Friday, February 25, 2022 / 11:34 AM / by FBNQuest Research / Header Image Credit: Seplat Energy

Event: Seplat Energy Plc (Seplat) reaches agreement to acquire Mobil Producing Nigeria Unlimited (MPNU)

Implications: According to official statements, Seplat has entered into a share and purchase agreement to acquire the entire share capital of MPNU for a purchase price of USD1.283bn, plus USD300m in contingents. Given MPNU's 2P oil and gas reserves of c.446 million barrels of oil equivalent (MMboe), this works out to a EV/2P of USD2.9/boe (excluding contingents). Prior to this announcement, we had expected a significantly higher ticket size and, as such, underlines the real desire for international oil companies (IOCs) to exit onshore and shallow water assets. 

The transaction will be financed solely by cash through a combination of existing cash resources and a new USD550m senior term loan facility and USD275m junior offtake facility. Contingent payments, if materialised, will be funded through net cashflows from operations. For Seplat, the immediate impact of the deal is significant. Based on MPNU's production figures in 2020, Seplat's working interest production will increase by c.95k barrels of oil equivalent per day (boepd). Strategically, the deal makes sense for Seplat as MPNU assets have significant gas upside potential, with undeveloped resources of 2,910bscf. 

Alongside a 40% operating interest in OMLs 67, 68, 70 and 104, Seplat will be acquiring the Qua-Iboe export terminal and majority interest in the Bonny River Terminal and Natural Gas Liquids Recovery Plants at Oso and EAP. We note that the deal is subject to regulatory approval.

Year to date, Seplat shares have gained +31% vs. the NGX ASI's +11%.  

We rate the stock Outperform.