Fitch: Seplat’s $800m Purchase of Mobil Assets Credit Positive
Emmanuel Addeh in Abuja
Fitch Ratings has said it views Seplat Energy plc’s (B-/positive) completion of the acquisition of Mobil Producing Nigeria Unlimited (MPNU) as beneficial for the former’s business profile, but neutral for its rating due to the constraint of Nigeria’s Country Ceiling of ‘B-’.
Seplat announced the completion of the acquisition of MNPU assets on December 12, 2024 for cash of $800 million, including a $128 million deposit it paid in 2022. The transaction was funded by a $350 million drawdown of the revolving credit facility, a new $300 million advanced payment facility with ExxonMobil, and $22 million of cash.
“The reported pro forma leverage as of June 2024 remained low at 0.7x versus Seplat’s standalone 0.8x. Fitch estimates that Seplat will maintain a conservative financial profile with Earnings Before Interest, Taxes Depreciation, and Amortisation (EBITDA) net leverage below 2.0x through to 2026, even though we expect higher capex, dividends, and moderation of oil and gas prices,” the ratings agency said in a report.
The acquisition, it pointed out, strengthens Seplat’s business profile due to diversification into offshore operations as well as the addition of 71,400 barrels of oil equivalent per day (boed) in hydrocarbons production, and 409 million barrels of oil equivalent (mmboe) of 2P reserves, of which 80 per cent are oil reserves.
According to Fitch, the combined production totalled around 120,000 boed, and 2P reserves reached 887 mmboe, indicating a 2P reserve life of around 20 years pro forma as of June 2024.
“Seplat maintains adequate liquidity despite the full drawdown of the Revolving Credit Facility (RCF) facility due in June 2025 with pro forma cash balance of $284 million at end-9M24. The RCF’s maturity will be automatically extended to December 2026 once the company refinances its $650 million senior notes due in April 2026.
“Seplat plans to complete the refinancing of notes ahead of June 2025, most likely in 1Q25. Fitch also assumes that Seplat will maintain a sufficient cash buffer in case of any delays with notes refinancing,” it said.
However, it stressed that Seplat is yet to announce its investment plans together with its joint venture partner owned by Nigerian National Petroleum Company Limited (NNPC).
“However, Fitch expects a material step up in capex to maximise output from the acquired assets. Since 2021, MNPU has invested only around $58 million in total capex, and as a result its working interest production reduced by around 25 per cent compared to 2020,” Fitch observed.
