TIDMSEPL
RNS Number : 4186V
Seplat Petroleum Development Co PLC
14 April 2021
14 April 2021
Seplat Petroleum Development Company Plc
2020 Annual Report and Notice of AGM
Seplat Petroleum Development Company Plc ("Seplat" or the
"Company") confirms it has today published its Annual Report and
Accounts for the year ended 31 December 2020 together with the
notice of the Company's eight Annual General Meeting ("AGM") and
forms of proxy. The Company will hold its AGM at 11:00am (local
time) on Thursday 20 May 2021 at 16a Temple Road (Olu Holloway),
Ikoyi, Lagos, Nigeria.
In accordance with Listing Rule 14.3.6 copies of the Company's
Annual Report and Accounts for the year ended 31 December 2020, the
Notice of AGM and proxy forms have also been submitted to the FCA
for publication through the document viewing facility of the
National Storage Mechanism and will shortly be available for
inspection at http:// www.morningstar.co.uk/uk/NSM
In accordance with Disclosure Guidance and Transparency Rule
("DTR") 6.3.5R(3), copies are available on the Company's website,
www.seplatpetroleum.com
The Company's audited financial statements and extracts of the
management report, were included in the Company's Final Results
announcement on 1 March 2021. That information, together with the
Appendices to this announcement, which contains the following
additional information that has been extracted from the 2020 Annual
Report, constitutes the material required for the purposes of
compliance with DTR 6.3.5 only:
-- the Directors' Responsibilities Statement;
-- a description of principal risks and uncertainties that the Company faces; and
-- related party transactions.
This announcement should be read in conjunction with and is not
a substitute for reading the full 2020 Annual Report. Page and note
references in the text below refer to page numbers and notes in the
2020 Annual Report and terms defined in that document have the same
meanings in these extracts.
Enquiries
Seplat Petroleum Development Company plc
Emeka Onwuka, CFO +234 (0) 1 277 0400
Edith Onwuchekwa, Company Secretary/General
Counsel
Carl Franklin, Head of Investor Relations
Ayeesha Aliyu, Investor Relations
Chioma Nwachuku, GM - External Affairs
and Communications
FTI Consulting
Ben Brewerton / Sara Powell +44 (0) 203 727 1000
seplat@fticonsulting.com
Notes to editors
Seplat Petroleum Development Company Plc is a leading indigenous
Nigerian energy company with a strategic focus on Nigeria, listed
on the Main Market of the London Stock Exchange ("LSE") (LSE:SEPL)
and Nigerian Stock Exchange ("NSE") (NSE:SEPLAT).
Seplat is pursuing a Nigeria focused growth strategy and is
well-positioned to participate in future divestment programmes by
the international oil companies, farm-in opportunities and future
licensing rounds. For further information please refer to the
company website, http://seplatpetroleum.com/
Appendices
Appendix A: Statement of Directors' responsibilities
The following Statement of Directors' responsibilities is
extracted from the 2020 Annual Report and Accounts (page 142).
The Companies and Allied Matters Act, 2020, requires the
Directors to prepare financial statements for each financial year
that gives a true and fair view of the state of financial affairs
of the Group at the end of the year and of its profit or loss. The
responsibilities include ensuring that the Group:
1. keeps proper accounting records that disclose, with
reasonable accuracy, the financial position of the Group and comply
with the requirements of the Companies and Allied Matters Act,
2020;
2. establishes adequate internal controls to safeguard its
assets and to prevent and detect fraud and other irregularities;
and
3. prepares its financial statements using suitable accounting
policies supported by reasonable and prudent judgements and
estimates and are consistently applied.
The Directors accept responsibility for the annual financial
statements, which have been prepared using appropriate accounting
policies supported by reasonable and prudent judgements and
estimates, in conformity with International Financial Reporting
Standards (IFRS), the requirements of the Companies and Allied
Matters Act, 2020 and Financial Reporting Council of Nigeria Act,
No. 6, 2011.
The Directors are of the opinion that the financial statements
gives a true and fair view of the state of the financial affairs of
the Group and of its financial performance and cash flows for the
year. The Directors further accept responsibility for the
maintenance of accounting records that may be relied upon in the
preparation of financial statements, as well as adequate systems of
internal financial control.
Nothing has come to the attention of the Directors to indicate
that the Group will not remain a going concern for at least 12
months from the date of this statement.
Signed on behalf of the Directors by:
A.B.C Orjiako R.T. Brown
Chairman Chief Executive Officer
FRC/2014/IODN/00000003161 FRC/2014/ ANAN/00000017939
1 March 2021 1 March 2021
Appendix B: Principal risks and uncertainties
The following principal risks and uncertainties table is
extracted from the 2020 Annual Report and Accounts (pages 30 to
36).
The implementation of our strategy can be hindered by various
risks and uncertainties. The risks that the Board considers most
significant are described here.
Operational risks
Field operations and Third-party infrastructure HSSE risks
project deliverability downtime
------------------------------- ------------------------------
Description Description Description
Failure to manage An over-reliance Oil and gas activities
operational activities on third-party operated carry significant
in line with planned transportation infrastructure levels of HSSE risks
expectations can lead can expose the Company if not properly managed.
to production misses, to an extended period As activity levels
project delays and of production being continue to increase
cost overruns, high shut in. there is a strong
production costs and focus on preventing
earlier than expected major environmental
field decommissioning. (including the emerging
Risk also expanded climate change - GHG
to cover the emerging emissions risk), health
OPEC quota restriction or safety incidents.
risk on production,
resulting in production
shut-ins.
------------------------------- ------------------------------
Mitigation Mitigation Mitigation
Focus on risk management Work is ongoing to Deployment of an
at planning phase secure a second export HSSE Management System
and mitigation plans line to complement in line with best
activated. Compulsory the Trans Forcados practices. Monitoring
'peer-to-peer' review Pipeline. Continue and reporting of HSSE
for high-value projects to explore export performance scorecards
and better project via barging as a back-up at management and
management techniques. option in extreme Board levels. Our
Protracted land acquisition, cases. Have two contingency HSSE systems and process
preparation and rig tanks in Amukpe for are subjected to independent
startup have been partial storage during review and identified
contributory factors shut-in over shorter improvement initiatives
which have received periods. More tanks are deployed. Continual
focused attention are planned. Additional focus on HSSE training
and significant process plans to scope FEED/DED and initiatives on
improvements and improved of a new export line incidence prevention.
communications with in the coming year Emergency Response
JV partner and approving 2021. plan set for any eventuality
regulators to mitigate and comprehensive
delays. Use of smart/ Incident Review panels
intelligent wells to identify and channel
to improve recovery lessons learnt to
and improved rig performance improvement activities.
monitoring and reporting Focus on the delivery
to manage NPTs. on projects earmarked
to reduce and or eliminate
gas flaring as spelt
out under the Company's
'gas flares out roadmap'.
------------------------------- ------------------------------
KPI/Performance metric KPI/Performance metric KPI/Performance metric
Net working interest Net working interest HSSE scorecards
production production LTIF
Operating costs per Days downtime TRIR
boe EBIT
------------------------------- ------------------------------
Strategic pillars Strategic pillars Strategic pillars
1, 2, 3 2, 3 2, 3, 5
------------------------------- ------------------------------
Assessment Assessment Assessment
Very high Very high High
------------------------------- ------------------------------
Trend Trend Trend
Steady. We continue Steady. Remarkably Steady. Though the
to refine our project improved uptime of risk is inherent,
management approach Forcados export system. we will continue to
for improved speed However, risk trend deploy our HSSE risk
of delivery and efficiency, is Steady, even though management in line
conclude the integration there is no near term with best practices
of the newly acquired line of sight for and with strong emphasis
Eland Assets into an alternative evacuation on prevention.
our business, consolidate line, in the sudden
performance across event of prolonged
board, maximise production, outage of the TFP.
maintain a strong Alternative line (AEP)
balance sheet, and is now scheduled for
strategically position Q2 2021 delivery.
the Company for future
growth.
------------------------------- ------------------------------
Operational risks continued
Infectious diseases Sustaining E&A programme
outbreak in Seplat
(e.g. Covid-19)
------------------------------
Description Description
Risk of an index Exploration and appraisal
case manifesting in activities carry significant
Seplat offices or levels of subsurface
field locations. This risk. Sustained E&A
leads to an unsuccessful drilling failure will
initial control of impact the Company's
an index case (probably ability to organically
resulting in communal replace reserves and
spread of the disease production.
in the Seplat community
as a result of late
detection of secondary
contact cases which
may have had close
contacts with index
case or close contacts
from other external
primary sources).
Risk also covers supply
chain disruptions
emanating from the
pandemic i.e. the
extent to which the
disease will have
an impact on all key
projects of the Company
(including ANOH) as
designed in the work
programme (impacting
the supply chain and
major contractors
scheduled to deliver
in a few months).
------------------------------
Mitigation Mitigation
Appointment of the Strict compliance
COVIMOG (monitoring with reservoir management
and response team) guidelines. Building
to assess the dynamics internal capacity
of the virus and report with skilled sub-surface
to leadership weekly. expertise. Drill a
Install hand washing minimum of two exploration
and sanitiser dispensers wells, as well as
across all business continuous M&A work
locations. Avoid large to secure available
crowd and physical opportunities at the
meetings of more than right price.
50 people. Avoid external
meetings; encourage
online meetings. Encourage
staffs and other tenants
on the building on
washing of hands and
use of sanitiser.
Suspend all non critical
travel plans and in
the event of critical
travels, put in place
mandatory self quarantine
and testing. Put in
place mandatory PCR
testing for all field
operations. LT alignment
on business scenarios
to gain stability
post-epidemic. Have
a Business Continuity
Plan in place to curb
post-economic recovery
challenges. Run an
operations impact
assessment and trigger
identification of
quick remediation
strategies/wins across
the business. Manage
press/publicity and
communication to avoid
mis-communication/
wrong press. Declare
work from home with
effective IT support.
------------------------------
KPI/Performance metric KPI/Performance metric
HSSE scorecards Reserve replacement
LTIF
TRIR
------------------------------
Strategic pillars Strategic pillars
1, 2, 3, 4 1, 2, 3, 5
------------------------------
Assessment Assessment
High Very high
------------------------------
Trend Trend
Rising. Trend is Steady. High grading
rising given the second our exploration portfolio
wave of the pandemic through a thorough
with its attendant prospect screening
contagious spread exercise. In the near
and the notable cases term, plan is to commence
recorded. The Company exploration drilling
will sustain the deployment campaign in the West.
of our HSE risk management
in line with best
practices and with
strong emphasis on
reducing the impact
of this unprecedented
pandemic.
------------------------------
External risks
Niger Delta stability Stakeholder management Geopolitical risk
and security relationships
-------------------------------- --------------------------------
Description Description Description
The Company operates Failure to manage Nigeria has at times
in a region where stakeholders can result in its history faced
security incidents in business disruptions political uncertainties
such as kidnappings, and interference. and threats such as
vandalism and criminal The Company prioritises terrorism aimed at
attacks on O&G installations the effective management de-stabilising and
can occur. of relationships with undermining the orderly
all stakeholders including and effective rule
host communities, of central government.
JV partners, government,
regulatory bodies
and shareholders.
-------------------------------- --------------------------------
Mitigation Mitigation Mitigation
Continuous security Successful operation Scenarios and response
monitoring and intelligence of the GMOU agreement options plan set.
work. Quick mechanism with host communities, Crisis management
for security advisory periodic engagement team in place for
to staff and movement and feedback forums. high alert political
restriction for high Tailored CSR programmes, periods. Continue
alert situations. capacity building to partner/network
Active participation and infrastructure with security stakeholders
in the industry pressure developments with and share intelligence
groups to find lasting the host communities. regarding security.
solution. Sustain local content Business continuity
development with priority plans actioned in
to community contractors. light of current geo-political
Organisational focus situation.
and clear strategy
to deliver shareholder
value pursued by the
Board and management.
Corporate governance,
transparency and proactiveness
in dealings with regulators
and JV partners.
-------------------------------- --------------------------------
KPI/Performance metric KPI/Performance metric KPI/Performance metric
LTIR Net working interest Be a highly responsible
TRIR production corporate citizen
Security incidents LTIR Maximise production
Operating cash flow TRIR and cash flows from
Host community incidences existing assets
Commercialise and
produce gas reserves
-------------------------------- --------------------------------
Strategic pillars Strategic pillars Strategic pillars
2, 5 2, 3, 5 1, 2, 5
-------------------------------- --------------------------------
Assessment Assessment Assessment
Very high High High
-------------------------------- --------------------------------
Trend Trend Trend
Steady. Efforts by Steady. We continue Steady.
the Government and to enjoy good working
industry pressure relations with our
groups, aimed at enhancing stakeholders.
security in the region
seems to be paying
off as there was a
significant drop in
targeted oil and gas
facilities attacks
in the region in year
2020. We will continue
our monitoring and
vigilance.
-------------------------------- --------------------------------
Financial risks
Oil price volatility Changes to tax status Availability of capital
and legislation
------------------------------- --------------------------------
Description Description Description
Oil prices have exhibited If the tax regime/legislation The oil and gas industry
a history of volatility under which the Company is highly capital
and can fluctuate operates its assets intensive. Significant
sharply in line with were to change, profitability amounts of capital
external factors. may be impacted. are required to continue
development activities
and fund M&A. Non
funding of cashcalls
by JV partners impacts
activities and liquidity.
------------------------------- --------------------------------
Mitigation Mitigation Mitigation
Hedging continues Perform evaluation Emphasis on compliance
to be our price risk of business plan and with requirements
management tool. Price performance metrics of the JV operating
sensitisation on project exclusive of tax benefits. agreement for effective/strict
economics and cost Project economics JV partner concurrence.
discipline for capital were determined on Board review and approval
projects sanctioning. maximum tax basis of financial strategy
Aggressive focus on to mitigate the impact and debt portfolio
cost reduction. of the now expired management with strong
pioneer tax status. banking relationships.
Impact assessment
of potential tax legislature
monitored at the Board
level.
------------------------------- --------------------------------
KPI/Performance metric KPI/Performance metric KPI/Performance metric
Realised oil price Effective tax rate JV receivables
Operating cash flow Tax status Capex
New M&A activities
------------------------------- --------------------------------
Strategic pillars Strategic pillars Strategic pillars
2 2, 3 2, 3, 5
------------------------------- --------------------------------
Assessment Assessment Assessment
High High Very high
------------------------------- --------------------------------
Trend Trend Trend
Decreasing. In the Steady. PIB is going Decreasing. JV partners
year 2020, we kept through legislative continues to remain
focus of our price process. Versions current in paying
risk management policy in circulation currently cash calls.
to protect the Company's being reviewed to
cash flow stream from assess the impact
downside scenarios. on Seplat valuation.
We will also continue
to take hedge positions
and apply cost reduction
strategies.
------------------------------- --------------------------------
Financial risks continued
Cost control risk Liquidity Foreign exchange risk
----------------------------------- ---------------------------
Description Description Description
Cost reduction remains Liquidity risk is The Company is exposed
central to the Company's the risk that the to exchange rate risk
current operating Company will not be to the extent that
strategy. High operating able to meet its financial balances and transactions
cost and ineffective obligations as they are denominated in
capital cost control fall due. a currency other than
negatively impacts the US Dollar.
operating cash flows
and profitability.
----------------------------------- ---------------------------
Mitigation Mitigation Mitigation
Comprehensive budgeting Manage liquidity The Company has options
process approved by risk by ensuring that to manage its foreign
the joint venture sufficient funds are exchange exposure
partner and the Board. available to meet including financial
Clear cost management commitments as they hedge instruments
targets. Grading of fall due. Uses both such as forward exchange
portfolio opportunities long-term and short-term contracts.
and project ranking cash flow projections
for capital allocation. to monitor funding
Focus on reducing requirements for activities
drilling costs at and to ensure there
well design phase. are sufficient cash
Cost monitoring and resources to meet
periodic reporting. operational needs.
Focus on effective Cash flow projections
contracting strategies take into consideration
for cost reduction. the Company's debts
and covenant compliance.
Surplus cash held
is transferred to
the treasury department
which invests in interest-bearing
current accounts,
time deposits and
money market deposits.
----------------------------------- ---------------------------
KPI/Performance metric KPI/Performance metric KPI/Performance metric
Operating cost per Operating cash flow Operating cash flow
boe Capex Capex
EBIT
Capex
Well costs
----------------------------------- ---------------------------
Strategic pillars Strategic pillars Strategic pillars
2, 3, 5 2 2, 3
----------------------------------- ---------------------------
Assessment Assessment Assessment
High Medium High
----------------------------------- ---------------------------
Trend Trend Trend
Steady. Cost discipline Steady. Improved Steady. Historically,
remains key focus uptime of TFP; improved the Company holds
of the business. JV cash call payment; majority of its cash
oil price rally; and and cash equivalent
strategic debt refinancing in US Dollar. Gas
all have greatly improved contracts are indexed
liquidity risk. in US Dollar.
----------------------------------- ---------------------------
Strategic risks
Portfolio concentration Merger & Acquisition Bribery and corruption
risk (M&A) risk risk
------------------------------- -----------------------------
Description Description Description
High dependency on Growth through M&A Bribery and corruption
a concentrated portfolio activities is part presents a risk throughout
of producing blocks of Seplat's strategy the global oil and
and limited number to pursue a focused gas industry and represents
of wells can leave acquisition and farm-in. an ongoing risk to
the Company more susceptible M&A deals and transactions any oil and gas company.
to declining long-term come with significant
growth and reserves risk including structural,
depletion. commercial and integration
risks. There is also
the risk of non achievement
of acquisition targets
due to highly competitive
landscape.
------------------------------- -----------------------------
Mitigation Mitigation Mitigation
Focus on portfolio New business development Extensive training
expansion strategy unit is always looking on anti-bribery and
from the Board level for the right opportunities corruption. Embedding
to diversify current for Seplat. Decision corporate governance
portfolio. Integrated review board (DRB) principles with key
long-term planning process is in place focus on areas of
on crude oil and gas to ensure deals are the business which
business. properly vetted and may be more susceptible
adequate due diligence to corruption such
done on new opportunities. as the contracting
The DRB ensures the and procurement process.
commercial, structural, Processes exist to
KYC and integration guide dealings with
risks are fully considered public officials.
and addressed with
mitigation plan approved
and in place prior
to deal closing.
------------------------------- -----------------------------
KPI/Performance metric KPI/Performance metric KPI/Performance metric
Successful execution Successful execution Whistleblowing reports
of new acquisition of new acquisition Number of disciplinary
and farm-in opportunities and farm-in opportunities cases
------------------------------- -----------------------------
Strategic pillars Strategic pillars Strategic pillars
2, 3 1, 3, 5 5
------------------------------- -----------------------------
Assessment Assessment Assessment
High Very high Very high
------------------------------- -----------------------------
Trend Trend Trend
Steady. The Company Steady. DRB process Decreasing. As geographical
is in build/transform in place to vet opportunities location continues
phase. and deals. Risk trend to be susceptible
steady following ongoing to corruption, risk
integration of Eland trend changed from
Oil and Gas Plc, as steady to decreasing.
well as ongoing strategy
to acquire more strategic
assets. M&A landscape
remains competitive.
------------------------------- -----------------------------
Strategic risks continued
Loss of key employees Fraudulent activity Information security
risk risk
----------------------------- ------------------------------
Description Description Description
The oil and gas industry Fraudulent activity Potential cyber attacks
is very specialised presents a risk throughout and information technology
in certain areas and the global oil and security breaches
there is competition gas industry and represents could result in loss
within the industry an ongoing risk to or compromise of sensitive
to secure talent and any oil and gas company. proprietary information,
highly-skilled and communication and
experienced personnel IT business continuity
in core areas. disruption across
operations.
----------------------------- ------------------------------
Mitigation Mitigation Mitigation
Annual benchmark Extensive whistleblowing We monitor and regularly
reviews to ensure campaign. Continuous upgrade the Company's
competitiveness in monitoring and improvement information technology
reward and recruitment. of the system of internal and security systems.
Succession planning controls by all lines The Company has a
in place as part of of defence with strong clearly defined employee
business continuity. internal audit activity. user policy and control
Focus on training Automation of processes of access rights.
as a key differentiating where possible to Our information security
factor in the operating reduce manual intervention. framework and infrastructure
environment. have been externally
reviewed in line with
requirements of ISO
27001. IT business
continuity plan is
in place for quick
deployment.
----------------------------- ------------------------------
KPI/Performance metric KPI/Performance metric KPI/Performance metric
Staff turnover Number of reported Information security
cases identification and
containment reports
----------------------------- ------------------------------
Strategic pillars Strategic pillars Strategic pillars
2, 5 5 2, 5
----------------------------- ------------------------------
Assessment Assessment Assessment
Medium Very high High
----------------------------- ------------------------------
Trend Trend Trend
Steady. Risk trend Steady. Risk is kept Rising. While cyber
changed to steady at very high and the security continues
this period. Company continues to hold international
to maintain a zero attention, there has
tolerance policy. not been material
IT breach on our operations.
However, the triggering
of the work from home
policy has resulted
in a rising trend
of the risk, given
the greater number
of employees working
externally.
----------------------------- ------------------------------
Appendix C: Related Party Transactions
The following Related party relationships and transactions are
extracted from the 2020 Annual Report and Accounts (page 231 )
41. Related party relationships and transactions
The Group is controlled by Seplat Petroleum Development Company
Plc (the parent Company). The parent Company is owned 6.43% either
directly or by entities controlled by A.B.C. Orjiako (SPDCL(BVI))
and members of his family and 10.21% either directly or by entities
controlled by Austin Avuru (Professional Support Limited and
Platform Petroleum Limited). The remaining shares in the parent
Company are widely held.
The goods and services provided by the related parties are
disclosed below. The outstanding balances payable to/receivable
from related parties are unsecured and are payable/receivable in
cash.
1. Shareholders of the parent Company
Shebah Petroleum Development Company Limited SPDCL (BVI):
The Chairman of Seplat is a director and shareholder of SPDCL
(BVI). The Company provided consulting services to Seplat. Services
provided to the Group during the period amounted to $900 thousand,
342 million (2019: $1.05 million, 322 million).
2. Entities controlled by key management personnel
(Contracts>$1million in 2020)
Cardinal Drilling Services Limited (formerly Caroil Drilling
Nigeria Limited):
The Company is owned by common shareholders with the parent
Company. The Company provides drilling rigs and drilling services
to Seplat. Transactions with this related party amounted to $5.7
million, 2.1 billion (2019: $9.44 million, 2.89 billion). Payables
amounted to $591 thousand, 225 million in the current period
(Payables in 2019: nil).
3. Entities controlled by key management personnel
(Contracts<$1million in 2020)
Abbeycourt Trading Company Limited:
The Chairman of Seplat is a director and shareholder. The
Company provides diesel supplies to Seplat in respect of Seplat's
rig operations. This amounted to $296 thousand, 106 million during
the period (2019: $0.93 million, 286 million). Payables amounted to
$15,273, 5.8 million (2019: nil).
Stage leasing (Ndosumili Ventures Limited):
A subsidiary of Platform Petroleum Limited (an entity in which
Austin Avuru has an equity interest). The Company provides
transportation services to Seplat. This amounted to $714 thousand,
257million (2019: $1.45 million, 445 million). Payables amounted to
$23,572, 8.9 million (2019: nil).
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