Seplat Petroleum Development Company Plc is floating a $650 million bond that is due in 2026. The amount is the largest ever bond to be issued by a Nigerian oil and gas company.
According to the company, the note priced at 7.75 per cent represents a significant pricing reduction from its $350 million debut issuance in 2018, which was priced at a yield of 9.50 per cent, with a coupon of 9.25 per cent.
The company said the offering was well oversubscribed with demand from 120 global investors from more than 20 countries, resulting in a final overbook of over $1.1billion, which was 1.7 times book coverage.
The global coordinators on the transaction are Citi, J.P. Morgan, Standard Bank and Standard Chartered Bank, with Natixis, Rand Merchant Bank and Société Générale acting as Joint Bookrunners and FCMB Capital Markets, Nedbank, United Bank for Africa Plc and Zenith Bank Plc acting as co-managers.
Orders came from high-quality institutional investors with long-term commitment to Seplat as well as new institutional investors. It stated that the transaction was well received in the market and traded above par post-pricing.
The company said the transaction showed confidence by the international market in the Nigerian economy as well as the oil and gas sector in particular, with a number of the investors committing to the transaction based on the strong gas story of Seplat.
It explained that the bond proceeds will be used to redeem the existing Seplat 2023 notes, repay drawings under the revolving credit facility, for general corporate purposes and pay transaction fees and expenses.
The company said it had notified investors of the conditional redemption of its $350 million aggregate principal amount of 9.25 per cent senior notes due 2023.
“The issuer has elected to redeem the entire outstanding principal amount of the notes outstanding on April 1, 2021. The leading independent indigenous upstream oil and gas company operating in Nigeria is rated B2 by Moody’s, B by S&P and B- by Fitch,” it stated.
On the strategies to enhance growth and profitability, the company said it is pursuing a Nigeria-focused growth strategy and is well-positioned to participate in future divestment programmes by the international oil companies, farm-in opportunities and future licensing rounds.
Of the current year, the company said it planned to produce an average of 48,000 – 55,000 boepd, taking into account the impact of OPEC+ quotas. Seplat continues to hedge against oil price volatility and expects a higher proportion of revenues to come from long-term gas contracts at stable prices.
“Seplat, which has significant cash resources, said it will continue to manage its finances prudently in 2021, expecting to invest $150 million of capital expenditure across the full year. The oil and gas company remains confident that its ongoing cost-cutting initiatives and prudent management of cash will enable further reductions in debt, whilst supporting dividend payments and investment for growth.
“Following its successful funding, the completion of the ANOH remains a major priority for Seplat. Although it expects some COVID-19 related delays to push completion into early 2022, following a cost optimisation programme,” it added.