• Friday, March 29, 2024
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Seplat full-year profit hit on deferred tax adjustment     

Seplat-OMLs 4

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 audited results for the full year ended December 31, 2018.
Seplat grew its full year revenue by 65 percent to $746 million, up from $452 million in 2017. Its operating profit of $310 million in 2018 as against $112 million in 2017 represents 177 percent increase. Also, profit before deferred tax (PBT) of $238 million in 2018 compared to $41 million in 2017 represents an increase of 480 percent.

After adjusting for deferred tax of $91 million, Seplat reported net profit after tax (PAT) decreased by 45 percent and stood at $147 million as against $265 million PAT in 2017. Seplat’s cash flow from operations increased by 12 percent to $502 million, from $447 million it reported in 2017.

The company’s cash flow position is significantly ahead of capital expenditures of $88 million in 2018 as against $33 million in 2017, representing an increase of 167 percent. The board has recommended a final dividend of $0.05 per share. The company’s 2018 gas revenue was at a record level of $156 million and accounted for 21 percent of total revenue in the year.

Most investors may not have been impressed with the hit on Seplat’s profit as they placed the stocks for sale at the Nigerian Stock Exchange (NSE) on Wednesday. Seplat’s share price decreased by 3.57 percent to N596.9 at the sound of trading gong of the Exchange on Wednesday, as against Tuesday’s high of N619. At the current price, Seplat’s stock is heading to its 52-week low of N520, having reached a 52-week high of N769.

Seplat in its results presentation noted that its Amukpe to Escravos alternate export pipeline is nearing completion. It is anticipated to be fully commissioned and operational in Q2 2019, ramping up to initial permitted capacity of 40,000 barrels per day (kbpd) during Q3 2019. It said access to three separate export routes at its western assets and two at its eastern assets providing adequate redundant capacity will significantly de-risk distribution of oil production to market.

“Seplat has delivered an excellent operational and financial performance resulting in robust profitability and cash flow generation providing us with an extremely solid foundation for growth in the coming years,” said Austin Avuru, Seplat’s chief executive officer.

“At our core assets in the West, OMLs 4, 38 and 41, the extension of the licence to 2038 means that we can confidently plan and invest long into the future to realise the full potential of those blocks,” he said.

Avuru said as the company continues to enhance production and revenue diversification with new wells scheduled at OML 53 in the East, the board took the Final Investment Decision to invest in the large scale ANOH gas and condensate development which will form the next phase of transformational growth for its gas business.

“Disciplined capital allocation continues to remain at the core of our activities evidenced by our continual deleveraging of our debt levels to the current balance of $350 million. In 2018, we reinstated the dividend, increased capital investments and with the resources and headroom in our capital structure, we are equipped to capitalise on organic and inorganic growth opportunities as they may arise,” he said.

The company successfully concluded debt refinancing in Q1 2018, including debut $350 million bond which diversifies the long-term capital base and new four-year $300 million revolving credit facility (RCF). Seplat’s cash at bank at $585 million and gross debt of $450 million result in a net cash position of $135 million at end 2018. It deleveraged further post period end by paying down $100 million to bring the RCF to zero while retaining the undrawn headroom in the capital structure to support growth. As a result, current gross debt is solely the bond at $350 million.

“Average working interest production for full year (FY) 2018 stood at 49,867 barrels of oil equivalent per day (boepd) compared to 36,923 boepd in FY 2017,” Effiong Okon, operations director, Seplat, noted in a presentation following the released full year 2018 results.
“Liquids production of 25,669 barrels of oil per day (bopd) against FY 2017 of 17,853 bopd; gas production in 2018 was 145 Million standard cubic feet per day (MMscfd) as against FY 2017 level of 114 MMscfd. Production uptime was 85 percent while average reconciliation losses were around 8 percent,” Effiong said.

Seplat FY 2019 working interest production guidance shows oil (24,000-27,000 bopd), and gas 146-164 MMscfd (25,000-28,000 boepd).

On its western assets – OMLs 4,38 and 41 – the 2019 outlook shows the Amukpe to Escravos pipeline is expected to be commissioned in second-quarter (Q2) 2019, with “back payments between pipeline owner and contractor now resolved”.

The company hopes to drill up to 7 new oil production wells; 1 new gas well; 1 rig-based re-entry of an existing oil well; and 1 appraisal well. It also hopes to focus on Sapele integrated gas processing facility project, and liquid treatment facility upgrades to enable increased deliveries of dry crude in Sapele and Amukpe. On the OPL 283, Seplat said preparation work would begin this year for development of the Igbuku field, in addition to concept selection and FEED.

On the eastern assets – OML 53 – 2019 outlook shows Seplat development of the Ohaji South oil reserves with the drilling of 3 new oil production wells; 1 rig-based workover of an existing oil production well at the Jisike field; appraisal well at the Owu oil discovery; and expansion of oil production facilities at Jisike and Ohaji South. On OML 55, the company restated its continued monetisation of liftings towards full recovery of the $330 million discharge sum.

Iheanyi Nwachukwu