Seplat Completes Acquisition of Stakes in OML 53, OML 55 in Nigeria

Seplat Petroleum Development Company Plc (Seplat or the Company), a leading Nigerian indigenous oil and gas company listed on both the Nigeria Stock Exchange and London Stock Exchange, announced Thursday that it has completed the acquisition of a 40 percent working interest in OML 53, onshore north eastern Niger Delta from Chevron Nigeria Limited (CNL). NNPC holds the remaining 60 percent interest in OML 53. The up-front acquisition cost to Seplat, after adjustments, is $254.6 million, of which $69 million had previously been paid as a deposit in 2013 and $185.6 million 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. 

The Company estimates net recoverable hydrocarbon volumes attributable to its 40 percent working interest to be approximately 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). Seplat has been designated as Operator of OML 53 pursuant to the Joint Operating Model approved by the Honorable Nigerian Minister of Petroleum Resources. “In particular, this transaction fits neatly with our strategy of securing, commercializing and monetizing natural gas in the Niger Delta with a view to supplying the rapidly growing and evolving domestic market. In addition to the large scale discovered, but undeveloped gas and condensate resources that are yet to be fully classified through detailed technical work, there are near term opportunities to increase and optimize oil production significantly above current levels,” said Austin Avuru, Seplat's CEO. “We very much look forward to working with NNPC and leveraging our technical and commercial expertise as Operator to realize the full potential of this high grade acreage,” he added. 

OML 53 covers an area of approximately 612 square miles (1,585 square kilometers) and is located onshore in the north eastern Niger Delta. The Jisike oil field, located in the north western area of the block, is currently the only producing field on OML 53. Current gross production from Jisike is approximately 2,000 barrels of oil per day or bopd (approximately 800 bopd on a 40 percent working interest basis). Existing infrastructure on OML 53 at Jisike comprises flow-lines, phase one separation facilities and a flow station with a design capacity of 12,000 bopd and 8 million standard cubic feet per day (MMscf/d). Oil production is then sent for further processing at the nearby Izombe facilities on OML 124 from where it is then exported via pipeline to the Brass oil terminal. The block also contains the large undeveloped Ohaji South gas and condensate field, the development of which will be coordinated with the SPDC operated Assa North field on adjacent OML 21, together referred to as the ANOS project. The expectation is that future gas production from the ANOS project will supply the domestic market, for which significant work on commercialization terms and development concepts has been undertaken, and that produced condensate will be available for sale into the global market. There is also shallow oil development potential at Ohaji South that could be pursued as a separate, standalone project in the near term. Prior to initiating development of the ANOS project, Seplat expects to focus efforts on increasing oil production at the Jisike field and development of the shallow oil reservoirs in Ohaji South. 

In a separate announcement, Seplat revealed that it has concluded negotiations to purchase 56.25 percent of the share capital of Belemaoil Producing Limited (Belemaoil), a Nigerian special purpose vehicle (SPV) that has completed the acquisition of a 40 percent interest in the producing OML 55, located in the swamp to coastal zone of south eastern Niger Delta, (the Acquisition), from Chevron Nigeria Limited (CNL). NNPC holds the remaining 60 percent interest in OML 55. Seplat's effective working interest in OML 55 as a result of the Acquisition is 22.5 percent. The cost for Seplat to acquire its 22.5 percent effective working interest in OML 55 is $132.2 million. The Company has also advanced certain loans of $132.9 million to the other shareholders of Belemaoil to meet their share of investments and costs associated with Belemaoil. Consequently, the up-front cash outlay to Seplat after adjustments is $265.1 million. The adjustments to the up-front acquisition cost include 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 percent, from 80 percent of the other shareholders oil lifting entitlements. 

The Company estimates net recoverable hydrocarbon volumes attributable to its 22.5 percent effective working interest to be approximately 20 million barrels of oil and condensate and 156 Bscf of gas (total 46 MMboe). Current gross production at OML 55 is approximately 8,000 bopd (1,800 bopd on a 22.5 percent working interest basis). Pursuant to the Joint Operating Model approved by the Honorable Nigerian Minister of Petroleum Resources, Seplat has been designated operator of OML 55. The Company will also act as technical services provider to Belemaoil. “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. OML 55 provides us with a number of attractive opportunities to boost oil and gas output, and is consistent with our strategy of prioritizing those that offer near-term production growth, cash-flow and reserve replacement potential in the onshore and shallow water offshore areas of Nigeria,” said Austin Avuru, Seplat’s CEO. “We are pleased to have extended our operating partnership with NNPC who we look forward to working with in our capacity as Operator pursuant to the Joint Operating Model,” he added. 

OML 55 covers an area of approximately 324 square miles (840 square kilometers) and is located in the swamp to shallow water offshore areas in the south eastern Niger Delta. The block contains five producing fields (Robertkiri, Inda, Belema North, Idama and Jokka). The majority of production on the block is from the Robertkiri, Idama and Inda fields. The Robertkiri field is located in swamp at a water depth of five meters and has a production platform and utility platform installed. Production capacity at the Robertkiri facilities is 20,000 barrels per day and 10 MMscf/d. Production facilities at the Idama field comprise a jackup mobile offshore production unit (MOPU) and riser platform that have a capacity of 30,000 barrels per day of total fluids and 34 MMscf/d. The Jokka field is produced through a manifold tied-back to the Idama facilities. Production facilities at the Inda field comprise a MOPU with a capacity of 30,000 barrels per day of total liquids and 34 MMscf/d. Other infrastructure on OML 55 comprises four flow-stations, a network of flow-lines and two eight-inch pipelines that connect to third party operated infrastructure. The Belema field is unitized with OML 25 and is produced via a flow-station on that block. All produced liquids from OML 55 are delivered via third party infrastructure to the Bonny terminal for processing and shipping. In addition to the oil potential on the block there is also an opportunity to develop the significant gas resources that have also been identified.