Oando Buys Two Shell Nigeria Blocks For $625.7 Million
Oando PLC, Nigeria's biggest energy firm, said Monday it has bought two Nigerian offshore oil licenses from Royal Dutch Shell PLC for $625.7 million and is in talks with two other foreign oil majors about possibly buying three more oil licenses.
The Shell asset sales, which were expected, give Oando 49.8% stakes in two blocks, the company said. Shell's decision to sell the blocks is aimed at strengthening the financial health of its Nigerian operations after losing a lot of onshore crude oil production and revenues the past two years to militant attacks on energy infrastructure.
Oando Chief Executive Wale Tinubu said the company, whose shares are traded on the Nigerian and Johannesburg exchanges, was in negotiations with another European oil major and one U.S. major about purchasing three more oil blocks.
"We are in talks with two other majors about buying these blocks. We hope to have something to announce in coming weeks or months," Tinubu told Dow Jones Newswires in an interview.
Tinubu said Oando, which is small with a market capitalization of around $350 million, was looking to raise $500 million in financing through a combination of debt and equity issuance to fund the acquisition of those additional blocks. He added that Oando wants to have that financing wrapped up before June.
In January, Oando took out a $200 million loan through Merrill Lynch to help buy Shell's two licenses.
The Shell asset sale has been privately endorsed by the Nigerian oil ministry, Nigerian energy officials say, although it must still gain approval from the government and from Agip, a unit of Italian oil company Eni SpA (E). Agip owns the remaining 50.2% in each block, Oando said.
Shell's decision to sell to Oando dovetails with the Nigerian government's desire to increase the role of Nigerian energy companies and banks in the country's energy sector.
The license disposals also reflect the increased pressure the Nigerian government is putting on foreign energy companies to fully utilize oil blocks they won in past licensing rounds. If block aren't utilized, the government has promised to strip companies of those licenses.
Copyright (c) 2008 Dow Jones & Company, Inc.
Operates 30 Offshore Rigs
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