They may be young, enterprising, and smart, but they are equally daring businessmen whose reach stretches beyond our national frontier. Unafraid to challenge the status quo, and in a move that has ruffled feathers, they have stamped their footprints in the high stake mega deals club of Nigeria’s oil men. In what may well be a first, the duo alongside their foreign technical partner, Heritage Oil Plc were able to convince JP Morgan to finance the 850 million dollars acquisition of OML 30, closing the deal in record time. Kola Karim, Chairman of Shoreline Natural Resources Ltd, the company’s Managing Director, Dr Ladi Bada and Mr Paul Atherton, Chief Financial Officer of Heritage Oil Plc set out in this interview to correct some misconceptions about one of their shareholder, Anthony Buckingham, and the deal that has just catapulted them to the big league in the capital intensive upstream oil and gas sector. Shaka Momodu was among those who engaged them.
Give us a brief history of Shoreline and how it got involved in the bid process for OML 30?
KOLA KARIM, Chairman of Shoreline: Shoreline Natural Resources Limited is a Nigerian company that was registered in 2010. It is owned 55 percent by Nigerians and 45 percent by Heritage Oil Plc. Shoreline Natural Resources is the company that entered into a transparent process with Shell, Agip and Total, in the acquisition of a 45 percent interest in OML 30. It is a Nigeria company majority owned by Nigerians. That is the situation. Secondly, there has been a lot of innuendos, and it is very important that we as the board Shoreline Natural Resources, sitting in front of you so that you can ask any question and we’ll answer you so that the Nigeria public can see and understand what the true position is about us in relation to this transaction. This is the brief history.
SPDC started a process in 2007, even before the government of President Goodluck came into being. They started the process in the western Delta of Nigeria, in encouraging the local companies in participating in the divestment programme of certain oil fields in the Western Delta. If you remember during the crises in the Delta, a lot of the major IOCs caped wealth. Now Nigeria earns revenue from taxation from the companies only. If we do not produce as a company, we will not get revenue from that production. So Shell and its partners were encouraged to start a divestment programme which was announced internationally and a lot of companies looked for partners.
So if you look at the history of all the others that have bought from the divestment programme, everyone had an international partner. The international partner comes with expertise, and more importantly, they come with capital because the oil and gas exploration and production business requires huge capital outlay.
When they started with the first divestment, companies like Seplat and partner Maurel et Prom, Neconde formed a partnership with Kulczyk Oil Ventures Inc. FNH partnered with Afren plc of the UK and this is where Shoreline partnered with Heritage Oil Plc. This is the simple fact to be verified. Shell and its partners commenced a transparent auction process for four licencees in the third quarter of 2010 and so we worked on this for two years.
The final bid came in and we got a letter for you to verify here, addressed to Shoreline Natural Resources dated 7th March, 2011, which states; Shoreline, you are a preferred bidder on this asset. Infect the winner was Conoil.
Now the history behind this is, as a preferred bidder we were told that we would have to wait and only negotiate with Shell if they did not close the transaction with the first party if they do not close the transaction. I believe there were four companies in line, with Shoreline Natural Resources being the second highest. These are facts Nigerians should know.
When were you contacted by Shell to step in and close the deal?
Nine months later. We received a call saying that Shell had not been able to close a transaction with Conoil, and asking if we were ready to step in? And together with our partner Heritage Oil Plc we responded, yes. Heritage Oil Plc is a London FTSE 250 company listed on the main board of the London Stock Exchange. They have over 8,000 shareholders of which over 50 percent of them are institutional investors, this is for the record and it is there. Mr. Anthony Buckingham is the chief executive officer. Heritage Oil Plc is also listed on the Toronto Stock Exchange.
So you can imagine a London listed company, with institutional shareholders, and over 8,000 shareholders, you can imagine the amount and quality of money they attract. Another important point is that Heritage Oil Plc is an emerging market focused oil and gas exploration company. They founded and discovered oil in Uganda and eventually sold their interests to Tullow their partners, for $1.45 billion dollars. They found oil in Congo Brazzaville- the M’Boundi Field and produced oil from two fields in Angola.
Recently, they just sold the largest discovered gas field in Kurdistan. So it is very clear to get the message to the Nigerian public that we have a partner that is a formidable first class international company which is well recognized in finding and working well anywhere in Africa and any part of the world.
Another important thing is that we see it as a land mark position for what Shoreline is that following negotiations with Shell and its partners , we signed a sale and purchase agreement to acquire the 45% working interest in OML 30 on the 29th June 2012. We posted a bank guarantee for $765 million and paid the deposit of $85 million at that time.
It is strange that many months later certain people are coming up with all sorts of rumours even though everything we have done is transparent and publically disclosed as Heritage is a publically listed company. All of its announcements are available on its website. This is important.
So what you are say basically is that Shoreline Natural Resources and not Heritage Oil plc acquired OML30 even though Heritage is a shareholder in Shoreline?
It is crystal clear that Heritage Oil did not buy any asset and the documents are here to show it and to show that Shoreline Natural Resources Limited, acquired the interest and it is a Nigerian owned company, majority controlled by Nigerians. The records are there with CAC,. It is very important as a Nigerian for me to state these facts. We have worked tirelessly, to bring the largest international banks to Nigerian and lend a record amount for Nigeria. This is the first time international banks like JP Morgan, Standard Bank, have leant such a large amount of money to a local Nigeria company. This is something of joy for the country because it puts us and our country in a formidable position and raises the profile of Nigeria.
The government has been pushing for local content, trying to drive local participation, local inclusion. The government’s main drive is to get Nigerians involved in our country, but international money has followed Shoreline Natural Resources into the country which is the foreign direct investment the government has been driving. Shoreline Natural Resources invested $850 million dollars as foreign direct investment into Nigeria at a time when a lot of people don’t want to invest. It is very important what you write because your pens are very powerful and the world sees it and the message you send has a direct impact on the international investing communities.
This is a land-mark transaction for another reason as this is the first time in history that there has been Chinese investment, in an African company without any Chinese content. The China Development Bank, has leant us $200 million dollars as part of its syndication to Shoreline Natural Resources and not to Heritage and the records are there.
The first ever funding from China that is not been given to any Chinese construction company or Chinese developer, this is given direct to Shoreline Natural Resources and you can imaging the quantum of money which all the international institutions are watching and listening and trying to see this type of positive news coming out from Nigeria.
So it is important from our side as a Nigerian that believes firmly in Nigeria because everything we have to put up this transaction, to strive to build and also to work, to try all we can do to be successful in our country. It is a very important fact, especially in these times where there is a lack of international finance available, it is easy to drive investments to other countries, international and financial institutions are watching.
How many Nigerian can invest 850million dollars? So we need international banks and international institutions and partners. But you can imagine as Nigerians, it tells you the level of confidence the international markets and institutions have in us to provide that money to us.
It is very important that in as much as the government is trying to do to support local companies, it is very important from your position as you are very powerful, that we send the right message that Nigeria belongs to all of us, and we all have to work together in making sure that we make a difference.
Tony Buckingham one of your Shareholders is being accused of having a dodgy past and being a supplier of arms to Mercenaries in conflict areas in Africa, and as such fears have been raised about potential security concerns.
Mr. Anthony Buckingham, this is on record, is over 60 years old and all the references happened a long time ago. He has a security background working for the British government and what soldiers do, is to go to war. Like in Nigeria, we have so many generals who have gone to war but are running businesses in Nigeria.
It is on record that he travels freely and globally, he is not wanted in any country and Heritage has operations in several African countries including the countries you referred to in the publication, it is there and if he is such a dangerous man as he’s painted to be, he cannot be the CEO running FTSE 250, which is one of the top 250 companies in the United Kingdom listed on the London Stock Exchange with its institutional investors. These are facts. He has been running in the oil and gas business for several years. He is just one of 8,000 shareholders of the company. So a threat to my own company, in a business that we have majority shareholders does not arise.
Nigeria is a very powerful country in Africa and the Nigeria government has all the apparatus to call any African leader in countries you refer to, to check. The British government is one of our closest allies in Nigeria and as a former colony; it’s a phone call away to check. Mr. Anthony Buckingham is a British citizen, who resides in the United Kingdom as a CEO of a British listed strong company that has a global footprint in business. So I hope to set the record straight, what has been painted and what is reality, are two different things and this is very important to note…
Paul Atherton interjects: It is appropriate that I add to that. I have worked with Anthony Buckingham since 1995, which is for over 17 years and so I know him extraordinarily well. He did have a security background focused on Africa and worked exclusively for internationally recognized governments with the tacit approval of the American and the UK government. He ceased all security operations in 1998, and has not been involved with any security company as a shareholder, or in any security operations since 1998. There is no cross shareholdings between any security companies and Heritage Oil. Heritage oil is purely an oil and gas focused company and has been extraordinarily successful. Mr. Anthony Buckingham is known as one of the most successful oil barons in the United Kingdom. In the last decade, Heritage has sold assets and received cash consideration in excessive of $2 billion US dollars. During the last decade, we have found four of the largest oil fields to be discovered onshore sub-Saharan Africa; in Uganda and the Republic of Congo.
In Uganda, we were the first company to explore for more than 60 years and it’s known as the pioneering oil company in Uganda. This has brought huge success and will transform this country and their economics as a result of Heritage’s oil finds.
Heritage Oil Plc is London listed and we are one of the largest oil companies listed on the London Stock Exchange. We listed on the Toronto Stock Exchange in 1999 and moved to the London Stock Exchange in March 2008. The London Stock Exchange and its lawyers, together with our broker, JP Morgan undertook thorough and complete and use third party agencies to check all facts and documents. The Toronto Stock Exchange did the same in 1999 and there never have been any issues, otherwise we would not have been allowed to list on the stock markets.
In addition JP Morgan, the world largest bank, only works with the world’s most prestigious company because they will not destroy their name with other companies. So the truth is that Mr. Anthony Buckingham is known to be one of the most successful CEOs of an oil company in London.
Clarify to us how the bid process works. Conoil put in a bid of 1.29 billion dollars while your company’s bid was 850 million dollars. One would have thought you will be asked to match Conoil’s bid?
Dr Ladi Bada: In answer to your first question, under the bidding processes, one party can bid x amount of money, for example 200 hundred naira and the next party bid 150 naira based on how they value a particular business and will be ranked accordingly.
Now if the number one person is not able to pay his 200 or so, the law of the bidding process does not state you match it but it state that they go to the next highest bidder and then you pay. So there is no issue of matching not within the normal bidding process. The process is documented all we needed to do, was to say we are able to pay what we bided for, and pay a deposit fund.
If we had failed to pay our $850 million, and for example the next person was $600 million what would naturally happen is that SPDC, if that 600 is acceptable for them because they might decide to stop the process and not proceed or they will move to the next bidder and will not tell them to match our own. This is the standard practice globally.
In relation to the asset in the Delta , it is the Shoreline Natural Resources and not Heritage Oil Plc. What is unique in this is that every where Heritage has gone, they have gone as a Heritage branded company be it Heritage in Uganda, Angola or Congo, but here it is Shoreline Natural Resources and Heritage is just a shareholder within that company and the company is majority owned by Nigeria.
We a Nigeria company invited them into own process so that everybody is of the understanding that here, we want to develop an asset and not to build an asset to sell.
And so our clan is to develop OML 30 to its full potential along with our fantastic partners NPDC. Shoreline Natural Resources own just 45 percent of OML 30. While NPDC, the exploration of production arm of and subsidiary of NNPC owns the other 55%. It is on record that NPDC is the operator of OML 30.
What is important for you to understand that, as non-operator that we are just a shareholder of OML 30. Neither Shoreline Natural Resources nor Heritage Oil has any operational activity in the Niger Delta which is very important to note.
So you’re satisfied with the fact that NPDC is the operator?
We have full faith in our operator which is NPDC, they have been operating in Nigeria for many years and they are going to handle every single aspect of this business from the community issues, to the operational issues and every other aspect of business. Our own relationship is one of a partner who they report to. So operationally the people on ground are NPDC.
But Shell was the operator so why can’t you be the operator?
We are not the operator of OML 30. Let’s look at Nigeria: Shell has positions in which they are operators and they have oil fields and joint ventures in which they are operators. They also have oil fields in which they are non-operators. Total, Agip, all of them have operating positions and they have non-operating positions and they are comfortable in both positions.
The nature of the oil and gas work is it does not diminish one over the other, but it’s just that they are different activities. Throughout the process Shell did not tell us at any point a time state that Shoreline Natural Resources would be appointed as operator.
But government as the majority shareholder took its “rightful right” to be appointed as the operator. We are comfortable with it to the extent that we know the antecedent of every duty and we are very comfortable with their ability as the operator.
We have our own technical team, financial team, and we work closely with NPDC on a daily basis since the acquisition completed with effect from 1 November 2012. By coincidence, today marks the end of the three month transmission period whereby operatorship transfers from Shell, the former operator of the licence and to NPDC.
So today is actually the first day in which NPDC takes full charge of OML 30 following the transition process. We have full faith in them and we work closely with them technically, commercially and other aspects as we jointly develop the asset.
Is it true as being alleged that Conoil was assured of operatorship of the well?
Our negotiation with Shell was a commercial transaction between private companies; we negotiated with Shell, Total and Agip and not with other company. So it will be irresponsible of us to comment on what another bidder may or may not have been told.
Now the situation is this, all the companies that participated in the OML 30 process, were called for meetings and after being pre-qualified the clear written rules and regulations guiding this transaction were provided to all. At no point was it every explicitly, directly or indirectly told to us by SPDC that we will be the operators.
There was no time around this transaction that we or any bidder that I know of, has any negotiation with NNPC and the government. This is because the ownership of OML 30 was: Shell 30%, Agip 5% and Total 10%, federal government of Nigeria 55%. What we bought is the portion that belongs to these three. The federal government still retains its 55% and more importantly retained and vested in right, in the operatorship of the block.
I will go back to one very simple fact which is, as a Nigeria company, there is been major fence surrounding this transaction. It is the ability of international banks believing in us for the first time, we are talking about Standard bank, JP Morgan providing a guarantee of $765 million and then a loan of $550 million to Shoreline Natural Resources, a local Nigerian Company.
You can imagine what we are trying to do here, for me the important thing is that we take it passionately. Shoreline Natural Resources’ focus is to continue building a material oil and gas business in Nigeria because there will be further huge opportunities, and the reason includes the fact that most international companies have to encourage Nigerians, but oil and gas money is not a small one. So you can imagine if we are not successful then it will affect generations of other Nigerian E&P that is coming up.
That is very important, and that is why we see it as very important that we call this meeting, to tell the world that Nigerians, young and old, what the reality position is. It is not about me. It is about what the government of Nigeria is trying to do, but it cannot be done without the relevant backing of international financial institutions.
At what point did you need the consent of the Ministry of Petroleum to consummate the process?
KOLA KARIM: Let me give you further details of the process. First, on the consent, the process is this, once we executed the sale and purchase agreement with the vendors and paid the deposit and provided the bank guarantee, the seller has to notify the NNPC, that I, company XYZ is now selling my shareholding in this to company Y. The Ministry will now have to come back and say, yes I consent with your notification, because they are the majority owner of the licence and since the hydrocarbon law in Nigeria requires this.
Government of the federal Republic of Nigeria and the people of Nigeria hold 55 percent of the DOA. Yes, there is consent from the minister, confirming the transaction. It is a written consent. The next position is on the name of the company. There is no company in Nigeria called Heritage, it is Shoreline Natural Resources Limited and the shareholding is very clear here. It was registered two and half years ago. The shareholding is 55 percent and 45 percent% to Heritage Oil Plc. It is very clear.
What is your strategic business focus now with your bold entry into the oil sector?
KOLA KARIM: Shoreline Natural Resources’ business strategy is to build a sizable exploration and production business in Nigeria and Africa. The Shoreline Power group has businesses in Ghana, Kenya, Uganda and Angola. We have been operating for over 14 years in several businesses in these countries. So our strategy in this country is to build a sizable business. So we are going to be investing and looking for further opportunities to invest in Nigeria, as well.
On capacity, as we stand today, we are already 99% of our staff are Nigerians. Today, Shoreline only has one expatriate in Finance, the rest are Nigerians. Young and enterprising, smart people that we are running our business. In terms of Shoreline Power, most of our staff working in Ghana are Nigerian expatriates, thereby demonstrating our believe in and commitment to Nigeria.
So our focus is to continue investing in Nigeria, because we believe in our country and continue to train people. Heritage is providing that back up technical support to train and support a lot of our staff in cross posting. That is the situation.