Savannah Energy in Move to Buy Nigerian Unit of China’s Sinopec

Savannah Energy Plc, a British energy company, yesterday agreed to sign separate Share Purchase Agreements with Sinopec International Petroleum Exploration and Production Corporation and Jagal Ventures Limited to acquire 100% of the outstanding share capital of its Nigerian unit, Sinopec International Petroleum Exploration and Production Company Nigeria Limited, according to the report. 

The statement was made on Tuesday, in which the firm stated that its Nigerian unit's principal asset was a 49% non-operated interest in the Stubb Creek oil and gas field located in Akwa Ibom State, Nigeria.

The company also confirmed that an affiliate of Savannah, Universal Energy Resources Limited, is the 51% owner and operator.

The statement partly reads,

"The SIPC SPA will see Savannah Energy SC Limited (a wholly owned subsidiary of Savannah) acquire a 75% equity interest in SIPEC for cash consideration of $52 million, payable on completion and subject to customary adjustments for a transaction of this nature from September 1, 2023.

"The Jagal SPA will see Savannah Energy SC Limited acquire a 25% equity interest in SIPEC for cash consideration of $7.5 million (without adjustment), payable on completion, plus $2 million in deferred cash consideration payable in eight equal quarterly installments post-completion.

"The transaction consideration is expected to be funded through a new bank debt facility arranged by The Standard Bank of South Africa Limited and the company's existing cash resources. Completion under each SPA is subject to the parties' satisfaction with customary conditions precedent, including certain regulatory approvals, and a mechanism ensuring that completion under both SPAs co-occurs."

The CEO of Savannah Energy, Andrew Knott, commented on the deal, "Savannah remains committed to growing our core business in Nigeria through a combination of value-accretive acquisitions and organic projects. This is reflected in this announcement of the SIPEC Acquisition.

"The base case acquisition has been priced per our expected return criteria. The identified upside cases (the oil de-bottlenecking and new gas sales to Accugas projects) are hoped to add significant value to the Stubb Creek field over time."

In December 2023, it was announced that SIPEC had 8.1 MMstb of 2P oil reserves and 227 Bscf of 2C Contingent Gas Resources.

SIPEC oil production is estimated at an average of 1.4 Kbopd for 2024. Savannah's reserve and resource base will increase by approximately 46 MMboe following the completion of the SIPEC acquisition.

According to the PUNCH, the firm anticipates that within 12 months following the completion of the SIPEC Acquisition, Stubb Creek's gross production should increase by approximately 2.7 Kbopd to approximately 4.7 Kbopd through the implementation of a de-bottlenecking program.

This deal will secure additional feedstock gas for sale to Savannah's 80%-owned Nigerian gas processing and distribution subsidiary, Accugas Limited.

Accugas has eight principal gas customers, including large thermal power stations, such as Calabar Generation Company Limited, and key industrial players, such as Lafarge Africa PLC and Central Horizon Gas Company Limited.