Seplat Petroleum Development Company Plc, a leading Nigerian indigenous oil and gas company listed on both the Nigerian Stock Exchange (NSE) and London Stock Exchange (LSE) has released its consolidated half-yearly (H1) financial results for the period ended June 30, 2019.
Highlights of the half-yearly results show revenue of $355 million, up 4percent year-on-year (YOY) with gas tolling revenue of $67 million recognised for the first time in relation to the processing of Nigerian Petroleum Development Company (NPDC) gas through the Seplat sole risk funded Oben Gas Plant 375Mmscfd expansion between June 2015 and end 2018.
Earlier this week, Austin Avuru, CEO, Seplat Petroleum Development Company Plc, Effiong Okon, its Operations Director and Roger Brown, the CFO hosted a webcast and conference call and discussed the Company’s results.
Gross profit of $207 million represents a 58percent margin (up from 51percent in H1 2018) while operating profit of $139 million is down 12percent year-on-year after adjusting for a $40 million impairment of NDPC receivables.
Significantly lower finance costs of $25 million (down 39percent year-on-year) have kept profit before tax (PBT) flat year-on-year at $120.4 million (H1 2018: $121.3 million) with net profit from continuing operations standing at $119 million.
The Group recognised non-cash corporate taxes and non-cash deferred tax of $1.3 million in the period to record a net profit of $122.2 million (H1 2018: $48.5 million).
Seplat is listed on the Premium Board of the NSE. Basic earnings per share increased to N64.21 from N26.12 in H1’18. At N490 per share as at Monday July 29, the stocks are nearing its 52-week low of N480 per share as against a 52-week high of N710.
With shares outstanding of 588,444,561 units, the market capitalisation of Seplat stood at N288.337billion. Looking at the NSE ASI with a negative year-to-date (YTD) return of -11.07percent as on July 29, the share price of Seplat has far underperformed the NSEASI with YTD negative return of -23.4percent.
Seplat H1 result shows robust balance sheet and cash flow generation. Cash at bank as on June 30, 2019 was $433 million; gross debt $350 million and net cash of $83 million with $225 million un-drawn headroom on the four-year revolving credit facility.
Net cash flow from operations in H1 2019 stood at $255 million against capital expense (capex) of $28 million; FY 2019 capex guidance revised downwards to $150 million.
FY 2019 capex guidance revised downwards to $150 million; three planned exploration / appraisal wells targeting longer term oil and gas production together with the Oben and Sapele LPG projects have been deferred
Austin into 2020 with the current focus on shorter-term oil and gas production gains.
The company’s overall working interest production in H1 across all blocks stood at 22,974 barrels of oil per day (bopd) and 145 million standard cubic feet per day (Mmscfd), or 48,004 barrels of oil equivalent per day (boepd) with production uptime of 88percent in the period.
FY 2019 guidance reiterated at 49,000 to 55,000 boepd on a working interest basis, comprising 24,000 to 27,000 bopd liquids and 146 to 164 Mmscfd (25,000 to 28,000 boepd) gas production, as impact of H2 weighted work programme takes effect and drives working interest production to a planned exit rate of 34,000 bopd liquids and 162,000 Mmscfd gas (or 62,000 boepd).
The company also provided investors and shareholders an update of its operations. Seplat is pursuing a Nigeria focused growth strategy and is well-positioned to participate in future divestment programmes by the international oil companies, farm-in opportunities and future licensing rounds.
It said Final Investment Decision (FID) has been taken for the large scale ANOH gas and condensate development in March and followed by capital markets days in London and Lagos; Project to comprise of a first phase 300 Mmscfd midstream gas processing development with first gas targeted for Q1 2021.
Equity investment of $150 million from government received with $150 million equity funding from Seplat also made into ANOH Gas Processing Company (AGPC). Gas sales of $72 million in H1 2019 and tolling fees of $67 million take total gas derived revenue for the period to $139 million.
“Today’s results further emphasizes the strong cash generation potential of our lowcost production base and the good progress we are making at the large scale ANOH gas and condensate development project,” said Austin Avuru, Chief Executive Officer, Seplat Plc.
He said: “Our H1 work programme has been impacted owing to unforeseen delays from rig contractors as well as the need to undertake higher levels of maintenance and asset integrity work for longer-term benefit of the assets.
“Both have affected production during the H1 but we have now secured the necessary rig capacity for the second half to implement the revised work programme which will drive us towards an 2019 exit working interest production rate of 62,000 boepd and bring annualised production within the unchanged guidance range of 49,000 to 55,000 boepd,” Avuru further said.
“Meanwhile, we remain on an extremely solid financial footing and concentrated on furthering our growth strategy as we target both organic and inorganic opportunities to grow shareholder returns,” Avuru added.
The Company said its policy of creating multiple export routes for all of its assets has resulted in it actively pursuing alternative crude oil evacuation options for production at OMLS 4, 38 and 41 and potential strategies to further grow and diversify production in order to reduce any over-reliance on one particular third party operated export system.
To add to the Transforcados Pipeline system and the back-up export via the Warri refinery, the Amukpe to Escravos 160,000 bopd capacity pipeline is set to provide a third export option for liquids production at OMLS 4, 38 and 41. The pipeline owners, NAPIMS (a 100percent subsidiary of NNPC), Pan Ocean Corporation Limited (Pan Ocean) and the pipeline contractor FENOG are responsible for completion of the pipeline, which has seen delays to date. Seplat notes that the completion of the project is in sight.
The hydro testing of the 20 inch pipeline which involves pigging to remove any debris which has accumulated in the construction, followed by flowing water under pressure from the injection point at Amukpe to the Escravos terminal commenced in early July, and the current flow rates have confirmed the integrity of the pipeline.
The company noted that final works within the Escravos terminal are underway, which includes the tie-in of the LACT measurement unit into the Chevron control system and with commissioning expected to be completed during Q3 2019 with export of oil to the permitted capacity of 40,000 boepd in Q4 2019.
It is Seplat’s ultimate intention to utilise all three independent export options to ensure there is adequate redundancy in evacuation routes, reducing downtime which has adversely affected the business over a number of years, significantly de-risking the distribution of production to market.
Alongside its oil business, the Company has also prioritised the commercialisation and development of the substantial gas reserves and resources identified at its blocks and is today a leading supplier of processed natural gas to the domestic market in Nigeria.
With overall operated gas processing capacity standing at 525 Mmscfd, the Company is actively engaged with counterparties to increase contracted gas sales with the intention of taking gross production towards the 400 Mmscfd level on a consistent basis.
Of the 525 Mmscfd total processing capacity, 465 Mmscfd is located at Oben with the remaining 60 Mmscfd located at Sapele.
The 375 Mmscfd expansion at Oben (Phases I and II) was completed by Seplat as a 100percent investment project. The gas processing capacity expansion is also designed to allow the Company to accept third party gas and receive a processing tariff.
During the period, agreement was reached with NPDC in the Operating Committee to back into their right to 55percent of the gas plant expansion of 375Mmscfd. A payment of $168 million was agreed between the parties, with $67 million being booked in H1 2019 as gas tolling revenues.
The final balance of $101 million will be paid and reflected in the Q3 results once the transfer of NPDC’S 55percent interest has been concluded. Work is on-going at the Sapele Gas Plant upgrade and which is expected to be completed in H2 2020.
