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RNS Number : 4155L Seplat Energy PLC 22 April 2024
22 April 2024
Seplat Energy PLC ("Seplat" or "the Company")
Publication of 2023 Annual Report and Notice of AGM
Seplat Energy PLC confirms it has today published its Annual Report &
Accounts for the year ended 31 December 2023. In the report we have adopted
for the first time and ahead of requirement, the IFRS Sustainability
Standards, improving the level of non-financial disclosures. We also publish
the notice of the Company's eleventh Annual General Meeting ("AGM") and forms
of proxy. The Company will hold its AGM at 11:00am (WAT) on Thursday, 16 May
2024 virtually. The virtual meeting link for the AGM is
https://www.seplatenergy.com/agm-2024/
(https://www.seplatenergy.com/agm-2024/)
In accordance with Listing Rule 14.3.6 copies of the Company's Annual Report
and Accounts for the year ended 31 December 2023, 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
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
(https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism)
In accordance with Disclosure Guidance and Transparency Rule ("DTR")
6.3.5R(3), copies are available on the Company's
website, https://www.seplatenergy.com (https://www.seplatenergy.com)
The Company's audited financial statements and extracts of the management
report were included in the Company's Final Results announcement on 29
February 2024. That information, together with the Appendices to this
announcement, which contains the following additional information that has
been extracted from the 2023 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 2023 Annual Report. Page and note references in the
text below refer to page numbers and notes in the 2023 Annual Report and terms
defined in that document have the same meanings in these extracts.
Enquiries:
Seplat Energy Plc
Emeka Onwuka, Chief Financial Officer +234 1 277 0400
Eleanor Adaralegbe, Chief Financial Officer, Designate
James Thompson, Head of Investor Relations ir@seplatenergy.com (mailto:ir@seplatenergy.com)
Edith Onwuchekwa, Director, Legal & Company Secretary
Chioma Afe, Director External Affairs & Social Performance
FTI Consulting
Ben Brewerton / Christopher Laing +44 203 727 1000
seplatenergy@fticonsulting.com
Citigroup Global Markets Limited
Tom Reid / Peter Catterall +44 207 986 4000
Investec Bank plc
Chris Sim / Charles Craven / Jarrett Silver +44 207 597 4000
About Seplat Energy
Seplat Energy PLC (Seplat) is Nigeria's leading indigenous energy company.
Listed on the Nigerian Exchange Limited (NGX: SEPLAT) and the Main Market of
the London Stock Exchange (LSE: SEPL), we are pursuing a Nigeria-focused
growth strategy in oil and gas, as well as developing a Power & New Energy
business to lead Nigeria's energy transition.
For further information please refer to our website, https://seplatenergy.com/
(https://seplatenergy.com/)
Appendices
Appendix A: Statement of Directors' responsibilities
The following Statement of Directors' responsibilities is extracted from the
2023 Annual Report and Accounts (page 167).
The Companies and Allied Matters Act, 2020, requires the Directors to prepare
financial statements for each financial year that give a true and fair view of
the financial position 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 give 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:
B. Omiyi
R.T.
Brown
Chairman
Chief Executive Officer
FRC/2016/IODN/00000014093
FRC/2014/ PRO/DIR/003/00000017939
29 February
2024
29 February 2024
Appendix B: Principal risks and uncertainties
The following principal risks and uncertainties table is extracted from the
2023 Annual Report and Accounts (pages 79 to 83).
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
Risk: Field operations and project deliverability Mitigation: Focus on risk management at planning phase and mitigation plans activated.
Compulsory 'peer-to-peer' review for high-value projects and better project
management techniques. Protracted land acquisition, preparation and
rig startup have been contributory factors which have received focused
attention and significant process improvements and improved communications
with JV partner and approving regulators to mitigate
delays. Use of smart/intelligent wells to improve recovery and improved
rig performance monitoring and reporting to manage Non Productive
Times (NPTs).
Definition: Failure to manage operational activities in line with planned expectations can
lead to production misses, project delays and cost overruns, high production
costs and earlier than expected field decommissioning.
Links: KPI/Performance metric Trend: Steady. We continue to redefine our project management approach for improved
speed of delivery and efficiency; Aqcuired the ISO 55001 Asset Management
Net working interest production System certification for Asset Integrity, successfully preserved the
certification by passing two follow-up surveillance Audits, consolidate
Operating costs per boe performance across board, maximize production, maintain a strong balance
sheet, and strategically position the company for future growth.
Strategy 3/4/5
Material issues 1/2/3/4/5/6/8/9/11
Assessment High
Risk: Third party infrastructure downtime Mitigation: Amukpe to Escravos pipeline (AEP) since commissioning in Q3 2022
has continued to compliment the Trans Forcados Pipeline in the event
of a shutdown of the latter. The company continues to explore other export
options via barging and crude trucking as a back-up option in extreme cases.
All associated Upgrades of existing Amukpe Flowstation & LTF Facilities
which were embedded in the Amukpe LTF Upgrade Project Scope shall
be individually reviewed and progressed (if necessary) as part of Amukpe
Facility Development.
Definition: An over-reliance on third party operated transportation infrastructure can
expose the Company to extended period of production being shut-in.
Links: KPI/Performance metric Trend: Steady. The Forcados export system recorded significant downtime during the
year - however the AEP since coming onstream has provided evacuation support
Net working interest production for the business and helped enhance bottom-line liquidity. Risk trend is kept
at steady with the AEP availability providing support in the event of an
Days downtime outage of the TFP.
EBIT
Strategy 3/4/5
Material issues 2/4/5/6/9
Assessment Very high
Risk: HSSE risks Mitigation: Deployment of an HSSE Management System in line with best practices.
Monitoring and reporting of HSSE performance scorecards at management and
Board levels. Our HSSE systems and process are subjected to independent review
and identified improvement initiatives are deployed. Continual focus on HSSE
training and initiatives on incidence prevention. Emergency Response plan set
for any eventuality and comprehensive Incident Review panels to identify and
channel lessons learnt to improvement activities. Focus on the delivery on
projects earmarked to reduce and or eliminate gas flaring as spelt out under
the company's "gas flares out roadmap" and new energy transition plan.
Definition: Oil and gas activities carry significant levels of HSSE risks which must be
properly managed. As activity levels continue to increase there is a strong
focus on preventing major environmental (including the emerging Climate Change
- GHG emissions risk), health or safety incidents
Links: KPI/Performance metric Trend: Steady. Though the risk is inherent, we will continue to deploy our HSSE
risk management in line with best practices and with strong emphasis
HSE scorecards
on prevention.
LTIR
TRIR
Strategy 1/2/3/4/5
Material issues 2/4/5/6/7/8
Assessment Very high
Operational risks (cont.)
Risk: Climate-related risks Mitigation: The company has identified a number of projects to deliver on projects
earmarked to reduce and or eliminate routine gas flaring as spelt out under
the ""gas flares out roadmap"; projects include (i) delivery of the LPG
projects at Sapele and Oben, (ii) Installation of booster compressors, and
(iii) the commissioning of the Sapele integrated gas plant project.
Other mitigation include (1.) seek alternative options for cleaner energy,
(2.) Participate in all industry discussions and initiatives aimed at the
introduction and deployment of Carbon-emissions trading schemes in a
developing carbon-trading oil and gas economy.
Definition: IFRS S2 defines climate risk as the potential negative effects of climate
change on an entity. These risks are categorised as climate-related physical
risks and climate related transition risks.
Links: KPI/Performance metric Trend: Steady. The risk trend is being kept at steady following the company's focus
continued drive and commitment to deliver all key projects towards reducing
HSE scorecards and or eliminating routine gas flaring as spelt out under the ""gas flares our
road map. Additionally, the company has developed climate change and
LTIR sustainability/ESG policies.
TRIR
Strategy 1/2/3/4/5/6
Material issues 1/2/3/4/5/6/9/10/11
Assessment Very high
Risk: Sustaining Exploration and Appraisal (E&A) programme Mitigation: Strict compliance with reservoir management guidelines. Building internal
capacity with skilled sub-surface expertise. Drill a minimum of two
exploration wells, as well as continuous M&A work to secure available
opportunities at the right price
Definition: Exploration and appraisal activities carry significant levels of subsurface
risk. Sustained E&A drilling failure will impact the Company's ability to
organically replace reserves and production.
Links: KPI/Performance metric Trend: Steady. High grading our exploration portfolio through a thorough prospect
screening exercise. In the near term, plan is to commence exploration drilling
Reserve replacement campaign in the West.
Strategy 4
Material issues 1/2/3/7/9/11
Assessment Very high
External risks
Risk: Niger Delta stability and security Mitigation: The Company, working with other industry players in the region, continue
to put pressure on government to find a lasting solution to Niger Delta
restiveness and the current security measures put in place by the facility
operators, consolidated with government's strategy of dialogue with
stakeholders in the region seems to be working.
Definition: Seplat Energy's core operations are located in the Niger Delta region of
Nigeria and that comes with significant risks. Historically, the Niger Delta
has always been a high-risk environment with security incidents such as
kidnappings, vandalism and criminal attacks on O&G installations.
Links: KPI/Performance metric Trend: Steady. Efforts by the Govt and industry pressure groups, aimed at enhancing
security in the region seems to be paying off as the business recorded zero
LTIR occurrence in militant attacks, similar to the previous year 2022. Our
monitoring of the response plans/mitigation actions, remains top notch.
TRIR
Security incidents
Operating cashflow
Strategy 1/2/3/4/5
Material issues 1/2/3/4/5/6/7/9/10/11
Assessment Very high
Risk: Stakeholder management relationships Mitigation: Ensure consistent delivery of CSR Initiatives (as well as full compliance with
the terms of the GMOU) across all operational areas. Sustain local content
development with priority to community contractors. Tailored CSR programmes,
capacity building and infrastructure developments with the host communities.
Organisational focus and clear strategy to deliver shareholder value pursued
by the Board and management. Implementation of the new PIA (Petroleum industry
Act) - inclusion of impacted communities as a driver for annulling community
agitation from our immediate host communities (GMOU vs PIA). Corporate
governance, transparency and proactiveness in dealings with regulators and JV
partners.
Definition: Failure to manage stakeholders can result in business disruptions and
interference. The Company prioritises the effective management of
relationships with all stakeholders including host communities, JV partners,
government, regulatory bodies and shareholders.
Links: KPI/Performance metric Trend: Steady. We continue to enjoy good working relations with all stakeholders
of the business.
Net working interest production
LTIR
TRIR
Host community incidences
Strategy 1/2/3/4/5
Material issues 1/2/3/4/5/6/7/8/9
Assessment Very high
External risks (cont.)
Risk: Geo-political risk Mitigation: Scenarios and response options plan set. Crisis management team in place for
high alert political periods. Continue to partner/network with security
stakeholders and share intelligence regarding security. Business continuity
plans actioned in light of current geo-political situation.
Definition: Nigeria has at times in its history faced political uncertainties and threats
such as terrorism aimed at de-stabilising and undermining the orderly and
effective rule of central government.
Links: KPI/Performance metric Trend: Steady. During the year 2023, the company recorded no incidents of terrorism
and secessionist agitations. As a mitigation strategy, the company continued
Occurrences of civil unrest and terrorism to monitor Niger Delta geo-political developments and issued regular reports
to management, as well as partnered with security stakeholders in the sharing
of intelligence regarding security.
Strategy 1/2/3/4/5
Material issues 1/11
Assessment High
Financial risks
Risk: Oil price volatility Mitigation: Hedging continues to be our price risk management tool. We conduct price
sensitisation on project economics and enforce cost discipline for capital
projects sanctioning. Aggressive focus on cost reduction.
Definition: Oil prices have exhibited a history of volatility and can fluctuate sharply in
line with external factors.
Links: KPI/Performance metric Trend: Steady. Seplat's risk management strategy is to protect itself against adverse
oil price movements through our oil price hedging policy, which targets
Realised oil price hedging c. 6 months in advance via out-of-the-money puts (i.e., "disaster
protection insurance"). In the year 2023, we kept focus on our price risk
Operating cashflow management policy to protect the company's cash flow stream from downside
scenarios. We will also continue to take hedge positions and apply cost
reduction strategies. Hedging has been important to several stakeholders,
including our bond investors, our banks and our rating agencies.
Strategy 3/4
Material issues 1
Assessment High
Risk: Changes to tax status and legislation Mitigation: Perform evaluation of business plan and performance metrics exclusive
of tax benefits. Project economics were conducted to ascertain the impact
of the new PIA on the company's bottom line. All Impact assessment
of potential tax legislation is monitored at the Board level.
Definition: If the tax regime/legislation under which the Company operates its assets were
to change (e.g. new PIA tax regime), profitability may be impacted.
Links: KPI/Performance metric Trend: Steady. The company is participating in all ongoing engagement with
stakeholders including community leadership for a better
Effective tax rate understanding/implementation of the PIA mechanism.
Tax status
Strategy 3
Material issues 1/2/3/4/5/6/9/10/11
Assessment Medium
Risk: Availability of capital Mitigation: Emphasis on compliance with requirements of the JV operating
agreement for effective/strict JV partner concurrence. Board review
and approval of financial strategy and debt portfolio management
with strong banking relationships.
Definition: The oil and gas industry is highly capital intensive. Significant amounts of
capital are required to continue development activities and fund M&A. Non
funding of cashcalls by JV partners impacts activities and liquidity.
Links: KPI/Performance metric Trend: Decreasing. JV partners continues to remain current in paying cash calls.
JV receivables
CAPEX
New M&A activities
Strategy 3/4/5/6
Material issues 1/2/4/5/6/10/11
Assessment Very high
Financial risks (cont.)
Risk: Cost control risk Mitigation: Comprehensive budgeting process approved by the joint venture partner and the
Board. Clear cost management targets. Grading of portfolio opportunities and
project ranking for capital allocation. Focus on reducing drilling costs at
well design phase. Cost monitoring and periodic reporting. Focus on effective
contracting strategies for cost reduction.
Definition: Cost reduction remains central to the Company's current operating strategy.
High operating cost and ineffective capital cost control negatively impacts
operating cash flows and profitability.
Links: KPI/Performance metric Trend: Steady. Cost discipline remains key focus of the business
Operating cost per boe
EBIT
CAPEX
Well costs
Strategy 3/4/5
Material issues 1/3/4/5/6/7/9/10/11
Assessment High
Risk: Liquidity Mitigation: Manage liquidity risk by ensuring that sufficient funds are available to meet
commitments as they fall due. Uses both long-term and short-term cash
flow projections to monitor funding requirements for activities and to ensure
there are sufficient cash resources to meet operational needs. Cash flow
projections take into consideration 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.
Definition: Liquidity risk is the risk that the Company will
not be able to meet its financial obligations as
they fall due.
Links: KPI/Performance metric Trend: Decreasing. The combination of the AEP and the Trans-Forcados Pipeline
assisted Seplat's liquidity position significantly in the year. We manage
Operating cashflow liquidity risk by ensuring that sufficient funds are available to meet
commitments as they fall due, using both long-term and short-term cash flow
CAPEX projections to monitor funding requirements for activities.
Strategy 3
Material issues 9/10/11
Assessment Medium
Risk: Foreign exchange risk Mitigation: The company has options to manage its foreign exchange exposure including
financial hedge instruments such as forward exchange contracts.
Definition: The Company is exposed to exchange rate
risk to the extent that balances and transactions are denominated in a
currency other than the
US dollar.
Links: KPI/Performance metric Trend: Rising. Historically, the Company holds majority of its cash and cash
equivalent in US dollar. Gas contracts are indexed in US dollar. The Federal
Operating cashflow Govt Policy on FX resulted in significant exchange rate fluctuations,
impacting on cost of essential commodities in-country.
CAPEX
Strategy 3
Material issues 9/10/11
Assessment High
Strategic risks
Risk: Portfolio concentration risk Mitigation: Focus on portfolio expansion strategy from the Board level to diversify
current portfolio. Integrated long-term planning on crude oil, gas and other
renewables business.
Definition: High dependency on a concentrated portfolio of producing blocks and limited
number of wells can leave the Company more susceptible to declining long-term
growth and reserves depletion.
Links: KPI/Performance metric Trend: Steady. The company strategic direction is targeted at accessing oil and gas
reserves and resources to support growth in Pillar2 (midstream) and Pillar 3
Successful execution of new acquisition and farm-in opportunities. (new energy)
Strategy 3/4/5/6
Material issues 6/10/11
Assessment Very high
Strategic risks (cont.)
Risk: Merger & acquisition (M&A) risk Mitigation: New business development unit is always looking for the right opportunities
for Seplat. Decision review board (EXCOM) process in place to ensure deals are
properly vetted and proper due diligence is done for new opportunities:
A Structured ExCom is now in place. The Decision Review board (DRB) process is
in place to ensure deals are properly vetted and adequate due diligence done
on new opportunities. The ExCom ensures the commercial, structural, KYC and
integration risks are fully considered and addressed with mitigation plans
approved and in place prior to deal closing.
Definition: Growth through M&A activities is part of the Seplat's strategy to pursue a
focused acquisition and farm-in. M&A deals and transactions come with
significant risk including structural, commercial and integration risks. There
is also
the risk of non achievement of acquisition targets due to highly competitive
landscape.
Links: KPI/Performance metric Trend: Steady. We have a robust process in place to vet opportunities and deals.
Risk trends are steady following an ongoing strategy to acquire more strategic
Successful execution of new acquisition and farm-in opportunities. assets. M&A landscape remains competitive.
Strategy 3/4/5/6
Material issues 5/6/10/11
Assessment Very high
Risk: Bribery and corruption risk Mitigation: Extensive training on anti-bribery and corruption. Embedding corporate
governance principles with key focus on areas of the business which may
be more susceptible to corruption such as the contracting and procurement
process. Processes exist to guide dealings with public officials.
Definition: Bribery and corruption presents a risk throughout the global oil and gas
industry and represents an ongoing risk to any oil and gas company.
Links: KPI/Performance metric Trend: Steady. Our geographical location continues to be susceptible to corruption.
However, the risk trend is kept at decreasing following lower cases of whistle
Whistle blowing reports blowing recorded during the year.
Number of disciplinary cases.
Strategy 3
Material issues 6/7/9/10/11
Assessment High
Risk: Fraudulent activity risk Mitigation: Extensive whistleblowing campaign. Continuous monitoring and improvement of
the system of internal controls by all lines of defence with strong internal
audit activity. Automation of processes where possible to reduce manual
intervention.
Definition: Fraudulent activity presents a risk throughout the global energy industry and
represents an ongoing risk to any energy company.
Links: KPI/Performance metric Trend: Decreasing. Risk is kept at High and the Company continues to maintain a zero
tolerance policy.
Number of reported cases
Strategy 3
Material issues 6/7/8/9/10
Assessment High
Risk: Information security risk Mitigation: We monitor and regularly upgrade the Company's information technology and
security systems. The Company has a clearly defined employee user policy and
control of access rights. Our information security framework and
infrastructure have been externally reviewed in line with requirements of
ISO27001. IT business continuity plan is in place for quick deployment.
Definition: Potential cyber attacks and information technology security breaches could
result in loss or compromise of sensitive proprietary information,
communication and IT business continuity disruption across operations.
Links: KPI/Performance metric Trend: Steady. While cyber security continues to hold international attention, there
has not been material IT breach on our operations. However, giving the current
Information security identification and containment reports norm of remote working, the company has taken steps to ensure adequate
protection/defence mechanisms are in place to avert any external cyber
attacks.
Strategy 3
Material issues 7/9/10/11
Assessment High
Appendix C: Related Party Transactions
The following Related party relationships and transactions are extracted from
the 2023 Annual Report and Accounts (page 250 and 287)
37. Related party relationships and transactions
The Group is controlled by Seplat Energy 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. The remaining shares in
the Parent Company are widely held.
The goods and services provided by the related parties are disclosed below.
i. Shareholders of the Parent Company
Shebah Petroleum Development Company Limited SPDCL (BVI): The former 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 nil (2022: $916.5 thousand, ₦409.8
million). Payables amounted to nil in the current period.
Amaze Limited: The former Chairman of Seplat is a director and shareholder of
Amaze Ltd. The company provided consulting services to Seplat. Services
provided to the Group during the period amounted to $587.4 thousand, ₦528.3
million.
ii. Entities controlled by Directors of the Company
Ubosi Eleh and Company (controlled by Director Ernest Ebi): The Company
provided a leasehold property to Seplat. The amount during the period amounted
to nil (2022: $53.7 thousand, ₦24 million).
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