Seplat Energy Completion of Mobil Acquisition Credit Positive –Fitch
Fitch Ratings views Seplat Energy Plc’s completion of the acquisition of Mobil Producing Nigeria Unlimited (MPNU) as beneficial for the former’s business profile but neutral for its rating due to the constraint of Nigeria’s country ceiling of ‘B-’.
Seplat announced the completion of the acquisition of MNPU assets on 12 December 2024 for cash of USD800 million, including a USD128 million deposit paid by Seplat in 2022.
The transaction was funded by a USD350 million drawdown of the revolving credit facility, a new USD300 million advanced payment facility with ExxonMobil, and USD22 million of cash. The reported pro forma leverage as of June 2024 remained low at 0.7x versus Seplat’s standalone 0.8x, the global ratings agency said in a commentary note.
Fitch estimates that Seplat will maintain a conservative financial profile with earnings before interest tax depreciation and amortisation, EBITDA, and net leverage below 2.0x through 2026, even though we expect higher capital expenditure, capex, dividends, and moderation of oil and gas prices.
The acquisition strengthens Seplat’s business profile due to diversification into offshore operations, the addition of 71,400 barrels of oil equivalent per day (boed) in hydrocarbons production, and 409 million barrels of oil equivalent (mmboe) of 2P reserves, of which 80% are oil reserves.
Analysts said combined production totalled around 120,000 boed, and 2P reserves reached 887 mmboe, indicating a 2P reserve life of around 20 years pro forma as of June 2024.
Fitch said Seplat maintains adequate liquidity despite the full drawdown of the RCF facility due in June 2025 with a pro forma cash balance of USD 284 million at end-9M24. The RCF’s maturity will be automatically extended to December 2026 once the company refinances its USD650 million senior notes due in April 2026.
Seplat plans to complete the refinancing of notes ahead of June 2025, most likely in 1Q25. Fitch also assumes that Seplat will maintain a sufficient cash buffer in case of any delays with notes refinancing.
The rating agency noted that Seplat is yet to announce its investment plans together with its joint venture partner owned by Nigerian National Petroleum Company Limited.
However, Fitch expects a material step-up in capex to maximise output from the acquired assets. Since 2021, MNPU has invested only around USD58 million in total capex, and as a result, its working interest production has reduced by around 25% compared to 2020.
The company plans to provide 2025 guidance for the enlarged group in February 2025 at its 2024 results announcement.
The initial purchase price of USD 1,283 million was largely reduced by locked-box, interest, and working-capital adjustments, as the effective date for the transaction remained 1 January 2021.
The transaction is also subject to contingent payments of up to USD 300 million due between 2022 and 2026. Seplat has already settled USD43 million in 2022-2023 and expects that contingent payments associated with 2024 production/revenue are unlikely to exceed the USD18 million paid in 2023.
“We expect the remaining payments for 2025 and 2026 to be in line with prior years unless there is a significant spike in realised oil prices or a material increase in MNPU’s share of production,” Fitch analysts said.
Other acquisition costs relate to USD 257.5 million expenditure comprising environmental, staff, and other costs deferred until December 2025. Seplat estimates the after-tax impact of this item to total USD25 million-USD35 million, as the cost will be partly offset by joint venture cash calls in 2025. #Seplat Energy Completion of Mobil Acquisition Credit Positive –Fitch NGX Rallies Intraday as Investors Take Positions in Access, FBNH
