Chevron Completes Sale of OML 53, 55 to Seplat

In an surprising move, and while all eyes were on its talked about acquisition of Afren, Seplat Petroleum Development Company completed the acquisition of Chevron's 40 per cent interest in oil mining leases 53 and 55, even while the issue of the sale remains 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 a rumoured bid of $1.6 billion.  

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.

It seems that Chevron has chosen to act within the window it has until the Supreme Court hearing. Seplat itself has always been quite bullish about its chances of success in the legal dispute and has now decided to move forward and close the deal even though they may not have heard the last of the dispute.  

Seplat closed the two transactions simultaneously. The compnay 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 (NNPC) taking over operatorship following divestment by the international oil companies (IOCs). NNPC holds the remaining 60 per cent interest in the two assets.

Austin Avuru, Seplat's CEO said: "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."

SacOil Considers Quitting Nigeria

NNPC Loses 60,000 Barrels Per Day Through Vandalism

Nigerian National Petroleum Corporation (NNPC) has given an estimate of how much daily production it is losing through pipeline sabotage. The figure, the Corporation said, wisas currently about 60,000 barrels of crude oil and condensate per day. The spate of attacks is said to have increased in recent times particularly on the Escravos-Lagos Gas Pipeline (ELGP).

NNPC's Group Executive Director Gas and Power, Dr. David Ige said the increase in the attacks on the Trans-Forcados Pipeline and the Escravos-Lagos Pipeline in the last six weeks are a significant dent on the nation's revenue, after the Trans Forcdos pipeline was broken into four times this year. However, although he did not say so, the situation would appear to be a significant improvement from the time of the former Group General Managing Director, Andrew Yakubu who had reported the daily losses at 105,000 barrels per day.

OPEC Daily Basket Price Stood at $50.81 a Barrel Thursday, 5 February 2015

The price of OPEC basket of twelve crudes stood at $50.81 a barrel on Thursday, compared with $52.22 the previous day, according to OPEC Secretariat calculations. The basket price is on an upward trend and has been rising since dropping to $43.79 on 30th of January.

Meanwhile, a Reuters survey revealed that OPEC's oil supply had risen this month due to more Angolan exports and growing output in Saudi Arabia and other Gulf countries. Supply from OPEC averaged 30.37 million barrels per day (bpd) in January, up from a revised 30.24 million bpd in December, according to the survey. Nigeria also managed to boost exports and is expected to average 2.1 million bpd in Q1 2015, representing an 11% increase on Q4 2014.

After refusing to cut production at their quarterly meeting in November, OPEC countries remain

optimistic that their strategy is the right one and that prices have gone as low as they will.

The new OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

Afren Shares Surge After Debt Restructuring

Afren's shares have surged even as it waits for Seplat to make up its mind whether or not it will make an offer for the beleaguered company. Shares in the FTSE 250 company have been plunging since last year when it was hit by scandal over unauthorized payments to its CEO and COO. Spiraling oil prices and crippling debt have weakened the company's ratings considerably.  

News of the gains will come it as a welcome relief for Afren after it brought it an investment bank to help it restructure a $50 million debt repayment to bond holders and banks. After managing to defer the debt repayment, its shares began to soar, gaining as much as 133pc before closing up 4.7p at 10p, an 88.7 per cent rise on Monday.

The euphoria may be short-lived however. Although Seplat has just raised $1 billion for acquisitions, over half of that has now been spent on completing the just announced acquisitions of OML 53 and 55. They intend to spend money ramping production up quickly on the asset. It remains to be seen what decision they will make regarding Afren when the deadline for making an offer or withdrawing, reaches on February 13..

PWC Clears NNPC Over Missing $20 Billion

State owned national oil company the Nigerian National Petroleum Corporation (NNPC) says it has been cleared over allegations that it failed to remit $20 billion in revenue from crude oil liftings to the federal government's revenue account. The Group General Manager, Group Public Affairs Division of NNPC, Ohi Alegbe, said PriceWaterhouseCoopers (PWC) had cleared the Corporation in an audit.

Former Governor of the Central Bank of Nigeria (CBN) and currently the Emir of Kano, Sanusi Lamido, made the allegations and although subsequently sacked, the allegations were taken seriously enough to for the government to order an audit of the Corporation. A reconciliation exercise by NNPC, the Ministry of Petroleum Resource, the Ministry of Finance and CBN had already failed to agree on the numbers.  

Although PWC recommended that the Corporation should remit $1.48 billion to the federation account, NNPC insists that this sum was never in dispute and was not part of the $20 billion alleged to be missing. The explanation given by the Corporation is that the sum is made up of statutory payments such as signature bonus, taxes and royalties, which had not yet been paid because of a delay in the reconciliation between the Department of Petroleum Resources and NNPC. The Minister of Petroleum has apparently order the Corporation to remit the money as recommended.

The forensic audit acknowledged that the total cash remitted into the Federation Accounts in relation to the crude lifting in the period under review was $50.81 billion. The subsidy payments for premium motor spirit and kerosene for the period under review was $8.7 billion.

The statement also shed light on the confusing issue of whether or not dual petroleum purpose kerosene (DPK) is subsidised.  The explanation as to why subsidy payments are still being made for DPK is that although there was a presidential directive on 19 October 2009, which removed the subsidy, it was assumed not to be in force since it was not gazetted as is required under the Petroleum Act of 1969.

The PWC report recommended that the laws should be changed so that NNPC is required to meets its cost entirely from the value is creates.

Pirates Kidnap Agip Workers in Niger Delta

Gun toting pirates have kidnapped 4 personnel working for the Nigerian Agip Oil Company (NOAC). The men who were said to be travelling by boat without an escort were overpowered by the gunmen and have since been taken away to the Ijaw area of Bayelsa State. A military spokesman for the army said they had already started a mission to rescue the men. Oil companies in the area are nervous about the forthcoming elections after threats of violence by militants if the President is not re-elected when the nation goes to the polls this month.

NEITI Director, Tariye George is Dead 

The Nigeria Extractive Industries Transparency Initiative (NEITI) announces with great pain, the death of its Director, Technical Services, Mr Tariye George.  Mr George died on Sunday 1st February, 2015 in a Ghanaian hospital, Accra after a brief illness.

Aged 49, Late Tariye George began his early life in Port Harcourt, where he had his primary and secondary education. A graduate of Geology from the University of Port Harcourt, Mr George also holds a Master of Science Degree in Industrial Technology from the Texas Southern University, United States.

Before joining the services of NEITI in September 2010, the late Tariye George worked for over 20 years in many international oil and gas companies during which he gained extensive experience in both up and down stream sectors of the industry.

As NEITI Director Technical Services, Late Mr Tariye George brought his vast experiences to bear in the implementation of all key projects including efficient supervision of the conduct of NEITI independent audits of the oil, gas and mining industries.    

By his death, NEITI in particular, and the global Extractive Industries Transparency Initiative have lost a dependable ally in efforts to ensure that revenues from natural resources support national development and poverty reduction in Nigeria.  

The Chairman of NEITI Board, Ledum Mitee, described the sudden death of Tariye George as devastating. In his words, "Tariye carried out his assigned duties for NEITI, with passion, dedication and competence. His death has created a big hole which will be difficult to fill in NEITI operations. In her condolences, the Executive Secretary, Mrs Zainab Ahmed described the death of Tariye George as a major setback for NEITI in the implementation of EITI in Nigeria, giving his knowledge, contacts and commitment to results in his duties.

A condolence register has been opened at the NEITI Secretariat, Maitama Abuja. Mr Tariye George is survived by an aged mother, a wife and four children.  

Nigerian Agip Oil Company invites interested and registered Nigerian companies to respond to the opportunity for the provision of civil works and maintenance services. The scope of services covers the provision of soil investigations, foundation piling and earthworks. Only tenderers who are registered in the NJQS product/category civil works/ building contracting services shall be invited to submit technical bids. The closing date for this opportunity is 11 February 2015.