Seplat Secures Return of $368 Million from Escrow

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Austin Avuru

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SEPLAT shares on the London Stock Exchange (LSE) have soared with the news that the dually listed (LSE and NSE) company has been able to secure access to $368 million previously held in escrow. Seplat has been in talks over a potential acquisition in the Niger Delta. The company, through its wholly owned subsidiary, Newton Energy, is part of a consortium that is in talks with the vendor over terms for the acquisition of the “large” asset. Talks had stalled with the drastic drop in oil prices but discussions have now been re-opened towards reaching a deal.

Seplat has not revealed details of the other members of its consortium or the vendor, citing confidentiality obligations. However, there is speculation that acquisition is from one of the majors (referred to locally as IOCs) and that is it a large ticket asset.

The company had previously set up an escrow account to the tune of $453 million in connection with the potential acquisition. This was a refundable deposit against the asset. However, due to delays in closing the deal, Seplat has been able to negotiate a return of $408 million, whilst the remaining $45 million remains as a deposit with the vendors whilst negotiations continue.

A further $29 million has been placed into a new escrow account against the deal, leaving Seplat with $368 million cash from the total amount originally in escrow. The funds will be released back to Newton should an agreement be reached in the potential acquisition. However, it will cost Newton $20 million to withdraw from the deal at this advanced stage. That sum will have to be paid to the other consortium members if it should withdraw.

Seplat has always been Nigeria focused and has been on an acquisition drive even before its spectacular dual listing. It acquired a 45 percent participating interest in a portfolio of three onshore producing oil mining leases (OMLs) 4, 38 and 41, which include the producing Oben, Ovhor, Sapele, Okporhuru, Amukpe and Orogho fields. Seplat says it has more than tripled production from these OMLs on which it is operator.

Three years later, in 2013, the company acquired a 40 per cent participating interest in the Umuseti/Igbuku marginal field area within OPL 283 from Pillar Oil using their subsidiary, Newton Energy.

Two years later, the company, which says it is pursuing a Nigeria focused growth strategy, was on the prowl for more assets to satisfy their burgeoning coffers. They acquired a 40 per cent interest in OML 53 and a 22.5 per cent interest in OML 55 from Chevron. This acquisition was however not plain sailing, as, in spite of having obtained Ministerial Consent to the acquisition, Brittania-U is in court claiming that it won the bid and urging the Nigerian courts to order the transfer of the assets to it. Many expect that a settlement will be reached with Brittania-U on the matter.

— Jul 22, 2015 @ 16:05 GMT

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