Nigerian oil-company Seven Energy Limited says that it has entered into an agreement with Oando PLC to acquire the entire issued share capital of East Horizon Gas Company Limited (“EHGC”) for total consideration of up to US$250 million.
Seven Energy Limited is a wholly owned subsidiary of Bermuda-based Seven Energy International Limited (“SEIL”), the integrated oil and gas development and production and gas distribution company with interests in Nigeria.
EHGC is a gas distribution and marketing company that operates the 128 km East Horizon gas pipeline through Akwa Ibom and Cross Rivers States in south east Nigeria. EHGC also has a gas sales agreement with an industrial offtaker to supply up to 25 Million cubic feet of gas per day (MMcfpd), increasing to 50 MMcfpd in 2016, under a 20 year gas sales agreement expiring in 2032.
The Acquisition will further enhance Seven Energy’s leading gas marketing and distribution position in the south east Niger Delta region, expanding the reach of its pipeline network in this growing regional market to over 200 km, diversifying its customer base and increasing long term contracted gas sales volumes to 225 MMcfpd.
An aggregate consideration of up to US$250 million adjusted for net liabilities will be payable by way of (i) an initial payment of US$100 million in cash, (ii) assumption of existing liabilities of EHGC, including approximately US$63 million of bank indebtedness and (iii) a deferred payment due on achievement of certain operational and contractual conditions that are expected to enhance the long term profitability of EHGC. It is expected that these conditions will be satisfied during the course of 2014.
The deferred payment will be satisfied in cash and by the issue to the vendor of up to US$43.5 million of equity in SEIL. The cash component of the Consideration will be funded using a new Seven Energy medium term loan facility of up to US$185 million and from working capital.
The completion of the acquisition is conditional inter alia on the new facility becoming unconditional and available for drawdown, on making certain regulatory filings and on obtaining various lender consents, including the consent of holders of the US$150 million 10% Guaranteed Convertible Bonds due 2014 issued by the Company to make certain amendments to the terms and conditions applicable to the bonds which are required in connection with the new facility. The company will in due course be sending to bondholders a Notice of Meeting to consider these proposals.
Seven Energy International Limited is an independent Nigerian integrated oil and gas development and production and gas distribution company founded in 2004. With the backing of strategic long-term investors and offices in Lagos and London, the group has a unique focus on the emerging Nigerian domestic gas market. Seven Energy has joint venture interests in the Uquo and Stubb Creek fields, onshore in the Niger Delta, and a participating interest in the Oil Mining Leases 4, 38 and 41 through a service contract with the Nigerian Petroleum Development Company.
Seven Energy Limited is a wholly owned subsidiary of Seven Energy International Limited, and is incorporated in Bermuda. The Company is the issuer of US$150 million 10% Guaranteed Convertible Bonds due 2014 which are listed on the Cayman Islands Stock Exchange.