By Yemisi Izuora/Ijeoma Agudosi-Lagos
The declining oil price in the international market is raising production concern among oil companies around the world.
Consequence of the emerging scenario is prompting oil companies to look at ways to cut production cost.
There are indication that merger and acquisition may become major consideration among players in 2015.
Already, Afren, the British oil and gas group with operations in Africa and Iraq, has received what it called a “highly preliminary approach” from Nigeria’s Seplat after an oil price rout set the stage for takeover activity in the sector, according to Financial Times report.
Afren’s shares have risen as much as 10.5 per cent following news of the approach, and after a run-up that forced Afren to reveal Seplat’s interest.
Afren plc notes the recent movement in Afren’s share price and confirms that it has received a highly preliminary approach from SEPLAT Petroleum Development Company plc regarding a possible combination with Afren.
The price of Brent crude, the global oil marker, has fallen more than 40 per cent since mid June due to lack of global demand and a surge in production of US shale energy.
That is making it appealing for oil companies to try and merge in order to cut costs.
One response to such sustained financial pressure would be an upsurge in deal making, as in the merger boom of 1998-2000 that brought BP together with Amoco and Arco, Exxon with Mobil, and Chevron with Texaco.
Mergers and acquisitions would make it possible to cut out duplication of overheads, and to improve the performance of under-managed assets.
The nascent homegrown oil industry in Nigeria has grown exponentially over the last five years, buying assets from the oil super-majors, Javier Blas writes.
Big Oil wants to reduce its onshore presence in Nigeria, in the face of theft and sabotage and long delays to a government bill setting out new terms for operators.
Royal Dutch Shell, Total of France, Eni of Italy and Chevron and ConocoPhillips of the US are among the companies that have sold about $5bn worth of oil fields and pipelines since 2008-09. Nigerian oil companies such as Oando and Shoreline Natural Resources, as well as Seplat and Afren, had been among the buyers, supported with debt from local and international banks.
Seplat is sitting on a pile of cash after it raised $500m on its flotation in London and Lagos in April and failed to buy any further assets in Nigeria.
Bankers had been expecting the company to lead the consolidation effort in the Nigerian industry
