26 Jan 2016 – The Nigerian government is expected to extend the licences of the oil fields OML 18, OML 24, OML 25 and OML 29 to their indigenous stakeholders, an official for the Ministry of Petroleum has said.
All four licenses are set to expire in 2019. Companies must apply for the licence extension more than 12 months before the existing license expires, which could see applications submitted at the end of 2017, the official said.
The ability to extend the licences may improve the stakeholders’ options to reorganize the debt they raised to purchase stakes in them, the official said.
The indigenous firms’ purchase of 45% of the blocks concerned was announced in March 2015. The Nigerian Petroleum Development Company (NPDC), a fully owned subsidiary of the Nigerian National Petroleum Corporation (NNPC) holds the remaining 55% of each block.
Aiteo has acquired a stake of OML 18. Midwest Oil has a stake of OML 29. Newcross Exploration acquired the stake of OML 24. James Bay was expected to buy OML 25 but the deal has not closed yet, as reported.
The deals for the licenses were signed in 2014 when oil was around USD 110 / bbl. The subsequent crash in oil prices has put the licensees under pressure and at risk of default.
As reported, Newcross and Aiteo are undergoing restructuring of the debt financing they raised to purchase their stakes in the license. Earlier this month Midwest Oil announced it had taken-over Mart Resources, the company that previously owned its stake of OML 29 through a JV named Eroton Exploration & Production Company. Prior to the takeover Mart had announced it was undergoing a restructuring of its debt.
“We are looking to minimize risk for the companies and financiers. We want to enforce a stable regime where possible. Although there may be slight delays in terms of the process,” the official said.
If the conditions for renewal are right, the government is open to extending the licenses for as much as 20 years, the official said.
Should oil prices maintain around the current USD 30/bbl, situations involving debt for equity swaps with the financing banks could arise, a sector banker commented.
At that point and if oil prices stay low, some banks will try to get rid of their exposure and they could do so by selling to PE firms, the second banker said.
However, these deals were already very leveraged so selling to private equity firms will not be that easy, the second banker added.
By Katie McQue & Davide Barbuscia