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Shell wraps up $1.2bn sale of OML 18 to Eroton Group

By on March 21, 2015

Shell Petroleum Development Company (SPDC), Nigerian National Petroleum Corporation (NNPC) and Eroton consortium on Thursday closed the deal involving the acquisition of Oil Mining Lease (OML) 18 by Eroton, THISDAY has learnt.

THISDAY also gathered that Erotron has clinched the prestigious Trade and Forfaiting Review (TFR) award for closing the transaction in record time with a syndicated reserve-based lending facility (SRBL).

Mart Resources Limited, Midwestern Oil and Gas Limited and Suntrust Oil and Gas Limited are the members of the Eroton consortium, which acquired Shell’s stake in the oil block in a deal valued at $1.2 billion.

The consortium, known as Eroton Oil and Exploration, yesterday took over the asset, following the consent granted by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, three weeks ago, sources conversant with the transaction informed THISDAY.

Afreximbank acted as the sole mandated lead arranger, as well as lender and facility agent, to raise the trade-backed $663 million SRBL required to close the asset sale.

Other participants included Diamond Bank Plc, Fidelity Bank Plc, Africa FINANCE Corporation (modelling bank), Ecobank Nigeria Plc, Zenith Bank Plc, FSDH Merchant Bank, and Shell Western Supply and Trading acting as lenders.
Eroton, an indigenous Nigerian company, incorporated as a special purpose vehicle by Mart Western Energy Limited, in 2014, won the bid for the acquisition of the oil block when Shell offered four oil block as well as the Nembe Creek Trunk Line (NCTL), which it put up for sale following a 2013 review of its business in the country.

The $663 million funding deal, which was completed on September 23, 2014, was structured as a seven-year facility, while the oil block licence will expire in five years.

However, a bespoke insurance tool was said to have been used to cover the risk in the event of non-renewal by the federal government, thus improving the borrowing capacity of the oil assets.

Afreximbank also used a standby letter of credit (LC) to backstop the payment obligations of the buyer to the sellers while the sale of the assets awaited the consent of the Minister of Petroleum Resources.

Owing to the success of the transaction, Eroton won the TFR award for closing the deal in a timely and seamless manner.

The judges noted the inspired use of a syndicated reserve-based lending facility, coupled with the humble letter of credit by Afreximbank to help Eroton part-finance the deal.

The overall ticket size was $1.2billion, and the acquisition was FINANCED through debt and equity and required the participation of Standard Chartered Bank as escrow agent in relation to the equity and loan components.

The acquisition of OML 18 by Eroton was one of four asset sales under Shell’s latest asset disposal programmes in Nigeria.

Others included the sale of OML 29 and the Nembe Creek pipeline to the Aiteo group for $2.562 billion; OML 24 to Pan Ocean Corporation Nigeria Limited for $900 million; and OML 25 to Crestar for $453 million.

However, NNPC has halted the sale of OML 25 to Crestar, resulting in a lawsuit instituted by Crestar challenging the action.

Central, West African Leaders to Meet on Boko Haram Next Month
The Central and West African states will hold a summit next month to agree on a common strategy to combat the Boko Haram insurgency, their leaders said on Wednesday.

Armies from Nigeria, Cameroun, Chad and Niger have launched an offensive to end the Islamic militant group’s six-year campaign, which has killed thousands in northern Nigeria and spilled over into Cameroun and Niger.

Ghana’s president, John Dramani Mahama and his Chadian counterpart, Idriss Deby, told Reuters in Accra that the April 7-8 summit, for which the host country had yet to be chosen, was needed to sustain the regional offensive.
Mahama chairs the West African regional bloc, Economic Community of West African States (ECOWAS), while Deby heads the Economic Community of Central African States (ECCAS).

“Single-handedly, no country can overcome this threat and therefore through pooling our resources together …we are going to overcome this challenge,” Deby said.