FCA) in the United Kingdom.
Describing the deal as transformative, Seplat Energy Plc noted that it was set to double its crude oil production to around 120,000 following the conclusion of the sales and purchase agreement.
“The transaction, which is expected to complete on December 12, 2024 is transformative for Seplat Energy, more than doubling production to around 120,000 barrels of oil equivalent per day.
“This will provide the company with a significant opportunity to further drive its growth and profitability, whilst contributing significantly to the Nigerian economy. These assets are of proven quality, located in one of the world’s leading hydrocarbon basins,” the company said.
Listing the transaction highlights, Seplat Energy noted that the final cash consideration payable to ExxonMobil at closing is now $672 million, with $128 million deposit paid in 2022 at first SPA signing, and total consideration at closing now $800 million.
It revealed that the deal is fully funded from available cash and debt facilities, with no new equity issuance required
“Further amount of $257.5 million (is) deferred to December 2025, related to Decommissioning and Abandonment and certain Joint Venture (JV) costs that will be partially offset by JV cash calls.
“The after-tax impact of this component on MPNU (is) expected to be $25-$35 million. The company will incur $23 million in other transaction related costs, with $64 million regulatory consent fees reflected in adjustments to the cash consideration due at closing,” the indigenous oil company stated.
The Roger Brown-led company also put the pro-forma 2P reserves for the enlarged group at 887 MMboe of oil as of June 30, 2024, with an increase of 86 per cent on Seplat’s reported 2P reserves, and pro-forma 2P + 2C reserves and resources of 1,210 MMboe an increase of 124 per cent.
While 2P reserves are the sum of a company’s proven and probable oil reserves, 2C resources are regarded as the best estimate of petroleum quantities that could be recovered from known accumulations.
It also put revenue increases at 245 per cent on a pro-forma basis to $1.456 billion, with adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increase to 199 per cent on a pro-forma basis (6M 2024) to $800 million.
Set to create Nigeria’s leading independent energy company, the prospectus showed that the enlarged company has equity in 11 blocks in onshore and shallow water Nigeria as well as 48 producing oil & gas fields.
Also, it now has five gas processing facilities and three export terminals, with multiple high-potential investment opportunities to drive growth.
“The acquisition of the entire issued share capital of MPNU adds the following assets to the Seplat Group: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua Iboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (BRT); NGL recovery plant 9.6 per cent and participating interest in the Aneman-Kpono field,” it pointed out.
In terms of human resources, Seplat Energy Plc put the number at approximately 1,000 staff and 500 contractors, that will transition to the Seplat group.
The transaction, announced on February 25, 2022 with an effective date of January 1 2021, it said, was for an initial consideration of $1.283 billion, with up to $300 million in contingent payments payable over a period of five years (commencing 1 Jan 2022), and other customary closing adjustments.
But the final consideration payable, Seplat Energy said, now takes into account the ‘locked box’ adjustment with an effective date of January 1, 2021.
“After adjusting for locked box and other completion items, the final consideration payable to ExxonMobil will be $800 million, of which $128 million has already been paid as deposit,” the company stressed.
It added, “The $672 million payable on closing the transaction will be funded by: $350 million drawn under the RCF (Revolving Credit Facility), $300 million new three year Advance Payment Facility with ExxonMobil, and $22 million balance sheet cash.”
Als Oando Plc, in its part said that with the support of the Nigerian National Petroleum Company Limited (NNPCL) it is expecting a robust oil production increase of over 100,000 barrels of oil per day and 1.3-1.4 billion cubic feet of gas per day within the next three years.
The company said it has already recorded increased crude oil production output by almost 50 per cent in three months following the acquisition of Nigerian Agip Oil Company from Eni, earlier this year.
The managing director of Oando Energy Resources Nigeria Limited, Dr. Ainojie Irune, disclosed this during a recent meeting with its joint venture partners, Nigerian National Petroleum Corporation Limited in Abuja.
The meeting was led by the group chief executive officer, NNPC Limited, Mele Kyari, including executives such as chief financial officer, Adedapo Segun; executive vice president, Business Services Danladi Inuwa, and executive vice president, Upstream, Udobong Ntia.
In August, the company announced a 100 per cent stake in the Nigerian Agip Oil Company from Italian energy firm Eni in a deal valued at $783million.
Speaking at the meeting, the Oando managing director expressed his gratitude for NNPCL’s support and used the opportunity to provide critical updates on the developments since Oando’s acquisition in August 2024.
He said, “Just by way of an update, in less than 100 days, since acquisition, we have been able to increase our production outputs by almost 50 per cent. This could not have been achieved without your support. We’ve been able to improve the integration of both legacy companies, again led by not just Oando, but NNPC, bringing the JV that used to exist in three parts into two, seamlessly.”
He emphasised the company’s commitment to increasing production and improving operational efficiency.
“We are excited about the future of this partnership. With the support of NNPC, we aim to increase production to over 100,000 barrels of oil per day and 1.3-1.4 billion cubic feet of gas per day within the next three years,” Irune added.
Responding, the NNPCL GCEO congratulated Oando on its recent acquisition of Nigerian Agip Oil Company from Eni.
“We believe that taking over the interests from Eni in this joint venture is a positive development for our industry and country. It signifies Indigenous companies’ ability to play a bigger role in big assets and align with the national aspiration in the energy industry.
“We see this development as a massive step on the path to realising that national goal. We will work with Oando intently to ensure that we do two things, as you have highlighted: increase oil production and also increase gas production,” Kyari remarked.
He also echoed Irune’s sentiments, emphasising the importance of the partnership and the potential for further growth.
He further expressed confidence in Oando’s ability to drive the JV town to new heights, stating, “We believe that you will be able to steer this ship to the delivery line in the short term and the long term.”
Irune also stressed the need for collaboration to successfully tackle the issues surrounding the industry’s current reality, which extend beyond financial, security, community, or production integrity issues.
“The challenges we have seen are not insurmountable. Rather, with the commitment and collaboration of all parties, we will overcome the current adversity to build a sustainable industry and economy,” the statement concluded.
“We also applaud the efforts of the regulatory authorities who have guided us through the approval process, specifically the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) team led by Engineer Gbenga Komolafe the CCE. We realize that government and regulatory support play a pivotal role in fostering impactful investments and enabling indigenous companies to thrive in Nigeria’s energy sector.”
This acquisition not only brings immediate production and cashflow benefits but also reinforces the company’s vision of building an upstream company capable of driving transformative change in Africa’s energy sector. “We remain dedicated to contributing to Nigeria’s economic prosperity and the development of its energy landscape through responsible and efficient operations.” the firm said.
