Following the announcement of Oando’s acquisition of Agip Oil on July 3, 2024, the former recorded a 9.9% gain in its stock price. Oando’s share price opened at N14.10 on the 4th of July and closed at N15.50 on the same day.
Oando Plc, a leading indigenous energy solutions provider, completed the acquisition of 100% shares of ENI’s Nigeria Agip Oil Company, Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Chief Executive, Engineer Gbenga Komolafe disclosed.
According to the Chief Executive of Oando Plc, Wale Tinubu CON, the acquisition will create opportunities to realign expectations, improve efficiency, optimize resource allocation, and significantly boost production.
Additionally, “it is in alignment with our strategy of acquiring, enhancing, appraising, and efficiently developing reserves.” Mr Tinubu said.
This might increase crude oil production in Nigeria and further develop Nigeria's oil and gas sector.
The share price which began the year at N10.50 has since gained 47.6% on its price valuation making it the 19th most valuable stock on the Nigeria Stock Market.
The Oando share is the 14th most traded stock on the NGX. It has traded a total volume of 598 million shares in 14,267 deals valued at N7.76 billion over the period with an average of 9.49 million traded shares per session.
Within the last 5 years, 6 foreign Oil and Gas companies have divested and sold their onshore operations to other locally owned oil and gas companies.
Divestment involves a company selling a portion of its assets to enhance value and improve efficiency. Companies often use divestment to offload peripheral assets, allowing management to focus more effectively on the core business.
Most divested oil and gas assets are onshore properties in shallow waters. Over the past decade, companies have divested a total of 26 mining licenses in Nigeria's Niger Basin Area.
The current acquisition gives Oando the following:
The transaction increases Oando’s current participating interests in Oil Mining Lease (OMLs) 60, 61, 62, and 63 from 20% to 40%.
It increases Oando’s ownership stake in all NEPL/NAOC/OOL Joint Venture assets and infrastructure which include forty discovered oil and gas fields, of which twenty-four are currently producing, approximately forty identified prospects and leads, twelve production stations, approximately 1,490 km of pipelines, three gas processing plants, the Brass River Oil Terminal, the Kwale-Okpai phases 1 & 2 power plants (with a total nameplate capacity of 960MW), and associated infrastructure.
Based on 2021 reserves estimates, Oando’s total reserves stand at 503.3MMboe and the transaction will deliver a 98% increase.
The transaction also grows Oando’s exploration asset portfolio through the acquisition of a 90% interest in OPL 282 and 48% interest in OPL 135.
NAOC Ltd participating interest in SPDC JV (Shell Production Development Company Joint Venture – operator Shell 30%, TotalEnergies 10%, NAOC 5%, NNPC 55%) is not included in the perimeter of the transaction and will be retained in Eni’s portfolio.
12% Lesser: Nigeria’s Crude Oil Production
The NNPC Group CEO Mele Kyari has declared an emergency on crude oil production in Nigeria, attributing it to a drop in the daily average crude oil production in successive months.
Indeed, crude oil production fell by 12.3% from 1.43 million barrels per day (mbpd)) in January 2024 to 1.25 mbpd in May 2024.
Mr Kyari attributed this decline to inefficiencies such as ambiguities in procurement procedures and infrastructural limitations.
“Obstacles to effective and efficient production such as delays in procurement processes and old pipeline networks were affecting the industry.
“NNPC would replace all the old crude oil pipelines built over four decades ago and introduce a rig-sharing program with its partners to ensure that production rigs stayed in the country,” he said.
However, while Mr Kyari attributes the state of emergency to the recent fall in oil production levels, the country has been experiencing average monthly increases in crude oil production in the last 3 years.
Despite the decline between January and May 2024, the average oil production in the 5 months surpasses the average in the previous 2 years.
Clearly, the situation as of May this year is not the worst for crude oil production in Nigeria, at least in the last 5 years.
Crude oil production was at its lowest between August and September of 2022. It fell to 972, 394, and 937,766 barrels per day (bopd) in the 2 respective months.
The highest crude oil production within this selected period was in February 2020. It stood at 1,799,354 daily average barrels (bopd).
However, if the decline persists, it might lead to difficulties in meeting domestic refineries’ crude oil demand, fuel scarcity, and a net importation of crude oil.
The Chairman of the Independent Petroleum Producers Group, IPPG, Abdulrazaq Isa warned that a slow decline in crude oil production may decrease the revenue for an oil-dependent economy like Nigeria, affecting government budgets, public services, and economic stability.
Although, Nigeria’s crude oil reserve is still among the highest in the world, a continuous decline in crude oil production might cause a decline in the country’s reserve.
The OPEC data shows that Nigeria is the 8th country with the highest crude oil reserve globally.
One of the major problems faced by the Nigerian oil and gas sector remains vandalism and oil theft.
In 2022, the country lost 470,000 barrels of crude oil per day (bpd) due to oil theft incidents, resulting in a monthly loss of $700m.
The government has initiated sector reforms, including the 2021 passage of the Petroleum Industry Act (PIA) to overhaul governance and fiscal frameworks. The PIA's implementation is expected to create a more competitive and attractive investment environment for local and international investors.
Mr Abdulrazaq Isa emphasized that the industry needs exceptional focus to address genuine concerns about its long-term sustainability.
“Unlocking this incremental production is achievable only through collaboration and commitment between the industry regulators (NUPRC and NMDPRA) and industry operators (NNPC, OPTS and IPPG) and this must be done for the sake of our country,” he stressed.
Thank you for reading this week’s Marina and Maitama. It was written by Lucy Okonkwo and edited by Oluseyi Olufemi