REG - Seplat Energy PLC - Full Year 2021 Financial Results

Seplat EnergyAnnouncement

28/02/2022 07:00

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RNS Number : 9812C  Seplat Energy PLC  28 February 2022

Please see the Full Audited Results in attached PDF

http://www.rns-pdf.londonstockexchange.com/rns/9812C_1-2022-2-28.pdf
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Seplat Energy Plc

Audited results for the year ended 31 December 2021

 

Lagos and London, 28 February 2022: Seplat Energy Plc ("Seplat Energy" or "the
Company"), a leading Nigerian independent energy company listed on both the
Nigerian Exchange Limited and the London Stock Exchange, announces its audited
results for the full year ended 31 December 2021.

Operational highlights
 •    Strong safety record extended, 28 million hours without LTI from Seplat Energy
      operated assets
 •    Delivered robust performance against challenging year for Nigerian oil &
      gas industry
 •    Working interest production averaged 47,693 boepd, impacted by August and
      December FOT shut ins
 •    Completed nine wells: five oil and four gas wells
 •    Eland's OML 40: four wells drilled at a total gross cost of US$60million, now
      delivering 15.5 kbopd (gross)
 •    Sibiri exploration on OML40 drilled to TD in February with initial indications
      it has encountered eight oil bearing reservoirs with 353 ft of gross
      hydrocarbon pay, net pay of 229 ft; further data acquisition and analysis are
      underway

Financial highlights
 •    Revenues up 38% to $733 million ($747 million including $14 million underlift)
 •    Adjusted EBITDA up 40% to $372 million,
 •    Strong cash generation of $394 million against capex of $137 million
      (excluding cost of rig acquisitions)
 •    Strong balance sheet with $341 million cash at bank, net debt of $426 million
      and
 •    Q4 dividend of US2.5 cents per share recommended

Corporate updates
 •    Name changed to Seplat Energy to reflect evolving strategy
 •    Proposed $1.28 billion MPNU acquisition adds transformational shallow water
      portfolio with dedicated export routes
 •    AEP mechanically completed in January, hydrocarbons introduced into line as
      part of commissioning process,

commercial agreements to enable production into terminal being finalised;
      injection expected in March
 •    ANOH project mechanical completion expected H2 2022 (84% complete at present,
      all materials in country), however delays to third-party spur line likely to
      delay first gas to H1 2023
 •    Related party transactions eliminated from 1 January 2022

Outlook for 2022 (excluding MPNU)
 •    Production guidance of 50-60 kboepd, capex expected to be $160 million
 •    MPNU next steps: focus on government approvals and transition planning,
      completion expected H2

 

Roger Brown, Chief Executive Officer, said:

"Seplat Energy announced a major acquisition last week and despite a
challenging year for Nigerian oil and gas, the robust results delivered today
clearly show how our increasing financial strength has made such an
acquisition possible, without the need to dilute shareholders, by giving
international financial partners the confidence to invest in our vision.

The addition of MPNU nearly trebles our production and doubles our reserves on
a pro forma 2020 basis, reinforcing our leadership of Nigeria's indigenous
energy sector and enabling us to generate strong future cash flows that will
underpin our investment in Nigeria's energy transition and improve our overall
stakeholder returns.

Our 2021 performance was affected by outages at Forcados Terminal that will no
longer have such an impact when we switch to the new Amukpe-Escravos Pipeline,
which we expect to launch in March. This is part of our strategy to diversify
and derisk routes to market, assuring higher revenues from significantly
better uptime and lower reconciliation losses. Furthermore, once we have
completed our acquisition of MPNU, we will add significant production from
offshore assets with dedicated export terminals that also have higher
availability and lower reconciliation losses.

The addition of MPNU offers a significant undeveloped gas resource base which,
alongside our ANOH gas project development, will underpin Nigeria's energy
transition and drive domestic and export revenues when developed.

Our financial strength is matched by the skills and ambitions of our staff and
we look forward to welcoming more than a thousand highly trained colleagues
from MPNU and working with them to ensure their smooth onboarding into Seplat
Energy. Together we will build a sustainable, world-class company that
generates attractive returns for stakeholders and delivers energy transition
for one of the world's largest and most rapidly growing populations."

Summary of performance
                                      $ million                             ₦ billion
                                      FY 2021  FY 2020  % change      FY 2021       FY 2020
 Revenue                              733.2    530.5    38.2%         293.6         190.9
 Gross profit                         285.2    124.6    128.9%        114.2         44.8
 Impairment of assets *               36.6     (144.3)  125.4%        14.6          (51.9)
 EBITDA **                            371.8    265.8    39.9%         146.8         95.7
 Operating profit (loss)              250.7    (31.7)   890.9%        100.4         (11.4)
 Profit (loss) before tax             177.3    (80.2)   321.1%        71.0          (28.9)
 Cash generated from operations       394.3    329.4    19.7%         157.9         118.6
 Working interest production (boepd)  47,693   51,183   (6.8)%
 Average realised oil price ($/bbl)   70.54    39.95    76.6%
 Average realised gas price ($/Mscf)  2.85     2.87     (0.7)%

* FY 2021 includes reversal of $74.7m impairment charge under IAS 36; FY 2020
includes $114.4m impairment charge under IAS36

** Adjusted for impairment, fair value loss and decommissioning

 

Responsibility for publication

The person responsible for arranging the release of this announcement on
behalf of Seplat Energy is

Emeka Onwuka, CFO, Seplat Energy Plc.

 

Signed:

 

Mr. Emeka Onwuka

Chief Financial Officer

 

 

Investor call

At 09:00 GMT / 10.00 WAT on Monday 28 February 2022, the Executive
Management team will host a conference call and webcast to present the
Company's results.

The presentation can be accessed remotely via a live webcast link and
pre-registering details are below. After the meeting, the webcast recording
will be made available and access details of this recording are also set out
below.

A copy of the presentation will be made available on the day of results on the
Company's website at https://seplatenergy.com/ (https://seplatenergy.com/) .

 

 Event title:                            Seplat Energy Plc: Full year results
 Event date                              9:00am (London) 10:00am (Lagos) Monday 28 February 2022
 Webcast Live Event Link                 https://secure.emincote.com/client/seplat/seplat012
                                         (https://secure.emincote.com/client/seplat/seplat012)
 Conference call and pre-register Link:  https://secure.emincote.com/client/seplat/seplat012/vip_connect
                                         (https://secure.emincote.com/client/seplat/seplat012/vip_connect)
 Archive Link:                           https://secure.emincote.com/client/seplat/seplat012
                                         (https://secure.emincote.com/client/seplat/seplat012)

 

The Company requests that participants dial in 10 minutes ahead of the call.
When dialling in, please follow the instructions that will be emailed to you
following your registration.

Enquiries:
 Seplat Energy Plc
 Emeka Onwuka, Chief Financial Officer                            +234 1 277 0400
 Carl Franklin, Head of Investor Relations
 Ayeesha Aliyu, Investor Relations
 Chioma Nwachuku, Director External Affairs & Sustainability

 FTI Consulting
 Ben Brewerton / Christopher Laing                                +44 203 727 1000

                                                                  seplatenergy@fticonsulting.com

 Citigroup Global Markets Limited
 Tom Reid / Luke Spells                                           +44 207 986 4000

 Investec Bank plc
 Chris Sim / Jarrett Silver                                       +44 207 597 4000

 

Notes to editors

Seplat Energy Plc is Nigeria's leading indigenous energy company. It is listed
on the Nigerian Exchange Limited (NGX: SEPLAT) and the Main Market of the
London Stock Exchange (LSE: SEPL).

Seplat Energy is pursuing a Nigeria-focused growth strategy through
participation in asset divestments by international oil companies, farm-in
opportunities, and future licensing rounds. The Company is a leading supplier
of gas to the domestic power generation market. For further information please
refer to the Company website, http://seplatenergy.com/
(http://seplatenergy.com/)

 

Important notice:

The information contained within this announcement is unaudited and deemed by
the Company to constitute inside information as stipulated under Market Abuse
Regulations. Upon the publication of this announcement via Regulatory
Information Services, this inside information is now considered to be in the
public domain

Certain statements included in these results contain forward-looking
information concerning Seplat Energy's strategy, operations, financial
performance or condition, outlook, growth opportunities or circumstances in
the countries, sectors, or markets in which Seplat Energy operates. By their
nature, forward-looking statements involve uncertainty because they depend on
future circumstances and relate to events of which not all are within Seplat
Energy's control or can be predicted by Seplat Energy. Although Seplat Energy
believes that the expectations and opinions reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations
and opinions will prove to have been correct. Actual results and market
conditions could differ materially from those set out in the forward-looking
statements. No part of these results constitutes, or shall be taken to
constitute, an invitation or inducement to invest in Seplat Energy or any
other entity and must not be relied upon in any way in connection with any
investment decision. Seplat Energy undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise, except to the extent legally required.

 
Operating review
HSE performance

Safe and responsible operations are critical to the delivery of Seplat
Energy's strategy. Staff and contractors worked a total of 8.0 million
man-hours with no fatalities, lost-time injuries, or major injuries in the
period.

The Company has achieved 28 million hours without LTI on its operated assets.
There were 88 HSE incidents in total, compared to 107 in 2020, including two
reportable spills and six gas leaks, all of which were remediated with limited
environmental impact. The Group established appropriate processes and
safeguards for its people and operations against Covid-19.

By the end of December, we had conducted 14,319 Covid-19 tests, with a
positivity rate of 3.3%. We have a vaccination policy for Covid-19 management
and continue to enforce all Covid-19 control protocols at our field operations
and offices, with no major Covid-19 related incidents.

Reserves

Seplat Energy's portfolio comprises direct interests in seven oil and gas
blocks and a revenue interest in one other block. This portfolio provides us
with a robust platform of oil and gas reserves and production capacity, as
well as material upside opportunities to add reserves through future
development.

Working interest reserves for the 2021 financial year
                                2P reserves at 31/12/2021               2P reserves at 31/12/2020
                                Liquids((1))      Gas      Total        Liquids    Gas        Total
                      Seplat %  MMbbl             Bscf     MMboe        MMbbl      Bscf       MMboe
 OMLs 4, 38 & 41      45%                144      651      256          156        693        275
 OPL 283              40%                5        68       17           5          66         17
 OML 53               40%                39       660      153          44         742        172
 OML 55               Fin. interest      4        -        4            5          0          5
 OML 40               45%                25       -        25           27         0          27
 Ubima                82%                2        -        2            4          0          4
 Total                                   219      1379     457          241        1501       499

1.       Eland has a 45% working interest in OML40 until the Westport
loan is fully repaid in accordance with the loan agreement, reverting to
20.25%.

2.       Eland has an 82% Working Interest in the Ubima marginal field
until the carry has been reached, reverting to 40%.

 

At 31 December 2021, total working interest 2P reserves, as assessed
independently by Ryder Scott Company, L.P., stood at 457.1 MMboe, comprising
219.2 MMbbls of oil and condensate and 1,379.4 Bscf of natural gas (237.8
MMboe). The change represents an organic decrease in overall 2P reserves of
8.4% year-on-year, due to production of 10.6 MMbbls of liquids and 39.3 Bscf
of gas, and reclassification and revisions of previous estimates.

 

                                            2C resources at 31/12/2021              2C resources at 31/12/2020
                      Liquids((1))  Gas    Total                   Liquids     Gas  Total
                      Seplat %             MMbbl       Bscf        MMboe            MMbbl      Bscf       MMboe
 OMLs 4, 38 & 41      45%           28                 162         56               48         167        77
 OPL 283              40%           4                  21          8                4          21         8
 OML 53               40%           4                  14          6                3          15         6
 OML 40               45%           3                  0           3                3          0          3
 Ubima                82%           2                  0           2                1          0          1
 Total                              41                 197         75               60         203        95

Working interest 2C resources stood at 74.9 MMboe, comprising 40.9 MMbbls of
oil and condensate and 197.1 Bscf of natural gas compared to 94.8 MMboe in
2020. The 21.1% decrease is mostly due to the inability to prove producibility
in Mosogar following the unsuccessful Drill Stem Test (DST). Consequently, the
Group's working interest 2P reserves and 2C resources stood at 531.9 MMboe at
31 December 2021, comprising 260.1 MMbbls oil and condensate and 1,576.5 Bscf
of natural gas (197 MMboe).

Production

Our oil and gas assets are in the onshore land and swamp areas of the prolific
Niger Delta in Nigeria. Principal areas of production are Edo, Delta, Imo and
Rivers States with evacuation for export through the Forcados, Bonny and Brass
oil terminals. Seplat Energy has significant opportunities within its
reserves base to grow production and extend field life through infill
drilling, well intervention programmes, and innovation through technology
deployment.

Working interest production for the 2021 financial year

 
                                            2021                                          2020
                      Liquids((1))  Gas    Total                    Liquids          Gas  Total
                      Seplat %             bopd   MMscfd            boepd                 bopd    MMscfd        boepd
 OMLs 4, 38 & 41      45.0%          18,243             107.9            36,844           21,249       101          38,718
 OPL 283              40%           1,012         -                 1,012                 970     -             970
 OML 53               40%           3,164         -                 3,164                 2,639   -             2,639
 OML 40               45%           5,923         -                 5,923                 7,884   -             7,884
 Ubima                82%           749           -                 749                   971     -             971
 Total                              29,091        107.9             47,693                33,714  101           51,183

Liquid production volumes as measured at the LACT unit for OMLs 4, 38 and 41;
OML 40 and OPL 283 flow station.

Volumes stated are subject to reconciliation and may differ from sales volumes
within the period.

Full-year total working interest production for 2021 averaged 47,693 boepd. Within this, liquids production was down 13.7% year-on-year. Delays in replacing the MT Harcourt storage vessel on OML40 reduced exports from the asset in the first quarter of 2021. In addition, volumes were impacted by decreased production from the Western Assets owing to the disruption caused by the suspension of exports at the Forcados Oil Terminal (FOT) for significant periods in the year. The impact of unplanned downtime in the second half of the year amounted to a deferment of working interest production of c.1.0 MMbbls of oil from OMLs 40, 4, 38 and 41. There was a 75% production uptime for the Trans Forcados System during the year. The impact of future FOT outages will be alleviated by our use of the new Amukpe-Escravos Pipeline, the launch of which is imminent following mechanical completion and introduction of hydrocarbons, with only commercial agreements pending.
Gas volumes were up 6.9% year-on-year to 107.9 MMscfd.

 

Drilling activities

During the period, we drilled and completed eight wells, with an additional
well completed early January 2022.

In OML 4 we completed the Oben-50 and Oben-51 gas wells, which are now
producing at a combined gross rate of

c. 60 MMscfd of gas and 4,000 bpd of condensates. We also completed the
workover of Oben-44 and 46 gas wells in the fourth quarter with combined gross
production rate of 70 MMscfd and 1,200 bpd.

In OPL 283, the Umuseti-07 well was successfully completed in August and is
producing ca.2,000 bopd gross.

The three-well Gbetiokun drilling campaign was completed ahead of schedule
with cost savings of 25%, achieved through efficient execution, underpinned by
the optimisation of drilling parameters and logistics. The wells were drilled
in tandem and batch drilled. The Gbetiokun-06, 07 and 08 wells have commenced
production, with gross production of approximately 12,000 bopd combined. An
additional well, Gbetiokun-09, was drilled in December 2021, hooked up in
January 2022 and is producing approximately 3,500 bopd gross. Given the strong
production of the new Gbetiokun wells, we deployed a larger evacuation vessel,
MT Hampden, in November to improve evacuation of crude.

Project activities associated with preparation for drilling the high-impact,
near-field Sibiri (formerly Amobe) exploration well in OML 40 were completed
in 2021 and the well was drilled in Q1 2022. The well has been drilled to TD,
with initial indications it has encountered eight oil-bearing reservoirs with
353 ft of gross hydrocarbon pay, net pay of 229 ft. Further data acquisition
and analysis on the well is underway.

Despite persistent adverse weather, we progressed preparation of the Owu
appraisal well in OML 53. However, the two wells (OHS KBAM1 and Owu appraisal)
planned for OML 53 in 2021 were deferred to 2022 due to partner recommendation
and rig contracting challenges.

We continue to exercise discretion over drilling investments and selectively
consider opportunities in our existing portfolio with a view to capturing the
highest cash return investment opportunities, whilst diligently preserving a
liquidity buffer.

Focus on asset integrity

At the core of Seplat Energy's operations is a focus on asset integrity,
process safety and maintenance culture, to ensure and improve the safety,
reliability, and availability of our facilities. This also promotes higher
revenue assurance. We are making progress towards an ISO 55001 Certification
with full implementation of the ISO standards by 2023. As defined in our July
2021 Capital Markets Day (CMD), and as part of our commitment to continuous
improvement, Seplat Energy's goal through various initiatives is to reduce
deferment by c.120kbbl annually, which will increase revenue assurance and
profitability.

Other capital projects

As indicated in our CMD, we initiated projects targeting cost reduction that
are also expected to increase production in the long term.

At OML 4, 38 and 41, we decommissioned the leased pumps at Amukpe and started
the installation of seven NOV pumps. The pump replacements will reduce
deferment of crude oil and improve produced water disposal. We undertook a
delivery line re-routing project for the Sapele-Amukpe pipeline to reduce the
risk of pipeline failure on the heavily encroached right of way and extended
the life span of the pipeline. We completed and secured 5.1 km of the
re-routed section and are reviewing tie-in options.

The optimisation of the Jisike Flow Station Debottlenecking and Gaslift
Compressor Station commenced in the period to provide lift gas for secondary
recovery of crude oil from existing weak wells. This includes an upgrade of
the capacity of the flowstation from 10 kbpd to 15 kbpd to handle future
increased production from the asset and a 6 MMscfd associated gas (AG)
compressor station to optimise gas lifting of oil wells and reduce flaring.

Oil business performance

Seplat Energy's liquids (oil and condensate) operations produced 10.6 MMbbls
on a working interest basis in 2021

(2020: 12.3 MMbbls). The average realised price per barrel in the period was
$70.54 (2020: $39.95), following a recovery of Brent prices on the receding
threat from the Covid-19 pandemic and the resultant return of global economic
activity.

The lower-than-expected oil production for the year was primarily due to the
curtailment of production and suspension of export operations from OMLs 4, 38,
41 and 40, after Shell Petroleum Development Company Limited (SPDC) declared a
month-long force majeure at the Forcados Oil Terminal (FOT) on 13 August
because of a failure of the loading buoy at the FOT. This was exacerbated by a
12-day shut in of the flow stations due to technical fault at the FOT in
December. Previously, delays in siting a new storage vessel at OML 40 to
replace the MT Harcourt, which was damaged in November 2020, resulted in
significantly lower volumes in the first quarter.

In December 2020, Seplat Energy signed a Crude Purchase Agreement (CPA) with
Waltersmith Petroman Oil Limited (Waltersmith) for the supply of between 2,000
and 4,000 bopd from existing working interest production from the Ohaji South
Field within OML 53, for Waltersmith's 5,000 bopd modular refinery at Ibigwe,
in Imo State. We commenced the supply of 2,000 bopd to the Waltersmith
Refinery in October with 172 kbbls supplied during 2021 and no pipeline losses
recorded.

OPEC+ quotas

During the period, Nigeria's quota stood at 1.6 million barrels per day,
excluding condensates. However, the country's production has trended below
allocated production, largely because of downtime on major pipelines, crude
oil theft and several operational challenges leading to production capacity
constraints in the assets. Seplat's OPEC quota is currently 68,554 bopd for
the Western Assets and 13,007 bopd for the Eastern Assets. Seplat has lifted
below the OPEC quota for the past 6 months due to the reasons highlighted
above. Following its July meeting, OPEC+ agreed an increased oil output of 1.8
million bopd for Nigeria, which restores all the production cuts imposed when
the Covid-19 pandemic started in 2020. The new quota, which excludes
condensates, will take effect in 2022.

Amukpe-Escravos pipeline commissioning

Following the introduction of hydrocarbons into the pipeline in December 2021
as part of the start-up and testing process, mechanical completion has now
been achieved and we are finalising crude handling and offtake agreements to
enable flowing of oil into the Escravos terminal, expected in March. Oil
Lifting from the terminal will be undertaken by the terminal operator -
Chevron, expected in Q2.

The 67km, mostly underground pipeline, provides a reliable and secure export
route for liquids from Seplat Energy's major assets OML 4, 38 and 41,
connecting them with the Chevron-operated Escravos Terminal. Until now, we
have relied on the Trans Forcados System, which has experienced numerous
disruptions due to maintenance and vandalism. The Amukpe-Escravos pipeline has
a capacity of 160,000 bpd, into which the Seplat Energy / NPDC joint venture
is entitled to inject 40,000 bpd.

Including the Warri Refinery, Seplat Energy now has access to three
independent export routes for production from OMLs 4, 38 and 41. It is our
intention to utilise all three to ensure there is adequate redundancy in
evacuation routes, reducing downtime that has adversely affected revenues over
a number of years, and significantly de-risking the distribution of products
to market.

Gas business performance

Alongside the oil business, we have also prioritised the development and
commercialisation of the substantial gas reserves identified in our assets, to
pursue new market opportunities. Today, Seplat Energy is a leading supplier of
processed natural gas to the Nigerian domestic market, which is independent of
global oil and gas market dynamics. With 100% of volumes dedicated to
supplying key demand centres within the domestic market, our customers include
power generation companies and the National Gas Marketing and Distribution
Company, which serves the power generation, industrial and agricultural
sectors. Seplat Energy is therefore strategically important to the security of
Nigeria's current and future gas supply.

Seplat Energy maintained a reliable and increased gas supply to customers
during the year. Working interest gas production for the period was 107.9
MMscfd at an average selling price of $2.85/Mscf (2020: 101 MMscfd,
$2.87/Mscf). The Gas business contributed 41.2% of the Group's volumes on a
boepd basis.

Gas pricing

The price of gas for power generation (Domestic Supply Obligation), which
accounts for about 30% of our gas volumes, was reduced from $2.50/Mscf to
$2.18/Mscf in July 2021 (implemented in August 2021) following a review of the
gas pricing framework by the Federal Government (FGN). As part of the process
to stabilise the sector, the Government has taken various measures to address
challenges with domestic gas utilisation as well as pricing and fiscal policy
issues limiting adoption. It is expected that the lower gas price will
translate to a reduced electricity tariff for the end consumer and will
improve collection for the entire value chain, as well as stimulate growth in
demand.

The regulated Domestic Supply Obligation (DSO) gas-to-power price of
$2.18/Mscf is expected to remain until a transition to a 'willing
buyer/willing seller' regime in 2023 (latest 2025) for a fully deregulated
market. We have assessed the business and economic impact of the price
reduction on Seplat Energy's gas portfolio and this price review will result
in a temporary reduction of the average weighted gas price to around $2.7/Mscf
in 2022. With the FGN's "Decade of Gas" programme promoting gas as Nigeria's
transition fuel towards Net Zero, we are confident of the growth of gas demand
and a corresponding adjustment in the pricing regime.

Oben Gas Plant

Despite the impact on oil volumes following the force majeure at the Forcados
Oil Terminal in the third quarter, disruption to gas volumes was minimal
because the associated condensate volumes were stored in the Amukpe buffer
tanks, ensuring continuity of gas production. However, our Associated Gas (AG)
station units were put on standby due to FOT outage.

To ensure the delivery of on-specification gas to our customers, we completed
the installation of heat exchanger trains 1 and 2; piping installation works
on heat exchangers 3, 4 and 5 are ongoing with commissioning expected in the
first quarter of 2022.

Additional third-party volumes

Seplat Energy is focused on developing third-party gas processing
opportunities that can utilise the remaining processing capacity at Oben.
Securing additional volumes from counterparties will secure long-term supplies
of raw natural gas from which we can optimise the plant's utilisation and
generate tolling revenues. We progressed discussions with targeted third-party
gas producers during the year and expect to conclude terms shortly.

 

Sapele Gas Plant
Work continues on the new Sapele Gas Plant with project progress at 45%. Upon completion, the processing capacity will be 85 MMscfd. The upgraded facility will produce gas that meets export specifications, and the LPG processing unit module will enhance the economics of the plant, as well as ensure that gas flaring is eliminated.
ANOH Gas Processing Plant

We have made good progress on the ANOH plant but have seen some delays in
shipments and releasing equipment from the ports. To date, we have achieved
84% overall project completion at the gas plant site. Our government partner,
the Nigerian Gas Company, (NGC) is delivering the pipelines that will take the
gas from ANOH to Oben, namely the 23km spur line and the Obiafu-Obrikom-Oben
(OB3) pipeline.

The OB3 pipeline project has seen a number of failed attempts to complete the
1.85km river crossing, which is needed to complete the pipeline. However, the
latest contractor is making progress and the HDD drilling stands at 20%
complete.  We do not anticipate the OB3 pipeline to delay the completion of
the overall ANOH project.

The Spur Line project has seen significant delays due to contracting issues
and payments. We have been informed that the milling of the line pipes, which
is being undertaken in China, will now commence in Q2 and therefore will not
arrive Nigeria until later this year. The latest schedule provided by NGC
shows completion in Q4 2022 / Q1 2023.

We had earlier communicated a first gas date by mid-year 2022, but based on
our current risking, we now expect further delays of between 9-12 months to
the original timeline, with the spur line expected to be the last piece of
infrastructure delivered.

The upstream development, including the drilling of six production wells, will
be delivered by the upstream unit operator SPDC. We expect that the two wells
on which drilling commenced in 2021 will be completed this year.

Located at OML 53 (in a unitised field between Seplat JV's OML 53 and SPDC
JV's OML 21), the ANOH Gas Processing Plant development will drive the next
phase of growth for Seplat Energy's core Midstream Gas business. The 300
MMscfd midstream gas processing plant is the most advanced of the FGN's seven
critical gas projects and is central to the National Gas Master Plan to
develop and expand the indigenous domestic gas market for additional power and
industrial projects.

The ANOH plant is being built by AGPC, which is an Incorporated Joint Venture
(IJV) owned equally between Seplat Energy and the NGC, a wholly owned
subsidiary of the Nigerian National Petroleum Corporation ("NNPC"). In
February 2021, AGPC successfully raised $260 million in debt to fund the
completion of the ANOH project. The project is now fully funded following
completion of equity investments of $210 million by each partner ($420 million
combined). The plant construction cost is expected to be no more than $650
million, inclusive of financing costs and taxes, which is significantly lower
than the original projected cost at Final Investment Decision (FID) of $700
million.

Net Zero by 2050

Seplat Energy supports the goals of the Paris Agreement and is in step with
society's objective to get the world to net zero carbon emissions by 2050, if
not before. Around 90% of the Company's Scope 1 and 2 emissions come from
flaring of associated gas. Through investments in decarbonisation projects
over the next two years, we plan to focus on maximising gas-to-grid options,
which will capture and monetise gas for productive use, drive LPG production
and put the Group on track to end routine flaring by 2024.

Aside from ending routine flares, we are investing in other ways to
decarbonise our operations such as replacing diesel with LPG or LNG and onsite
solar energy generation. Longer-term, as part of Nigeria's energy transition,
we will selectively target opportunities in solar energy projects, which
alongside our gas-to-power developments, will be critical to providing an
alternative to Nigeria's expensive and extensive diesel generated electricity.

Outlook and plans for 2022

Full-year production guidance for 2022 is set at 50,000 to 60,000 boepd on a
working interest basis, comprising 30,000 to 35,000 bopd liquids and 116 to
150 MMscfd (20,000 to 25,000 boepd) gas production. This guidance does not
include any contribution from MPNU and the ANOH Gas Plant.

We expect production uptime of 75% for evacuation through the TFS and 90% for
evacuation via the AEP, the latter being our preferred export route from OMLs
4, 38, & 41.

Capital expenditure for 2022 is expected to be around $160 million. We expect
to drill a minimum of ten wells, including the Sibiri exploration well and one
appraisal well, complete ongoing projects, invest in maintenance capex to
secure the existing assets and continue investments in gas. The 2022 drilling
programme is designed to address production decline and along with completion
of maintenance activities, will support long-term production levels from the
assets. With the recovery in oil prices, rig-based and other project
activities activity will ramp-up in 2022.

Facilities and engineering projects will focus on delivery of an upgraded
integrated gas processing facility at Sapele and further upgrades to the
liquid treatment facility to enable increased deliveries of dry crude. Towards
our goal to end routine flaring by 2024, we will focus on Oben, Amukpe, Sapele
& Jisike end of routine flaring projects, which will capture and monetise
gas for productive use.

In OML 53, in addition to drilling, we plan to complete the Jisike flow
station debottlenecking and gaslift compressor station and installation of the
Ohaji South Lease Automatic Custody Transfer (LACT) Unit.

For the non-operated assets, in OML 40, in additional to the drilling plans,
facilities and engineering work will focus on the Gbetiokun facilities upgrade
to optimise the Gbetiokun barging operations; whilst we complete all front-end
activities for the Gbetiokun to Adagbasa pipeline which will replace the
barging of the produced crude. In OPL 283, we have planned one gas well
re-entry for production testing and the Igbuku gas plant design (FEED). The
delivery of the 2022 workplan will be underpinned by a strong commitment to
safety, asset integrity, GHG emissions reduction and operational excellence.

 
Financial review
Revenue and other income

Revenue from oil and gas sales in 2021 was $733.2 million, a 38.2% increase
from the $530.5 million achieved in 2020.

Crude oil revenue was $618.4 million (2020: $417.9 million), 48.0% higher than
2020, largely reflecting higher average realised oil prices of $70.54/bbl for
the period (2020: $39.95/bbl). The total volume of crude lifted in the year
was 8.8 MMbbls, lower than the 10.5 MMbbls lifted in 2020, due to the decrease
in production following the suspension of exports at the FOT. In addition, the
Group's 2021 produced liquid volumes were subject to reconciliation losses of
14.5%, compared to less than 10% in the corresponding period in 2020. We
expect these to improve significantly when we evacuate the bulk of our crude
through the Amukpe-Escravos underground pipeline.

Gas sales revenue increased by 2.0% to $114.8 million (2020: $112.5 million),
due to higher gas sales volumes of 39.4 Bscf compared to 37.1 Bscf in 2020,
which reflects new gas wells coming onstream during the period. The average
realised gas price was slightly lower, at $2.85/Mscf (2020: $2.87/Mscf) and
reflects the reduction applied to the DSO gas-to-power volumes from August
2021.

Other income of $20.1 million includes an underlift $13.9 million (shortfalls
of crude lifted below Seplat's share of production, which is priced at the
date of lifting and recognised as other income) representing 152 kbbls and
$5.2 million tariff income generated from the use of the Company's pipeline.
In addition, there was a $5.4 million reversal of decommissioning obligation
no longer required for Eland operations in the period.

Gross profit

Gross profit increased by 128.9% to $285.2 million (2020: $124.6 million). The
non-production costs primarily consisting of royalties and DD&A totalled
$270.9 million, compared to $228.9 million in the prior year. The higher
royalties were the result of higher oil prices, and the DD&A charge for
oil and gas assets increased to $141.1 million (2020: $127.5 million), because
of a higher depletion rate applied following a reclassification and revision
of previous 2P estimates compared to the prior year.

Direct operating costs, which include crude-handling fees, rig-related costs
and operations and maintenance costs amounted to $172.1 million in 2021, 2.6%
higher than $167.7 million in 2020. The increase was primarily because of the
higher operational and maintenance costs of $107.9 million that include
unaccrued late charges of $13.8 million related to the OML 40 asset operated
by NPDC. On a cost-per-barrel equivalent basis, production opex was higher at
$9.9/boe (2020: $8.9/boe) due to the additional costs detailed above and the
average working interest production reducing in 2021 compared to 2020.
However, a continuous cost reduction drive for production evacuation from the
Gbetiokun and Ubima fields resulted in a 26.4% reduction in barging and
trucking costs, to $11.7 million (2020: $15.9 million).

IAS impairments reversal

As previously reported, under IAS 36 the Company identified the need to
revalue its assets due to the significant economic uncertainty of the Covid-19
crisis in 2020 and booked a non-cash provision of $114.4 million across
non-financial assets in the period. Following a reassessment of the business
models and assumptions at the end of 2021, a reversal of $74.7 million was
recognised to reflect the current and expected higher oil price environment.

Operating profit

The operating profit for the year was $250.7 million, compared to an operating
loss of $31.7 million in 2020 (which resulted mainly from the $160.9 million
impairment charges).

During the year, the Group recognised impairment losses totalling $38.1
million, which include financial asset charges of $22.6 million for
outstanding receivables and non-financial asset charges of $15.2 million for
the rigs. This was offset by the $74.7 million impairment reversal described
above.

General and administrative expenses increased by 5.4% to $80.1 million (2020:
$76.0 million) and reflect the increase in administrative activities across
the business compared to the previous year, which was more heavily impacted by
the Covid-19 pandemic and its associated reduction in activities.

An EBITDA of $371.8 million adjusts for non-cash items which include
impairment, abandonment, and exchange losses, equating to a margin of 50.7%
for the year (2020: $265.8 million; 50.1%).

Taxation

The income tax expense of $60.2 million reflects a higher assessable profit
driven by higher accounting profit compared to the prior year, and represents
an effective tax rate of 34% (2020: $5.1 million; 6%). The tax charge
comprises a deferred tax charge of $22.6 million and a current tax charge of
$37.6 million. The deferred tax charge is mainly driven by the unwinding of
previously unutilised capital allowances.

Net result

The profit before tax was $177.3 million (2020: $80.2 million loss before tax)
and profit for the year was $117.2 million (2020: $85.3 million net loss). The
resultant basic earnings per share was $0.24 in 2021, compared to $0.13 basic
loss per share in 2020.

Cash flows from operating activities

Cash generated from operations in 2021 was $394.3 million (2020: $329.4
million). Net cash flows from operating activities were $369.8 million (2020:
$308.7 million), after accounting for tax payments of $12.9 million (2020:
$10.4 million) and a hedge premium of $9.0 million ($8.4 million). Free cash
flow for the period amounted to $200 million (2020: $163.9 million).

The Group received $235 million from the major JV partner towards the
settlement of cash calls. The major JV receivable balance now stands at $83.9
million, down from $107.1 million at the end of 2020.

Cash flows from investing activities

Net capital expenditure of $136.4 million consisted of $37.7 million towards
completing five development oil wells (Umuseti 07, GB-06, 07, 08, 09) and
$26.3 million for completing two new gas wells (Oben 50, 51) and two workover
wells (Oben 44, 46). Associated facilities and engineering costs amounted to
$72.4 million. We realised significant cost savings from drilling in the
period because of the relatively lower cost workover operations compared to
new drills carried out for two Oben gas wells in addition the optimisation of
drilling parameters and logistics applied in the execution of the Gbetiokun
wells.

Payments for non-oil and gas assets amounting to $33.5 million relates to the
net effect of consideration for the four Cardinal rigs at $36 million
purchased in October 2021 and $3.5 million for spares classified as inventory.
The rigs were funded out of already restricted funds (excluded from previous
cash flow statements) held at Access Bank and the Federal High Court of
Nigeria, as previously disclosed.

Seplat Energy received $4.9 million in the period through the allocation of
94.2 kbbls of crude oil from OML 55. Recovery in the period is below
expectations and impacted by significant sabotage along the NCTL and TNP
pipelines, with a theft factor of up to 60% recorded. The next lifting due to
Seplat Energy is scheduled for March 2022 (previously December 2021 but
delayed because of evacuation challenges) and we continue to work with
BelemaOil to optimise production and sustain recovery of the remaining
discharge amount. Out of $330 million to be paid to Seplat Energy, $129.9
million has been recovered with $200.1m outstanding.

Cash flows from financing activities

Net cash outflows from financing activities were $100.8 million (2020: $217.4
million). Proceeds from loans and borrowings of $671.0 million reflects the
debt restructuring where the Group offered senior notes of $650 million. The
gross proceeds of the notes were used to redeem the existing $350 million
senior notes and to repay in full drawings of the $250 million RCF. It also
reflects a further $10.0 million drawn from the Westport RBL facility and
$11.0 million drawn on the $50 million off-take facility to support drilling
operations at Elcrest. Payments for other financing charges, which include
$20.4 million transaction costs on the debt facilities and interest paid on
loans, totalled $89.6 million (2020: $65 million). The dividend payment for
the period totalled $73.4 million (2020: $58.3 million), net of withholding
taxes is $15.1 million higher because of timing of quarterly dividend
distribution introduced in 2021.

A charge of $4.9 million relates to the share buy-back programme for Seplat
Energy's Long-Term Incentive Plan. The programme commenced on 1 March 2021 and
shares are held by the Trustees under the Trust for the benefit of Seplat
Energy employee beneficiaries covered under the Trust.

Liquidity

The balance sheet continues to remain healthy with a solid liquidity position.

 Net debt reconciliation at 31 December 2021  $ million  Coupon       Maturity
 Senior notes*                                648.1      7.75%        April 2026
 Westport RBL*                                108.8      Libor+8%     March 2026
 Off-take facility*                           9.7        Libor+10.5%  April 2027
 Total borrowings                             766.6
 Cash and cash equivalents                    340.5
 Net debt                                     426.1

* including amortised interest

Seplat Energy ended the year with gross debt of $766.6 million (with
maturities in 2026 and 2027) and cash at bank of $340.5 million, leaving net
debt at $426.1 million. Liquidity, which includes the $350 million RCF
available for drawing, a $39 million undrawn offtake facility plus the cash
balance, was more than $700 million at the end of the period.

Dividend

In line with the quarterly dividend policy announced in 2021, Seplat
distributed four dividend payments in 2021 and paid out $73.4 million. The
Board has recommended a final dividend of US2.5 cents per share for the
financial year 2021, which will bring the total dividend declared for 2021 to
$0.10 per share (2020: $0.10 per share).

Subject to approval of shareholders, the recommended dividend will be paid
shortly after the Annual General Meeting, which will be held in Lagos,
Nigeria, on 18 May 2022.

Hedging

Seplat's hedging policy aims to guarantee appropriate levels of cash flow
assurance in times of oil price weakness and volatility. For 2021, the Group
had in place dated Brent put options as follows: (i) for Q1, 1.0 MMbbls at a
strike price of $30/bbl and 1.0 MMbbls at a strike price of $35/bbl; (ii) for
Q2, 2.0 MMbbls at a strike price of $35/bbl; and (iii) for Q3, 1.0 MMbbls at a
strike price of $35/bbl and 1.0 MMbbls at a strike price of $40/bbl. The $11.1
million hedging costs were recognised as fair value charges in the period.

This hedging programme has been continued in 2022 with put options for 5.0
MMbbls through Q3 2022 at an average premium of $1.41/bbl as follows: (i) for
Q1, 1.0 MMbbls at a strike price of $50/bbl and 1.0 MMbbls at a strike price
of $55/bbl; (ii) for Q2, 2.0 MMbbls at a strike price of $55/bbl; and (iii)
for Q3, 1.0 MMbbls at a strike price of $55/bbl.

The Board and management team continue to closely monitor prevailing oil
market dynamics and will consider further measures to provide appropriate
levels of cash flow assurance in times of oil price weakness and volatility.

Credit ratings

Seplat maintains corporate credit ratings with Moody's Investor Services
(Moody's), Standard & Poor's (S&P) Rating Services and Fitch. The
current corporate ratings are as follows: (i) Moody's B2 (stable); (ii)
S&P B (stable) and (ii) Fitch B (stable).

Elimination of related-party transactions

In our continuous efforts to promote world-class governance, all related-party
transactions (RPT) were eliminated from

1 January 2022.

Petroleum Industry Act 2021

Nigeria's Petroleum Industry Bill was signed into law on 16 August 2021,
shortly after the bill received legislative approval from both the Senate and
the House of Representatives. The assent by the Executive enacts the Petroleum
Industry Act, 2021 (PIA 2021) as the superseding policy to provide legal,
governance, regulatory and fiscal frameworks for the Nigerian petroleum
industry, the development of host communities, and related matters. The PIA
2021 also repeals existing Acts and makes transitional and savings provisions
to accommodate instances of licensees that may choose not to convert until
their current license expires.

We have reviewed the fiscal provisions of the Act, and a multi-disciplinary
project team has been commissioned to review the impact of Seplat Energy
business entering the new PIA regime, versus the benefits of remaining in the
current fiscal regime until the expiry of our licenses. The analyses will be
based on the life-cycle data of all the assets and the result of the review
will inform management's decision on whether Seplat Energy converts to the PIA
regime or remains in the current tax regime.

Climate change and financial disclosures

Seplat Energy Plc recognises that climate change and the decarbonisation of
the global economy, within the context of the energy transition, present
significant risks and opportunities to the company's strategy, operations, and
financial planning, and to the delivery of long-term shareholder value.
Accordingly, Seplat Energy will, in the near future:

1. Adopt climate change as a Principal Risk within the company's risk
management framework; and

2. Carry out an assessment of the impact of climate change on the company's
financial statements using scenario analysis as recommended by the Taskforce
on Climate-related Financial Disclosures (TCFD). Seplat Energy aims to publish
an inaugural TCFD-aligned report in mid-2022

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