Jason Bourne has never been this happy in his entire life as he crossed his legs while sitting in a mahogany chair at his office in the commercial area of Marina, Lagos.
The 41 year old investor had wagered that Seplat Development Corporation Company Plc would record two consecutive stellar performances, and it turned out to be so.
Bourne is among hundreds of shareholders of the upstream oil and gas giant whose earnings will be magnified due to the companys consistent earning growth, strong working capital position, and a solid balance sheet.
Also, the continued uptick in global crude price since last year- thanks to OPEC and allies output cut- means the company’s future is bright.
Seplat has continued to deleverage its balance sheet so as to reduce financial risk and pave the way for future bond issuances. Its robust operating cash position means it can pay dividend, pay money owed to financial institution, and fund future expansion plans.
Financial Performance for Q1
For the first three months through March 2019, Seplat’s profit after tax increased by 59.55 percent to N10.02 billion from N6.28 billion the previous year; the N10.02 billion figure is the highest profit in 5 years since the company surmounted the headwinds brought on by disruption of gas pipeline at Forcados in 2016.
The growth at the bottom-line (profit) was largely driven by an income tax credit of N4.06 billion in the period under review,
The company’s operating profit can cover its interest expense at times interest coverage ratio stood at 2.04 times in March 2019, outstripping the 1.50 times globally accepted benchmark.
Its deleveraging strategies have yielded fruit as total debt its balance sheet has reduced, further adding impetus to the bottom line since interest expense otherwise known as finance costs has been curtailed.
Interest bearing loans and borrowing declined by 23.34 percent to N104.89 billion from N136.83 billion the previous year; a cursory look at the chart shows total borrowing has been ebbing since 2015.
Debt to equity ratio fell to 20.88 percent in the period under review from 27.86 percent the previous year; this means there has been a reduction in the level of debt in the capital structure.
The upstream oil and gas giant has repaid $100 million on the four-year RCF bringing balance drawn to zero while retaining significant headroom in the capital structure to fund growth initiatives
Seplat is targeting output of 49,000 to 52,000 barrels of oil equivalent a day this year and “will probably start seeing a gradual increase in production’’ from next year on sustained expenditure and stability in the delta,
The company, meanwhile, will more than double capital spending to $200 million this year from 2018 as it seeks to take advantage of “relative stability’’ in the Niger Delta region.
“Our operations have continued to perform in line with expectation, with the phasing of our 2019 work programme such that the production uplift will be felt throughout the second half of the year as we step up drilling activities to focus on capturing the numerous high margin and short-cycle cash return opportunities within our current portfolio,” said Austin Avuru, , Seplat’s Chief Executive Officer.
Seplat has turned each Naira invested in sales into higher profit as net profit margin increased to 20.97 percent in March 2019 from 11.37 percent as at March 2018.
Net operating cash from operating activities were up 73.54 percent to N24.40 billion in the period under review as against N14.06 billion the previous year; this means the company is not beleaguered by liquidity issues while it can meet its obligations as at when due.
The company is paying less for each unit of free cash flow as free cash flow yield now stands at 7.03 per share as at Friday, 2019.
“The next phase of growth for our gas business is now gathering pace following FID for the ANOH project, with government’s first tranche of equity investment received. We have continued to deleverage the balance sheet and self-fund investments into the existing portfolio from operational cash flow, while retaining the financial flexibility and available resources that will enable Seplat to capitalise on what we expect to be an increasingly busy pipeline of inorganic growth opportunities that fit our acquisition criteria.” Avuru.
Seplat and NNPC to Raise $700 Million for Gas Plant
Seplat and Nigeria National Petroleum Corporation (NNPC) have agreed to raise $700 million for a joint gas project scheduled to start production next year as the government steps up plans to reduce the country’s reliance on oil.
The project, known as Assa North-Ohaji South, is one of seven to boost gas production and infrastructure development in the West African nation, the continent’s biggest producer of crude. ANOH Gas Processing Co., which is owned by Seplat and the Nigerian Gas Co., a unit of the Nigerian National Petroleum Corp., will develop, build and operate the plant in southeastern Imo State.
Seplat and Nigerian Gas will provide 60 percent of the funds as equity, while ANOH will source the balance as debt.
The plant, which will process wet gas from the unitized upstream fields at OML 53 and OML 21, has an initial capacity of 300 million standard cubic feet per day. It’s scheduled to begin production by the last quarter of 2020 and the first supply is targeted in 2021, Avuru said.
Nigeria’s government is encouraging investments in gas infrastructure to improve supplies to power companies and diversify the economy away from oil, which currently accounts for the bulk of revenue.
BALA AUGIE
