OML 18 : Afriexim bank offers $750 million debt facility to Eroton

Olubunmi Martins

African Export–Import Bank, also referred to as Afreximbank, leading consortium of lenders, is said to be inconclusive talks with Eroton Oil and Gas for a debt facility totaling $750 million. The facility is to finance a 45% equity acquisition in OML 18 by Eroton

Details of the discussions concerning the debt facility were made public on September 1, 2022, by San Leone Energy Company, as an interested party to the transaction, in fulfillment of London Stock Exchange Regulatory Obligations.

EnergyDay had previously published a report on equity swap arrangements involving San Leone Energy, Eroton, Midwestern Oil and Gas, and Energy Link Infrastructure in an intertwined merger of interests.

In the statement made available to EnergyDay, San Leone explained that it has encountered a brief delay in bringing to completion arrangements over the reorganization of its operations concerning OML 18.

Wood Mackenzie described the asset as, “a large block located south of Port Harcourt, containing 11 oil and gas fields including Cawthorne Channel, Awoba, Akaso, and Alakiri are the only four producers at the moment.

The terrain of the block is a mangrove swamp, and it is heavily intersected by wide rivers and creeks. Field facilities are mounted on semi-submerged piled platforms, and drilling requires a swamp barge. The block has been in production since 1970. ”

San Leone Energy has disclosed its intention to build its own pipeline infrastructure and ring-fence the asset for optimum production while also creating job opportunities for the host community as a more practical measure to prevent agitation and willful damage to the asset.

EnergyDay gathered that most oil producers now avoid the challenges of pipeline vandalism through ESG engagement with their host communities.

“To acquire additional interests in OML 18 and take its economic interest to 45% of OML 18, Eroton proposes to enter into new senior secured reserve-based lending facilities totaling US$700 million (the “New Eroton Debt Facilities”), to be provided to Eroton by a lending consortium headed by Afreximbank. San Leone said in its briefing note concerning the transaction.

San Leone further explained that “Whilst this process has advanced, it remains a complex procedure with several interested parties and, as a result, additional time is needed to finalize the loan agreements and ancillary documentation.

Consequently, the conditions relating to the New Eroton Debt Facilities, which had been due to be finalised by August 31, 2022, have now been extended to September 30, 2022, by agreement with Midwestern.

Apart from the extension of timing, the structure of the new Eroton Debt Facilities remains in accordance with the description in the Admission Document.

The board of San Leon remained confident that the proposed transactions will be completed by or during the final quarter of this year, as originally set out in the Admission Document.

Completion of the proposed MLPL Reorganisation is subject to several conditions, details of which were set out in the Company’s announcement of July 8, 2022, and in the Admission Document.

EnergyDay further gathered that some of these conditions have been satisfied, notably the publication of the Admission Document and the approval of relevant matters about the proposed transactions by shareholders at the company’s extraordinary general meeting held last month.

San Leone Energy entered into this transaction in a move that would give it substantial equity ownership in OML 18, an asset previously held by Shell Petroleum but ceded in part to Eroton Exploration through a joint venture arrangement with the Nigerian National Petroleum Company Limited, which holds a 55% stake in the asset.

Our correspondent has also confirmed that the asset could on average produce 40,000bpd and further ramp up production for export without going through the Trans Forcardoes Pipeline facility.

Afriexim bank has now successfully emerged as a strong financial partner to support the optimum use of hydrocarbon resources by African producers, ahead of the global transition to cleaner energy.