Seplat Petroleum Posts 34.2% Drop in Revenue in H1 2020

Seplat Petroleum Development Company Plc, a leading Nigerian independent energy firm, grew revenue to US$234 million in the first half of the year.

In the unaudited financial statements released through the Nigerian Stock Exchange, the company’s revenue declined by 34.2 percent due to lower oil prices and a drop in global demand for the commodity.

Highlights

Operational

• Working interest production comfortably within guidance at 51,177 boepd despite market volatility
• Eland OML40/Ubima assets produced 10,861 bopd, 32% of Group oil volumes, integration progressing well
• Low unit cost of production at US$7.60/boe, with cost-cutting initiatives ongoing, particularly at OML40/Ubima
• Liquids production of 34,117 bopd, gas production of 99 MMscfd
• ANOH project remains on track for Q4 2021 first gas, financing RFP launched
• Amukpe-Escravos Pipeline delayed due to access to the Escravos terminal, expected operational in H2 2020

Financial

• Cash increased to US$343 million despite lower revenues, US$29 million 2019 dividend, and US$86 million capex
• Net debt steady at US$457 million with most maturities after 2021
• Revenue US$234 million, down 34.2% due to lower oil prices and demand
• IAS 36 impairment provision of US$146 million (non-cash) in line with IAS 36 COVID-19 impact assessment
• Provision reverses operating profit of US$33 million to operating loss of US$113 million

Business continuity

• Business continuity and re-opening plan successfully mitigating the impact of COVID-19 lockdowns
• Oil field operations largely unaffected, 28-day rotations in force

Outlook

• Full-year production guidance reiterated at 47-57 kboepd, subject to market conditions. We expect to narrow
the guidance range in Q3
• Oil hedging: 1.5MMbbl at US$45/bbl Q3 2020, 1.5MMbbl at US$30/bbl Q4 2020, 1.0MMbbl at US$30/bbl Q1 2021
• Full-year capex of US$120 million (US$86m already invested) to include two gas wells and related infrastructure

Commenting on the company’s performance for the period, Austin Avuru, Chief Executive Officer, said “Seplat has delivered a robust performance despite the unprecedented crises we have experienced since March. Our continued resilience is possible as a result of our financial strength, our careful management of risk and our prudent approach to capital allocation. Unlike many in our industry, we were able to protect our 2019 dividend and increase our capital investment to ensure continued growth.

“Our oil hedging strategy and gas revenues continue to protect the business from price volatility, we are achieving substantial cost reductions from our suppliers and are managing our own costs even more carefully in this challenging period. Thanks to the excellent relationships we have with our Government partners and supply chain, our NPDC receivables have fallen and we are managing our payments equitably. The cash position is also robust because our careful management of debt has ensured that the majority of obligations mature in 2022 and 2023. We are operating within our covenants on all our lines of debt.

“As part of our commitment to our host communities, we have provided medical and food assistance where needed and will continue to do whatever we can to support those upon whom we depend for our business. I was heartbroken to learn of the deaths of seven contractors in July at the operations on OML40. Health and safety is a top priority for the Seplat Group; we will learn whatever we can from the ongoing investigation into the matter and will take whatever steps are necessary to ensure such a tragedy is never repeated.

“This is my final set of results as Chief Executive of the Company I helped to found ten years ago. I thank all my staff, past and present, for working to make Seplat a major force in Nigerian energy production. I hand a robust and successful company over to Roger Brown in the confidence that he and everyone at Seplat will make its second decade even more successful than its first.”