In order to reduce debts and regain its glory days, Brazilian state-owned firm Petrobras announced it has entered into a Share Purchase Agreement (SPA) to sell a 50 percent ownership interest in Petrobras Oil and Gas (POGBV) for $1.4 billion to a consortium led by Vitol, the world’s biggest independent energy trader.
Petrobras, one of the world’s most indebted oil majors has been trying to regain its fame of 2011 and has targeted $21-billion in asset sales for 2018, but only succeeded in unloading $9.5billion worth by the end of the first half as net debt stood at $73.66billion by the end of June 2018, down 13 per cent from $84.87 billion at the end of last year.
“Brent prices were considerably superior in 2011,” Ivan Monteiro Petrobras chief executive officer said in August, citing the global benchmark for crude. At the same time, he said the profit was the “result of discipline’ in spending.
The agreement which is based on a purchase price of $1.407 billion is on a cash and debt free basis as a deferred payment of up to $123 million may be due to Petrobras depending on the date and ultimate OML 127 tract participation in Agabmi field which is subject to a redetermination process.
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Russell Hardy CEO of Vitol said the company has a long history of investing in Nigeria’s energy sector and is proud to add this significant upstream asset to infrastructure and downstream Nigerian investments.
“POGBV has a strong non-operated portfolio, managed by Chevron and Total and which represents circa 20 percent of Nigerian production, Vitol looks forward to continuing to grow and invest in Nigeria,” CEO of Vitol said.
Emmanuel Afimia an energy expert at Afimia consulting said the reason indigenous firms in the upstream sector like Seplat can’t bid for project like this is because the company faces the same problem other indigenous oil companies are currently facing in Nigeria which is, inability to secure large funds.
“I was part of the team that developed the first ever third party finance model in Nigeria for OMLs 83 & 85, and I know what NNPC/FIRST E&P JV, the owners of the assets, went through before they could find a financier (Schlumberger),” Afimia told BusinessDay.
The consortium buying the assets comprises Vitol Investment Partnership II who owns 50 percent, Africa Oil Corporation (a Canadian oil and gas company with assets in Kenya and Ethiopia) owns 25 percent and Delonex Energy (backed by International Finance Corporation, a member of the World Bank Group) owns 25 percent.
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 Petrobras during the period between the effective date and completion.
POGBV has an existing reserve-based lending facility with a syndicate of International Banks and commitment of $1.245 billion which POGBV and consortium believe may be increased.
For Vitol, the deal marks a rare investment in the upstream oil sector. POGBV has a participation in deepwater oil exploration blocks offshore in Nigeria that include two producing fields in Agbami operated by affiliates of Chevron Corporation, and an indirect 16 percent interest in OML 130, operated by affiliates of TOTAL S.A., which contains the producing Akpo Field and the Egina Field, which is expected to commence production by the end of 2018.
Brazilian investment bank BTG Pactual will continue to hold its 50 percent stake in the Petrobras Oil & Gas (POGBV) JV, which owns interests in two blocks that contain three fields located more than 100km off the coast of Nigeria.
Vitol said the three fields in these two licenses are all giant fields, located over 100 km offshore Nigeria, and are some of the largest and highest quality in Africa. Two of these fields, Agbami and Akpo, have been in production since 2008 and 2009, respectively, and in 2017 averaged a combined gross production rate of approximately 368,000 barrels of oil per day as lifting costs in 2017 were well below $10/bbl.
DIPO OLADEHINDE & ENDURANCE OKAFOR
