Foreign investors’ confidence in Seplat Energy Plc has dropped, as some exited their investment in the Nigerian oil company following a setback in the acquisition of ExxonMobil shallow waters business in Nigeria.
Seplat Energy had announced in late February that it had entered into Sale and Purchase Agreement to acquire entire shares of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil.
The purpose of the acquisition was to increase Seplat’s revenue, however, more than four months later, the deal has still not been approved by the Nigerian government, which is using its agency, Nigerian National Petroleum Company Limited (NNPC) to block the acquisition.
Foreign investors react negatively amid court battle over Seplat and ExxonMobil deal
NNPC is against the acquisition of the oilblock asset, which it co-owns with ExxonMobil, and intends to use its first refusal rights under their Joint Operating Agreement (JOA) to stop the deal and takeover of the oilfield.
Seplat had offered over $1.2 billion to purchase MPNU, the local firm overseeing ExxonMobil’s stake in the oilblock. In a bid to stop the deal, NNPC went to court on July 5 to get a restraining order against the transfer or sale to Seplat, but the lawsuit was made public on Tuesday.
Ripples Nigeria gathered that as trading resumed in the London Stock Exchange on Wednesday, Seplat share depreciated in value by -0.24% due to sell off among investors, with fear that if the company fails to acquire MPNU, its management would be unable to significantly grow its earnings.
This means value on investment held by stock market investors in Seplat will record little or no growth, as the company will have no reason to increase dividends in the future, compared to if the acquisition was done.
Which makes Seplat’s growth in the future blurry, discouraging new investors from demanding the firm’s stock on the exchange floor. This often causes the share to fall in near to midterm period, and result to losses on shareholders investment, hence, the sell off on Wednesday.
The sell off pulled Seplat share down to £104.25, below the £104.50 it sold for on the exchange floor on Tuesday. During intraday trading earlier today, traders exchanged the stock for as low as £101.50.
Trading is still ongoing, but so far, investment still held by other shareholders is down -0.24%.
What is Seplat saying about NNPC court case over MPNU acquisition
Investors are selling off despite Seplat releasing a statement on Tuesday that the court case wouldn’t affect the acquisition of MPNU. The company said the lawsuit is between NNPC and ExxonMobil over the rights issue relating to the JOA, and nor Seplat.
It assured that while the matter was awaiting resolution by the State High Court in Abuja, the SPA is still valid and subsisting, “and the Company remains confident that the matter will be brought to a proper conclusion in accordance with the law.”
However, the statement has done little or nothing to calm investors based on the ongoing capital market activity around Seplat shares on the exchange floor.
Join the conversation
Support Ripples Nigeria, hold up solutions journalism
Balanced, fearless journalism driven by data comes at huge financial costs.
As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.
If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.
Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.
INVESTIGATION: 4 yrs after completion, Kwara PHC facility inactive, rural dwellers in pains
In the middle of the night sometime in September 2019, Fatimah Ballah struggled with severe pains as she tries to...
INVESTIGATION: How Oyo State, contractors spent N1.1bn on water projects, but communities don’t have a drop
Multimillion naira water projects largely initiated by the late Abiola Ajimobi-led state government in Oyo State to benefit over 40...
INVESTIGATION: In Cross River, civil servants retire into poverty as govt looks away, squanders funds on frivolities
Thousands of civil servants in Cross River State struggle to stay alive as they are denied their gratuities and monthly...
Students suffer as contractors abandon Kano school projects after receiving over N70m
In 2019, to improve the condition of public schools in Kano State, the Federal Government disbursed millions of naira to...
SPECIAL REPORT: World Bank road projects go bad in Enugu, as state govt fails to fulfill promise
Counterpart funded road projects between the world Bank and Enugu State government have started to fail, as the state government...