Seplat sees 30% earnings from gas by 2017 on Nigeria reforms

Seplat Petroleum Development Co., Nigeria’s largest listed indigenous Exploration and Production firm sees revenues from gas making up 30 percent of its earnings by 2017 on reforms that have moved prices to$2.50/1,000 Mcf from as low as 0.7 cents in 2007.

“We decided that gas was our niche and by the end of Q1 2015 we would have doubled our production capacity to 275 million Scf,” CEO Austin Avuru, said in an interview with Business-Day in Lagos on Friday.

“We are also building a new modular gas plant and by 2017, Seplat will be in a position to supply 300 m – 400 m Scf a day into the domestic market.”

Nigeria, the holder of Africa’s largest gas reserves with about 182 Tcf of proven gas, raised the price of gas to power plants to $2.50 per million standard cubic feet plus 80 cents for transport last August.

Avuru said the company could get as much as $5 per million standard cubic feet for supplying industries like cement or petrochemical plants.

Seplat announced on January 15 that it had secured a $1 billion debt refinancing from a number of banks and achieved a new production record in December when gross daily liquids production at OMLS 4, 38 and 41 exceeded 76,000 bopd.

Read also: Analysts see reform opportunity for NNPC

Net working interest production for full year 2014 has averaged about 24,248 bopd and 39.4 mmscfd, in line with FY guidance of 29,000 – 33,000 boepd, it said.

“Seplat remains among our top picks in our African oils research coverage… we view Seplat as strongly positioned to capture upcoming non-organic growth opportunities, with potentially one or two deals in the next 6-12 months,” Renaissance Capital energy analysts led by Illdar Davletshin said in a January 13 note.

Seplat announced last week that it won an extension to a deadline for announcing whether it intends to make a firm offer for oil producer Afren, the London-listed firm.

“The refinancing gives us fire – power as we seek to continuously grow oil and gas production and reserves to underpin such production,” said Avuru.

Oil has slumped 36 percent since the Organization of Petroleum Exporting Countries’ Nov. 27 accord to maintain production at 30 million barrels a day amid a glut caused by U.S. shale output.

Brent crude for March settlement advanced to $49.25 a barrel on the ICE Futures Europe exchange on Friday.

Seplats Lagos listed shares which has closely tracked oil are down 18 percent this year to N300.

Avuru says Seplat did not hedge its production against a downturn in oil prices and expects a rebound in the near future as oil companies cancel Capex on big projects across the globe.

“We take a long term view of the industry and have been able to build a balance sheet that enables us to operate at all times,” Avuru said.

“I suspect the stable long term price for oil is at around $70 – $80.”

Seplat was named by government officials as one of eight oil companies it was negotiating with for new gas sales and purchase agreements. It is to supply 140,000 Mcf/d of gas to some of the 10 NIPPs.

Gas supplies have been constrained in Nigeria by low gas prices set by the government, which barely cover the cost of production and processing.