Consortium of Africa Oil, Delonex and Vitol acquires assets in deepwater Nigeria

consor 2A consortium led by Vitol, Africa Oil Corp and Delonex Energy Ltd has entered into a share purchase agreement (SPA) to acquire a 50 per cent ownership interest in Petrobras Oil and Gas BV for US$1.407bn

BTG Pactual E&P BV will continue to own the remaining 50 per cent of POGBV. The transaction is subject to customary conditions precedent.

The primary assets of POGBV are an indirect eight per cent interest in oil mining lease (OML) 127, which contains the producing Agbami Field, operated by affiliates of Chevron Corporation, and an indirect 16 per cent interest in OML 130, operated by affiliates of TOTAL SA, which contains the producing Akpo Field and the Egina Field, which is expected to commence production by the end of 2018.

Russell Hardy, CEO of Vitol, said, “POGBV has a strong non-operated portfolio, managed by Chevron and Total and which represents circa 20 per cent of Nigerian production. Vitol looks forward to continuing to grow and invest in Nigeria.”

Africa Oil CEO Keith Hill commented, “Combining these assets with our Kenya development project and recently rejuvenated exploration portfolio, we believe that Africa Oil is exposed to high growth potential in the current and anticipated strong oil price environment. The two producing fields have consistently outperformed expectations and our goal will be aligned with our operators and partners to keep the FPSOs as full as possible for the foreseeable future.”

Rahul Dhir, CEO of Delonex, noted, “This acquisition represents an important strategic step for our company. We look forward to working with our operators and partners to further develop and achieve the goals of the consortium and deliver value for the government and nation of Nigeria.”

A deferred payment of up to US$123mn may be due to the Seller depending on the date and ultimate OML 127 tract participation in the Agbami Field, which is subject to a redetermination process. The Consortium’s funding required to ultimately close the transaction will be reduced by any leakage paid to the Seller by POGBV, including dividends, and increased by any contributions made to POGBV by the Seller during the period between the Effective Date and completion.

POGBV has an existing reserve-based lending facility, with a syndicate of international banks and commitments of US$1.245bn, which POGBV and the Consortium believe may be increased. Given the anticipated time required to complete the transaction, POGBV’s debt capacity, forecast post-effective date cash flow and the structure of the transaction, Africa Oil expects to fund its share of the acquisition with cash on hand.

The three fields in these two licenses are all giant fields, located over 100km offshore Nigeria, and are some of the largest and highest quality in Africa. Two of these fields, Agbami and Akpo, have been on production since 2008 and 2009, respectively, and in 2017 averaged a combined gross production rate of approximately 368,000 bopd. Lifting costs in 2017 were well below $10/bbl. The TOTAL-operated Egina development project in OML 130 is the largest investment project currently ongoing in the oil and gas sector in Nigeria. The Egina FPSO, with a 200,000 bopd capacity is currently on station and is being hooked up to existing wells. Egina first oil is expected before the end of 2018 and quickly ramp up to plateau production of approximately 200,000 bopd during the first half of 2019. The fields all have high quality reservoirs and produce light sweet crude oil with state of the art Floating Production, Storage and Offloading (FPSO) facilities.

During 2017, daily oil production from the Agbami Field averaged approximately 240,000 barrels of crude oil. Production commenced from the field in 2008 and has been on plateau for more than eight years. An infill drilling program is ongoing, aimed at extending plateau into 2020. The field spans OML 127 and OML 128 and is subject to a unitisation agreement, with 62.5 per cent of field production currently allocated to OML 127. A redetermination process has been subject to expert review and arbitration in order to finally determine an increase in the portion of the Agbami Field attributable to OML 127. During 2017, POGBV’s entitlement of daily oil production averaged approximately 21,000 bopd.

During 2017, daily oil production from the Akpo Field averaged approximately 128,000 barrels of crude oil. Production commenced from the field in 2009. During 2017, POGBV’s entitlement of daily oil production averaged approximately 26,000 barrels of crude oil.

In addition to the current fields under production and development there are other growth opportunities in horizons not yet under developed in existing fields and adjacent fields being considered for development together with exploration opportunities.

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