TIDMSEPL
RNS Number : 9812C
Seplat Energy PLC
28 February 2022
Please see the Full Audited Results in attached PDF
http://www.rns-pdf.londonstockexchange.com/rns/9812C_1-2022-2-28.pdf
Seplat Energy Plc
Audited results for the year ended 31 December 2021
Lagos and London, 28 February 2022: Seplat Energy Plc ("Seplat
Energy" or "the Company"), a leading Nigerian independent energy
company listed on both the Nigerian Exchange Limited and the London
Stock Exchange, announces its audited results for the full year
ended 31 December 2021.
Operational highlights
-- Strong safety record extended, 28 million hours without LTI
from Seplat Energy operated assets
-- Delivered robust performance against challenging year for Nigerian
oil & gas industry
-- Working interest production averaged 47,693 boepd, impacted
by August and December FOT shut ins
-- Completed nine wells: five oil and four gas wells
-- Eland's OML 40: four wells drilled at a total gross cost of
US$60million, now delivering 15.5 kbopd (gross)
-- Sibiri exploration on OML40 drilled to TD in February with initial
indications it has encountered eight oil bearing reservoirs
with 353 ft of gross hydrocarbon pay, net pay of 229 ft; further
data acquisition and analysis are underway
Financial highlights
-- Revenues up 38% to $733 million ($747 million including $14
million underlift)
-- Adjusted EBITDA up 40% to $372 million,
-- Strong cash generation of $394 million against capex of $137
million (excluding cost of rig acquisitions)
-- Strong balance sheet with $341 million cash at bank, net debt
of $426 million and
-- Q4 dividend of US2.5 cents per share recommended
Corporate updates
-- Name changed to Seplat Energy to reflect evolving strategy
-- Proposed $1.28 billion MPNU acquisition adds transformational
shallow water portfolio with dedicated export routes
-- AEP mechanically completed in January, hydrocarbons introduced
into line as part of commissioning process,
commercial agreements to enable production into terminal being
finalised; injection expected in March
-- ANOH project mechanical completion expected H2 2022 (84% complete
at present, all materials in country), however delays to third-party
spur line likely to delay first gas to H1 2023
-- Related party transactions eliminated from 1 January 2022
Outlook for 2022 (excluding MPNU)
-- Production guidance of 50-60 kboepd, capex expected to be $160
million
-- MPNU next steps: focus on government approvals and transition
planning, completion expected H2
Roger Brown, Chief Executive Officer, said:
"Seplat Energy announced a major acquisition last week and
despite a challenging year for Nigerian oil and gas, the robust
results delivered today clearly show how our increasing financial
strength has made such an acquisition possible, without the need to
dilute shareholders, by giving international financial partners the
confidence to invest in our vision.
The addition of MPNU nearly trebles our production and doubles
our reserves on a pro forma 2020 basis, reinforcing our leadership
of Nigeria's indigenous energy sector and enabling us to generate
strong future cash flows that will underpin our investment in
Nigeria's energy transition and improve our overall stakeholder
returns.
Our 2021 performance was affected by outages at Forcados
Terminal that will no longer have such an impact when we switch to
the new Amukpe-Escravos Pipeline, which we expect to launch in
March. This is part of our strategy to diversify and derisk routes
to market, assuring higher revenues from significantly better
uptime and lower reconciliation losses. Furthermore, once we have
completed our acquisition of MPNU, we will add significant
production from offshore assets with dedicated export terminals
that also have higher availability and lower reconciliation
losses.
The addition of MPNU offers a significant undeveloped gas
resource base which, alongside our ANOH gas project development,
will underpin Nigeria's energy transition and drive domestic and
export revenues when developed.
Our financial strength is matched by the skills and ambitions of
our staff and we look forward to welcoming more than a thousand
highly trained colleagues from MPNU and working with them to ensure
their smooth onboarding into Seplat Energy. Together we will build
a sustainable, world-class company that generates attractive
returns for stakeholders and delivers energy transition for one of
the world's largest and most rapidly growing populations."
Summary of performance
$ million billion
------------------ --------- ------------------
FY 2021 FY 2020 % change FY 2021 FY 2020
-------- -------- --------
Revenue 733.2 530.5 38.2% 293.6 190.9
Gross profit 285.2 124.6 128.9% 114.2 44.8
Impairment of assets * 36.6 (144.3) 125.4% 14.6 (51.9)
EBITDA ** 371.8 265.8 39.9% 146.8 95.7
Operating profit (loss) 250.7 (31.7) 890.9% 100.4 (11.4)
Profit (loss) before tax 177.3 (80.2) 321.1% 71.0 (28.9)
Cash generated from operations 394.3 329.4 19.7% 157.9 118.6
Working interest production (boepd) 47,693 51,183 (6.8)%
Average realised oil price ($/bbl) 70.54 39.95 76.6%
Average realised gas price ($/Mscf) 2.85 2.87 (0.7)%
===================================== ======== ======== ========= ======== ========
* FY 2021 includes reversal of $74.7m impairment charge under
IAS 36; FY 2020 includes $114.4m impairment charge under IAS36
** Adjusted for impairment, fair value loss and
decommissioning
Responsibility for publication
The person responsible for arranging the release of this
announcement on behalf of Seplat Energy is
Emeka Onwuka, CFO, Seplat Energy Plc.
Signed:
Mr. Emeka Onwuka
Chief Financial Officer
Investor call
At 09:00 GMT / 10.00 WAT on Monday 28 February 2022, 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) 10:00am (Lagos) Monday 28 February 2022
Webcast Live Event Link https://secure.emincote.com/client/seplat/seplat012
Conference call and pre-register Link: https://secure.emincote.com/client/seplat/seplat012/vip_connect
Archive Link: https://secure.emincote.com/client/seplat/seplat012
======================================= ================================================================
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
Carl Franklin, Head of Investor Relations
Ayeesha Aliyu, Investor Relations
Chioma Nwachuku, 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 +44 207 986 4000
============================================================= ================================
Investec Bank plc
Chris Sim / Jarrett Silver +44 207 597 4000
============================================================= ================================
Notes to editors
Seplat Energy Plc is Nigeria's leading indigenous energy
company. It is listed on the Nigerian Exchange Limited (NGX:
SEPLAT) and the Main Market of the London Stock Exchange (LSE:
SEPL).
Seplat Energy is pursuing a Nigeria-focused growth strategy
through participation in asset divestments by international oil
companies, farm-in opportunities, and future licensing rounds. The
Company is a leading supplier of gas to the domestic power
generation market. For further information please refer to the
Company website, http://seplatenergy.com/
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 as a result of new information, future events
or otherwise, except to the extent legally required.
Operating review
HSE performance
Safe and responsible operations are critical to the delivery of
Seplat Energy's strategy. Staff and contractors worked a total of
8.0 million man-hours with no fatalities, lost-time injuries, or
major injuries in the period.
The Company has achieved 28 million hours without LTI on its
operated assets. There were 88 HSE incidents in total, compared to
107 in 2020, including two reportable spills and six gas leaks, all
of which were remediated with limited environmental impact. The
Group established appropriate processes and safeguards for its
people and operations against Covid-19.
By the end of December, we had conducted 14,319 Covid-19 tests,
with a positivity rate of 3.3%. We have a vaccination policy for
Covid-19 management and continue to enforce all Covid-19 control
protocols at our field operations and offices, with no major
Covid-19 related incidents.
Reserves
Seplat Energy's portfolio comprises direct interests in seven
oil and gas blocks and a revenue interest in one other block. This
portfolio provides us with a robust platform of oil and gas
reserves and production capacity, as well as material upside
opportunities to add reserves through future development.
Working interest reserves for the 2021 financial year
2P reserves at 31/12/2021 2P reserves at 31/12/2020
------------------------------ ------------------------------
Liquids(1) Gas Total Liquids Gas Total
-----------
Seplat % MMbbl Bscf MMboe MMbbl Bscf MMboe
================= ============== ============== ===== ======= =========== ======= ========
OMLs 4, 38 & 41 45% 144 651 256 156 693 275
OPL 283 40% 5 68 17 5 66 17
OML 53 40% 39 660 153 44 742 172
OML 55 Fin. interest 4 - 4 5 0 5
OML 40 45% 25 - 25 27 0 27
Ubima 82% 2 - 2 4 0 4
----------------- -------------- -------------- ----- ------- ----------- ------- --------
Total 219 1379 457 241 1501 499
-------------- -------------- ----- ------- ----------- ------- --------
1. Eland has a 45% working interest in OML40 until the Westport
loan is fully repaid in accordance with the loan agreement,
reverting to 20.25%.
2. Eland has an 82% Working Interest in the Ubima marginal field
until the carry has been reached, reverting to 40%.
At 31 December 2021, total working interest 2P reserves, as
assessed independently by Ryder Scott Company, L.P., stood at 457.1
MMboe, comprising 219.2 MMbbls of oil and condensate and 1,379.4
Bscf of natural gas (237.8 MMboe). The change represents an organic
decrease in overall 2P reserves of 8.4% year-on-year, due to
production of 10.6 MMbbls of liquids and 39.3 Bscf of gas, and
reclassification and revisions of previous estimates.
2C resources at 31/12/2021 2C resources at 31/12/2020
-------------------------------- -------------------------------
Liquids(1) Gas Total Liquids Gas Total
------------
Seplat % MMbbl Bscf MMboe MMbbl Bscf MMboe
================= ========= =============== ====== ======= ============ ======= ========
OMLs 4, 38 & 41 45% 28 162 56 48 167 77
OPL 283 40% 4 21 8 4 21 8
OML 53 40% 4 14 6 3 15 6
OML 40 45% 3 0 3 3 0 3
Ubima 82% 2 0 2 1 0 1
----------------- --------- --------------- ------ ------- ------------ ------- --------
Total 41 197 75 60 203 95
--------- --------------- ------ ------- ------------ ------- --------
Working interest 2C resources stood at 74.9 MMboe, comprising
40.9 MMbbls of oil and condensate and 197.1 Bscf of natural gas
compared to 94.8 MMboe in 2020. The 21.1% decrease is mostly due to
the inability to prove producibility in Mosogar following the
unsuccessful Drill Stem Test (DST). Consequently, the Group's
working interest 2P reserves and 2C resources stood at 531.9 MMboe
at 31 December 2021, comprising 260.1 MMbbls oil and condensate and
1,576.5 Bscf of natural gas (197 MMboe).
Production
Our oil and gas assets are in the onshore land and swamp areas
of the prolific Niger Delta in Nigeria. Principal areas of
production are Edo, Delta, Imo and Rivers States with evacuation
for export through the Forcados, Bonny and Brass oil terminals.
Seplat Energy has significant opportunities within its reserves
base to grow production and extend field life through infill
drilling, well intervention programmes, and innovation through
technology deployment.
Working interest production for the 2021 financial year
2021 2020
----------------------------------- ----------------------------
Liquids(1) Gas Total Liquids Gas Total
--------
Seplat % bopd MMscfd boepd bopd MMscfd boepd
================= ========= =========== ========== ========== ======== ======= =========
OMLs 4, 38 & 41 45.0% 18,243 107.9 36,844 21,249 101 38,718
OPL 283 40% 1,012 - 1,012 970 - 970
OML 53 40% 3,164 - 3,164 2,639 - 2,639
OML 40 45% 5,923 - 5,923 7,884 - 7,884
Ubima 82% 749 - 749 971 - 971
----------------- --------- ----------- ---------- ---------- -------- ------- ---------
Total 29,091 107.9 47,693 33,714 101 51,183
--------- ----------- ---------- ---------- -------- ------- ---------
Liquid production volumes as measured at the LACT unit for OMLs
4, 38 and 41; OML 40 and OPL 283 flow station.
Volumes stated are subject to reconciliation and may differ from
sales volumes within the period.
Full-year total working interest production for 2021 averaged
47,693 boepd. Within this, liquids production was down 13.7%
year-on-year. Delays in replacing the MT Harcourt storage vessel on
OML40 reduced exports from the asset in the first quarter of 2021.
In addition, volumes were impacted by decreased production from the
Western Assets owing to the disruption caused by the suspension of
exports at the Forcados Oil Terminal (FOT) for significant periods
in the year. The impact of unplanned downtime in the second half of
the year amounted to a deferment of working interest production of
c.1.0 MMbbls of oil from OMLs 40, 4, 38 and 41. There was a 75%
production uptime for the Trans Forcados System during the year.
The impact of future FOT outages will be alleviated by our use of
the new Amukpe-Escravos Pipeline, the launch of which is imminent
following mechanical completion and introduction of hydrocarbons,
with only commercial agreements pending.
Gas volumes were up 6.9% year-on-year to 107.9 MMscfd.
Drilling activities
During the period, we drilled and completed eight wells, with an
additional well completed early January 2022.
In OML 4 we completed the Oben-50 and Oben-51 gas wells, which
are now producing at a combined gross rate of
c. 60 MMscfd of gas and 4,000 bpd of condensates. We also
completed the workover of Oben-44 and 46 gas wells in the fourth
quarter with combined gross production rate of 70 MMscfd and 1,200
bpd.
In OPL 283, the Umuseti-07 well was successfully completed in
August and is producing ca.2,000 bopd gross.
The three-well Gbetiokun drilling campaign was completed ahead
of schedule with cost savings of 25%, achieved through efficient
execution, underpinned by the optimisation of drilling parameters
and logistics. The wells were drilled in tandem and batch drilled.
The Gbetiokun-06, 07 and 08 wells have commenced production, with
gross production of approximately 12,000 bopd combined. An
additional well, Gbetiokun-09, was drilled in December 2021, hooked
up in January 2022 and is producing approximately 3,500 bopd gross.
Given the strong production of the new Gbetiokun wells, we deployed
a larger evacuation vessel, MT Hampden, in November to improve
evacuation of crude.
Project activities associated with preparation for drilling the
high-impact, near-field Sibiri (formerly Amobe) exploration well in
OML 40 were completed in 2021 and the well was drilled in Q1 2022.
The well has been drilled to TD, with initial indications it has
encountered eight oil-bearing reservoirs with 353 ft of gross
hydrocarbon pay, net pay of 229 ft. Further data acquisition and
analysis on the well is underway.
Despite persistent adverse weather, we progressed preparation of
the Owu appraisal well in OML 53. However, the two wells (OHS KBAM1
and Owu appraisal) planned for OML 53 in 2021 were deferred to 2022
due to partner recommendation and rig contracting challenges.
We continue to exercise discretion over drilling investments and
selectively consider opportunities in our existing portfolio with a
view to capturing the highest cash return investment opportunities,
whilst diligently preserving a liquidity buffer.
Focus on asset integrity
At the core of Seplat Energy's operations is a focus on asset
integrity, process safety and maintenance culture, to ensure and
improve the safety, reliability, and availability of our
facilities. This also promotes higher revenue assurance. We are
making progress towards an ISO 55001 Certification with full
implementation of the ISO standards by 2023. As defined in our July
2021 Capital Markets Day (CMD), and as part of our commitment to
continuous improvement, Seplat Energy's goal through various
initiatives is to reduce deferment by c.120kbbl annually, which
will increase revenue assurance and profitability.
Other capital projects
As indicated in our CMD, we initiated projects targeting cost
reduction that are also expected to increase production in the long
term.
At OML 4, 38 and 41, we decommissioned the leased pumps at
Amukpe and started the installation of seven NOV pumps. The pump
replacements will reduce deferment of crude oil and improve
produced water disposal. We undertook a delivery line re-routing
project for the Sapele-Amukpe pipeline to reduce the risk of
pipeline failure on the heavily encroached right of way and
extended the life span of the pipeline. We completed and secured
5.1 km of the re-routed section and are reviewing tie-in
options.
The optimisation of the Jisike Flow Station Debottlenecking and
Gaslift Compressor Station commenced in the period to provide lift
gas for secondary recovery of crude oil from existing weak wells.
This includes an upgrade of the capacity of the flowstation from 10
kbpd to 15 kbpd to handle future increased production from the
asset and a 6 MMscfd associated gas (AG) compressor station to
optimise gas lifting of oil wells and reduce flaring.
Oil business performance
Seplat Energy's liquids (oil and condensate) operations produced
10.6 MMbbls on a working interest basis in 2021
(2020: 12.3 MMbbls). The average realised price per barrel in
the period was $70.54 (2020: $39.95), following a recovery of Brent
prices on the receding threat from the Covid-19 pandemic and the
resultant return of global economic activity.
The lower-than-expected oil production for the year was
primarily due to the curtailment of production and suspension of
export operations from OMLs 4, 38, 41 and 40, after Shell Petroleum
Development Company Limited (SPDC) declared a month-long force
majeure at the Forcados Oil Terminal (FOT) on 13 August because of
a failure of the loading buoy at the FOT. This was exacerbated by a
12-day shut in of the flow stations due to technical fault at the
FOT in December. Previously, delays in siting a new storage vessel
at OML 40 to replace the MT Harcourt, which was damaged in November
2020, resulted in significantly lower volumes in the first
quarter.
In December 2020, Seplat Energy signed a Crude Purchase
Agreement (CPA) with Waltersmith Petroman Oil Limited (Waltersmith)
for the supply of between 2,000 and 4,000 bopd from existing
working interest production from the Ohaji South Field within OML
53, for Waltersmith's 5,000 bopd modular refinery at Ibigwe, in Imo
State. We commenced the supply of 2,000 bopd to the Waltersmith
Refinery in October with 172 kbbls supplied during 2021 and no
pipeline losses recorded.
OPEC+ quotas
During the period, Nigeria's quota stood at 1.6 million barrels
per day, excluding condensates. However, the country's production
has trended below allocated production, largely because of downtime
on major pipelines, crude oil theft and several operational
challenges leading to production capacity constraints in the
assets. Seplat's OPEC quota is currently 68,554 bopd for the
Western Assets and 13,007 bopd for the Eastern Assets. Seplat has
lifted below the OPEC quota for the past 6 months due to the
reasons highlighted above. Following its July meeting, OPEC+ agreed
an increased oil output of 1.8 million bopd for Nigeria, which
restores all the production cuts imposed when the Covid-19 pandemic
started in 2020. The new quota, which excludes condensates, will
take effect in 2022.
Amukpe-Escravos pipeline commissioning
Following the introduction of hydrocarbons into the pipeline in
December 2021 as part of the start-up and testing process,
mechanical completion has now been achieved and we are finalising
crude handling and offtake agreements to enable flowing of oil into
the Escravos terminal, expected in March. Oil Lifting from the
terminal will be undertaken by the terminal operator - Chevron,
expected in Q2.
The 67km, mostly underground pipeline, provides a reliable and
secure export route for liquids from Seplat Energy's major assets
OML 4, 38 and 41, connecting them with the Chevron-operated
Escravos Terminal. Until now, we have relied on the Trans Forcados
System, which has experienced numerous disruptions due to
maintenance and vandalism. The Amukpe-Escravos pipeline has a
capacity of 160,000 bpd, into which the Seplat Energy / NPDC joint
venture is entitled to inject 40,000 bpd.
Including the Warri Refinery, Seplat Energy now has access to
three independent export routes for production from OMLs 4, 38 and
41. It is our intention to utilise all three to ensure there is
adequate redundancy in evacuation routes, reducing downtime that
has adversely affected revenues over a number of years, and
significantly de-risking the distribution of products to
market.
Gas business performance
Alongside the oil business, we have also prioritised the
development and commercialisation of the substantial gas reserves
identified in our assets, to pursue new market opportunities.
Today, Seplat Energy is a leading supplier of processed natural gas
to the Nigerian domestic market, which is independent of global oil
and gas market dynamics. With 100% of volumes dedicated to
supplying key demand centres within the domestic market, our
customers include power generation companies and the National Gas
Marketing and Distribution Company, which serves the power
generation, industrial and agricultural sectors. Seplat Energy is
therefore strategically important to the security of Nigeria's
current and future gas supply.
Seplat Energy maintained a reliable and increased gas supply to
customers during the year. Working interest gas production for the
period was 107.9 MMscfd at an average selling price of $2.85/Mscf
(2020: 101 MMscfd, $2.87/Mscf). The Gas business contributed 41.2%
of the Group's volumes on a boepd basis.
Gas pricing
The price of gas for power generation (Domestic Supply
Obligation), which accounts for about 30% of our gas volumes, was
reduced from $2.50/Mscf to $2.18/Mscf in July 2021 (implemented in
August 2021) following a review of the gas pricing framework by the
Federal Government (FGN). As part of the process to stabilise the
sector, the Government has taken various measures to address
challenges with domestic gas utilisation as well as pricing and
fiscal policy issues limiting adoption. It is expected that the
lower gas price will translate to a reduced electricity tariff for
the end consumer and will improve collection for the entire value
chain, as well as stimulate growth in demand.
The regulated Domestic Supply Obligation (DSO) gas-to-power
price of $2.18/Mscf is expected to remain until a transition to a
'willing buyer/willing seller' regime in 2023 (latest 2025) for a
fully deregulated market. We have assessed the business and
economic impact of the price reduction on Seplat Energy's gas
portfolio and this price review will result in a temporary
reduction of the average weighted gas price to around $2.7/Mscf in
2022. With the FGN's "Decade of Gas" programme promoting gas as
Nigeria's transition fuel towards Net Zero, we are confident of the
growth of gas demand and a corresponding adjustment in the pricing
regime.
Oben Gas Plant
Despite the impact on oil volumes following the force majeure at
the Forcados Oil Terminal in the third quarter, disruption to gas
volumes was minimal because the associated condensate volumes were
stored in the Amukpe buffer tanks, ensuring continuity of gas
production. However, our Associated Gas (AG) station units were put
on standby due to FOT outage.
To ensure the delivery of on-specification gas to our customers,
we completed the installation of heat exchanger trains 1 and 2;
piping installation works on heat exchangers 3, 4 and 5 are ongoing
with commissioning expected in the first quarter of 2022.
Additional third-party volumes
Seplat Energy is focused on developing third-party gas
processing opportunities that can utilise the remaining processing
capacity at Oben. Securing additional volumes from counterparties
will secure long-term supplies of raw natural gas from which we can
optimise the plant's utilisation and generate tolling revenues. We
progressed discussions with targeted third-party gas producers
during the year and expect to conclude terms shortly.
Sapele Gas Plant
Work continues on the new Sapele Gas Plant with project progress
at 45%. Upon completion, the processing capacity will be 85 MMscfd.
The upgraded facility will produce gas that meets export
specifications, and the LPG processing unit module will enhance the
economics of the plant, as well as ensure that gas flaring is
eliminated.
ANOH Gas Processing Plant
We have made good progress on the ANOH plant but have seen some
delays in shipments and releasing equipment from the ports. To
date, we have achieved 84% overall project completion at the gas
plant site. Our government partner, the Nigerian Gas Company, (NGC)
is delivering the pipelines that will take the gas from ANOH to
Oben, namely the 23km spur line and the Obiafu-Obrikom-Oben (OB3)
pipeline.
The OB3 pipeline project has seen a number of failed attempts to
complete the 1.85km river crossing, which is needed to complete the
pipeline. However, the latest contractor is making progress and the
HDD drilling stands at 20% complete. We do not anticipate the OB3
pipeline to delay the completion of the overall ANOH project.
The Spur Line project has seen significant delays due to
contracting issues and payments. We have been informed that the
milling of the line pipes, which is being undertaken in China, will
now commence in Q2 and therefore will not arrive Nigeria until
later this year. The latest schedule provided by NGC shows
completion in Q4 2022 / Q1 2023.
We had earlier communicated a first gas date by mid-year 2022,
but based on our current risking, we now expect further delays of
between 9-12 months to the original timeline, with the spur line
expected to be the last piece of infrastructure delivered.
The upstream development, including the drilling of six
production wells, will be delivered by the upstream unit operator
SPDC. We expect that the two wells on which drilling commenced in
2021 will be completed this year.
Located at OML 53 (in a unitised field between Seplat JV's OML
53 and SPDC JV's OML 21), the ANOH Gas Processing Plant development
will drive the next phase of growth for Seplat Energy's core
Midstream Gas business. The 300 MMscfd midstream gas processing
plant is the most advanced of the FGN's seven critical gas projects
and is central to the National Gas Master Plan to develop and
expand the indigenous domestic gas market for additional power and
industrial projects.
The ANOH plant is being built by AGPC, which is an Incorporated
Joint Venture (IJV) owned equally between Seplat Energy and the
NGC, a wholly owned subsidiary of the Nigerian National Petroleum
Corporation ("NNPC"). In February 2021, AGPC successfully raised
$260 million in debt to fund the completion of the ANOH project.
The project is now fully funded following completion of equity
investments of $210 million by each partner ($420 million
combined). The plant construction cost is expected to be no more
than $650 million, inclusive of financing costs and taxes, which is
significantly lower than the original projected cost at Final
Investment Decision (FID) of $700 million.
Net Zero by 2050
Seplat Energy supports the goals of the Paris Agreement and is
in step with society's objective to get the world to net zero
carbon emissions by 2050, if not before. Around 90% of the
Company's Scope 1 and 2 emissions come from flaring of associated
gas. Through investments in decarbonisation projects over the next
two years, we plan to focus on maximising gas-to-grid options,
which will capture and monetise gas for productive use, drive LPG
production and put the Group on track to end routine flaring by
2024.
Aside from ending routine flares, we are investing in other ways
to decarbonise our operations such as replacing diesel with LPG or
LNG and onsite solar energy generation. Longer-term, as part of
Nigeria's energy transition, we will selectively target
opportunities in solar energy projects, which alongside our
gas-to-power developments, will be critical to providing an
alternative to Nigeria's expensive and extensive diesel generated
electricity.
Outlook and plans for 2022
Full-year production guidance for 2022 is set at 50,000 to
60,000 boepd on a working interest basis, comprising 30,000 to
35,000 bopd liquids and 116 to 150 MMscfd (20,000 to 25,000 boepd)
gas production. This guidance does not include any contribution
from MPNU and the ANOH Gas Plant.
We expect production uptime of 75% for evacuation through the
TFS and 90% for evacuation via the AEP, the latter being our
preferred export route from OMLs 4, 38, & 41.
Capital expenditure for 2022 is expected to be around $160
million. We expect to drill a minimum of ten wells, including the
Sibiri exploration well and one appraisal well, complete ongoing
projects, invest in maintenance capex to secure the existing assets
and continue investments in gas. The 2022 drilling programme is
designed to address production decline and along with completion of
maintenance activities, will support long-term production levels
from the assets. With the recovery in oil prices, rig-based and
other project activities activity will ramp-up in 2022.
Facilities and engineering projects will focus on delivery of an
upgraded integrated gas processing facility at Sapele and further
upgrades to the liquid treatment facility to enable increased
deliveries of dry crude. Towards our goal to end routine flaring by
2024, we will focus on Oben, Amukpe, Sapele & Jisike end of
routine flaring projects, which will capture and monetise gas for
productive use.
In OML 53, in addition to drilling, we plan to complete the
Jisike flow station debottlenecking and gaslift compressor station
and installation of the Ohaji South Lease Automatic Custody
Transfer (LACT) Unit.
For the non-operated assets, in OML 40, in additional to the
drilling plans, facilities and engineering work will focus on the
Gbetiokun facilities upgrade to optimise the Gbetiokun barging
operations; whilst we complete all front-end activities for the
Gbetiokun to Adagbasa pipeline which will replace the barging of
the produced crude. In OPL 283, we have planned one gas well
re-entry for production testing and the Igbuku gas plant design
(FEED). The delivery of the 2022 workplan will be underpinned by a
strong commitment to safety, asset integrity, GHG emissions
reduction and operational excellence.
Financial review
Revenue and other income
Revenue from oil and gas sales in 2021 was $733.2 million, a
38.2% increase from the $530.5 million achieved in 2020.
Crude oil revenue was $618.4 million (2020: $417.9 million),
48.0% higher than 2020, largely reflecting higher average realised
oil prices of $70.54/bbl for the period (2020: $39.95/bbl). The
total volume of crude lifted in the year was 8.8 MMbbls, lower than
the 10.5 MMbbls lifted in 2020, due to the decrease in production
following the suspension of exports at the FOT. In addition, the
Group's 2021 produced liquid volumes were subject to reconciliation
losses of 14.5%, compared to less than 10% in the corresponding
period in 2020. We expect these to improve significantly when we
evacuate the bulk of our crude through the Amukpe-Escravos
underground pipeline.
Gas sales revenue increased by 2.0% to $114.8 million (2020:
$112.5 million), due to higher gas sales volumes of 39.4 Bscf
compared to 37.1 Bscf in 2020, which reflects new gas wells coming
onstream during the period. The average realised gas price was
slightly lower, at $2.85/Mscf (2020: $2.87/Mscf) and reflects the
reduction applied to the DSO gas-to-power volumes from August
2021.
Other income of $20.1 million includes an underlift $13.9
million (shortfalls of crude lifted below Seplat's share of
production, which is priced at the date of lifting and recognised
as other income) representing 152 kbbls and $5.2 million tariff
income generated from the use of the Company's pipeline. In
addition, there was a $5.4 million reversal of decommissioning
obligation no longer required for Eland operations in the
period.
Gross profit
Gross profit increased by 128.9% to $285.2 million (2020: $124.6
million). The non-production costs primarily consisting of
royalties and DD&A totalled $270.9 million, compared to $228.9
million in the prior year. The higher royalties were the result of
higher oil prices, and the DD&A charge for oil and gas assets
increased to $141.1 million (2020: $127.5 million), because of a
higher depletion rate applied following a reclassification and
revision of previous 2P estimates compared to the prior year.
Direct operating costs, which include crude-handling fees,
rig-related costs and operations and maintenance costs amounted to
$172.1 million in 2021, 2.6% higher than $167.7 million in 2020.
The increase was primarily because of the higher operational and
maintenance costs of $107.9 million that include unaccrued late
charges of $13.8 million related to the OML 40 asset operated by
NPDC. On a cost-per-barrel equivalent basis, production opex was
higher at $9.9/boe (2020: $8.9/boe) due to the additional costs
detailed above and the average working interest production reducing
in 2021 compared to 2020. However, a continuous cost reduction
drive for production evacuation from the Gbetiokun and Ubima fields
resulted in a 26.4% reduction in barging and trucking costs, to
$11.7 million (2020: $15.9 million).
IAS impairments reversal
As previously reported, under IAS 36 the Company identified the
need to revalue its assets due to the significant economic
uncertainty of the Covid-19 crisis in 2020 and booked a non-cash
provision of $114.4 million across non-financial assets in the
period. Following a reassessment of the business models and
assumptions at the end of 2021, a reversal of $74.7 million was
recognised to reflect the current and expected higher oil price
environment.
Operating profit
The operating profit for the year was $250.7 million, compared
to an operating loss of $31.7 million in 2020 (which resulted
mainly from the $160.9 million impairment charges).
During the year, the Group recognised impairment losses
totalling $38.1 million, which include financial asset charges of
$22.6 million for outstanding receivables and non-financial asset
charges of $15.2 million for the rigs. This was offset by the $74.7
million impairment reversal described above.
General and administrative expenses increased by 5.4% to $80.1
million (2020: $76.0 million) and reflect the increase in
administrative activities across the business compared to the
previous year, which was more heavily impacted by the Covid-19
pandemic and its associated reduction in activities.
An EBITDA of $371.8 million adjusts for non-cash items which
include impairment, abandonment, and exchange losses, equating to a
margin of 50.7% for the year (2020: $265.8 million; 50.1%).
Taxation
The income tax expense of $60.2 million reflects a higher
assessable profit driven by higher accounting profit compared to
the prior year, and represents an effective tax rate of 34% (2020:
$5.1 million; 6%). The tax charge comprises a deferred tax charge
of $22.6 million and a current tax charge of $37.6 million. The
deferred tax charge is mainly driven by the unwinding of previously
unutilised capital allowances.
Net result
The profit before tax was $177.3 million (2020: $80.2 million
loss before tax) and profit for the year was $117.2 million (2020:
$85.3 million net loss). The resultant basic earnings per share was
$0.24 in 2021, compared to $0.13 basic loss per share in 2020.
Cash flows from operating activities
Cash generated from operations in 2021 was $394.3 million (2020:
$329.4 million). Net cash flows from operating activities were
$369.8 million (2020: $308.7 million), after accounting for tax
payments of $12.9 million (2020: $10.4 million) and a hedge premium
of $9.0 million ($8.4 million). Free cash flow for the period
amounted to $200 million (2020: $163.9 million).
The Group received $235 million from the major JV partner
towards the settlement of cash calls. The major JV receivable
balance now stands at $83.9 million, down from $107.1 million at
the end of 2020.
Cash flows from investing activities
Net capital expenditure of $136.4 million consisted of $37.7
million towards completing five development oil wells (Umuseti 07,
GB-06, 07, 08, 09) and $26.3 million for completing two new gas
wells (Oben 50, 51) and two workover wells (Oben 44, 46).
Associated facilities and engineering costs amounted to $72.4
million. We realised significant cost savings from drilling in the
period because of the relatively lower cost workover operations
compared to new drills carried out for two Oben gas wells in
addition the optimisation of drilling parameters and logistics
applied in the execution of the Gbetiokun wells.
Payments for non-oil and gas assets amounting to $33.5 million
relates to the net effect of consideration for the four Cardinal
rigs at $36 million purchased in October 2021 and $3.5 million for
spares classified as inventory. The rigs were funded out of already
restricted funds (excluded from previous cash flow statements) held
at Access Bank and the Federal High Court of Nigeria, as previously
disclosed.
Seplat Energy received $4.9 million in the period through the
allocation of 94.2 kbbls of crude oil from OML 55. Recovery in the
period is below expectations and impacted by significant sabotage
along the NCTL and TNP pipelines, with a theft factor of up to 60%
recorded. The next lifting due to Seplat Energy is scheduled for
March 2022 (previously December 2021 but delayed because of
evacuation challenges) and we continue to work with BelemaOil to
optimise production and sustain recovery of the remaining discharge
amount. Out of $330 million to be paid to Seplat Energy, $129.9
million has been recovered with $200.1m outstanding.
Cash flows from financing activities
Net cash outflows from financing activities were $100.8 million
(2020: $217.4 million). Proceeds from loans and borrowings of
$671.0 million reflects the debt restructuring where the Group
offered senior notes of $650 million. The gross proceeds of the
notes were used to redeem the existing $350 million senior notes
and to repay in full drawings of the $250 million RCF. It also
reflects a further $10.0 million drawn from the Westport RBL
facility and $11.0 million drawn on the $50 million off-take
facility to support drilling operations at Elcrest. Payments for
other financing charges, which include $20.4 million transaction
costs on the debt facilities and interest paid on loans, totalled
$89.6 million (2020: $65 million). The dividend payment for the
period totalled $73.4 million (2020: $58.3 million), net of
withholding taxes is $15.1 million higher because of timing of
quarterly dividend distribution introduced in 2021.
A charge of $4.9 million relates to the share buy-back programme
for Seplat Energy's Long-Term Incentive Plan. The programme
commenced on 1 March 2021 and shares are held by the Trustees under
the Trust for the benefit of Seplat Energy employee beneficiaries
covered under the Trust.
Liquidity
The balance sheet continues to remain healthy with a solid
liquidity position.
Net debt reconciliation at 31 December 2021 $ million Coupon Maturity
Senior notes* 648.1 7.75% April 2026
Westport RBL* 108.8 Libor+8% March 2026
Off-take facility* 9.7 Libor+10.5% April 2027
Total borrowings 766.6
Cash and cash equivalents 340.5
Net debt 426.1
* including amortised interest
Seplat Energy ended the year with gross debt of $766.6 million
(with maturities in 2026 and 2027) and cash at bank of $340.5
million, leaving net debt at $426.1 million. Liquidity, which
includes the $350 million RCF available for drawing, a $39 million
undrawn offtake facility plus the cash balance, was more than $700
million at the end of the period.
Dividend
In line with the quarterly dividend policy announced in 2021,
Seplat distributed four dividend payments in 2021 and paid out
$73.4 million. The Board has recommended a final dividend of US2.5
cents per share for the financial year 2021, which will bring the
total dividend declared for 2021 to $0.10 per share (2020: $0.10
per share).
Subject to approval of shareholders, the recommended dividend
will be paid shortly after the Annual General Meeting, which will
be held in Lagos, Nigeria, on 18 May 2022.
Hedging
Seplat's hedging policy aims to guarantee appropriate levels of
cash flow assurance in times of oil price weakness and volatility.
For 2021, the Group had in place dated Brent put options as
follows: (i) for Q1, 1.0 MMbbls at a strike price of $30/bbl and
1.0 MMbbls at a strike price of $35/bbl; (ii) for Q2, 2.0 MMbbls at
a strike price of $35/bbl; and (iii) for Q3, 1.0 MMbbls at a strike
price of $35/bbl and 1.0 MMbbls at a strike price of $40/bbl. The
$11.1 million hedging costs were recognised as fair value charges
in the period.
This hedging programme has been continued in 2022 with put
options for 5.0 MMbbls through Q3 2022 at an average premium of
$1.41/bbl as follows: (i) for Q1, 1.0 MMbbls at a strike price of
$50/bbl and 1.0 MMbbls at a strike price of $55/bbl; (ii) for Q2,
2.0 MMbbls at a strike price of $55/bbl; and (iii) for Q3, 1.0
MMbbls at a strike price of $55/bbl.
The Board and management team continue to 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.
Credit ratings
Seplat maintains corporate credit ratings with Moody's Investor
Services (Moody's), Standard & Poor's (S&P) Rating Services
and Fitch. The current corporate ratings are as follows: (i)
Moody's B2 (stable); (ii) S&P B (stable) and (ii) Fitch B
(stable).
Elimination of related-party transactions
In our continuous efforts to promote world-class governance, all
related-party transactions (RPT) were eliminated from
1 January 2022.
Petroleum Industry Act 2021
Nigeria's Petroleum Industry Bill was signed into law on 16
August 2021, shortly after the bill received legislative approval
from both the Senate and the House of Representatives. The assent
by the Executive enacts the Petroleum Industry Act, 2021 (PIA 2021)
as the superseding policy to provide legal, governance, regulatory
and fiscal frameworks for the Nigerian petroleum industry, the
development of host communities, and related matters. The PIA 2021
also repeals existing Acts and makes transitional and savings
provisions to accommodate instances of licensees that may choose
not to convert until their current license expires.
We have reviewed the fiscal provisions of the Act, and a
multi-disciplinary project team has been commissioned to review the
impact of Seplat Energy business entering the new PIA regime,
versus the benefits of remaining in the current fiscal regime until
the expiry of our licenses. The analyses will be based on the
life-cycle data of all the assets and the result of the review will
inform management's decision on whether Seplat Energy converts to
the PIA regime or remains in the current tax regime.
Climate change and financial disclosures
Seplat Energy Plc recognises that climate change and the
decarbonisation of the global economy, within the context of the
energy transition, present significant risks and opportunities to
the company's strategy, operations, and financial planning, and to
the delivery of long-term shareholder value. Accordingly, Seplat
Energy will, in the near future:
1. Adopt climate change as a Principal Risk within the company's
risk management framework; and
2. Carry out an assessment of the impact of climate change on
the company's financial statements using scenario analysis as
recommended by the Taskforce on Climate-related Financial
Disclosures (TCFD). Seplat Energy aims to publish an inaugural
TCFD-aligned report in mid-2022
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END
FR EAFAPALAAEEA
(END) Dow Jones Newswires
February 28, 2022 02:00 ET (07:00 GMT)
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