What you need to know about Heirs Holding’s newly acquired oil asset

The acquisition of a 45 percent participating interest in OML 17 by Heirs Holdings, in partnership with Transnational Corporation of Nigeria Plc through TNOG Oil and Gas Limited, their associated company is a significant development in a sector starved of investments.

The acquisition from the Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and ENI was described as one of the largest oil and gas financing in Africa in more than a decade, with a financing component of $1.1 billion, provided by a consortium of global and regional banks and investors.

Production capacity

OML 17 has a current production capacity of 27,000 barrels of oil equivalent per day and, according to our estimates, 2P reserves of 1.2 billion barrels of oil equivalent, with an additional 1 billion barrels of oil equivalent resources of further exploration potential.

Wood Mackenzie reports there are 15 fields on OML 17, of which six are producing. The operator exports oil via the Trans-niger Pipeline to Shell’s bonny terminal.

Location

According to Woodmackenzie, OML 17 is a large onshore licence within the NNPC/SHELL JV. The block includes the northern half of Port Harcourt, which is the largest city in the Niger Delta. It extends from the low-lying swamp northwards into drier terrain where the operating conditions are easier.

Local challenges

Host communities around OML 17 objected to SPDC’S plans for the sale in November 2020 claiming SPDC had not consulted locals around the plans, raising the possibility of disrupting operations.

According to the report, the decision to sell off these assets is triggered by the continued unrest in the oil-rich region and an age-long accusation of environmental pollution levelled against the Dutch oil firm.

Host communities of the OML 17 comprises of Ikwerre, Obio/akpor, Etche and Oyigbo Local Government Areas of the the state.

Shell has over the years faced stiff opposition in operating within the Niger-delta region, with several reports of pipeline vandalism and youth restiveness in the region. This situation has left the oil company with undeveloped oil and gas reserves.

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Reports in 2018 suggested SPDC had hoped to sell OML 11 and 17 for $2 billion. The company has run into a number of challenges around OML 11, with Rivers State declaring it had seized the licence in December 2020.

Rivers government claims to have taken possession of SPDC’S 45percent stake in OML 11.

Transcorp’s share price movement

Investors at the floor of the Nigerian Stock Exchange on January 15 responded positively to the report of the new deal as Transcorp’s stock rose by 0.03percent from N0.95 per share to N0.98.

All together there were 141 transactions on the Transcorp stock on January 15 involved 36,269,389 shares valued at N35,402,985.17.

Transcorp’s CEO took position

The President/ceo of Transcorp, Owen Omogiafo was also among those who took position as she was reported to have purchased 5,000,000 shares of the company on the Nigerian Stock Exchange (NSE) at N0.975 per share.

In a notification of share dealing by insider filed by the company, the transaction was said to have taken place on 15th January 2021

Recall in November 2020, Transcorp, one of the largest power producers in Nigeria, with 2,000 MW of installed capacity, through ownership of Transcorp Power Plant, acquired Afam Power Plc and Afam Three Fast Power Limited for $300 million.

Transcorp, which supplies electricity to the Republic of Benin, operates OPL281 under a production sharing contract with the Nigerian National Petroleum Corporation (NNPC).

Similarly, Heirs Holdings’ subsidiary, Tenoil is the operator of OPL 2008 under a production sharing contract with NNPC. Tenoil also owns the Ata Marginal Field, which will commence production in Q2, 2021, with 3,500 barrels of oil per day

An integrated energy company

Heirs Holdings is well on its way towards attaining an integrated energy company status by significantly expanding its oil and gas portfolio in acquiring stakes in Oil Mining Lease 17 from Shell Petroleum Development Company of Nigeria, Total E&P Nigeria, and ENI.

Heirs Holdings’ strategy of creating an integrated energy business in Africa is being executed through a series of strategic portfolio holdings. Transcorp is one of the largest power producers in Nigeria, with 2,000 megawatts (MW) of installed capacity, through ownership of Transcorp Power Plant and the recent acquisition of Afam Power Plc and Afam Three Fast Power Limited. Transcorp closed the US$300 million Afam acquisitions in November 2020.

Transcorp supplies electricity to the Republic of Benin, as part of an emphasis on promoting regional integration and delivering robust power supply to catalyse development in Africa. Transcorp also operates Oil Prospecting Licence (OPL) 281, under a production sharing contract with the Nigerian National Petroleum Corporation (NNPC).

Similarly, Heirs Holdings’ subsidiary, Tenoil is the operator of OPL 2008, under a production sharing contract with NNPC. Tenoil also owns the Ata Marginal Field, which will commence production in Q2, 2021, with 3,500 barrels of oil per day.

“We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs,” Tony Elumelu, chairman Heirs Holdings said. “The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria.”

Heirs Holdings is inspired by Africapitalism, the belief that the private sector is the key enabler of economic and social wealth creation in Africa. Driven by this philosophy, Heirs Holdings invests for the long-term, bringing strategic capital, sector expertise, a track record of business success and operational excellence to companies we invest in.

“This deal further demonstrates Transcorp’s integrated energy strategy and our determination to power Africa,” Owen Omogiafo, president/ GCEO of Transcorp said.

Heirs Holdings was advised by Standard Chartered Plc, as Global Coordinator, and United Capital Plc, with a syndicate of lending institutions including Afreximbank, ABSA, Africa Finance Corporation, Union Bank of Nigeria, Hybrid Capital, and global asset management firm Amundi. The deal also involves Schlumberger as a technical partner, as well as the trading arm of Shell as an off-taker.