Nigerian oil and gas firm Seplat Petroleum Development Company PLC on Wednesday priced its initial public offering at 210 pence a share, giving it a market capitalization of $1.91 billion and making it the largest European IPO of an exploration and production business since the financial crisis.
The company is raising $505.36 million in the float, which will be used to buy and develop new acquisitions. It will also use $48 million to pay back in full a shareholder loan from MPI SA.
Seplat’s listing underscore’s London’s reputation as the stock exchange of choice for emerging-market resource companies looking to IPO, a status that has been hurt in recent years by a number of high-profile corporate governance scandals at mining companies listed in the U.K. capital.
It also highlights the investment potential in Nigeria’s booming indigenous oil-and-gas sector as major divestment programs by oil producers such as Royal Dutch Shell PLC and Chevron Corp. create growth opportunities for local oil companies.
“The number of blocks that will be sold in the next few years is massive,” said Miguel Azevedo, head of investment banking for Africa at Citigroup.
Seplat is among a number of companies currently in the running for oil fields Shell is selling in the Niger Delta that Ecobank, an African investment bank, estimates could be worth $5 billion.
Seplat currently produces around 60,000 barrels of oil a day from three oil blocks it bought from Shell in 2010 and says it plans to use the proceeds of its IPO to fund more deals.
“We are already a leading indigenous independent in our home market but the opportunities opening up in Nigeria for companies like ours are significant. The proceeds from the global offer place us in a strong position to make further acquisitions as the IOCs [International Oil Companies] divest their onshore assets in the Niger Delta,” said Austin Avuru, Seplat’s chief executive.
Rolake Akinkugbe, head of energy, oil and gas research at Ecobank said Seplat’s IPO could open the way for a “flurry” of Nigerian oil & gas companies looking to tap the capital markets to fund billions-of-dollars-worth of acquisitions as the major oil companies leave the Niger Delta.
However, analysts cautioned it could take time for other Nigerian companies to develop the corporate governance infrastructure to stand up to the scrutiny of investors and regulators.
“If I look into Nigeria right now, I don’t think there are any companies at the level of Seplat,” said Citi’s Mr. Azevedo. “But there are certainly a few that now they have seen Seplat [IPO], they are actually learning from that and they are willing to replicate,” he added.
Data from Dealogic, a financial information provider, showed the listing was the largest European IPO of an E&P company since the financial crisis.
Conditional dealings in Seplat’s shares started in London on Wednesday and go unconditional in London and start trading in Nigeria on April 14.
The company’s Nigerian founders will remain its largest shareholders, along with French energy company Maurel & Prom. Swiss-based trader Mercuria Energy Group also holds a minority stake in Seplat.