TIDMSEPL
RNS Number : 0028U
Seplat Energy PLC
28 July 2022
Please see the Full Audited Results in attached PDF
http://www.rns-pdf.londonstockexchange.com/rns/0028U_1-2022-7-27.pdf
Seplat Energy Plc
Unaudited results for the six months ended 30 June 2022
Lagos and London, 28 July 2022: 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 2022.
Financial highlights
-- Revenues up 71% from 6M 2021 to $527.0 million, higher realised oil prices of $107/bbl
-- EBITDA up 92% to $342.7 million (adjusted for non-cash items)
-- Strong cash generation of $330.1 million, capex of $70.7 million
-- Strong balance sheet with $350.0 million cash at bank, net debt of $418.6 million
-- Lower production opex of $8.1/boe achieved
-- Average realised gas pricing sustained at $2.76 despite
pricing pressure on domestic gas delivery obligation
-- Q2 dividend of US$2.5 cents per share, taking 6M 2022 total to US$5.0 cents per share
Operational highlights
-- Strong safety record extended to 28.4 million man-hours without lost-time injury from Seplat Energy-operated assets
-- Working interest production improved to 52.4 kboepd in Q2
(liquids 30.3 kbopd, gas 22.1 kboepd),
6M average of 49.9 kboepd (excludes volumes from Ubima, which
was divested in Q1)
-- Amukpe-Escravos Pipeline commercial agreements signed,
continuous injection expected from first week of August
-- Exit from Ubima completed for consideration of $55 million,
with initial payment of $6.4 received in July
-- Agreement for 95% equity farm-in to the Abiala Marginal Field carved out of OML 40
-- Five wells drilled
-- Full-year guidance narrowed to 50-54 kboepd (excludes Ubima)
Update on proposed acquisition of Mobil Producing Nigeria
Unlimited (MPNU)
-- Transformational acquisition announced in February 2022 will
almost triple production and boost reserves
-- Seplat Energy reiterates that the Sales & Purchase
Agreement (SPA) signed on 25 February 2022 to acquire Exxon's
shallow water operations in Nigeria, MPNU, remains valid and the
Company remains confident that the proposed acquisition will be
brought to a successful conclusion in accordance with the law
Q2 corporate updates
-- Ongoing strengthening of governance continues with transition
from founder Chairman to Independent Chairman, Basil Omiyi,
appointed 18 May; three new Board members announced during the
period
-- Samson Ezugworie joins Board in newly created role of Chief Operating Officer
-- 'Tree for Life' decarbonisation initiative launched in May
with a commitment to plant five million trees in five years across
five states in Nigeria
-- Seplat West (OMLs 4,38 &41) recommended for ISO 55001
(Asset Management), a first for African E&P
Roger Brown, Chief Executive Officer, said:
"Production increased strongly in the second quarter, achieving
52.4 kboepd across our operations, and we expect to maintain higher
volumes for the rest of the year now that we plan to export liquids
through the more secure Amukpe-Escravos Pipeline. Having divested
our interest in Ubima because of its high production costs and
export difficulties, we recently acquired a 95% interest in the
Abiala marginal field and plan to begin operations there next year
using existing infrastructure in OML 40. This is consistent with
the strategy for low-cost, low-risk upstream growth we announced
last year."
"We remain confident that our transformational acquisition of
MPNU will be approved, adding significant reserves and production
capacity that will strongly reinforce Seplat Energy's position as
Nigeria's leading indigenous oil and gas producer."
"We have recently launched a roadmap for decarbonisation, with a
clear path to ending routine flaring by 2024. In addition, our
'Tree for Life' initiative will plant five million saplings to
sequester carbon across five states. All of these initiatives
demonstrate our strategic commitment to build a sustainable company
that delivers energy transition for the benefit of all
Nigerians."
Summary of performance
$ million billion
6M 2022 6M 2021 % Change 6M 2022 6M 2021
Revenue 527.0 308.8 70.7% 219.2 120.4
Gross profit 274.3 88.9 208.5% 114.1 34.7
EBITDA * 342.7 178.9 91.6% 142.6 75.0
Operating profit (loss) 245.3 109.4 124.2% 102.0 42.7
Profit (loss) before tax 209.9 62.1 238.0% 87.3 24.2
Cash generated from operations 330.1 125.6 162.8% 137.3 49.1
Working interest production (boepd) 49,924 **50,786 -1.7%
Average realised oil price ($/bbl.) $107.35 $64.69 65.9%
Average realised gas price ($/Mscf) $2.76 $2.86 -3.5%
===================================== ======== ========= ========= ======== ========
* Adjusted for non-cash items **includes Ubima production
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
Investor call
At 09:00 BST / WAT on Thursday 28 July 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 Half year results
Event date 9.00am (BST/WAT) Thursday 28 July 2022
Webcast live link https://secure.emincote.com/client/seplat/seplat014
Conference call and pre-register link https://secure.emincote.com/client/seplat/seplat014/vip_connect
Archive link https://secure.emincote.com/client/seplat/seplat014
====================================== ================================================================
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 / Charles Craven / 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, https://seplatenergy.com/
Operating review
Working interest production for the six months ended 30 June
2022
6M 2022 Q2 2022 6M 2021
Liquids Gas Total Liquids Gas Total Liquids Gas Total
(1)
Seplat % bopd MMscfd boepd bopd MMscfd boepd bopd MMscfd boepd
========= ========= ======== ======= ======= ======== ======== ======= ======== ======= =======
OMLs 4,
38 & 41 45% 17,386 117.7 37,681 17,119 127.9 39,166 19,618 120 40,376
OML 40 45% 8,688 - 8,688 10,150 - 10,150 5,211 - 5,211
OML 53 40% 2,139 - 2,139 1,573 - 1,573 3,275 - 3,275
OPL 283 40% 1,416 - 1,416 1,496 - 1,496 1,159 - 1,159
Total 29,629 117.7 49,924 30,338 127.9 52,385 29,263 120 50,021
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.
Following the decision to exit from the Ubima asset in April
2022, volumes from the marginal field have not been reported
Volumes stated are subject to reconciliation and may differ from
sales volumes within the period.
Production
Working interest production for 6M 2022 averaged 49,924 boepd,
(6M 2021: 50,021 boepd, excluding Ubima), with an oil / gas mix of
59% and 41%, respectively. Within this, liquids production was up
1.3% year-on-year, to 29,629 bopd. Second-quarter total production
averaged 52,385 boepd, up 10.0% from the previous quarter (Q1
2022). The higher overall production in Q2 was from higher oil and
gas volumes, up 4.3% and 19.1%, respectively, because of an
improvement in overall uptime.
Compared to the first half of 2021, lower volumes from OMLs 4,
38 and 41 were primarily due to outages in the Trans Forcados
System that resulted in a third-party downtime of 16%, exacerbated
by scheduled and unscheduled maintenance activities leading to a
total downtime of 23%. However, the impact of future FOT (Forcados
Oil Terminal) outages on production from OMLs 4, 38 and 41 is
expected to be alleviated by our use of the Amukpe-Escravos
Pipeline from August 2022, which will deliver liquids to the
alternative Escravos terminal through more secure underground
pipeline.
Despite evacuation constraints, significantly higher volumes of
8,688 bopd were achieved from OML 40 (6M 2021: 5,211 bopd) and
following the deployment of additional vessels, 10,150 bopd
production was achieved in the second quarter of 2022.
At our smaller OML 53 operation, which contributed less than 11%
of liquids in 2021, production was affected by major disruption to
export operations in Eastern Nigeria, although we continue to
export 2,000 bopd to the nearby Waltersmith Refinery.
Six-month gas volumes were down 1.9% year-on-year to 117.7
MMscfd, impacted by lower gas supply in Q1 2022 when price
renegotiation with customers and issues with a hot oil burner at
the Oben Gas Plant affected production. However, following
successful conclusion of these price discussions and installation
of a new burner, gas production improved significantly to 127.9
MMscfd in Q2 2022.
Overall, the Group's oil and gas production for the period
totalled 9.0 MMboe compared to 9.1 MMboe in the same period in 2021
(excluding Ubima).
Drilling activities
The Group's ongoing drilling programme has a minimum of ten
wells planned for 2022 to arrest decline and grow production across
the assets. We completed three oil wells (Amukpe-05, Opuama-12 and
Gbetiokun-13 well, which was spudded late 2021) and concluded
drilling on the Sibiri exploration well. The Owu-02 (appraisal
well), Opuama-13 and Oben-52 oil wells were spudded in the second
quarter with drilling progressing according to plan.
As reported in the 3M 2022 results, the Sibiri exploration 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.
We continue to work with our partners to secure regulatory
approval to carryout extended well testing (EWT) to confirm
producibility, among other parameters critical to full field
development.
We have successfully moved all four rigs acquired from Cardinal
Drilling to Seplat Energy well locations. Following a post-rig move
survey of all rig equipment, two rig inspection vendors were
selected to carry out the Rig Inspection and Certification work.
The Company expects that the recommended repairs will be concluded,
and the rigs commissioned by the end of 2023.
Upstream business performance
Seplat Energy's liquids (oil and condensate) operations produced
5.3 MMbbls on a working interest basis in 6M 2022
(6M 2021: 5.4 MMbbls). Production in the period was affected by
evacuation constraints, Ubima exit, and other deferments tied to
maintenance activities. Production downtime for the Group in the
period was 23%.
Seplat West, which holds the working interest and operates our
major assets (OML 4, 38 & 41), has been recommended for ISO
55001 Asset Management Systems certification, reflecting our
commitment to operational excellence across the Group. We believe
this is the first African oil and gas operation to achieve such
certification.
Pipeline vandalism in Eastern Nigeria, on the route that
evacuates oil from OML 53, has led to a full production shut-in of
around 1,000 bopd (gross) at Jisike since February. However, the
Company continues to evacuate produced volumes of around 2,000 bopd
from Ohaji to the Waltersmith Refinery. Overall, OML 53 contributes
less than 11% of total liquids based on 2021 volumes. We have
engaged with our JV partner (NAPIMS) to operationalise an
alternative evacuation option of trucking/barging for Jisike and
Ohaji South fields.
Ubima marginal field exit
A settlement agreement was reached in Q1 2022 with the JV
Partner All Grace Energy Ltd. (AGEL) to divest our subsidiary
Wester Ord Oil and Gas Nigeria Ltd.'s (WON) rights in the Ubima
Marginal Field for a consideration of $55 million. In accordance
with agreement, AGEL began payments to WON in July, with a payment
of $6.4 million.
Ubima is in a high operating cost environment with major
evacuation challenges and substantial capital expenditure would
have been required to create more secure evacuation routes for
production from the field. The decision to exit will enable the
Company to invest in other parts of its business that generate
higher returns. Following the execution of settlement agreements
and transfer of rights in the asset to AGEL, WON derecognised both
asset and liabilities in H1 2022 (Ubima's current reserves of
approximately 2 MMbbls). Ubima's production has been removed from
the average daily production stated in these results.
Farm-in to Abiala marginal field
Following the 2020 Marginal Field Bid Round in Nigeria, Naphta
Global E&P Ltd. (Naphta) was awarded 100% equity in the Abiala
marginal field carved out of OML 40 by the NUPRC. The marginal
field contains 2C gross oil resources of around 23 MMbbls and 2U
gross resources of around 54 MMbbls.
Elcrest (45% owned by Seplat Energy) has entered into an
agreement with Naphta for a 95% equity farm-in into the Abiala
marginal field, while Naphta will have a 5% carried interest.
Elcrest will also assume the role of Operator and Technical &
Financial Partner in the Elcrest/Naphta Joint Venture. The Heads of
Agreement was executed with a signature bonus of $12 million paid
to NUPRC. The transaction represents a consolidation of the
Company's strategic position on the OML 40 block and provides an
early monetisation opportunity using existing OML 40 facilities,
subject to agreement with NPDC (Nigerian Petroleum Development
Company), which operates the OML 40 Asset.
In developing the field, Elcrest is targeting first oil by end
of Q2 2023 and plans to focus on low-cost development with early
monetisation opportunities that leverage existing contractual
positions to accelerate the field's development. Seplat Energy will
also explore how to optimise its tax position to the extent
possible under the new PIA.
Amukpe-Escravos pipeline
Following mechanical completion of the pipeline, Seplat Energy
has signed all the necessary offtake and crude handling agreements.
Dewatering of the AEP line has commenced and the continuous
injection of crude is expected by the first week of August. This
therefore allows us to commence lifting from the Chevron terminal
during this quarter. The mostly underground pipeline will provide
greater revenue assurance through reduction in losses and
downtime.
Midstream Gas business performance
Working interest gas volumes for the period were 117.7 MMscfd
(6M 2021: 120 MMscfd). The Gas business contributed 41% of the
Group's volumes on a boepd basis and 10.9% of Group revenues. Price
renegotiation with customers was concluded in the period and
following the DGDO gas pricing revision in August 2021, the average
gas price achieved was $2.76/Mscf. During the period we signed
short-term gas sales agreements (GSAs) with three new customers,
two of which commenced offtake at a combined rate of 66 MMscfd in
January and March. The third customer will commence offtake of 20
MMscfd in Q4 when conditions precedent to commence are expected to
have been satisfied.
In the second quarter, gas sales volumes were impacted by
network pressure affecting offtake by our customers downstream, by
the shutdown of the Oben gas plant for repairs of critical
equipment and by the well testing campaign carried out.
ANOH Gas Processing Plant
Seplat Energy continues to make progress on the ANOH plant and
has achieved 87% overall project completion at the gas plant site.
The 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.
Drilling on the 1.85km River Niger crossing has encountered some
technical issues on a small section of the crossing, and this is
needed to complete the OB3 pipeline project. The partner, NGC, is
confident of resolving this and Seplat is engaging constantly as
resolution options are considered.
In addition, on the separate spur line project, the Company has
been informed that the milling and coating of the outstanding line
pipes for the spur line project, which is being undertaken in
China, is nearing completion. Shipping out of China is expected in
Q3 2022.
The latest schedule provided by NGC shows completion of both OB3
and Spur Line in Q1 2023, and therefore the Company maintains its
timeline of first gas in H1 2023.
NERC initiative to assure gas supply and revenue collection
To secure the sustainability of gas supply to the Generation
Companies (Gencos), the Nigerian Electricity Regulatory Commission
(NERC) has established a pathway to reactivate partial
securitisation of Gas Contracts for the Nigerian Electricity Supply
Industry.
The commission facilitated contractual agreements between the
generation, transmission, and distribution companies to guarantee a
daily average of 5,000 MW of electricity to consumers. The order,
which became effective on 1 July 2022, proposes a payment waterfall
to address the current issue of the non-collection of full revenue
for gas sales for Domestic Gas Delivery Obligation (DGDO
Customers). In addition, the order gives the gas suppliers and gas
transporters priority over the Gencos in terms of payments. This is
a positive development that will guarantee offtake, improve revenue
collection and reduce trade receivables, which currently stands at
$27 million for the Company's existing DGDO GSAs.
ESG developments
Seplat Energy is committed to environmental protection and is in
step with global objectives to reduce carbon greenhouse gas
emissions. Through investments in decarbonisation projects, the
Company has developed a road map with defined operational targets
towards eliminating flares from Seplat Energy operations over the
next two years. We hope to reduce routine flaring by 40% by the end
of 2022 (exit rate compared to a start-of-year baseline) primarily
through the installation of gas compressors at Sapele. Flare
reduction initiatives are also ongoing at the Oben and Amukpe
stations and in June 2022, daily flares at Oben and Amukpe were
reduced by 8.2% and 23.5%, respectively.
Aside from ending routine flares, we are investing in other ways
to decarbonise our operations, such as replacing diesel with LPG
(Liquefied Petroleum Gas) and onsite solar energy generation.
To offset the residual carbon emissions, the Seplat Energy 'Tree
for Life' initiative was launched in May and is a commitment to
plant five million trees in five years across Nigeria, starting
with the five states of Edo, Delta, Imo and two Northern
states.
HSE performance
Safe and responsible operations are critical to the delivery of
Seplat Energy's strategy. The Company has now achieved more than
28.4 million man-hours without LTI on its operated assets.
Staff and contractors worked a total of 4.2 million man-hours
with no fatalities or lost-time injuries. There was one major
injury incident in the period, which was managed according to the
Company's governing processes. Improvements have been implemented
and learnings shared to enable continuous improvement and improve
mitigating actions.
There were 24 HSE incidents in total, compared to 21 incidents
in the first six months of 2021, including five reportable oil
spills and four 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. A spike in positive
cases was observed in the second quarter, prompting the Company to
re-enforce all Covid-19 control protocols at our field operations
and offices. These measures will be kept in place for as long as
necessary.
Board changes
On 22 April 2022, the Company announced the appointment of three
new Directors, effective 18 May 2022: Mrs. Bashirat Odunewu
(Independent Non-Executive Director); Mr. Kazeem Raimi
(Non-Executive Director); and Mr. Ernest Ebi (Non-Executive
Director).
Following the decision of the founding Chairman ABC Orjiako to
step down from the Board at the 2022 AGM, Basil Omiyi was appointed
Independent Non-Executive Chairman on 18 May 2022. Charles
Okeahalam was appointed Senior Independent Non-Executive
Director.
On 30 June 2022, the Company announced the appointment of Mr.
Samson (Sam) Chibogwu Ezugworie as the new Chief Operating Officer
and Executive Director on the Board of the Company effective 1 July
2022. Mr. Ezugworie comes with over 30 years' extensive industry
experience, the last 25 years being with Royal Dutch Shell in
Nigeria and overseas. Mr. Ezugworie has built a strong reputation
as a business / safety / ethical leader and integrator.
Mr. Effiong Okon, the Operations Director and Executive Director
on the Board of Seplat Energy, stepped down from the Board on 1
July 2022. Mr. Okon assumed a new position as the Director New
Energy to significantly accelerate the development of the new
energy business and advance the Company's agenda on energy
transition.
Update on proposed acquisition of MPNU
The Company announced on 11 July that the Nigerian National
Petroleum Company Limited (NNPC) commenced an action at the State
High Court of the Federal Capital Territory in Abuja, Nigeria
(State High Court) in relation to the acquisition of the entire
shares of MPNU. MPNU, its shareholders (Mobil Development Nigeria,
Inc. and Mobil Exploration Nigeria, Inc.), and the NUPRC are named
as defendants in the action. This follows NNPC's request to the
State High Court to declare that a dispute has occurred between
itself and MPNU in relation to the interpretation of pre-emption
rights under their Joint Operating Agreement (JOA) and order NNPC
and MPNU to arbitration as required by the JOA.
The State High Court made an ex-parte order of interim
injunction restraining the defendants from completing any
divestment in MPNU, including the SPA signed with Seplat Energy
Offshore Limited, while the matter was before the Court.
Neither Seplat Energy nor Seplat Energy Offshore Limited is a
party to the suit. The Company cannot provide further comments as
the matter is awaiting resolution by the State High Court and is
therefore sub judice. Seplat Energy reiterates that the SPA is
still valid and subsisting, and the we remain confident that the
proposed acquisition will be brought to a successful conclusion in
accordance with the law. We will provide further updates as and
when applicable.
Outlook
Full-year production guidance for 2022 reflects expected third
party downtime and the derecognition of Ubima and has been narrowed
to 50,000 to 54,000 boepd on a working interest basis, comprising
30,000 to 33,000 bopd liquids and 116 to 121 MMscfd (around 20,000
to 21,000 boepd) gas production.
Capital expenditure expectation for 2022 remains at around $160
million. The Company expects to drill four additional oil wells in
the coming quarter to arrest decline and support production growth
across the asset base, complete ongoing projects, invest in
maintenance capex to secure the existing assets and continue
investments in gas.
Financial review
Revenue
Revenue from oil and gas sales in 6M 2022 was $527.0 million, a
70.7% increase from the $308.8 million achieved in 6M 2021.
Adjusted for an underlift (shortfalls of crude lifted below Seplat
Energy's share of production, which is priced at the date of
lifting and recognised as other income) of $42.7 million
representing 463 kbbls, total revenues were $569.7 million.
Crude oil revenue was 91.7% higher than for the same period last
year at $469.2 million (6M 2021: $244.8 million), reflecting higher
average realised oil prices of $107.35/bbl . for the period (6M
2021: $64.69/bbl .), the increase being mostly attributable to the
impact of the conflict in Ukraine on global energy prices. The
total volume of crude lifted in the period was 4.4 MMbbls, higher
than the 3.9 MMbbls lifted in 6M 2021. In addition, the Group's 6M
2022 produced liquid volumes were subject to reconciliation losses
of 12.2%. We expect these to improve from August, when we begin to
evacuate the bulk of our crude through the new Amukpe-Escravos
underground pipeline.
Gas sales revenue decreased by 9.5% to $57.8 million (6M 2021:
$63.9 million), due to lower gas sales volumes of 21.3 Bscf
compared to 21.7 Bscf in 6M 2021, because of lower customer
offtake, production stoppages at Oben, as well as outages on the
Trans Forcados Pipeline. In addition, the average realised gas
price was lower at $2.76/Mscf (6M 2021: 2.86 Mscf), reflecting the
reduction applied to the DGDO (Domestic Gas Delivery Obligation)
gas-to-power volumes from August 2021.
Gross profit
Gross profit increased by 208.5% to $274.3 million (6M 2021:
$88.9 million) and benefitted from higher realised oil prices.
Non-production costs consisted primarily of $108.8 million
royalties and DD&A of $70.4 million, compared to $63.4 million
royalties and $64.5 million DD&A in the prior year. The higher
royalties were the result of higher oil prices.
Direct operating costs, which include crude-handling charges
(CHC), barging/trucking, operation and maintenance costs, amounted
to $67.6 million in 6M 2022, 23.7% lower than $88.6 million
incurred in 2021. This was partly because of a $5.3 million (net)
credit note arising from 2020 & 2021 reconciliation of CHC
invoices that offset fees incurred in the period as well as lower
operation and maintenance costs.
On a cost-per-barrel equivalent basis, the normalised production
opex (excluding the above credit note) was $8.1/boe, 16.5% lower
than $9.7/boe incurred in 2021 when extensive asset integrity works
were carried out.
Operating profit
The operating profit for the period was $245.3 million, compared
to $109.4 million in 6M 2021, an increase of 124.1%.
An impairment charge of $14.9 million was recognised in the
period. This includes a non-financial asset charge of $8.5 million
reflecting a provision for long outstanding line pipes and a $6.4
million provision for the ageing of some government receivables. We
expect these to reverse once recoveries are secured.
General and administrative expenses of $46.4 million were 27.1%
higher than the H1 2021 costs of $36.5 million. The increase was
driven by higher travel and training costs, following relaxation of
travel restrictions, and other increases to staff salaries and
emoluments.
An EBITDA of $342.7 million adjusts for non-cash items, which
include impairment and exchange losses, equating to a margin of
65.0% for the period (6M 2021: $178.9 million; 57.9%).
Net result
The profit before tax was 238% higher at $209.9 million (6M
2021: $62.1 million). The income tax expense of $126.6 million
includes a current tax charge (cash tax paid) of $36.4 million and
deferred tax charge of $90.2 million. The deferred tax charge is
driven by the unwinding of previously unutilised capital allowances
and movements in underlift/overlifts in the current year. The
effective tax rate for the period was 60% (6M 2021: 42%).
The profit for the period was $83.3 million (6M 2021: $36.2
million) with a resultant basic earnings per share of $0.14 in 6M
2022, compared to $0.10 per share in 6M 2021.
Cash flows from operating activities
Cash generated from operations in 6M 2022 was $330.1 million (6M
2021: $125.6 million). Net cash flows from operating activities
were $284.3 million (6M 2021: $109.9 million), after accounting for
tax payments of $41.1 million (6M 2021: $12.4 million) and a hedge
premium of $4.7 million (6M 2021: $3.4 million).
The Group continued to record improvements in the recovery of
receivables from the major JV partner and in H1 2022 received $141
million towards the settlement of cash calls. The major JV
receivable balance now stands at $55.5 million, down from $83.9
million at the end of 2021.
Cash flows from investing activities
Net capital expenditure of $70.7 million included $42.1 million
invested in drilling and $28.6 million in engineering projects.
Deposits for investment of $140.3 million include a deposit for
the proposed acquisition of Mobil Producing Nigeria Unlimited,
announced in February of $128.3 million and the $12.0 million
farm-in fee for the Abiala marginal field carved out of OML 40.
The Group received total proceeds of $10.8 million in the period
under the revised OML 55 commercial arrangement with BelemaOil for
the monetisation of 298.4 kbbls of crude oil. In 2022, recovery has
been affected by sabotage along the Nembe Creek Trunk Line and the
Trans Niger Pipeline, with theft factors ranging from 30% to
90%.
Cash flows from financing activities
The Company paid $28.2 million dividends to shareholders in the
period. Other financing charges of $9.4 million reflect the
commitment fee on the $350 million Revolving Credit Facility and
$26.1 million reflects interest paid on loans and borrowings.
Liquidity
The balance sheet continues to remain healthy with a solid
liquidity position.
Net debt reconciliation $ million $ million drawn Coupon Maturity
31 March 2022
Senior notes* 661.7 650.0 7.75% April 2026
Westport RBL* 98.3 110.0 Libor+8% March 2026
Off-take facility* 8.6 11.0 Libor+10.5% April 2027
Total borrowings 768.6 771.0
Cash and cash equivalents (exclusive of restricted cash) 350.0 350.0
Net debt 41 8.6
* Including amortised interest
Seplat Energy ended the first half of the year with gross debt
of $768.6 million (with maturities in 2026 and 2027) and cash at
bank of $350.0 million, leaving net debt at $418.6 million.
Included in the restricted cash balance is $8.0 million and $6.2
million set aside in the stamping reserve account and debt service
reserve account respectively for the revolving credit facility.
Dividend
The Board has approved a Q2 dividend of US2.5 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 12
August 2022. This takes H1 dividend payments to US5.0 cents per
share, 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.
Total volumes hedged in 2022 was 7.5 MMbbls and the program for the
remainder of 2022 consists of dated Brent put options of 3.5 MMbbls
at an average premium of $1.32/bbl . as follows: (i) for Q3, 1.0
MMbbls are protected at a strike price of $55/bbl . and 1.0 MMbbls
at $60/bbl . and (ii) for Q4, 1.5 MMbbls at a strike price of
$65/bbl. Further barrels are expected to be hedged for 2023 in the
coming months in line with the approach to target hedging two
quarters in advance.
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.
PIA 2021
The Petroleum Industry Act (PIA) was signed into law on 16
August 2021. The Group is required to notify the NUPRC of the
decision to either convert to the PIA tax regime or remain in the
existing PPTA regime in October 2022. The conversion deadline is
February 2023. The Group has reviewed the fiscal provisions of the
PIA and a preliminary impact analysis across all assets has just
been concluded resulting in an overall favourable position for
Seplat Energy to convert to the PIA regime for all its assets.
However, certain issues such as relinquishing parts of the existing
acreages are still under consideration by the Board.
There are some compliance requirements of the PIA that are
applicable to all companies in the industry irrespective of
conversion and a multi-disciplinary team is managing the Group's
readiness to comply with the various aspects.
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 27 July 2022 was 36.2%.
Directors' interest in shares
In accordance with Section 301 of the Companies and Allied
Matters Act, 2020, the interests of the Directors (and of persons
connected with them) in the share capital of the Company (all of
which are beneficial unless otherwise stated) are as follows:
31-Dec-20 31-Dec-21 27-July-22
------------------- ----------------- ----------------- ------------------------------------ -----------------
No. of Ordinary No. of Ordinary As a percentage No. of Ordinary As a percentage
Shares Shares of Ordinary Shares of Ordinary
Shares in issue Shares in issue
=================== ================= ================= ================= ================= =================
Roger Brown 2,840,585 3,224,702 0.55% 4,296,462 0.73%
Samson Ezugworie n/a n/a 0.00% 0 0.00%
Bello Rabiu n/a 20,000 0.00% 20,000 0.00%
Emeka Onwuka 0 0 0.00% 0 0.00%
Oliver De Langavant 0 0 0.00% 0 0.00%
Charles Okeahalam 495,238 495,238 0.08% 699,990 0.12%
Basil Omiyi 495,238 495,238 0.08% 495,238 0.08%
Nathalie Delapalme 0 0 0.00% 0 0.00%
Arunma Oteh, OON 0 0 0.00% 0 0.00%
Emma Fitzgerald 0 0 0.00% 0 0.00%
Kazeem Raimi n/a n/a n/a 0 0.00%
Bashirat Odunewu n/a n/a n/a 0 0.00%
Ernest Ebi n/a n/a n/a 0 0.00%
Fabian Ajogwu 0 0 0.00% 0 0.00%
------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total 3,831,061 4,235,178 0.71% 5,511,690 0.93%
=================== ================= ================= ================= ================= =================
Substantial interest in shares
On 27 July 2022, the following shareholders held more than 5.0%
of the issued share capital of the Company:
Shareholder Number of holdings %
MPI 120,400,000 20.46
Petrolin Group 81,015,319 13.77
Professional Support 47,929,438 8.15
Sustainable Capital 45,850,413 7.79
Allan Gray Investment Management 44,212,357 7.51
Principal risks and uncertainties
The Board of Directors is responsible for setting the overall
risk management strategy of the Company and the determination of
what level of risk is acceptable for Seplat Energy to bear. The
principal risks and uncertainties facing Seplat Energy at the
year-end are detailed in the risk management section of the 2021
Annual Report and Accounts.
The Board has identified the principal risks for the remainder
of 2022 to be:
-- Infectious diseases outbreak
-- Niger Delta stability, security, and other Geopolitical risks
-- Field operations and project deliverability
-- Low oil price
-- OPEC quota restrictions
-- Climate Change
-- JV receivables and future cash call funding
-- Liquidity risk
Responsibility Statement
The Directors confirm that to the best of their knowledge:
a) The condensed set of financial statements have been prepared
in accordance with lAS 34 'Interim Financial Report';
b) The interim management report includes a fair review of the
information required by UK DTR 4.2.7R (indication of important
events during the first six months and description of principal
risks and uncertainties for the remaining six months of the year);
and
c) The interim management report includes a fair review of the
information required by UK DTR 4.2.8R disclosure of related
parties' transactions and changes therein.
The Directors of Seplat Energy Plc are as listed in the Group's
2021 Annual Report and Accounts. A list of current Directors is
included on the company website: www.seplatenergy.com.
By order of the Board,
B. Omiyi R.T. Brown E. Onwuka
FRC/2016/IODN/00000014093 FRC/2014/ANAN/00000017939 FRC/2020/003/00000020861
Chairman Chief Executive Officer Chief Financial Officer
28 July 2022 28 July 2022 28 July 2022
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.
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END
IR BKOBBDBKBQOB
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