Heirs Holdings’ Audacious Acquisition of OML 17

The bold move by Heirs Holdings which manifested in the successful acquisition of a 45 per cent participating interest in Oil Mining Licence17, underscored the winning spirit of Nigerian indigenous companies, writes Peter Uzoho

Last week, Africa’s conglomerate and strategic investor, Heirs Holdings, in partnership with its affiliated company, Transnational Corporation of Nigeria Plc (Transcorp), announced its acquisition of a 45 per cent participating interest in Nigerian Oil Mining Licence (OML 17) and related assets, in a $1.1 billion investment, through TNOG Oil and Gas Limited, a related company of Heirs Holdings and Transcorp, from the Shell Petroleum Development Company of Nigeria Limited, Total Exploration and Production Nigeria Limited and ENI (Agip).

With the deal, TNOG is now the sole partner with the Nigerian National Petroleum Corporation (NNPC), which retains its 55 per cent stake in the asset and the deals means that the Heirs Holdings Group will now take over operatorship of OML 17, demonstrating the strength and quality of the industry team assembled by Elumelu’s group.
The transaction has been described as one of the largest oil and gas financings 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.

The investment demonstrates a further important advance in the execution of Heirs Holdings’ integrated energy strategy and the Group’s commitment to Africa’s development, through long term investments that create economic prosperity and social wealth. Heirs Holdings’ heritage and approach to business fundamentally underscores its commitment to inclusive development and shared prosperity with its host communities. Heirs Holdings is fully invested in the development of the Niger Delta region.

OML 17 is a large onshore licence within the NNPC/Shell JV with production capacity of 27,000 barrels per day equivalent per day and 2P reserves of 1.2 billion barrels of oil equivalent and additional one billion barrels of oil equivalent resources of further exploration potential.

Shell has 30 per cent stake in the asset, Total holds 10 per cent while Eni holds five per cent. 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. There are 15 oil and gas fields on OML 17, six of which are producing. Crude is exported through the Trans-Niger Pipeline, to the Shell-operated Bonny oil and gas terminal. The largest producer on OML 17 is Agbada.

Deal Facilitation

In brokering the strategic $1.1 billion investment deal, Heirs Holdings was advised by world class investment bankers including Standard Chartered Plc, which played 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 involved Schlumberger as a technical partner, as well as the trading arm of Shell as an offtaker.

SPDC had in a statement, announced the completion of the sale of its 30 per cent interest in the OML 17 and associated infrastructure to TNOG for a consideration of $533 million. The completion followed the receipt of all approvals from the relevant authorities of the Federal Government of Nigeria.

SPDC said it was committed to the transfer of the stake in an “orderly and responsible manner” and it would “provide a sustainable long-term plan to unlock the asset’s full potential”.

The Managing Director, SPDC and Country Chair, Shell Companies in Nigeria, Mr. Osagie Okunbor, said that, “as with previous divestments, we will facilitate a successful transition to new ownership. Shell has been in Nigeria for over 60 years and remains committed to a long-term presence here.”

Elumelu’s Pledge

Delighted by the landmark investment record, the Chairman of Heirs Holdings, Mr. Tony Elumelu, expressed satisfaction and pride in closing the deal, as a Nigerian and Niger Delta indigene, stressing on its importance to the nation’s economy and to the life of the asset’s host community.

According to Elumelu, “As a Nigerian, and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria.”

Heirs Holdings has been at the forefront of Elumelu’s Africapitalism philosophy, championing the private sector’s leadership in developing Africa.

TNOG Oil and Gas, HH’s latest investment and addition to a fast-growing and successful group of investee companies across energy, financial services, hospitality, real estate, and healthcare sectors, will create thousands of jobs for youths nationwide, expanding its current 30,000 employee database across its portfolio companies.

TNOG Oil and Gas will also extend Heirs Holdings’ “doing good, doing well” commitment to developing the communities of its operations through pillars of entrepreneurship, youth development and community building, pursuing an indigenous approach to catalysing development in host communities, an insider at Heirs Holdings told THISDAY.

Oil Industry Hails Move

Recognising the importance of such audacious investment by a Nigerian indigenous company, oil and gas experts under the aegis of Petroleum Technology Association of Nigeria (PETAN), described the acquisition of OML 17 by the Elumelu-led conglomerate as a bold strategic move for the oil and gas industry in the country.

PETAN’s President, Mr. Emeka Ene, said the bold move to acquire OML 17 was, “certainly strategic from the industry perspective.”

Ene said three mega-trends have emerged from the impact of the global pandemic including deglobalisation, capital flight and digitalisation.

He added: “While we in Africa and Nigeria specifically may appear helpless, this scenario presents opportunities to grow from the inside-out.

“With this context investment in idle assets becomes an essential path to generating near team growth in an industry that has flat-lined over the last five years.

“Nigeria was only able to attract less than five per cent of the over 74 billion dollars in FDI that flowed into Africa. The answer lies within and the OML 17 acquisition creates new opportunities for growth.

“The major concern is that the Nigerian investor recognises that the acquisition places a burden to utilise 100 per cent local services companies to develop the asset and not fall into the trap of believing that multinational companies are the way to go when Nigeria companies large and small have proved competence, delivered technology and operational excellence even at times of grave economic and environmental constraints.”

He noted that rather than seek credible companies locally, there “is a tendency to circumvent the provisions of the Local Content Act through MOUs with fronts and briefcase operators.

“Local content is a 360 degrees commitment that applies to the Nigerian operator and the service company equally.”

Expressing further, his joy at the purchase of such a huge asset by a Nigerian investor, Ene said he was confident that Elumelu recognised the strategic importance of the effort.
He said Elumelu, a Delta-born billionaire, “has always been in the forefront of Nigeria and Africa first. These are interesting times.”

Boosting Investor Confidence

“Heirs Holdings’ ability to bring together global and African investors, in one of the biggest African deals of the last 10 years, is a tribute to its professionalism and determination. It reassures global investors of the country’s untapped investment opportunities and affirms the company’s commitment to improving lives and transforming Africa,” one analyst said.

Also, some economic policy analysts who spoke with THISDAY on the deal, said Nigeria would benefit significantly from the billion dollar oil and gas investment, saying the Del would renew investor confidence in the nation’s economy.

They specifically described the investment as a positive affirmation of confidence in the robustness of the Nigerian economy.

The analysts described the deal as a welcome light on the opportunities that are available in Nigeria, especially given the increased pessimism globally and in Nigeria.
They highlighted the credentials of Heirs Holdings as a committed indigenous business and the presence of Transcorp, Nigeria’s largest listed conglomerate, with over 300,000 shareholders in the transaction.

According to them, the deal further demonstrates the ability of the Tony Elumelu-led Heirs Holdings to spearhead Africa’s economic resurgence amidst the calamity posed by COVID-19 pandemic.

The analysts also said the acquisition again shows Heirs Holdings’ strategic intent in relation to the Nigerian energy sector – to ensure that Nigerian natural resource assets are deployed to Nigeria’s power network, driving broad-based economic growth.

Speaking with THISDAY, the Head of Research at Agusto Consulting, a pan-African credit rating agency, Mr. Jimi Ogbobine, stressed that looking at the wider issues in the economy as well as the disruptions caused by the COVID-19, the transaction was good for the deal book.

He said: “It shows that COVID-19 has not shut down the deal books. Since March last year, the number of deals in the oil and gas slowed down and so this deal was a good announcement coming at the beginning of the year.

“Secondly, this is a first major private sector acquisition in President Muhammadu Buhari’s second term and it think it is very good for the Nigerian oil and gas space. This will improve confidence in the oil and gas sector and we hope to see more deals in the later part of this year.”

On his part, the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, said the deal has shown that more indigenous companies are now capable enough to participate actively in critical sectors of the nation’s economy.

“This means that we are seeing more indigenous participation in the oil and gas upstream which is good because when we talk about building an economy that is inclusive it is also about the degree with which the indigenous investors are also involved in the economy especially in some critical sectors of the economy.

“So it’s a very good thing and I think it is something that the government should encourage in every possible way to see that without prejudice to the importance of foreign investment, it is good to encourage our domestic investors in as many sectors as possible especially this sector that is usually dominated by foreign investors. So it’s a very good development,” Yusuf said.

Transcorp is one of the largest power producers in Nigeria, with 2,000 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 $300 million Afam acquisitions in November 2020.