Oando’s acquisition of Conoco’s assets

The role of Nigerian indigenous oil and gas companies in the upstream of the Nigerian oil industry has clearly grown in the past few years, with local players having access to more oil blocks, in a sign of progress in efforts to promote local participation in the industry.

This has resulted in increase in oil and gas production from local players, which has been put at 10 percent of total production in the country. The surge of indigenous firms picking up the exploration and production (E&P) gauntlet is being driven by the government’s policy on local content as well as the ongoing trend of asset divestment by international oil companies (IOCs) operating in the country amid onshore risks. A number of major E&P firms such as Shell, Total and ENI have sold off a number of their joint assets.

With the acquisition of the Nigerian assets of United States’ oil major ConocoPhillips by Oando Energy Resources (OER), the upstream business of Oando Plc, already granted government approval, local production is set for a boost as Oando’s production would increase from about 5,000 barrels per day (bpd) to 50,000 bpd.

The acquisition will give OER a number of onshore and offshore assets, and the access to these assets also partners it up with some of the industry’s leading major E&P companies. Onshore, the company will pick up Phillips Oil Co. Nigeria Limited, which holds a 20 percent non-operating interest in Oil Mining Leases (OMLs) 60, 61, 62, and 63 as well as related infrastructure and facilities in the Nigerian Agip Oil Company Ltd (NAOC) joint venture (NAOC JV). The other partners are NNPC and NAOC. On the offshore, the company gains a 95 percent operated interest in OML 131 partnered with Medal Oil. OER also gains a 20 percent non-operated interest in OPL 214 and will be partnered with Chevron, ExxonMobil, NNPC, Sasol and Svenska.

No sooner had word gone out two weeks ago that OER had received the consent of the minister of petroleum resources for the acquisition of ConocoPhillips’ assets for a total cash consideration of $1.65 billion than the shares in Oando rose the maximum 10 percent allowed on the Nigerian Stock Exchange.

On December 20, 2012, Oando Plc, Nigeria’s leading indigenous energy group listed on both the Nigerian and Johannesburg bourses, disclosed that OER had entered into agreements with ConocoPhillips to acquire its entire business interests in Nigeria.

Prior to the minister’s consent, OER, which is listed on Toronto Stock Exchange, had said though it had successfully acquired all funds required to complete its acquisition of the assets, closing of the ConocoPhillips acquisition had remained subject to the satisfaction of certain closing conditions, including government and regulatory approval, and the consent of the minister of petroleum resources.

The acquisition of the ConocoPhillips’ Nigerian upstream oil and gas business is expected to position OER as one of the leading indigenous E&P players in Nigeria, as measured by total reserves and production.

Industry analysts have said that the acquisition of divested assets by local players demonstrates that the policy of capacity-building in terms of indigenous participation in the upstream is yielding some dividends, as it is expected to further boost the development of local talent in the industry.

By the end of this year, the major divestments by IOCs since 2010 are expected to transfer about 5 billion barrels of oil and 20 trillion cubic feet (Tcf) of gas to indigenous players.

We believe that as the participation of indigenous companies increases, especially in the upstream, the Nigerian Stock Exchange will see more listings from the industry, enabling more Nigerians to benefit from the abundant oil and gas resources in the country.