Nigeria: TotalEnergies Divests its Non-Operated Interest in the Bonga Field

TotalEnergies has agreed to sell its 12.5% non-operated interest in the OML118 Production Sharing Contract (PSC) in Nigeria to Shell Nigeria Exploration and Production Company Ltd (SNEPCo) for $510 million. The OML118 PSC contains the Bonga field and Bonga North field, with production representing approximately 11,000 boe/d in 2024; the sale aligns with TotalEnergies' strategy to high-grade its Upstream portfolio by focusing on assets with lower costs and emissions while concentrating on its operated gas and offshore oil assets in Nigeria.

Analysis

TotalEnergies SE (TTE) is strategically divesting its 12.5% non-operated interest in the OML118 Production Sharing Contract (PSC) in Nigeria to Shell Nigeria Exploration and Production Company Ltd (SNEPCo) for $510 million. This transaction, involving an asset that currently contributes approximately 11,000 barrels of oil equivalent per day (boe/d) to TotalEnergies' production in 2024, aligns with the company's stated objective to high-grade its Upstream portfolio by concentrating on assets characterized by low technical costs and low emissions, thereby aiming to lower its overall cash breakeven point. The OML118 PSC, which includes the producing Bonga field and the Bonga North field under development, is operated by SNEPCo (55%), with other partners being Esso Exploration and Production Nigeria (20%) and Nigerian Agip Exploration (12.5%). Despite this sale, Nigeria remains a significant contributor to TotalEnergies' global hydrocarbon production, accounting for 209,000 boe/d in 2024. The company intends to maintain its focus on its operated gas and offshore oil assets in Nigeria, exemplified by the progression of the Ubeta project aimed at sustaining gas supply to Nigeria LNG. This divestment is perceived positively, as indicated by a sentiment score of 0.7, reflecting an optimistic market view of TotalEnergies' portfolio optimization efforts. The completion remains subject to customary conditions, including regulatory approvals.

Key Decisions for Investors

• Investors should view this divestment as a positive step in TotalEnergies' strategy to optimize its asset portfolio towards lower-cost and lower-emission projects, potentially enhancing long-term profitability and sustainability metrics.
• Consider the $510 million cash inflow's impact on TotalEnergies' balance sheet, providing flexibility for reinvestment in core strategic areas or shareholder returns, pending the successful completion of the transaction.
• Monitor the progress of TotalEnergies' remaining operated assets in Nigeria, particularly the Ubeta gas project, as these will be key to its future production and revenue generation in the region following this sale.