Afren rival suitors would likely have Nigeria focus, regulatory probe deterrent – industry sources

16 Jan 2015 – Any bidders to rival Seplat Petroleum’s [LON:SEPL] potential offer for Afren [LON:AFR] would likely come from Nigeria-focused groups, industry sources said. But the possibility of an investigation into financial misconduct at the group may deter possible buyers, said one industry source.

Afren was described by industry sources as a very interesting opportunity with good assets, but a difficult deal for those unfamiliar with Nigeria’s oil and gas sector.

Afren’s founder, Ethelbert Cooper, is looking to put together a bid for the company with the backing of commodity trader Vitol and China’s ZhenHua Oil, the Financial Times reported this week. Meanwhile, South Atlantic Petroleum (SAPetro) – headed by Nigerian businessman and former army chief of staff General TY Danjuma – has been stakebuilding in Afren and now owns 7.05%. A representative of Danjuma’s London-based family office declined to comment on their intentions.

An African-focussed private equity-backed group had also been looking at buying Afren but has cooled on the prospect, according to a source familiar with the matter.

Industry sources tipped Riverstone-backed White Rose Energy and private Nigerian group Oriental Energy Resources, which partners Afren on the Ebok and Okwok assets, as potential bidders. But sources familiar with both groups said neither was considering a bid.

Other energy groups operating in Nigeria include Shoreline Energy International and Seven Energy. Commodity group Glencore [LON:GLEN] was reported to be looking to buy some Shell [LON:RDSA] assets in the country in 2014.

A possible stumbling block to any deal is the potential for a regulatory investigation into Afren or the chance of ligation in connection with unauthorised payments that resulted in the sacking of its CEO, COO and two associate directors, said one of the industry sources.

Following an independent review by law firm Willkie Farr & Gallagher, Afren said it would make the full report available to the FCA. On 31 December, Afren said it had received USD 20m from its former CEO and COO.

Seplat has until 19 January to make an offer for Afren or walk away after confirming a “highly preliminary approach”. Talks between the two sides are friendly, it is understood.

Seplat confirmed on 15 January USD 1bn of debt refinancing, including an option to upsize by an additional USD 700m for “qualifying acquisition opportunities”. Seplat is involved in ongoing legal proceedings over the acquisition of the Chevron [NYSE:CVX] blocks OML 52, 53 and 55 in Nigeria.

Spokespeople for Afren and Seplat declined to comment.

by Julie-Anna Needham and Katie McQue

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