Propelled by an apparent windfall from the recovery in crude oil prices, Seplat Energy has staged a turnaround so far this year from a full-year loss of N31 billion in 2020 to a profit of N14 billion at the end of the third quarter operations ended September 2021.
BusinessDay analysis of the company’s latest financial statements showed the oil-producing company’s crude delivery price averaged $67.4 over the three quarters of the year, a record increase of $28.8 over the average price of $38.6 in the same period in 2020.
Here are other major talking points
Revenue performance
The upturn in the company’s revenue registers clearly in dollar terms. Sales revenue amounted to $460.4 million at the end of September, rising by roughly 19 percent year-on-year. Crude oil earnings led the revenue growth at an increase of 21 percent to $369.5 million over the same period.
This is a recovery from a drop of 15.6 percent in crude oil sales revenue to N$418 million at the end of last year and from a 17 percent drop in gas earnings to $112 million in the year.
Oil business performance
Total working-interest oil production volume for Seplat over the nine months of operations dropped from 9.1 million barrels of oil (MMbbls) to 7.6 MMbbls with a total of 5.5 MMbbls crude lifted over the review period. The loss of crude oil volume resulted from export disruption caused by the suspension of exports at the Forcados terminal.
Growth in crude production volume was a major strength for the company last year, which helped to moderate the full impact of the drop in the average crude price realised.
The company’s management is hopeful that the production losses and downtime would reduce when the much-awaited Amukpe-Escravos underground pipeline comes on stream.
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Gas business performance
The company’s average realised gas price declined slightly over the review period but this was more than compensated by a gain in gas sales volume. The average realised gas price for Seplat slipped from $2.88/Mscf to $2.86/Mscf at the end of September 2021.
On the other hand, gas sales volumes rose from 27.5 Bscf in the corresponding period last year to 30.8 Bscf. Earnings from gas sales therefore recovered from a drop in dollar terms last year.
The company said in its report that the gain in volume of gas sales is reflective of new gas wells it brought on stream during the period as well as restoration of full operations of Oben gas plant after turnaround maintenance in 2020.
The contribution of gas sales to group revenue declined from 21.2 percent to 19.7 percent over the review period, as crude oil revenue grew well ahead of gas earnings
Cash flows from financing activities
Net cash outflows from financing activities stood at $70.6 million in 9M 2021 compared to $180.5 million in the corresponding period last year.
“This reflects the debt restructuring where the Group offered senior notes of $650 million,” Seplat said.
Cash flows from operating activities
Net cash flows from operating activities, after movements in working capital stood at $144.5 million in the first nine months of 2021, lower than $187.4 million in 9M 2020.
According to Seplat, this was partly due to an increase in restricted cash at the end of the period related to a $20 million bank guarantee filed by Seplat Energy in line with an order from the Court of Appeal in January 2021.
Cash flows from investing activities
Capital expenditures in the period were $83.9 million, comprising $41.9 million drilling costs in relation to the completion of two Oben gas wells, two Gbetiokun oil wells, pre-drill and on-going drilling operations costs and associated facilities development, and engineering costs of $40.7 million.
Seplat raked in total sales revenue of close to N183 billion at the end of the third quarter operations, which represents a year-on-year increase of about 35 percent or N47 billion. The company closed last year’s operations with a turnover of N191 billion.
Cost of moderation
Input expenses present a major cost-saving angle for the company with a moderated increase of 20 percent to N124.5 billion compared to a 35 percent increase in turnover. The proportion of sales revenue claimed by cost of sales declined from 77 percent in the same period last year to 68 percent at the end of September 2021.
A major favorable development on the side of cost is in respect of impairment loss on non-financial assets, which dropped from over N55 billion in the same period last year to zero. Also, impairment loss on financial assets dropped by 64 percent to N2.7 billion over the review period.
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