Eni's Sale to Oando Approved Amid Nigeria Regulatory Shifts

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has approved the sale of Eni SpA's E local unit, Nigerian Agip Oil Company ("NAOC"), to Oando in a significant development for Nigeria's oil sector.

The approval marks a crucial step forward for the transaction, which includes the transfer of interests in four onshore oil mining leases - 60, 61, 62 and 63.

Announced initially in September 2023, the sale of NAOC to Oando had been pending for months due to regulatory requirements under Nigeria's new oil industry law. The law mandates that such deals receive a sign-off from the petroleum minister, a process that had caused considerable delays.

Gbenga Komolafe, the head of the NUPRC, confirmed the approval during an energy conference in Abuja, highlighting the regulatory body's commitment to facilitating smoother transitions in the sector. This move is seen as part of a broader strategy to streamline approvals and encourage responsible divestments by international oil companies.

Simultaneously, the NUPRC has sanctioned the sale of Equinor's EQNR assets to the new entrant, Project Odinmim. The transaction represents a notable entry for Project Odinmim into Nigeria's oil industry, underscoring the country's evolving landscape as established players divest from onshore operations.

While the approvals for Eni and Equinor's sales have been granted, other significant transactions remain in the pipeline. The recent approvals come amid broader challenges facing Nigeria's onshore oil operations, including theft, vandalism and environmental pollution. These issues have prompted major oil companies to shift their focus toward deepwater explorations, seeking more secure and profitable ventures.

In response to these challenges, the NUPRC introduced measures to expedite pending asset sales. One notable condition was that the selling companies must take responsibility for oil spills and provide compensation to affected communities. This stipulation aims to prevent prolonged delays caused by disputes over liability and ensure that transactions proceed more swiftly.

The NUPRC's recent approvals signify a pivotal moment for Nigeria's oil sector, reflecting both challenges and opportunities within the industry. As Oando and Project Odinmim prepare to take over their newly acquired assets, the focus will be on how these transitions impact the broader market dynamics and address the longstanding issues of theft, vandalism and environmental concerns.

With significant transactions still awaiting approval, the coming months will be critical in shaping the future landscape of Nigeria's oil industry.

Zacks Rank & Key Picks

Currently, Eni carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Transportadora TGS and GeoPark Ltd. GPRK, each currently sporting a Zacks Rank #1 (Strong Buy).

Transportadora's midstream asset portfolio has the most extensive natural gas pipeline network in Latin America. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.

Transportadora has witnessed upward estimate revisions for its 2024 bottom line in the past 60 days. The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at 77 cents and $1.81, respectively. TGS currently has a Growth Score of A and B for Value.

GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value and B for Growth.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.

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