Seplat Petroleum Development Company has concluded the acquisition of Chevrons oil mining leases despite the case Brittiania-U instituted against it in court
SEPLAT Petroleum Development Company has completed the acquisition of Chevron’s 40 per cent interest in oil mining leases 53 and 55, despite the fact that the matter is in court in Nigeria. The two assets are part of a trio of assets, which include OML 52 that Chevron put up for sale in 2013. Whilst Chevron was negotiating closing details with Seplat, Britannia-U went to court to stop the sale, claiming that it was the highest bidder for all three assets combined with an alleged bid of $1.6 billion.
According to Oil and Gas Intelligence report made available to Realnews last week, Brittania-U immediately secured a High Court injunction, preventing Chevron from transferring the assets to Seplat or any other bidder. Chevron sought to have the case thrown out for lack of jurisdiction on the basis that it was a private commercial matter and further that it should be referred to arbitration on the basis of the confidentiality agreement signed by the parties. The court ruled that there was a triable dispute over which it had jurisdiction.
Chevron, who would no doubt prefer to see Seplat declared the winner, appealed to the Court of Appeal against the interim injunction granted by the Federal High Court. The Court of Appeal ruled in their favour and Britannia-U headed for the Supreme Court, hoping to overturn the Court of Appeal decision. A hearing date has still not been set for the Supreme Court hearing.
Meanwhile, Chevron has chosen to act within the window it has until the Supreme Court hearing. Seplat itself has always believed in its chances of success in the legal dispute and has now decided to move forward and close the deal even though the case is yet to be determined.
Seplat closed the two transactions simultaneously. The company acquired Chevron’s 40 per cent working interest in oil mining lease (OML) 53, onshore northeastern Niger Delta directly whilst OML 55 has been acquired through an interest in Belema Oil, which won the bid.
The up-front acquisition cost of the OML 53 acquisition to Seplat, after adjustments, was $254.6 million, of which Seplat had previously paid $69 million as a deposit in 2013. The balance of $185.6 million paid was paid at completion. The adjustments to the up-front acquisition cost include a deferred payment of $18.75 million contingent on oil prices averaging $90 a barrel or above for 12 consecutive months over the next five years.
Seplat estimates that its net recoverable hydrocarbon volumes attributable to its 40 percent working interest in OML 53 is in the region of 51 million barrels of oil and condensate and 611 billion standard cubic feet (Bscf) of gas (total 151 million barrels of oil equivalent or MMboe).
OML 53 covers an area of approximately 612 square miles (1,585 square kilometers). The only producing field on the block currently is Jisike, which currently produces just 2,000 barrels of oil per day or bopd but it also contains the large undeveloped Ohaji South gas and condensate field. There is also shallow oil development potential at Ohaji South that could be pursued as a separate, standalone project in the near term. Seplat expects initially to focus efforts on increasing oil production at the Jisike field and development of the shallow oil reservoirs in Ohaji South.
Seplat has also succeeded in securing an interest in OML 55 after funding Delta State owned Belema Oil Producing to acquire the asset. The company revealed that it had paid $132.2 million for a 22.5 per cent effective working interest in OML 55, whilst stomping up the remaining $132.9 million in loans to Belema Oil shareholders to enable them to make the acquisition from Chevron making a total cash outlay to Seplat of $265.1 million.
The deal on OML 55 includes adjustments to the up-front acquisition cost, including a deferred payment of $20.6 million contingent on oil prices averaging $90 a barrel or above for 12 consecutive months over the next five years. Under the agreed terms Seplat will recover the loaned amounts, together with an uplift premium of $20.6 million and annual interest of 10 per cent, from 80 per cent of the other shareholders oil lifting entitlements. Net recoverable hydrocarbon volumes attributable to its 22.5 per cent effective working interest are estimated at approximately 20 million barrels of oil and condensate and 156 Bscf of gas (total 46 MMboe). Gross production is approximately 8,000 bopd.
Seplat will be the operator of both blocks after the Ministry of Petroleum backed down on its recent model of insisting on the Nigerian National Petroleum Corporation taking over operatorship following divestment by the international oil companies. NNPC holds the remaining 60 per cent interest in the two assets.
Austin Avuru, chief executive of Seplat was quoted by Oil and Gas Intelligence as saying: “The addition of OML 55 to our portfolio, together with the separately announced acquisition of OML 53, expands our footprint in the Niger Delta to six blocks and further cements our position as a leading indigenous independent E&P in Nigeria.”
— Feb. 23, 2015 @ 01:00 GMT