Gabon celebrates $1.3 bil Assala oil deal, but questions linger over financing

Gabon's acquisition of Carlyle Group's 45,000 b/d oil assets will allow the country to "increase its revenues and mark its sovereignty in the oil sector," the leader of its military junta said after pre-empting one of Africa's biggest recent M&A deals, but questions remain over financing.

On the evening of Feb. 15, S&P Global Commodity Insights reported that state-owned Gabon Oil Company (GOC) had signed a share purchase agreement with Carlyle to buy the US private equity firm's Assala Energy assets, worth $1.3 billion.

The audacious deal, which people close to the transaction had predicted would fall apart due to shaky financing, pre-empts Maurel & Prom's $730 million bid for Assala, accepted in August 2023, which included rolling over a $600 million debt facility. Both Carlyle and M&P confirmed the SPA Feb. 16.

GOC's decision to pre-empt, announced in November, followed a military coup in Gabon in August.

In a statement, Pertamina-backed M&P said it had noted the agreement, which "supersedes the SPA signed by M&P and Carlyle."

Carlyle, which originally bought the assets from Shell in 2017 for $587 million, said in a statement: "GOC's right to pre-emption was recognized as a suspensory condition in the share purchase agreement between M&P and Carlyle. Carlyle believes that under GOC's ownership, Assala Energy is well positioned to continue to contribute to the future of Gabon's energy industry and economy."

The company added that the terms were "materially the same" as M&P's bid.

Sources with knowledge of the matter said GOC -- which is believed to be short on cash -- had paid a deposit but had not yet secured financing. The SPA is not contingent on financing, but closing is. The NOC, which had been in discussions with trading houses, claims it has made progress with various parties, the sources said.

"They have agreed a few months to raise the financing," said one source. "Yes, they can borrow money, but unlikely the total amount needed."

Carlyle declined to comment further on the details of the deal or the financing. GOC did not respond to requests for comment.

A source said the deal remained a "big risk" for the West African country in the long term. "To maintain production you don't only need strong operating skills (which they have and most the guys on the ground are local) but you need consistency over time, good operatorship and new discoveries, and GOC is probably not best placed," they said.

GOC has never operated a major project and currently produces less than 1,000 b/d itself from the Mbouma field, according to S&P Global data. Mature assets of this kind require considerable investment and expertise to maintain production. Carlyle pumped hundreds of millions of dollars into the assets, increasing output by a third.

Assala holds seven onshore production licenses -- six of them operated -- a pipeline network and the Gamba export terminal. The company controls a significant share of Gabon's key Rabi crude, which is a medium sweet grade popular among refiners in Europe, Israel and Asia.

Other producers in Gabon, which pumped 230,000 b/d of crude in January, according to the Platts OPEC Survey, use the Gamba terminal, "so it has to be well managed," a source said.

After signing the SPA, Gabon's President Brice Oligui Nguema -- who seized power from Ali Bongo in August, ending the decades-long rule of the Bongo family, and announced the pre-emption in a New Year speech -- said on social media: "This operation will allow Gabon, among other things, to raise its GDP, increase its revenues and mark its sovereignty in the oil sector, which represents the heart of the national economy."

Oil exports are a key source of government revenue, but production has fallen in recent years due to underinvestment. Nguema is expected to call elections within the next two years.

Economy minister Mays Mouissi said the country had "taken a historic step for our country and its future. At the end of this process, Gabon will control 20% of its oil production for the first time in its history."

A spokesperson for Gabon's government did not respond to a comment request. M&P said that it "confirms and reiterates its wish to remain a trusted partner of the Republic of Gabon, as evidenced by its presence and its projects in the country for nearly 20 years now."