Finally, the much awaited approval of the minister of petroleum resources for the acquisition of ConocoPhillips (COP) Nigerian assets by Oando plc has been obtained, thereby concluding the transaction for a price, after customary adjustments of $1.57 billion.
Financing for the acquisition has been secured
So far, a total of $550 million has been paid to ConocoPhillips while the company has secured additional funds through debt commitments from financial local and foreign financial institutions, totally $800 million. OER recently completed a private placement in which it raised $50 million through the issuance of 35,070,063 common shares and 17,535,031 common share purchase warrants at a price of C$1.57 per unit. Oando plc has also secured some financing through private placement for $192 million and the recent sale of its East Horizon Gas Company (EHGC) asset to Seven Energy Limited for $250 million to complete the acquisition.
Now one of the largest indigenous oil exploration companies
Oando is the largest integrated oil and gas company in sub-Saharan Africa with primary listing on the Nigerian Stock Exchange. The company also has a secondary listing on the Johannesburg Stock Exchange and an upstream listing on the Toronto Stock Exchange. The company is the largest private sector importer of premium motor spirit (PMS) in the country, leverages its diversification across the oil and gas segments, and its long-standing industry expertise, to continually provide substantial value for the end users of its products.
Oando Energy Resources (OER) is the Group’s exploration and production subsidiary, with a current net production of 4,700 barrels of exploration per day (boepd), which will now grow by an additional 43,000boepd (19,000beopd of oil, and 24,000boepd of gas) with the acquisition of the Nigerian assets of ConocoPhillips (COP). The development is set to position OER as one of the largest indigenous oil producers in Nigeria, as the company will boost its 2P reserves (OML’s 60, 61, 62, and 63) and 2C resources (OML 131 & 241) by 221 million barrels of oil equivalent (MMboe) and 492 million barrels of oil equivalent (Mmboe), respectively.
Despite delay, value is being created for Oando’s shareholders
Although the delay affected the closure of the transaction, Oando has been the owner of the assets in-principle since the signing of the memorandum of understanding (MoU). Since they are in operation, COP’s share of income generated by the assets are being accrued and kept in an escrow account for Oando. The company would now be able to access the money after the closure of the transaction; implying that the assets are already creating value for the shareholders of Oando.
The sum of the parts is greater than the whole
The hidden value in Oando can be seen in the valuation of one of Oando’s subsidiaries, OER whose market value of $831.77 million on the TSX as of March 10, 2014, translates to over N130 billion and 80 percent of the Group total market capitalisation of N161.06 billion.
