Despite some of the world’s biggest oil and gas companies cutting spending this year following a collapse in oil prices, Seplat Petroleum Development Company Plc has announced plans to revise it’s Capital Expenditure (CAPEX) upwards to $120 million with two additional gas wells and related infrastructure.
Seplat announce its increasing CAPEX by 20 percent to $120 million with two additional gas wells and related infrastructure despite prices tumbling to a three-decade low.
Seplat recorded a loss after tax of $106.6 million loss
“We have significant cash resources available and will continue to manage our finances prudently in 2020, expecting now to invest $120 million of capital expenditure across the year, including two new gas wells and associated infrastructure,” Seplat said in its First Quarter 2020 report.
COVID-19 has caused a decline in oil demand given restrictions in movement and reductions in travel, a development which has led to oil majors slashing Capex.
Cuts announced by nine major oil companies, including Saudi Aramco, Exxon Mobil and Royal Dutch Shell, come to a combined $38 billion, or a drop of 22percent from their initial spending plans of $175 billion.
However, Seplat said its business is hedged against low oil prices and a significant proportion of its revenues now come from gas, which offers further protection from oil price volatility.
“We are in constant dialogue with partners on monies owed and are pleased to report that our cash flow remains robust and we have significant cash in reserve,” Austin Avuru, Seplat’s Chief Executive Officer said.
With Brent oil price averaging $50.90 in the first quarter of 2020 compared to $63.59 in the corresponding Quarter last year, Seplat recorded a loss after tax of $106.6 million loss in its unaudited Q1’20 result which was mostly driven by a $145.5 million impairment loss (compared to a gain of $14million in Q1 2019) charged on its oil and gas assets.
Seplat noted that Amukpe to Escravos pipeline is set to provide a third export option for liquids production from OMLs 4, 38 and 41 although completion work on the 160,000 bopd pipeline has been slower than anticipated due to delays in the contractor delivery schedule, final activities have been delayed due to the COVID-19 pandemic lockdown order.
“However, we expect that the pipeline will be commissioned during the first half of 2020 and become fully operational to the initial permitted volume for the Seplat / NPDC joint venture of 40 kbopd,” Seplat said.
During the period, three new development wells (Sap-35, Oben-48 and Ovh-06) were completed and the wells are expected to flow at a combined initial gross rate of approximately 4,200 bopd.
The drilling of Ovhor-20 commenced and expected to be completed in the second quarter of 2020 with an expected initial flow rate of 2,500 bopd.
This, coupled with the majority of our debt repayment obligations extending beyond 2021, gives us confidence that we can continue to operate comfortably within the covenants on all lines of debt,” Avuru concluded.
