Inside Collapsing Seplat’s Board Room
Seplat, a Nigerian oil and gas company listed on the Nigerian Exchange (NGX) and the London Stock Exchange, is facing internal crises and legal battles stemming from changes in managerial structure and the delayed acquisition of Mobil Producing Nigeria Unlimited assets.
The boardroom drama has led to an implosion that has seen mass retirement and resignations from key board members involved in the debacle.
Sources within the company mention that there are some aggrieved parties who may be working against the company to further their own agenda threatening to impact Seplat’s long-term success if they are not addressed.
To understand the root cause of events at the publicly listed company, we reviewed a series of events that have led up to this point.
Acquisition of MPNU assets
Sources within Seplat told Nairametrics that the series of controversies at Seplat began in February 2022, when the company struck a deal worth as much as $1.6 billion to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from US supermajor ExxonMobil.
The deal would have seen a boost in Seplat’s production to 146,000 barrels of oil equivalent per day (boepd) and see its proven and probable liquids reserves jump from 241 million barrels to 650 million barrels.
In its February 25, 2022 acquisition note, Seplat highlighted MPNU assets as a 40% operating ownership of 300 producing wells in 4 oil mining leases (OMLs 67, 68, 70, 104) and associated infrastructure, with NNPC being the 60% partner, the Qua Iboe Terminal, a 51% interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso, 409 MMBBL of 2P liquid reserves, and 211 Bscf of 2P gas reserves, with the undeveloped gas potential of 2,910 Bscf.
Meanwhile, On July 11, 2022, Seplat announced that the Nigerian National Petroleum Company Limited (NNPCL) had initiated legal action in the State High Court of the Federal Capital Territory in Abuja. NNPCL requested a declaration that a dispute had arisen between itself and MPNU regarding the interpretation of pre-emption rights under their Joint Operating Agreement (JOA) and asked the court to order NNPC and MPNU to engage in arbitration as required by the JOA.
Following the request, the State High Court issued an ex-parte order of interim injunction, which prohibited the defendants from finalizing any divestment in MPNU, including the sale and purchase agreement (SPA) signed with Seplat Energy Offshore Limited, while the case was pending before the court. It’s worth noting that neither Seplat Energy nor Seplat Energy Offshore Limited was involved in the lawsuit.
By August 8, 2022, President Buhari had given his approval for Seplat to acquire MPNU’s assets, citing the numerous benefits to Nigeria’s economy. However, shortly after President Buhari’s decision, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) publicly opposed the acquisition during a widely broadcasted television interview.
At that time, the Chief Executive Officer, Gbenga Komolafe stated that based on the Petroleum Industry Act (PIA) of 2021, the NUPRC is the sole regulator in dealing with such matters in the Nigerian upstream sector. He refuted the President’s approval.
To everyone’s dismay, President Buhari reversed his earlier approval by August 10, 2022, blaming his indecision on the lack of coordination among sector agencies.
According to sources at Seplat, this singular act gave rise to a double whammy within Seplat;
The investors who had purchased shares after the initial deal was struck and were worried about the flip-flopping of the Nigerian government. It was reported that by mid-morning on February 25 after Seplat’s announcement of the sale and purchase agreement with MPNU, Seplat’s share price rose from 93 pence to 105.5 pence ($1.24 to $1.41) on the London Stock Exchange.
Shareholders were divided between looking for an exit strategy and staying on course until the company receives government approval for the MPNU acquisition.
However, in early March 2023, the company CEO, Roger Brown had said Seplat was committed to pursuing the MPNU acquisition deal before a new president is sworn in by the end of May 2023.
Corporate governance issues
According to sources familiar with the matter, Seplat has also been wading into controversy over corporate governance issues.
In September 2022, Bloomberg reported that Seplat Energy spent over $450 million on goods and services provided by companies linked to its two founders between 2010 and 2021. The report said that most of the transactions occurred after Seplat was publicly listed in London and Lagos exchanges in 2014.
According to the Bloomberg report cited, Seplat made payments to 18 companies associated with its founders, Austin Avuru and ABC Orjiako for services rendered. Those businesses were connected to both Orjiako and Avuru’s family members.
During the period highlighted, Seplat paid $410 million to companies associated with Orjiako and $299 million to companies associated with Avuru, according to the company’s annual reports. As of March 2021, Seplat’s board led by Orjiako, announced that the company would eliminate all related-party transactions.
A minority shareholder told Nairametrics that it is a matter of concern that the company spent over $450 million on goods and services provided by companies linked to its founders between 2010 and 2021. According to him, it is not a good sign for corporate governance. But he expressed confidence that the company would do better going forward for many reasons, one of which is Seplat being listed on the London Stock Exchange and its activities will be scrutinized publicly, unlike on the Nigerian Exchange where companies may get away with unethical practices.
On November 17, 2021, Seplat announced that ABC Orjiako would step down from his position as Board Chairman in May 2022. This announcement was made after a Federal High Court in Lagos issued a Mareva Injunction restraining ABC Orjiako, and other firms linked to him, from accessing the accounts and assets of Seplat Energy Plc.
The Mareva injunction was issued because Zenith Bank Plc had taken Dr Orjiakor, Shebah Exploration and Production Company Limited, Shebah Petroleum Development Company Limited and six others before the Federal High Court, over an alleged debt of about $78,426,578.64.
Justice Yellin Bogoro of the Federal High Court had issued an interim order restraining Orjiako, and the two firms, as well as their proxies in Nigeria and any jurisdiction worldwide, from receiving and or transferring assets and accounts of Seplat Energy Plc.
After ABC Orjiako stepped down as Board Chairman at Seplat, the company had a consultancy arrangement with him, which obliged him to provide defined assistance to certain external stakeholders. Seplat went ahead to pay $509,000 to a firm that holds Orjiako’s shares for consulting services during the first six months of 2022, actively violating its own March 2021 resolution to eliminate all related-party transactions.
By February 13, 2023, Seplat suspended the consultancy agreement with its former Chairman, ABC Orjiako through Amaze Limited. In March 2023, the company decided to terminate the contract due to repeated corporate governance breaches of a material nature, such as unilaterally making significant commitments on behalf of Seplat and using the company’s letterhead to communicate said commitments without prior approval by the Board.
At the same time, Seplat filed a suit with No FHC/ABJ/CS/386/2023, at the Federal High Court Abuja, on March 21, 2023, accusing Dr Orjiako of acting unilaterally when he communicated with the Federal Government over a business transaction worth over $300 million, allegedly without the consent of the company’s Board of Directors. Seplat is demanding the sum of $5 billion in damages.
Meanwhile, ABC Orjiako responded by denying any wrongdoing in the letter he initiated to the Federal Government to facilitate the consummation of the lingering $1.3 million MPNU deal, saying he acted within the scope of his mandate for the benefit of the company.
CEO Roger Brown saga
In January 2023, some former employees filed a petition against Seplat’s CEO, Roger Brown on the grounds of alleged intimidation, sacking of Nigerian staff, abuse of corporate governance, the relegation of host communities, relocation of Seplat technology office to Aberdeen, UK, bullying of Nigerian staff by foreign nationals, as well as spending of over $5 million dollars to shuttle between Lagos and his London home after allegedly fraudulently collecting a relocation allowance from the company.
By March 8, 2023, had his work permit, visa, and residence permit revoked by the Nigerian Ministry of Interior. The Ministry had said that Mr Brown was in possession of a Combined Expatriate Residence Permit and Aliens Card (CERPAC) that was not based on a validly issued Expatriate Quota approved by the Ministry of Interior resulting in the violation of relevant Immigration Laws and Regulations.
Meanwhile, the company and its Board members continued to support Mr Brown through his ordeal, and he kept exercising his duties as the company CEO from the UK office, despite the withdrawal of his work permit.
By April 2023, Nairametrics reported that the Nigerian Immigration Service dropped all charges against Seplat. Seplat Energy also announced that the Lagos Federal High Court has vacated the ex parte interim orders against Seplat, its Chief Executive Officer, and its Board Chairman.
These include the orders that restrained the company’s CEO Roger Brown from participating in the running of the Company. Meanwhile, the case has been adjourned to May 16, 2023, to continue the hearing.
What next for Seplat
Seplat Energy Plc says it is ready to move on from its challenges. On Tuesday, April 25, Seplat Energy Plc which is listed on both the Nigerian Exchange Limited and the London Stock Exchange, announced a Boardroom succession plan that will help the company move on from recent challenges and strengthen corporate governance.
The plan involves the retirement of Mr Basil Omiyi as Board Chairman, as well as the retirement of Senior Independent Non-Executive Director (SINED), Dr Charles Okeahalam before the company’s Annual General Meeting in May 2024.
Meanwhile, the company will embark on a recruitment process to select a new Board Chairman and establish a new level of corporate governance as the company works to resolve all pending legal issues as well as its acquisition of MPNU assets.
Despite these challenges, the company has surprisingly avoided the boardroom mele impacting its revenues. In its 2023 first quarter results, it reported higher revenue of 36.9% to $331 million. The company also reported a pre-tax profit of $86.1 million representing a 3.2% jump over the same period in 2022. Cash generated from operations was also robust at $139.9 million even though it is 21.7% lower when compared to the period.
The company’s share price in the last year is down 7% and 19.1% respectively on the NGX and the London Stock Exchange respectively.