Seplat Petroleum Development Company Plc, a leading Nigerian independent energy company listed on both the Nigerian Stock Exchange 9NSE) and the London Stock Exchange (LSE), has announced its unaudited results for the nine months ended 30 September 2020, recording increased operational efficiencies and further reduction in costs.
The Company has continued its expansion into midstream gas processing to reduce carbon emissions by displacing inefficient and expensive diesel generated electricity, and this is aimed at ensuring that Seplat remained at the forefront of Nigeria’s exciting energy transition and provide sustainable energy for a young and rapidly growing population.
Despite the restraints of the COVID-19 pandemic and the recent unrest in Nigeria, Seplat announced a $0.05 dividend payout to shareholders for the period whilst remaining confident that its cost-cutting initiatives and prudent management of cash would enable further reductions in debt, and support dividend payments and investment for growth.
Commenting on the results, which were released to the NSE and LSE on Friday, Mr. Roger Brown, the Chief Executive Officer of the Company, said: “Seplat’s third-quarter performance has again demonstrated the resilience of our business in challenging times and in addition to voluntarily reducing our debt leverage by US$100 million, we are maintaining our commitment to shareholders by declaring an interim dividend of US$0.05 per share, as we have in previous years. The business continues to operate effectively despite the restraints of the COVID-19 pandemic and the recent unrest in Nigeria.
“We continue to hedge our oil business against further price volatility and are pursuing further cost-cutting initiatives to ensure that we will remain profitable even at lower prices experienced earlier in the year.
“We have strengthened our oversight with the appointment of two independent directors, Arunma Oteh and Xavier Rolet, who bring considerable local and international business and governance expertise to the Board.
“I have taken over the leadership of Seplat at a challenging time for our industry, but I am confident that our actions to increase operational efficiencies, further reduce costs and continue our expansion into midstream gas processing to reduce carbon emissions by displacing inefficient and expensive diesel generated electricity, will ensure that Seplat remains at the forefront of Nigeria’s exciting energy transition and provide sustainable energy for a young and rapidly growing population.”
Highlights
Operational:
• Working-interest production within guidance at 50,653 boepd, despite market volatility
• Liquids production of 33,327 bopd, gas production of 100 MMscfd
• Eland OML40/Ubima assets produced 9,151 bopd, 27.5% of Group oil volumes, integration progressing well
• TFP reconciliation losses reduced to 8.6%
• Amukpe-Escravos Pipeline now expected operational in H2 2021
• Low unit cost of production at US$8.73/boe, with cost-cutting initiatives ongoing, particularly at OML40/Ubima
• ANOH project remains on track for Q4 2021 first gas, completion of financing imminent
Financial:
• Strong cash balance of US$213 million after US$100 million RCF repayment, US$29 million 2019 final dividend, and US$109 million capex
• Net debt steady at US$480 million with most maturities after 2021
• Revenue US$388 million due to lower oil prices
• IAS 36 COVID-19 impact assessment and IFRS 9 non-cash impairment provision of US$180 million.
• Provision reverses operating profit of US$100 million to operating loss of US$79 million
• NPDC receivables further reduced to US$152 million
Interim dividend declared
• Interim dividend of US$0.05 per share (2019: US$0.05) in line with Seplat’s normal dividend distribution timetable
Outlook:
• Full-year production guidance narrowed to 48-52 kboepd, subject to market conditions
• Oil hedging: 1.5MMbbl at US$30/bbl and 0.5MMbbl at US$35/bbl in Q4 2020
• Full-year capex expected to be around US$120 million (US$109 million already invested)
Outlook for 2020
Following our performance over the first nine months of the year we are narrowing guidance to 48,000-52,000 boepd for the full year. We continue to hedge against oil price volatility and expect a higher proportion of revenues to come from long-term gas contracts at stable prices. We also continue to focus on cost savings to maintain profitability at the lower oil prices we have realised so far this year.
We have significant cash resources available and will continue to manage our finances prudently in 2020, expecting now to invest US$120 million of capital expenditure across the full year (of which US$109 million has already been invested). We remain confident that our cost-cutting initiatives and prudent management of cash will enable further reductions in debt, whilst supporting dividend payments and investment for growth.
The timely completion of the ANOH project in late 2021 remains a major priority and we expect that the debt financing will achieve financial close in the coming week.