Seplat Petroleum Development Co., a Nigerian oil producer posted profit after tax of N13.57 billion in the third quarter of the year despite falling oil price as the company continues to be pivotal to Africa largest economy’s gas master plan.
Analysts say the number of Seplat’s projects in the pipeline combined with its ability to keep its head above waters amid headwinds means shareholders should expect a high return on their investments.
The company’s strategic decisions to react to the oil price difference by completely re-ordering its overall work program, cutting CAPEX and also slashing budget for 2015 by almost 40 percent contributed to its profit position in the period under review.
As a result of the unexpected fall in the oil price by 60 percent, the Nigerian oil giant top lines took a hit as sales dropped by 9.71 percent to N83.0 billion in 2015 as against N92 billion last year.
Oil firms in Africa most populous nation have been are groaning under the oil price fall as Oando Energy Plc, a major player in the industry also had sales drop by 4.49 percent despite recent acquisition.
These uncertainties have forced oil firms to scale back on major capital projects in order to save costs and remain afloat in an industry that is increasingly becoming unpredictable.
Analysts say the government unpaid arrears to Nigeria hydrocarbon firms contributes to increased debt to equity ratios and hinder them from embarking on future projects.
The Nigerian National Petroleum Corporation, NNPC, and its subsidiaries owed the industry about $7billion.The total debt in Seplat balance sheet increased by 64.39 percent to N191.47 billion in 2015 from N116.10 billion in 2014.
Debt to equity (D/E) moved to 78.02 percent in 2015 as against 44.02 percent last year. The higher D/E ratio means 78 percent of the company’s balance sheet is financed with outside funds while the remaining by equity.
Despite the touting challenges, Seplat is pivotal to the country’s power generation as it continues to increase supplies amid doldrums.
The recent increase in power supply is coming from gas supply, according to Mason Oghenejobo Strategy & Portfolio Adviser, SEPLAT during the West Africa Power Industry Convention.
“If you build more power plants, we will supply more gas. Nigeria can solve its power problems,” said Oghenejobo
A part from contributing to power supply through a solid gas structure, gas contributed 117 percent the company’s half year profit.
Seplat said gas business will account for 20-30 per cent of its bottom line by 2017.
The company has processing capacity of 300mmscf per day, averaging between 220 million and 260mmscf as against the previous three years at an annualised average of about 70mmscf
The company’s total assets increased by 18.02 percent to N524.85 billion in 2015 compared to N444.02 billion the previous year.
Return on equity (ROE) fell to 5.59 percent in 2015 from 13.69 percent the in 2014. Earnings per share dipped to N24.54 in the period under review as against N76.67, the same period of the corresponding year 2014.
Seplat share price closed at N222.10 on the floor of the exchange while market capitalisation was N125.141 billion.
BALA AUGIE
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
