Nigeria is witnessing more mergers and acquisitions, M&A, in the oil and gas industry as the African continent is positioning itself as a driver of oil and gas deals in 2022.
The events of the past two years have accelerated mergers & acquisitions trends in Africa, and 2022 is already witnessing increased deal activity.
Several transformational transactions have already been announced over the past six months, according to Paul Sinclair, Vice President of Energy & Director of Government Relations – Green Energy Africa Summit and Africa Oil Week.
The proposed acquisition of Mobil Producing Nigeria by Seplat Energy in February remains, so far, the biggest acquisition in the industry globally this year.
However, while deal-making is on the rise, acquisition strategies and targets vary from one region to another.
Higher oil prices since 2021 have further unlocked the African M&A market, especially for well-established operators and asset owners. However, companies remain highly cautious in their spending given continued market uncertainty and a focus on shareholder returns.
This is translating into consolidation around key producing assets for companies seeking to maximize the value earned from blocks or fields they are already familiar with.
Several such transactions have occurred since 2020, including small and mid-sized acquisitions by Perenco in Gabon and the DRC, by Panoro Energy in Gabon and Equatorial Guinea, or by Decklar Resources and San Leon Energy in Nigeria.
Brownfield assets are also the ones attracting the biggest M&As by far. At the end of last year, Savannah Energy announced its acquisition of the entire upstream and midstream asset portfolio of ExxonMobil and PETRONAS in both Chad and Cameroon. The deals were valued at some $626m, making them amongst the biggest in the region.
Earlier this year, Seplat Energy also announced its proposed cash acquisition of Mobil Producing Nigeria for $1.283bn (plus up to $300 million contingent consideration), in what remains so far the biggest deal of the year globally.
Both Savannah Energy and Seplat Energy’s acquisitions are so significant that they constitute Reverse Takeover transactions under the UK listing rules.
Within the region, Nigeria will continue to drive M&A activity, first because of continued divestments by IOCs but also because of the size of its proven reserves. Shell’s divestment from its entire JV portfolio in the country will be a natural driver, with a 30 per cent interest in 19 oil mining leases (OMLs) onshore and in shallow water up for grab. But beyond IOCs’ assets, Nigeria holds Africa’s most attractive brownfield opportunities with well-established reserves waiting to be developed by investors, providing they are willing to take on the above-the-ground risks.
The year 2022 will only entrench the rise of established and new independents across the continent as they continue to top the list of buyers.
In Nigeria, established independents who are familiar with the country’s business and risk environment already seek to grow their portfolio and take on some of the IOCs’ assets. While access to capital will be a challenge for many of them, the market has already seen two deals worth over $1bn each in 2021 and 2022. But Nigeria is not just a billion-dollar deals market and holds significant potential for smaller and less risky ventures relying on risk service agreements such as FTSAs or RFTSAs around near-producing assets with existing discovery wells and established infrastructure.