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Interesting on an average day with zero news, very approx for each 10,000 shares purchased vs sells we see an average of 1p increase in the SP
What on earth will happen when the Mobile deal is signed off and the facts are made known, the City will/should be very impressed with the eventual deal, increased production, increased Reserves of oil, the TCF of gas is a lovely extra, FCF jumps, and the actual end price paid decreased due the lengt of time taken to cross the line.
On every metric this should be a superb deal for SEPL.
As always DYOR/DD
More transcribes are being released from the NURPC workshop last friday, and I'm highlighting the parts about timeline below. Link is here: https://www.thisdaylive.com/index.php/2024/05/04/for-reinvestment-in-mobil-shell-agip-equinor-oil-blocks-nuprc-gives-two-week-ultimatum
Two weeks to decide about Option 1 & 2 (this has been explained in this board earlier, so I'm not repeating that).
But, followed up with some other comments that might be disconcerting for some:
“Even when we want to finish that in the middle, we don’t plan to keep you waiting in limbo. We expect that by June 30, we should have finished everything.
“And we expect some more time to make our recommendations, to dialogue with you, make our recommendations, submit that to the minister, the minister approves and communicates his consent to you.
“So, we hope that no matter what, by August 31, everything should have been done and you have your consent. So, that’s the proposition we have for you today,” she stated.
Now, I wouldn't rule out an earlier execution because we have Mr. Heineken on the record saying he recently was in New York, meeting Exxon, and agreed upon the details. (Seplat 10 year anniversary). I also would like to believe that some of NURPC demands has been communicated to Exxon, Equinor, Eni and Shell prior to last Friday i.e. the process might be further ahead than we believe.
Two days ago the CEO of Oando, who's buying ENI assets, said the following:
“working through the obligations under the Share Purchase Agreement” and is “on track” to close the deal this quarter."
Buying 20% of 4 OMLs which NNPC already owns 60% of i.e. a setup almost 1:1 to ours.
To sum it up, I'm extremely confident the deal will go through. August 31 is later than I had hoped for, but I've been holding since Feb. 2022 so I might hold another 3 months. :)
Mmm just spotted the AGM is pencilled in for next Thursday, wouldn’t it be an ideal opportunity to announce good news !! Fingers crossed😊
My $700m in Free Cash Flow up to 2023-05-24 from 2021-01-01 certainly is conservative (as stated), and I consider everything above that as a cherry on top. :) Bless
"I get $1.7b already in the lockbox since Jan2021"
That's closer to the number I have, those saying $800m I think are quoting the "capital access" research firm who it looks like didn't account for depreciation, amortization and impairment; they had mpnu doing $387m in free cashflow on $4.5 billion in revenue in 2022 which makes no sense whatsoever.
Some excellent posts on here as ever. Thanks for them.
Drawing together some of those details, at $80 bbl with $17 opex on 64k bbl, and presuming a 50/50 share for the last 12 months with Mobil, I get $1.7b already in the lockbox since Jan2021
Thanks Alex, excellent commentary.
Looking at all the evidence, this points to a quite amazing deal in SEPL favour, especially going forward, say 18 months.
Forgot to add:
When I talked to Seplat management they told me that MPNU's opex/boe is $17. Somewhat higher than the onshore fields, but instead you have zero (0) oil-theft and the royalties are lower in shallow water.
When ANOH comes online the expect opex/boe go down for the group, as it's essentially new incremental wells feed straight into the plants. Highly efficient, high margin.
Some more details have emerged that I find highly interesting:
1) The Chief Executive of the NUPRC said this weekend that the current average production of MPNU is 159 378 bop/d and that the technical production potential is 244 268 bop/d. Seplat working interest will be 40% i.e. additional 64,000 bop/d capacity in H2 2024 and reaching 97,000 early 2026.
Research firm 'Capital Access' had MPNU Seplat working interest at 50,000 bop/d so this was a very positive revelation.
2) "The commission expects the divesting parties to indicate their preferred option and issue the applicable instrument within two weeks of the date of this workshop. I assure you that the commission is eager to close the divestments within the shortest timeline upon the receipt of any of the required instruments.”
I appreciate this language of urgency from the part of NURPC.
3) Most certainly will the majors that are divesting (Exxon, Equinor, Eni & Shell) try to offload all liabilities of the acquiring part. However, I doubt that's in the interest of the regulator; setting a precedent were a producer simply divests near end of life assets.
The language here is also aimed at the divesting part:
"...the divesting companies will be required to issue an undertaking to retain the liabilities until confirmation of the release by the commission of all or part of the retained liabilities."
4) These last statements (10Y Seplat anniversary Mr. Heineken & NURPC this weekend) have de-risked the case of Seplat enormously, in my opinion. Keep in mind, the major risk was always that 1) termination of the deal or 2) NNPC strong-arm into some of the fields %. Both these risks are of the table now.
5) The Lockbox: all net profit in MPNU from effective date January 1 2021 to 2023-05-24 was accumulated and earmarked to Seplat which in turn lower the acquisition price. In my calculations it shouldn't be below $700m.
2023-05-24 the RNS stated that Exxon and Seplat from this date "share" the profits - but no further details were disclosed. Let's say it's 50/50: the lockbox could be +$800m today.
$700m accumulated and $128m already in deposit. In a base-case Seplats final and remaining consideration for acquiring these massive assets could be in the range of ~$500m.
I would love to know the full detail of discussions between the various parties and the existing contracts that are in place. Unfortunately, small private investors are rarely in such a privileged position. We’re often left with reading in between the lines.
There are some judgement calls we can make:
1. There was no mention NNPC’s first right of call to make a bid for the assets, which may imply that NNPC have agreed not to pursue that route, if an agreement can be reached? This would be very positive for us.
2. All parties will act in their self-interest. Going by the various press releases all would like a speedy closure. The government has shown its hand to the oil majors and Herminator, as you’ve rightfully mentioned, the ball is in their court, they have a starting point which they can further negotiate with respect to legal elements, time frames for any payment and even negotiate liabilities.
3. As more than one major oil company is involved, they may propose to collectively set up a fund to address the issues rather than individually suffer reputational damage and get caught up in legal wranglings.
4. The oil majors will be mindful of setting any negative precedence for liabilities, both locally and internationally.
5. In the current environment, the oil majors will want to guard their reputation with respect to environment and exploitation of local communities. This limits their options and makes a high level solution more probable.
6. The government is focusing on ensuring companies that acquire the assets have appropriate capabilities. This is a major plus for Seplat as the leading local company, this should provide greater opportunities for further acquisitions.
7. As the government and the regulator are actively involved, there is increased potential for kickbacks for the oil majors for their remaining assets. An additional catalyst and negotiating tool.
Most of this will favor an early high level resolution, not necessarily within two weeks but soon. GLA and hopefully start of another long bull run.
So when the Regulator said the SEPL deal could be signed off within 2 weeks, this is why.
We could get news any day, the details of which will be very telling for the rest of the industry, large Co divestment of huge O&G reserves, but at a known cost - if a balanced deal is offered, everyone can get on with making money.
Nigeria is desperate to create a renaissance of the O&G industry.
So to me this is quite now a simple fix scenario, all the big guns such as exxon,shell etc that wish to call it a day as it was with the huge interests in Nigeria with O&G met with the NURPC agree the exit fee of clean-up and environmental issues that have been caused, compensate where needed, then we will grant your wish and rubber stamp the sale of your assets. to me this is in the majors corner now, I haven't got a clue too how much the NURPC have set as a standard, but they have clearly said, if you agree to these terms and sign the agreement in june there will be NO delay. If you ponder and question the proposal it will definitely cost you more and delay nigerias transformation for the thirst of extra revenue and of course developing our infrastructure, the new goverment to me have been very astute in what they are going too achieve. Lets hope now theres a clear agenda just need it to be actioned, im hoping for lift off soon :)
regards H.
Some further clarifications
https://www.reuters.com/world/africa/oil-majors-offered-faster-nigerian-exit-if-they-pay-cleanup-2024-05-03/
A further snipit from "this day newspaper Nigeria " was The president tweeted after the meeting, “It was a pleasure to play host to Exxon Mobil executives, Liam Mallon and Adesua Dozie at the State House earlier today. The meeting marks the continuation of this administration’s efforts to secure the collaboration of critical players in the oil sector towards ensuring stability, transparency, and fair competition in the sector. which does speak volumes to me. regards H.
Its hard to know where to start, firstly this is Nigeria, a ever growing economy and population, I have been in this share ever since seplat aquired elland back around 5 years ago. I would be very surprised if this deal dosent go through now (probably take a further 2 months before everything is signed) because this will set a trend to foreign investor groups paving the way for further deals. Dont forget also the capitol this will put into Nigeria's coffers allowing funding for the country which is badly needed, if you think about the pollical structure is changing, the government is sorely missing the cash from the gold mine which is oil/gas. I am hoping that this all goes through amicably, as Im sure there will be big international investors keeping a eye on things. as always GL everyone wo is invested regards H. may I also add some fantastic insight into figures and facts from seatank and others.
As in most business, common sense, a balanced outcome and an end date for final sign off.
Everyone is keen to get this over the line !!
Big day today. Will they or wont they agree? Fit for a Nollywood blockbuster!
Seems the regulator wants money to be set aside for various legal requirements. I wonder who will fit the bill? Who needs this deal the most?
THISDAY is reporting that the parties have two mutually exclusive options, a full audit or accept provisions required for decomm, communities and environment. As these are mature fields, most of this cost should fall on Exxon.
In Seplat’s last update, the discussions were described as being constructive, I assume this means the discussions have been beneficial for Seplat?
Exxon needs to demonstrate that it’s making progress to realign its portfolio and would be keen to get closure. Otherwise, it risks getting bogged down for many years to come and may still be no better off.
Giving an idea of final deal and timescale
Thx Alex
MPNU in the bag and $400-500m in net profits next year i.e. p/e 2.5x
With these amazing news today, I'm confident to underwrite that Seplat consummates MPNU in Q3 2024 - and I've updated my sheet accordingly. You can find an excerpt/dashboard of my sheet here, link: https://i.imgur.com/6Ph3iCP.png
New assets that are coming online in Q3 2024 that will create a tremendous Year-over-Year result:
- Sapele build-out: up to additional 35 MMscfd
- ANOH Gas: 70 MMscfd net from Seplat via incremental wells
- MPNU: +90k boep/d in early 2022 which I assume - with a substantial margin of safety - is down to 55k Q3-2024; and will regain to at least 70k boep/d in 2026. (IMHO, my assumption leaves substantial upside)
- AGPC first dividend of $30m in 2026 - reaching +$100m in 2030.
KPIs:
- To create additional margin of safety I assume that OPEX/barrel goes to $12 from current $9.6 and CAPEX to $12 from current $10.
- Effective tax rate is difficult, but I'm putting a flat 40%
I envision we make +$500m in 2025 and +$600m in 2026. Let's assume further delays or blackouts; $400m in 2025 and +$500m in 2026.
This is probably a +300p stock within 18 months, IMHO.
For those whom may have difficulties in opening the link from alexeliassons post .
Nigeria could sign off on Exxon oil asset sale to Seplat within weeks, NUPRC says
By Camillus Eboh and Isaac Anyaogu
May 2, 20241:58 PM GMT+1Updated an hour ago
ABUJA/LAGOS, May 2 (Reuters) - ExxonMobil's Nigerian petroleum assets sale to Nigeria's Seplat could be approved in less than two weeks, the country's oil regulator told Reuters on Thursday.
The $1.28 billion sale in Africa's largest oil exporter has awaited regulator approval since 2022.
Gbenga Komolafe, chief executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), told Reuters the parties involved would be invited to a meeting on Friday.
"Subject to the outcome of the meeting, consent...could be given in less than two weeks from the date of the meeting," he said.
NUPRC would give the companies two mutually exclusive options that, if accepted, would permit approval of the deal, he said.
He did not spell out what these options were but said the law requires money to be set aside for decommissioning, host community development and environmental remediation.
"As a commission, we don't want our nation to carry unwarranted financial burdens arising from the operations of the assets over time by the divesting entities."
A spokesperson for Seplat declined to comment. An Exxon spokesperson did not immediately comment.
Observers say approving the deal would bring much needed investment into Nigeria's petroleum sector. While it is pending, there is little incentive to put money into the assets, which means production will gradually decline.
Former Nigerian president Muhammadu Buhari initially consented to the transaction, but withdrew that consent days later after the oil regulator refused to sign off on it.
President Bola Tinubu, who took office last year, has made attracting investment a key priority.
My apologies, here's the link: https://www.reuters.com/markets/deals/nigeria-could-sign-off-exxon-oil-asset-sale-seplat-within-weeks-nuprc-2024-05-02/
Can you post a link to the article please?
Read the news again, "the options" seems to be in regard to guarantees about decommissioning i.e. our best case is playing out. Shell was also notified about similar, last week.
"He did not spell out what these options were but said the law requires money to be set aside for decommissioning, host community development and environmental remediation."