M&A and Financings Threatened by Nigerian Guidelines for Oil & Gas Deals?


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In late 2014, the Nigerian Ministry of Petroleum Resources (MPR) published guidelines for the approval of oil and gas transactions seeking to extend the MPR’s jurisdiction to cover, not only transfers of interests in Nigerian oil and gas assets or companies, but also offshore corporate and finance transactions where they directly or indirectly involve Nigerian oil and gas assets. These transactions are affected even when they take place outside of Nigeria but involve companies which directly or indirectly hold oil and gas assets in Nigeria, irrespective of other assets held.

Impacted transactions include:

  • Public takeovers - the guidelines raise a number of practical issues for public takeovers, including: a lack of clarity as to the percentage of shares which must be acquired to constitute a takeover; timing, as MPR approval may take six-12 months or longer to obtain; increased leak and insider trading risks; and potential for Nigerian assets to be a ‘poison pill’.
  • IPOs - the guidelines also raise a number of practical issues for IPOs, including: who is to be approved (e.g. where the previous owner retains a controlling stake post IPO or there is no controlling shareholder post IPO); how approval would be obtained within the IPO timeframe (e.g. if an IPO is priced and sold in the few days prior to listing, while MPR approval takes 6-12 months or longer to obtain); and whether the approval requirement might deter financial investors, who may be unwilling to share their financial information with the MPR or submit to its process.
  • Offshore corporate M&A transactions - prior to the guidelines and the 2012 Moni Pulo case in Nigeria, there was a lack of consensus as to whether offshore M&A transactions required MPR approval and a number of transactions took place without it. The guidelines expressly bring such transactions within the approval net and accordingly question the legality of previous transactions - something which may limit the ability of affected companies to obtain development finance, at least without retrospective approval.
  • Financing - the guidelines impose a requirement for mortgages of Nigerian oil and gas assets to be approved prior to grant and, possibly, also prior to enforcement. By contrast, it appears charges over shares in companies holding assets may be granted without MPR approval, but would require approval for enforcement. This raises key timing, cost and, ultimately, bankability issues.

The guidelines impose a series of onerous procedural and financial obligations, including a new requirement to obtain MPR pre-approval prior to commencing a transaction process; a new, non-specific requirement for indigenous companies to be given first consideration; and an approval fee of 1%-5% of the transaction value, there being no guidance as to where in the range transactions will fall.

A version of this article was first published in Petroleum Review, February 2015 and reproduced with permission of the Energy Institute.

Update since publication:

Since the this article was first published in Petroleum Review, representations have been made to the MPR as to the impact of the guidelines on oil and gas transactions, including the issues they raise for offshore capital markets, corporate and financing transactions.

We understand the MPR is now well aware of these issues and is disposed to consider derogations in appropriate cases. It is also understood that the guidelines may be revised and re-published in the near term to further clarify their application.

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