Seplat Energy Plc is embarking on a major initiative to revive hundreds of idle oil wells in Nigeria after finalizing its $1.28 billion purchase of ExxonMobil’s onshore oil and gas assets in the country.
The move comes as Seplat aims to breathe new life into the nation’s oil industry by reactivating dormant oil wells and ramping up production at these facilities.
Currently, only about 200 of Seplat’s 600 oil wells are producing, but with the acquisition of ExxonMobil’s assets, the company plans to bring back hundreds of idle wells into full operation.
“Our immediate focus is to intervene with rigs, carry out short-term oil generation activities, rejuvenate idle wells, and bring them back to production,” said Seplat’s Chief Operating Officer, Samson Ezugworie. “Only 200 of about 600 oil blocks are currently producing. This is a significant area of focus for us.”
The purchase deal, announced on Thursday, marks a major milestone for Seplat, a prominent Nigerian oil and gas company. The acquisition of Mobil Producing Nigeria Unlimited from ExxonMobil was approved by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October, completing the long-awaited sale.
This acquisition follows a growing trend of foreign oil companies exiting Africa’s largest oil producer, a move that Seplat has seized to increase its footprint in the Nigerian energy sector.
“It’s just a little over half of the EBITDA for the full year, so it pays back itself very quickly,” said Seplat’s Chief Financial Officer, Eleanor Adaralegbe. She pointed out that Seplat’s earnings before interest, taxes, depreciation, and amortization (EBITDA) for the nine months through September saw a 25% rise to $383 million, compared to the same period last year.
The deal saw Seplat pay an initial $128 million when the agreement was signed in 2022, with an additional $800 million paid this week. The remaining $257.5 million will be deferred until December 2025 due to certain costs related to decommissioning, abandonment, and joint venture agreements.
This ambitious purchase is expected to significantly strengthen Seplat’s position in the Nigerian oil market. The company anticipates the deal will double its production capacity and expand its assets, which now include 11 blocks in onshore and shallow water Nigeria, 48 producing oil and gas fields, five gas-processing facilities, and three export terminals.
“We are confident this acquisition will help us increase our oil production in the short term,” said Seplat CEO Roger Brown. “Our goal is to lift production to over 200,000 barrels per day, up from about 71,000 barrels of oil equivalent daily.”
Seplat’s goal to increase output aligns with its long-term strategy of boosting its operational capacity. However, the company did not provide specific details on how quickly it expects this increase to materialize.
The strategic acquisition also highlights Seplat’s growing focus on Nigeria’s vast gas resources. In addition to increasing its oil output, Seplat sees major potential in Nigeria’s liquefied natural gas (LNG) sector and domestic gas production.
“In the portfolio, we have significant gas opportunities,” Brown emphasized. “There is a huge opportunity in LNG and the domestic gas space.”
Nigeria, home to Africa’s largest oil reserves, faces significant challenges in its oil and gas sector. The industry has struggled with aging infrastructure, underperforming fields, and environmental concerns. But Seplat’s commitment to rejuvenating idle wells could play a crucial role in revitalizing the sector and addressing these challenges.
This move by Seplat comes at a critical time for Nigeria’s oil industry, which has seen foreign companies such as ExxonMobil reduce their investments due to a combination of declining global oil prices, local regulatory issues, and concerns over the future of fossil fuels.
While the global oil market remains volatile, Seplat’s strategy appears to be a calculated effort to capitalize on the opportunities left behind by foreign oil giants. The company has also benefited from Nigeria’s oil reforms, which have made the local market more attractive to independent oil producers.
The transaction represents one of the largest deals in Nigeria’s oil and gas sector in recent years. It is also seen as a significant vote of confidence in Nigeria’s energy future, especially with Seplat’s plans to increase production and inject new life into old fields.
The deal’s success could have far-reaching implications for the future of Nigeria’s oil sector. Analysts believe that it could encourage other independent companies to invest in the country’s oil fields, boosting overall production and potentially attracting more foreign investment.
“This deal shows that there is still value in Nigeria’s oil and gas assets,” said energy analyst, Chijioke Nwankwo. “Seplat’s ability to successfully acquire ExxonMobil’s onshore assets and breathe new life into dormant wells could lead to more independent oil companies seeking to invest in Nigeria’s energy sector.”
Seplat’s acquisition also emphasizes the role of independent oil companies in the country’s oil and gas industry. As the global energy transition continues, independent players like Seplat are taking the lead in revitalizing aging fields and boosting domestic production.
In recent years, Nigeria has struggled with declining oil output and persistent challenges in attracting new investments. The country’s oil reserves have also faced scrutiny due to underproduction and the inability to fully utilize available resources. Seplat’s plans to reactivate idle wells could address this issue, helping to increase production and boost the country’s energy output.
Seplat Energy is an independent Nigerian oil and gas company listed on both the Nigerian Stock Exchange (NSE) and the London Stock Exchange (LSE). It has become one of the leading players in the Nigerian energy sector, focusing on oil production, gas exploration, and infrastructure development.
ExxonMobil’s exit from Nigeria is part of a broader trend of multinational oil companies scaling down their operations in Africa. In recent years, many foreign companies have sold off their assets in Nigeria due to concerns about the country’s oil production challenges, environmental issues, and regulatory uncertainties.
Despite these challenges, Nigeria remains a significant player in global oil markets, and local companies like Seplat are well-positioned to take advantage of the opportunities in the country’s oil and gas industry.
