SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC - Eland Acquisition: The Rise Of A Bigger Seplat

SEPLAT PETROLEUM DEVELOPMENT COMPANY

Eland acquisition: The rise of a bigger Seplat

Seplat, yesterday, announced its intention to fully acquire Eland Oil and Gas Plc, a UK-based company that operates in Nigeria’s upstream industry. The proposed offer comprises a cash consideration of $382 million for the entire equity of Eland, the equivalent of 166 pence for every Eland share— representing a 28.5% premium to Eland’s closing share price on October 14, 2019 and an 11% premium to Eland’s book value. The acquisition is expected to be financed partly by cash and debt.

A stronger Seplat post Eland acquisition 
Evidently, the proposed acquisition comes with several positives for Seplat’s operations. At the fore of these positives is the expected surge in Seplat’s 2P oil reserves (working interest) to 267.3 MMbbls (FY’18: 226.6 MMbbls). Furthermore, we highlight that, post-acquisition, Seplat’s oil output will jump to 38 kb/d, resulting in a 2019 oil output average of 36 kb/d (FY’18: 24 kb/d). However, our estimate for Seplat’s 2019 gas output remains unchanged at 146 MMscfd, as Eland is currently not involved in gas exploration. Another major plus for Seplat is Eland’s use of the Trans Forcados Pipeline (TFP) as its major export pipeline—a more reliable pipeline than the Nembe Creek Trunk Line, which has, in recent times, emerged as one of the most vandalized pipelines in the Niger Delta region.