TIDMSEPL
RNS Number : 4848H
Seplat Energy PLC
28 July 2023
Please see the Full Audited Results in attached PDF
http://www.rns-pdf.londonstockexchange.com/rns/4848H_1-2023-7-27.pdf
Unaudited results for the six months ended
30 June 2023
28 July 2023
Lagos and London, 28 July 2023: Seplat Energy PLC ("Seplat
Energy" or "the Company"), a leading Nigerian independent energy
company listed on both the Nigerian Exchange and the London Stock
Exchange, announces its unaudited results for the six months ended
30 June 2023.
Summary
Our operating performance in 6M 2023 was solid, we achieved a 2%
increase in production, helped by reduced losses on our Western
Asset, which is benefitting from the availability of the
Amukpe-Escravos Pipeline and increased output from OML40. Revenue
remained strong, while operating profits in the period were
impacted by lower oil prices and other items, most notably the
non-cash impact of the devaluation of the Nigerian Naira .
Financial highlights
-- Revenues up 3.8% to $547.0 million (including overlift of
$59.4m), on improved production, offset by lower oil price
-- Cash generation of $259.1 million, funding capex of $88.8
million and improved shareholder returns
-- Balance sheet remains strong, $381.0 million cash at bank,
despite impact of the devaluation of the Naira on USD cash
balances, net debt now at $380.0 million ($128 million MPNU cash
deposit not included)
-- Further $3.3 million received as part of the Ubima disposal,
total proceeds up to $21.9 million
-- Unit production opex of $9.6/boe
-- Average oil price $79.54/bbl (6M 2022: $107.35/bbl); average
gas price $2.87/Mscf (6M 2022: $2.76/Mscf)
-- Q2 2023 dividend declared of US 3 cents per share, in line
with higher core annual dividend of US 12 cents
Operational highlights
-- Working interest production increased by 1.8% to 50,805
boepd, in the middle of our 45-55 kboepd guidance
-- Amukpe-Escravos Pipeline (AEP) continued to provide
alternative evacuation resulting in lower downtime overall
-- Completed five new wells, boosting liquids production at OML 40
-- Island section of grouting operations on OB3 pipeline
complete. ANOH gas plant mechanical completion and partner operated
key project milestones expected by end 2023
-- Achieved more than 4.2 million hours without Lost Time Injury (LTI) at Seplat-operated assets
-- Carbon intensity figure of 26.3 kg/boe. Sapele Power gas
offtake expected to commence in 2H23, this is expected to reduce
emissions by approximately 40%
Corporate updates
-- Extended the Share Sale and Purchase Agreement (SSPA) for the
acquisition of ExxonMobil's share capital of Mobil Producing
Nigeria Unlimited (MPNU) to preserve the transaction, pending the
resolution of certain legal proceedings and receipt of applicable
regulatory approvals; we continue to work with all parties to
achieve a successful outcome
-- Full-year production guidance retained at 45-55 kboepd
-- Capex guidance range at $160 - $190 million (previously $160
m) to support the Group's objectives for the year
-- Following our previously announced Board succession plan (25
April 2023), we are pleased to announce that Eleanor Adaralegbe,
currently VP Finance, has been appointed CFO-designate and will
succeed Emeka Onwuka as CFO in 2024
Roger Brown, Chief Executive Officer, said:
"Seplat Energy's continuing strong performance puts us on track
for an excellent year that will support the increased quarterly
dividends we announced in April, and our balance sheet remains
strong despite the impact of the recent Naira devaluation. We are
benefiting greatly from use of the new Amukpe-Escravos Pipeline,
which has supported our robust cash generation this year, and
remain focused on improving operations, reducing costs where
possible and further derisking the business. We continue to
strengthen our Company in the knowledge that our efforts to improve
governance and sustainability are widely supported by Nigerian and
international investors.
The distraction of frivolous legal actions is receding, and we
are focused on developing our assets and launching our joint
venture ANOH Gas Processing Plant, which will significantly boost
our cash generation in the coming years. We expect that this will
enable us to fund additional investment in Nigeria's energy
infrastructure and return higher dividends to shareholders.
We remain confident that our proposed and transformational
acquisition of MPNU will be approved, enabling us to scale into a
significant energy supplier with diverse and productive assets that
have potential to generate substantial benefits for Nigeria. We
wholly align and support the recent government efforts to make
Nigeria a more attractive place to invest and continue to focus on
delivering affordable and reliable energy for Nigeria's young,
entrepreneurial and rapidly growing population."
Summary of performance
$ million billion
6 M 2023 6m 2022 % Change 6 M 2023 6M 2022
Revenue * 547.0 527.0 3 .8 % 278.3 219.2
Gross profit 276.3 274.3 0 .7 % 140.6 114.1
EBITDA ** 235.8 342.7 ( 31.2 %) 120.0 142.6
Operating profit (loss) 118.4 245.3 (51.7%) 60.2 102.0
Profit (loss) before tax 85.4 209.9 (59.3%) 43.5 87.3
Cash generated from operations 259.1 330.1 (21.5%) 131.8 137.3
Working interest production (boepd) 50,805 49,924 1.8%
Volumes lifted (MMbbls) *** 6.1 4.4 38.6%
Average realised oil price ($/bbl.) $79.54 $107.35 (25.9%)
Average realised gas price ($/Mscf) $2.87 $2.76 4.0%
LTIF 0.0 0.0
CO2 emissions intensity
from operated assets, kg/boe 26.3 24.6 6.9%
===================================== ========= ======== ========== ========= ========
* 6M 2023 revenue includes an overlift of $59.4m
** Adjusted for non-cash items
*** Volumes lifted in 6M 2023 includes 845 kbbl of overlift
Responsibility for publication
This announcement has been authorised for publication on behalf
of Seplat Energy by Emeka Onwuka, Chief Financial Officer, Seplat
Energy PLC.
Signed:
Emeka Onwuka
Chief Financial Officer
Important notice
The information contained within this announcement is unaudited and deemed by the Company
to constitute inside information as stipulated under Market Abuse Regulations. Upon the publication
of this announcement via Regulatory Information Services, this inside information is now considered
to be in the public domain.
Certain statements included in these results contain forward-looking information concerning
Seplat Energy's strategy, operations, financial performance or condition, outlook, growth
opportunities or circumstances in the countries, sectors, or markets in which Seplat Energy
operates. By their nature, forward-looking statements involve uncertainty because they depend
on future circumstances and relate to events of which not all are within Seplat Energy's control
or can be predicted by Seplat Energy. Although Seplat Energy believes that the expectations
and opinions reflected in such forward-looking statements are reasonable, no assurance can
be given that such expectations and opinions will prove to have been correct. Actual results
and market conditions could differ materially from those set out in the forward-looking statements.
No part of these results constitutes, or shall be taken to constitute, an invitation or inducement
to invest in Seplat Energy or any other entity and must not be relied upon in any way in connection
with any investment decision. Seplat Energy undertakes no obligation to update any forward-looking
statements, whether because of new information, future events or otherwise, except to the
extent legally required.
Investor call
At 09:00 GMT / 09:00 WAT on Friday 28 July 2023, the Executive
Management team will host a conference call and webcast to present
the Company's results.
The presentation can be accessed remotely via a live webcast
link and pre-registering details are below. After the meeting, the
webcast recording will be made available and access details of this
recording are also set out below.
A copy of the presentation will be made available on the day of
results on the Company's website at https://seplatenergy.com/ .
Event title: Seplat Energy Plc: Full year results
Event date 9:00am (London) 09:00am (Lagos) Friday 28 July 2023
Webcast Live Event/Archive Link https://secure.emincote.com/client/seplat/seplat017
Conference call and pre-register Link: https://secure.emincote.com/client/seplat/seplat017/vip_connect
The Company requests that participants dial in 10 minutes ahead
of the call. When dialling in, please follow the instructions that
will be emailed to you following your registration.
Enquiries:
Seplat Energy Plc
Emeka Onwuka, Chief Financial Officer +234 1 277 0400
Eleanor Adaralegbe, Vice President, Finance
James Thompson, Head of Investor Relations
Ayeesha Aliyu, Investor Relations
Chioma Afe, Director, External Affairs & Sustainability
========================================================= ================================
FTI Consulting
Ben Brewerton / Christopher Laing +44 203 727 1000
seplatenergy@fticonsulting.com
========================================================= ================================
Citigroup Global Markets Limited
Tom Reid / Luke Spells / Peter Catterall +44 207 986 4000
========================================================= ================================
Investec Bank plc
Chris Sim / Charles Craven +44 207 597 4000
========================================================= ================================
About Seplat Energy
Seplat Energy PLC (Seplat) is Nigeria's leading indigenous
energy company. Listed on the Nigerian Exchange Limited (NGX:
SEPLAT) and the Main Market of the London Stock Exchange (LSE:
SEPL), we are pursuing a Nigeria-focused growth strategy in oil and
gas, as well as developing a Power & New Energy business to
lead Nigeria's energy transition.
Seplat's energy portfolio consists of seven oil and gas blocks
in the prolific Niger Delta region of Nigeria, which we operate
with partners including the Nigerian Government and other oil
producers. We also have a revenue interest in OML 55. We operate a
465MMscfd gas processing plant at Oben, in OML4, and are building
the 300MMscfd ANOH Gas Processing Plant in OML53 and a new 85MMscfd
gas processing plant at Sapele in OML41, to augment our position as
a leading supplier of gas to the domestic power generation market.
https://www.seplatenergy.com/
Operating review
Update on developments in Nigeria
Following the 2023 general elections, President Bola Ahmed
Adekunle Tinubu assumed office as Nigeria's new President. Since
taking office, President Tinubu has introduced several pro-market
reforms, including removing the controversial fuel subsidy and
unifying multiple exchange rate windows. These reforms have been
well received by the capital market, as they are crucial to
restoring investor confidence in Nigeria's economy. The unified
exchange rate system promotes transparency and market-driven
exchange rates, fostering macroeconomic stability and growth.
The recent foreign exchange (FX) reforms have positively
impacted FX liquidity. Notably, data from FMDQ Group indicates that
the average turnover at the Investors & Exporters (I&E)
window, which now includes all FX windows, has increased by 41%
since the announcement of these policies. However, the devaluation
of the Naira has implications for our business, leading to currency
losses on naira cash balances and receivables and resulting in
gains on payables balances (further details in the financial review
section).
Overall, we view these changes as beneficial for both the
country and Seplat operations.
OPEC Quota
During the period, the 35th Ministerial Meeting of OPEC+ took
place, during which the crude oil market dynamics were assessed.
Some members, led by Saudi Arabia, agreed to extend production cuts
into 3Q2023. These measures played a significant role in
stabilising the market and reducing price volatility in recent
months.
Apart from the voluntary production cuts, revisions were made to
the production baselines for 2024 and 2025. Nigeria's production
quota was adjusted downward due to ongoing challenges in meeting
production targets. In 2024, Nigeria's production baseline will
decrease by 0.36mbpd, leading to a production quota of 1.38mbpd
(excluding condensates).
Currently, the Seplat JV share of the OPEC quota stands at
approximately 48 kbopd for the Western Assets and 11 kbopd for the
Eastern Assets. Given the decrease in Nigeria's crude oil
production quota, it is possible that Seplat Energy may also face a
reduction in its production quota. However, the Company does not
anticipate any significant impact on its business due to the
presence of a reasonable head room.
Upstream business performance
Working interest production for the six months ended 30 June
2023
During the first half of 2023, the total working interest
production increased by 1.8% to 50,805 boepd (6M 2022: 49,924
boepd); the oil & gas mix was 59% and 41% respectively. Average
production in the first six months of 2023 sits just above the
mid-point of our 2023 guidance of 45,000-55,000 boepd, which
remains unchanged.
6M 2023 6M 2022
Liquids Gas Total Liquids Gas Total
Seplat bopd MMscfd boepd bopd MMscfd boepd
%
========== ======= ======== ======= ======= ======== ======= =======
OMLs 4,
38 & 41 45% 16,533 119.4 37,118 17,386 117.7 37,681
OML 40 45% 10,803 - 10,803 8,688 - 8,688
OML 53 40% 1,164 - 1,164 2,139 - 2,139
OPL 283 40% 1,721 - 1,721 1,416 - 1,416
Total 30,221 119.4 50,805 29,629 117.7 49,924
Liquid production volumes as measured at the LACT (Lease
Automatic Custody Transfer) unit for OMLs 4, 38 and 41; OML 40 and
OPL 283 flow station.
Gas conversion factor of 5.8 boe per scf.
Volumes stated are subject to reconciliation and may differ from
sales volumes within the period.
Total liquids production increased by 1.8% compared to the same
period in 2022. The production for the period was 5.5 MMbbls
compared to 5.4 MMbbls in 2022. The higher production during the
period, was supported by the improved availability of the Forcados
Oil Terminal, which achieved an uptime of 80% and the availability
of the Amukpe-Escravos Pipeline (AEP). Average daily gas production
was up 1.4% to 119.4 MMscfd (6M 2022: 117.7 MMscfd).
At OMLs 4, 38, & 41, working interest liquids production
fell 4.9% to 16,533 bopd (6M 2022: 17,386 bopd) due to higher
unscheduled deferment and delays to the on-stream timing of new
wells, which were planned to arrest the natural decline on the
assets. The AEP continued to provide an alternative evacuation
solution, helping to de-risk our Western Asset production and we
now evacuate crude via this route and the Trans Forcados Pipeline
(TFP).
Our operations at OML 40 contributed the most significant growth
in the period. Working interest production from the asset grew by
24.3% to 10,803 bopd in 6M 2023 (6M 2022: 8,688 bopd). The strong
growth in OML 40 volumes was because of higher production uptime
and delivery of new wells as planned.
At the smaller Eastern operations in OML 53, daily working
interest production fell 45.6% to 1,164 bopd in 6M 2023, with
evacuation of these volumes to the nearby Waltersmith Refinery. The
ongoing production issues are primarily due to evacuation
challenges caused by the unavailability of key delivery lines. Both
the Antan-Ebocha delivery line, which supports the Jisike
operations, and the Trans Niger Pipeline (TNP), utilised for Ohaji
operations, remain unavailable.
We are actively working towards resolving these third-party
evacuation issues and are in final discussions with the Edo
Refinery regarding an alternative evacuation option. The plan
entails supplying approximately 1,000 bopd of JV crude from Ohaji
to the Edo Refinery. By exploring alternative evacuation options,
we aim to mitigate the challenges faced in the Eastern operations
and maintain a consistent production flow.
We remain committed to resolving evacuation issues and
optimising production from our Eastern operations while actively
exploring alternative solutions to ensure efficient crude
evacuation in the future.
Drilling and other Capital Projects
During the period, five wells in our drilling program were
delivered: Opuama-17, Sibiri-2, Gbetiokun 4 workover, Gbetiokun-10,
and Assa North-05. In the first quarter of the year, Opuama-17, was
completed and is producing at a gross rate of c. 3,000 bopd.
Sibiri-2 well has been drilled to TD, with the target reservoirs
completed; we are currently awaiting regulatory approval to
commence production from the well. GB-10 well has been drilled and
completed ahead of the target date and is expected to add c.1,300
bopd to production upon completion of flowline installation and
well head construction. Lastly, GB-4 W/O will add c. 2,200 bopd to
production.
However, while completed wells have been supportive, overall,
our drilling program is moderately behind plan. Drilling of the
Orogho-8 and Ovhor-21 wells, due for completion in 1Q and 2Q
respectively are ongoing. A combination of downhole challenges has
been exacerbated by mechanical issues on the contracted rigs. We
now expect completion of both wells in 3Q23. Given slower than
planned progress year to date, we have initiated a drilling
recovery program and an accelerated contracting plan in alignment
with the Joint Venture partners and are confident of delivering the
planned number of wells for the year.
Drilling activities in ASSN-06 are ongoing and expected to
complete by the end of July.
Midstream Gas business performance
During the period, the average working interest gas volumes
reached 119.4 million standard cubic feet per day (MMscfd), showing
improvement compared to 117.7 MMscfd in the first half of 2022.
This increase can be attributed to enhanced well performance and
the availability of condensate evacuation routes.
We have successfully entered into a new Gas Sales Agreement
(GSA) with a bulk gas supplier for a volume of 50 MMscfd. Once all
the necessary Conditions Precedent are met by the new customer, we
will commence gas supply under this agreement. The execution of
additional GSAs is part of our strategy to optimise the capacity of
the Oben gas plant. We are also actively working on securing
third-party gas to feed both the Oben and Sapele gas plants.
The execution of the plan for separating the midstream business
from the upstream operations has progressed according to schedule.
We have completed the internal transfer of midstream assets to
Seplat Midstream Company (SMC). Additionally, we have issued
notices to our joint venture partners and relevant regulators to
inform them of these developments. We will continue to keep the
market updated on the progress of this separation process.
ANOH Gas Processing Plant
As of the latest update, the IJV (AGPC) has achieved significant
progress in installing all necessary equipment for the mechanical
completion of the gas plant, reaching a completion level of over
93%. The gas plant is still expected to achieve mechanical
completion later this year. Safety has been a priority, and AGPC
recently reached a milestone of 9 million man-hours without any
lost time injury on the project.
The government partner, NGIC, is responsible for delivering the
pipelines required to transport the gas from ANOH to the demand
centres, including the 23km spur line and the Obiafu-Obrikom-Oben
(OB3) pipeline.
Noteworthy progress has been made with completion of grouting
operations for the critical Island Section of the OB3 pipeline that
had faced challenges due to the collapsing of the HDD wall in a
section of the river crossing. The drilling and pipe installation
crew has returned to the site, and preparations are underway to
resume tunnelling operations after the completion of grouting. The
target completion for both ends' tunnelling, equipment
demobilisation, and tie-ins is set for Q3 2023. The project was at
97% completion before the suspension of work.
Regarding the Spur Line project, all line pipes required for all
23.3km spur line sections are now in country and have been
delivered to the project site. The first phase of the spur line
(5.5km length) has been completed, with another 4.5km currently in
progress. Our government partner has confirmed the revised
completion date of Q3 2023.
In terms of upstream development, the drilling of the third well
has been completed, and work on the fourth well is ongoing, with
expected completion before the end of Q3 2023. Additionally, work
on surface facilities required to deliver wet gas to the AGPC plant
is in progress and expected to be completed by the upstream unit
operator, SPDC, in Q4 2023.
Once completed, ANOH will provide two income streams for Seplat
Energy: wet gas sales from OML 53 to the plant and dividends from
the joint venture ANOH Gas Processing Company, which will operate
the plant.
New Energy Business
Strategic growth investment opportunities are being pursued for
the New Energy Business, with a particular focus on entry into
off-grid power generation. Such projects will increase the
reliability, lower the cost and reduce the carbon intensity of
existing electricity consumption. We continue to work through
technical and commercial due diligence to evaluate these investment
opportunities.
HSE Performance
During the period, the Company achieved over 4.2 million hours
without any Lost Time Injury (LTI) on its operated assets, which
reflects the Company's strong focus on safety and the dedication of
its workforce to maintaining a secure work environment. In addition
to the safety record, no major human injuries were reported during
this period. This accomplishment highlights the effectiveness of
the safety measures and procedures implemented by the Company.
However, there was one Tier 2 Process Safety Loss of Primary
Containment (LOPC) incident and e fforts are being made to
continuously strengthen the robust safety framework in place and
prevent such incidents from occurring in the future. The Company
has embarked on a journey to obtain ISO 45001 and 14001
certifications. These certifications are internationally recognised
standards for occupational health and safety management systems and
environmental management systems, respectively. By pursuing these
certifications, the Company aims to ensure the highest standards of
safety and environmental performance.
Seplat Energy places a strong emphasis on safety and
environmental responsibility. As part of its commitment to
biodiversity and sustainability, the company is collaborating with
the National Conservation Foundation (NCF) to promote and support
initiatives that protect and preserve the environment.
Reducing carbon intensity is crucial for the Company, and the
flares-out roadmap, which includes measures to minimise greenhouse
gas emissions and improve overall energy efficiency, is being
implemented to eliminate routine flares by Q4 2024
The carbon intensity recorded for the period was 26.3 kg/boe,
higher than the 24.6 kg/boe recorded in 6M 2022. Currently, flare
volumes make up around 80% of the total emissions. Flare volumes in
6M 2023 were modestly higher (0.5% increase), principally at our
Sapele operations; the recorded flare volumes were 4.40 bcf,
compared to 4.38 bcf in the same period of 2022. An encouraging
development is the completion of the 72-hour reliability run test
of the Sapele Accelerated AG compressor , which will process c.26
MMscfd of otherwise flared gas. With the resumption of unprocessed
gas offtake by Sapele Power, expected in the second half of the
year, we anticipate a material reduction of around 40% in absolute
emissions.
Proposed acquisition of MPNU
On 24 May 2023, we announced that we have extended with Mobil
Development Nigeria Inc. and Mobil Exploration Nigeria Inc.
(ExxonMobil) the Share Sale and Purchase Agreement (SSPA) for the
acquisition of ExxonMobil's share capital of Mobil Producing
Nigeria Unlimited (MPNU) to preserve the transaction pending the
resolution of certain legal proceedings and receipt of applicable
regulatory approvals.
The Board remains confident that the transaction will be
approved, and all associated legal issues will be resolved. We
continue to work with all parties to achieve a successful outcome
and have been encouraged by recent developments. We will provide
further updates as appropriate.
Shareholder Actions
Seplat Energy is pleased that the Company's Chief Executive
Officer ("CEO"), Mr. Roger Brown has resumed his position as the
CEO of Seplat Energy and can validly enter and stay in Nigeria.
This followed the Ministry of Interior ("Ministry") and the Nigeria
Immigration Service ("NIS") restoration of his Working Permit,
Combined Expatriate Residence Permit and Aliens Card ("CERPAC") and
other Visas for the entry or stay in Nigeria ("Immigration
Documents") of the Company's CEO.
The Company had previously announced that the Immigration
Documents were withdrawn by the Ministry, following baseless and
false allegations of racism, unfair prejudice, discrimination and
improper immigration status made by certain individuals parading as
"concerned workers and stakeholders of Seplat Energy Plc". The
Company cooperated fully with the verification checks conducted by
the Immigration Authorities, which resulted in the restored
immigration status of Roger Brown.
The Company had also previously announced the striking out by
the Federal High Court sitting in Lagos, of the Petition commenced
on 8th March 2023 by Moses Igbrude and others in Suit No.
FHC/L/CP/402/2023. The Court ordered the Petitioners to pay NGN1
million in costs. This followed the filing of a Notice of
Discontinuance by the Petitioners.
Similarly, the Federal High Court in Abuja had struck out the
criminal charge brought by the Nigeria Immigration Service against
the Company and some of its Officers. The Court fully discharged
all named defendants. The charge had earlier been withdrawn by the
Nigerian Immigration Service on the 20th April 2023 and was in
relation to the immigration status of Mr. Roger Brown and the
withdrawal of his immigration visa by the Ministry of Interior.
The Court of Appeal also suspended the ex parte Interim Orders
granted by the Federal High Court (Abuja) in Suit No.
FHC/ABJ/CS/626/2023 - Juliet Gbaka & two others v. Seplat
Energy Plc & thirteen others. The matter comes up on 3rd
October 2023 at the Federal High Court and 31st October 2023 at the
Court of Appeal.
Seplat Energy remains confident that the courts will
appropriately address the outstanding frivolous litigations brought
by minority shareholders holding less than 0.005% combined of the
Company's issued shares.
Seplat, as a responsible corporate citizen, will continue to
engage all its stakeholders in accordance with applicable law and
established corporate governance best practices.
Outlook
Group production performance has improved in 2023, thanks to
greater uptime on OML40 and reduced losses on our Western Asset. We
maintain our 2023 guidance range at 45,000-55,000 boepd, which we
are confident of meeting, given year to date production and the
expected benefit of new well stock as it becomes available in the
latter part of the year. We stress that our guidance does not
include any expected contribution from MPNU or ANOH projects.
Our capital expenditure guidance for 2023 is adjusted to a range
of $160-190 million. Our commitment to meeting the planned drilling
targets remains steadfast, and we have a drilling plan in place to
meet these targets in 2H 2023.
Financial review
Revenue
Oil prices have experienced a steady downward trend since the
highs of 2022, primarily due to mounting concerns about the global
economy and its potential impact on crude oil demand. Consequently,
the average realised oil price for the first six months of 2023
declined by 25.9% to $79.54/bbl compared to the $107.35/bbl
achieved during the same period in 2022.
Despite these challenging market conditions, oil and gas sales
revenue in the first half of 2023 reached $547.0 million, a 3.8%
increase compared to the $527.0 million generated in the first half
of 2022. This growth can be attributed to the positive effect of
overlifts realised during the period. However, upon adjusting for
the overlift amounting to $59.4 million, revenue stood at $487.6
million, reflecting the impact of the lower oil price during the
period despite the higher production.
Crude oil revenue was up 3.0% in 6M 2023 compared to the same
period in the previous year, $483.3 million in 6M 2023 (as opposed
to $469.2 million in 6M 2022) for the abovementioned reasons. The
total volume of crude lifted during the period amounted to 6.1
million barrels, a 38.6% increase from the 4.4 million barrels
lifted in the first half of 2022. Upon adjustment for the
previously highlighted overlifts of $59.4 million (equivalent to
845 kbbl), crude oil revenue for the period stood at $423.9
million. A reconciliation loss of 3.3% was recorded for the
period.
Similarly, gas revenue experienced a 10.2% increase, reaching
$63.7 million in 6M 2023 (compared to $57.8 million in 6M 2022).
This growth is attributed to increased realised gas prices and a
rise in sales volume. The average realised gas price rose by 4.4%
to $2.87/Mscf, while gas production saw a moderate 1.4% increase to
21.6 Bscf during the same period (compared to 21.3 Bscf in 6M
2022). The average realised gas price improvement reflects the
impact of upward gas price revisions implemented in the period.
Gross profit
In the first half of 2023, gross profit showed marginal growth,
increasing by 0.7% to reach $276.3 million, compared to $274.3
million in 2022. Non-production costs primarily included $94.1
million in royalties and $81.3 million in depreciation, depletion,
and amortisation (DD&A), contrasting with $108.8 million in
royalties and $70.4 million in DD&A in the previous year. The
decrease in royalties was because of the lower oil prices realised
during the period, while the higher DD&A costs reflect the
increased production levels.
Direct operating costs, which encompass expenses related to
crude-handling charges (CHC), barging/trucking, operations and
maintenance, amounted to $88.7 million in 6M 2023, marking a 31.2%
increase from the $67.6 million incurred in 6M 2022. This rise in
direct operating costs is attributed to higher costs on additional
alternative evacuation routes secured by Seplat to minimise outages
and Third-party infrastructure downtime. On a cost/boe basis
overall costs are fair and remain comparable with prior period.
Considering the cost per barrel equivalent basis, production
operating expenses (opex) were $9.6/boe in 6M 2023, compared to
$8.1/boe in 6M 2022.
Operating profit
During the period under review, our operating profit was $118.4
million, showing a significant decrease of 51.7% compared to the
$245.3 million achieved in 6M 2022. This decline in operating
profit was attributed to a combination of lower oil prices and
foreign exchange (FX) losses due to changes in exchange rates. On
June 14, 2023, the Central Bank of Nigeria (CBN) implemented a
major operational change in the foreign exchange (FX) market to
unify the multiple exchange rate windows. This change involved
consolidating all FX segments into the Investors and Exporters
(I&E) window, which became the sole approved and recognized
window for setting the FX rate, following the adoption of "willing
buyer, willing seller" model.
Because of these new CBN guidelines, there was a significant
adjustment in the exchange rate between the Nigerian Naira (NGN)
and the US Dollar (USD). The closing rate for June 2023 was
adjusted to NGN753.01/US$, representing a notable difference from
the May 2023 rate of NGN461.28/US$. The revaluation of financial
assets arising from this exchange rate resulted in a net (non-cash)
loss of $33.8 million.
Overall, there is no adverse effect on the company and
summarised in the table below are expected future impacts of Naira
devaluations.
Component Impact Impact Notes
NGN USD
Gas revenue Increase Unchanged Gas sales are priced in
dollars but invoiced in
Naira at the prevailing
I&E rate. The same applies
for crude sold to the
Waltersmith refinery
G&A/Opex Unchanged Reduce Devaluation would lead
to a reduction in Naira
denominated costs when
expressed in Dollars
Cash balances Unchanged Minimal Naira revenue to closely
match Naira expenses with
percentage of Naira balances
in cash maintained at
reasonable levels
Trade receivables Unchanged Reduce Exchange loss on Naira
receivables
Other Naira financial Unchanged Reduce Exchange loss in US$ on
assets the valuation and settlement
of Naira-denominated financial
assets
Naira liabilities Unchanged Reduce Exchange gains in US$
upon revaluing or settling
our Naira-based liabilities
The Company acknowledges the importance of effectively managing
the impacts of foreign exchange (FX) fluctuations. It recognizes
that navigating the changing currency dynamics is crucial to its
financial stability and overall success. Seplat will continue to
utilise its Naira revenue (which will also increase in quantum in
line with new exchange rates since gas and some oil (OML53)
contract values are Dollar denominated although settled in Naira)
to fund local currency transactions and constantly manage our
holding Naira which usually doesn't exceed 20% of total cash
holding. By proactively monitoring this, the Company aims to
mitigate potential risks arising from currency volatility. This
strategic approach will allow the Company to safeguard its
financial position, optimize its operations, and maintain
resilience in the face of currency uncertainties.
General and administrative expenses (G&A) amounted to $65.8
million, 42.0% higher than the G&A costs of $46.4 million
incurred in 6M 2022. This increase in G&A costs was mainly due
to professional fees associated with the litigation costs in
response to the unprecedented and intense period of minority
shareholder actions through the Courts and some costs associated
with the MPNU transaction. Excluding these exceptional items,
G&A costs would have closed relatively flat compared to the
previous year. Nevertheless, Seplat remains committed to reducing
G&A expenses and has established cost champions to identify
cost pressure points and we are implementing measures to control
expenditure in those areas.
After adjusting for non-cash items such as impairment, fair
value, and exchange losses, the adjusted EBITDA for the period was
$235.8 million (6M 2022: $342.7 million), resulting in a margin of
43.1% (6M 2022: 65.0%).
Taxation
The income tax expense of $2.8 million includes a current tax
charge of $31.5 million and a deferred tax credit of $28.7 million.
The deferred tax credit recorded during the period was due to
change in applicable tax rate on our Elcrest assets which impacted
deferred tax asset balance brought forward from prior years. The
effective tax rate for the period was 3% (6M 2022: 60%).
Effective tax rate analysis Income tax expense Tax rate
Profit before tax ($'million) Current Deferred Total ETR Current
(Effective Tax rate
Tax Rate)
85.4 31.5 (28.7) 2.8 3.3% 36.9%
Net result
Profit before tax declined by 59.3%, amounting to $85.4 million,
compared to $209.9 million in 6M 2022. However, the profit decline
was mitigated due to lower taxation in the current period,
resulting in a closing profit of $82.6 million, as opposed to $83.3
million in 6M 2022.
The profit attributable to equity holders of the parent company,
representing shareholders, was $43.5 million in 6M 2023, which
resulted in basic earnings per share of $0.07 for the period (6M
2022: $0.14/share).
Cash flows from operating activities
During the period, the Company generated $259.1 million in cash
from its operations, a decrease from the $330.1 million generated
in 6M 2022 because of lower oil prices.
Net cash flows from operating activities amounted to $209.4
million in 6M 2023, compared to $284.3 million in 6M 2022. This
figure considers tax payments of $47.0 million and a hedging
premium of $2.7 million during the current period, while in the
previous year, tax payments were $41.1 million, and the hedging
premium paid was $4.7 million.
The Company received $172 million in the first half of 2023
towards settling cash calls. This progress led to the reduction of
the net NEPL receivable balance, which now stands at $89
million.
Cash flows from investing activities
In the first half of 2023, the total net cash outflow from
investing activities was $81.4 million, which decreased from the
$200.4 million recorded in 6M 2022.
The capital expenditure during the period was $87.2 million,
including $62.1 million invested in drilling activities and $25.1
million invested in engineering projects.
The Company received $3.3 million from All Grace Energy
regarding the divestment from the Ubima field. This payment brought
the total amount received to $21.9 million out of the total
settlement sum of $55.0 million.
Cash flows from financing activities
Net cash outflows from financing activities were $111.3 million,
which increased from the $64.2 million recorded in 6M 2022.
These outflows included $32.9 million for interest on loans and
borrowings, reflecting the cost of servicing the Company's debt
obligations. Additionally, a commitment fee of $2.4 million was
incurred on our credit facilities.
The loan repayments of $11.0 million during the period represent
the first principal repayment of the Eland Senior RBL Facility.
During the period, shareholders were paid dividends amounting to
$61.8 million (6M 2022: $28.2 million paid).
Liquidity
The balance sheet continues to remain healthy with a solid
liquidity position.
Net debt reconciliation $ million* Coupon Maturity
30 June 2023
Senior notes* 673.0 7.75% April 2026
Westport RBL* 78.5 SOFR rate+8% March 2026
Off-take facility* 9.5 SOFR rate+10.5% April 2027
Total borrowings 761.0
Cash and cash equivalents (exclusive
of restricted cash) 380.7
Net debt 380.3
* Including amortised interest
Seplat Energy ended the first quarter with gross debt of $761.0
million (with maturities in 2026 and 2027) and cash at bank of
$380.7 million, leaving net debt at $380.3 million. The restricted
cash balance of $24.9 million includes $8.0 million and $15.2
million set aside in the stamping reserve and debt service reserve
accounts for the revolving credit facility.
As the Company continuously reviews its funding and maturity
profile, it continues to monitor the market in ensuring that it is
well positioned for any refinancing and or buy back opportunities
for the current debt facilities - including potentially the US$650
million 7.75% 144A/Reg S bond maturing in 2026.
Dividend
The board has approved a Q2 2023 dividend of US3.0 cents per
share (subject to appropriate WHT) to be paid to shareholders whose
names appear in the Register of Members as at the close of business
on 17 August 2023. This takes dividend payments to US6.0 cents per
share for the 2023 financial year to date, in line with the
Company's dividend policy.
Hedging
Seplat's hedging policy aims to guarantee appropriate levels of
cash flow assurance in times of oil price weakness and volatility.
For Q3 2023, 1.0mmbbls are protected at $50/bbl. (at a cost of
$0.82/bbl) and 0.5mmbbls are protected at $55/bbl (at a cost of
$0.51/bbl). For Q4 2023, 1.5mmbbls are protected at $55/bbl. (at a
cost of $0.73/bbl).
Oil put options Q3 2023 Q3 2023 Q4 2023
Volume hedged (MMbbls) 1.0 0.5 1.5
Price hedged ($/bbl.) 50 55 55
Additional barrels are expected to be hedged for the first
quarter of 2024, in line with the approach to target hedging two
quarters in advance. The Board and management team closely monitor
prevailing oil market dynamics and will consider further measures
to provide appropriate levels of cash flow assurance in times of
oil price weakness and volatility.
Petroleum Industry Act (PIA) Implementation Status
Since submitting the conditional application to convert all our
assets to the PIA regime in February 2023, our multi-disciplinary
team has been diligently preparing the Company for full compliance
with the various aspects of the PIA. Meanwhile, the regulator is
finalising the guidelines for the conversion and has shared
concession contracts with converting companies to enable a thorough
review and understanding of the contractual terms and obligations
that will be applicable under the new PIA regime. Therefore, the
Long-stop date has been extended to September 30, 2023. Our
internal review process is still underway, aiming to enable a final
decision on converting our assets to the PIA regime.
Share dealing policy
We confirm that, to the best of our knowledge, there has been
compliance with the Company's share dealing policy during the
period.
Free float
The Company's free float on 30 June 2023 was 29%.
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END
IR RRMLTMTATBMJ
(END) Dow Jones Newswires
July 28, 2023 02:00 ET (06:00 GMT)
Seplat Energy (LSE:SEPL)
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Seplat Energy (LSE:SEPL)
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