Lagos-based marginal field operator, Brittania-U Nigeria Limited, has caused an upset among the companies aspiring to buy three of the five oil blocs put up for sale by Chevron, as it offers to pay $1.2 billion for them.
The prevailing industry opinion is that the assets would be good to go for $400 million, Africa Oil+Gas report says, quoting an investment banker.
Chevron recently announced plans to divest its 40 percent interests in five oil blocs which included OMLs 52, 53, 55, 83 and 85 and hold oil reserves in excess of 250 million barrels of oil and over 3.5 billion cubic feet of gas.
Some industry analysts have said that Brittania-U Nigeria Limited is offering $1.6 billion for the three oil blocs among the five. The company’s bid with an equity financing partner and their joint offer is around $1 billion higher than those from three other competing consortia who made it to the final of the three-month long process.
Brittania-U is bidding to buy OMLs 52, 53 and 55 estimated to contain proven oil and gas reserves of 555 million barrels of oil equivalent (MMBOE).
The other companies contending with Brittania-U are Seplat/Amni Production, Niger Delta Petroleum/SAPETRO and Sahara/Septa, all Nigerian companies.
First E&P put in a bid for only OML 55; so did Belema Oil, a company linked to the host communities in the same acreage, according to Africa Oil+Gas report.
It was not clear as at Tuesday whether Brittania-U has been declared winner, but industry analysts said they might get the OMLs following the bid price they have offered.
Brittania-U was considered a dark horse at the beginning of the sale process. The company produces 5,000 barrels of oil per day (BOPD) from the shallow-water Ajapa marginal field previously held by Chevron, but it is not perceived as a technically honed company.
Eddy Wikina, former external relation affairs manager, Shell Nigeria Exploration Petroleum Company (SNEPCO), said he was not surprised that Britannia-U was able to put such a price tag because of its high credit rating.
“The company was able to pay back the money it borrowed to acquire the Ajapa oil field within one year and because of this its credit rating among money lenders would be high. Bankers would be ready to lend money to such a company to acquire the oil blocs because they know they would not have difficulties getting their money back,” he said.
According to him, OML 53 is a cash cow. The money Brittania-U is making from Ajapa oil field puts her in a comfortable position to put down such money.
Wikina said many of the companies, such as Seplat, Amin and Niger Delta Petroleum Company, have the capacity to pay for such oil blocs because they have good track record of paying back their loans to their lenders.
Stakeholders had feared that by the time multinational oil companies leave and independent players probably take control, it might be difficult to raise necessary funds to finance the development of these assets by the locals.
However, some industry operators think the fears entertained by some of their counterparts are not necessary, saying that divestment would strengthen local operators while sourcing for fund would not be an issue.
Claire Lawrie, head of oil and gas advisory, Ernst&Young, said the assets being put up on offer by the IOCs are mostly onshore oil blocs.
According to her, “The major reasons for selling these onshore assets are worries over oil theft, relations with communities living around oil fields and uncertainty over the stalled Petroleum Industry Bill (PIB) to overhaul fiscal terms.”
She said since 2010 Nigeria has had a policy of encouraging local content in the oil and gas industry. This, according to her, has led to more direct ownership of oil blocs and assets by Nigerians, either through the NPDC, the exploration and development subsidiary of Nigerian National Petroleum Corporation (NNPC), or independent private firms.
On who would buy the assets, she said many of the indigenous Nigerian firms are backed/or owned by businessmen that are able to buy these assets. For example, SEPLAT, which is partly owned by French oil explorer, Maurel & Prom, and Swiss-based commodity trader, Mercuria, is likely to submit a bid, according to industry sources.
“There are also other independent companies that already manage marginal fields in the Niger Delta area including Brittania-U, Vertex, Sogenal and Seven Energy,” she said, explaining that Nigerian banks have demonstrated the ability to raise the required financing for oil and gas assets through local and foreign collaborative arrangements.
Seye Fadahunsi, executive director, Pillar Oil, while also reacting to this development, said some Nigerian independents in alliance with foreign interests are poised to buy the divested oil blocs.
He said local companies can enter into partnership with foreign interests or they can pool resources in JV with other independents.
As to whether Nigerian banks can raise the funds required to finance the assets, he said Nigerian banks have of late become more bullish and risk-averse and would want to show capacity by aggressively seeking for funds from international market to boost their capital base in order to fund the acquisition. “The driver is the high rate of return on investment in this sector,” he said.
Information from Business Day was used in this report.