REG - Seplat Energy PLC - Half Year 2023 Financial Results
28/07/2023 07:00
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RNS Number : 4848H Seplat Energy PLC 28 July 2023
Please see the Full Audited Results in attached PDF
http://www.rns-pdf.londonstockexchange.com/rns/4848H_1-2023-7-27.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4848H_1-2023-7-27.pdf)
Unaudited results for the six months ended
30 June 2023
28 July 2023
Lagos and London, 28 July 2023: Seplat Energy PLC ("Seplat Energy" or "the
Company"), a leading Nigerian independent energy company listed on both the
Nigerian Exchange and the London Stock Exchange, announces its unaudited
results for the six months ended 30 June 2023.
Summary
Our operating performance in 6M 2023 was solid, we achieved a 2% increase in production, helped by reduced losses on our Western Asset, which is benefitting from the availability of the Amukpe-Escravos Pipeline and increased output from OML40. Revenue remained strong, while operating profits in the period were impacted by lower oil prices and other items, most notably the non-cash impact of the devaluation of the Nigerian Naira.
Financial highlights
· Revenues up 3.8% to $547.0 million (including overlift of $59.4m), on
improved production, offset by lower oil price
· Cash generation of $259.1 million, funding capex of $88.8 million and
improved shareholder returns
· Balance sheet remains strong, $381.0 million cash at bank, despite
impact of the devaluation of the Naira on USD cash balances, net debt now at
$380.0 million ($128 million MPNU cash deposit not included)
· Further $3.3 million received as part of the Ubima disposal, total
proceeds up to $21.9 million
· Unit production opex of $9.6/boe
· Average oil price $79.54/bbl (6M 2022: $107.35/bbl); average gas
price $2.87/Mscf (6M 2022: $2.76/Mscf)
· Q2 2023 dividend declared of US 3 cents per share, in line with
higher core annual dividend of US 12 cents
Operational highlights
· Working interest production increased by 1.8% to 50,805 boepd, in the
middle of our 45-55 kboepd guidance
· Amukpe-Escravos Pipeline (AEP) continued to provide alternative
evacuation resulting in lower downtime overall
· Completed five new wells, boosting liquids production at OML 40
· Island section of grouting operations on OB3 pipeline complete. ANOH
gas plant mechanical completion and partner operated key project milestones
expected by end 2023
· Achieved more than 4.2 million hours without Lost Time Injury (LTI)
at Seplat-operated assets
· Carbon intensity figure of 26.3 kg/boe. Sapele Power gas offtake
expected to commence in 2H23, this is expected to reduce emissions by
approximately 40%
Corporate updates
· Extended the Share Sale and Purchase Agreement (SSPA) for the
acquisition of ExxonMobil's share capital of Mobil Producing Nigeria Unlimited
(MPNU) to preserve the transaction, pending the resolution of certain legal
proceedings and receipt of applicable regulatory approvals; we continue to
work with all parties to achieve a successful outcome
· Full-year production guidance retained at 45-55 kboepd
· Capex guidance range at $160 - $190 million (previously $160 m) to
support the Group's objectives for the year
· Following our previously announced Board succession plan (25 April
2023), we are pleased to announce that Eleanor Adaralegbe, currently VP
Finance, has been appointed CFO-designate and will succeed Emeka Onwuka as CFO
in 2024
Roger Brown, Chief Executive Officer, said:
"Seplat Energy's continuing strong performance puts us on track for an
excellent year that will support the increased quarterly dividends we
announced in April, and our balance sheet remains strong despite the impact of
the recent Naira devaluation. We are benefiting greatly from use of the new
Amukpe-Escravos Pipeline, which has supported our robust cash generation this
year, and remain focused on improving operations, reducing costs where
possible and further derisking the business. We continue to strengthen our
Company in the knowledge that our efforts to improve governance and
sustainability are widely supported by Nigerian and international investors.
The distraction of frivolous legal actions is receding, and we are focused on
developing our assets and launching our joint venture ANOH Gas Processing
Plant, which will significantly boost our cash generation in the coming years.
We expect that this will enable us to fund additional investment in Nigeria's
energy infrastructure and return higher dividends to shareholders.
We remain confident that our proposed and transformational acquisition of MPNU
will be approved, enabling us to scale into a significant energy supplier with
diverse and productive assets that have potential to generate substantial
benefits for Nigeria. We wholly align and support the recent government
efforts to make Nigeria a more attractive place to invest and continue to
focus on delivering affordable and reliable energy for Nigeria's young,
entrepreneurial and rapidly growing population."
Summary of performance
$ million ₦ billion
6M 2023 6m 2022 % Change 6M 2023 6M 2022
Revenue * 547.0 527.0 3.8% 278.3 219.2
Gross profit 276.3 274.3 0.7% 140.6 114.1
EBITDA ** 235.8 342.7 (31.2%) 120.0 142.6
Operating profit (loss) 118.4 245.3 (51.7%) 60.2 102.0
Profit (loss) before tax 85.4 209.9 (59.3%) 43.5 87.3
Cash generated from operations 259.1 330.1 (21.5%) 131.8 137.3
Working interest production (boepd) 50,805 49,924 1.8%
Volumes lifted (MMbbls) *** 6.1 4.4 38.6%
Average realised oil price ($/bbl.) $79.54 $107.35 (25.9%)
Average realised gas price ($/Mscf) $2.87 $2.76 4.0%
LTIF 0.0 0.0
CO2 emissions intensity 26.3 24.6 6.9%
from operated assets, kg/boe
* 6M 2023 revenue includes an overlift of $59.4m
** Adjusted for non-cash items
*** Volumes lifted in 6M 2023 includes 845 kbbl of overlift
Responsibility for publication
This announcement has been authorised for publication on behalf of Seplat
Energy by Emeka Onwuka, Chief Financial Officer, Seplat Energy PLC.
Signed:
Emeka Onwuka
Chief Financial Officer
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 because of new information, future events
or otherwise, except to the extent legally required.
Investor call
At 09:00 GMT / 09:00 WAT on Friday 28 July 2023, 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) 09:00am (Lagos) Friday 28 July 2023
Webcast Live Event/Archive Link https://secure.emincote.com/client/seplat/seplat017
Conference call and pre-register Link: https://secure.emincote.com/client/seplat/seplat017/vip_connect
(https://secure.emincote.com/client/seplat/seplat017/vip_connect)
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
Eleanor Adaralegbe, Vice President, Finance
James Thompson, Head of Investor Relations
Ayeesha Aliyu, Investor Relations
Chioma Afe, 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 / Peter Catterall +44 207 986 4000
Investec Bank plc
Chris Sim / Charles Craven +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.
Seplat's energy portfolio consists of seven oil and gas blocks in the prolific
Niger Delta region of Nigeria, which we operate with partners including the
Nigerian Government and other oil producers. We also have a revenue interest
in OML 55. We operate a 465MMscfd gas processing plant at Oben, in OML4, and
are building the 300MMscfd ANOH Gas Processing Plant in OML53 and a new
85MMscfd gas processing plant at Sapele in OML41, to augment our position as a
leading supplier of gas to the domestic power generation market.
https://www.seplatenergy.com/ (https://www.seplatenergy.com/)
Operating review
Update on developments in Nigeria
Following the 2023 general elections, President Bola Ahmed Adekunle Tinubu
assumed office as Nigeria's new President. Since taking office, President
Tinubu has introduced several pro-market reforms, including removing the
controversial fuel subsidy and unifying multiple exchange rate windows. These
reforms have been well received by the capital market, as they are crucial to
restoring investor confidence in Nigeria's economy. The unified exchange rate
system promotes transparency and market-driven exchange rates, fostering
macroeconomic stability and growth.
The recent foreign exchange (FX) reforms have positively impacted FX
liquidity. Notably, data from FMDQ Group indicates that the average turnover
at the Investors & Exporters (I&E) window, which now includes all FX
windows, has increased by 41% since the announcement of these policies.
However, the devaluation of the Naira has implications for our business,
leading to currency losses on naira cash balances and receivables and
resulting in gains on payables balances (further details in the financial
review section).
Overall, we view these changes as beneficial for both the country and Seplat
operations.
OPEC Quota
During the period, the 35th Ministerial Meeting of OPEC+ took place, during
which the crude oil market dynamics were assessed. Some members, led by Saudi
Arabia, agreed to extend production cuts into 3Q2023. These measures played a
significant role in stabilising the market and reducing price volatility in
recent months.
Apart from the voluntary production cuts, revisions were made to the
production baselines for 2024 and 2025. Nigeria's production quota was
adjusted downward due to ongoing challenges in meeting production targets. In
2024, Nigeria's production baseline will decrease by 0.36mbpd, leading to a
production quota of 1.38mbpd (excluding condensates).
Currently, the Seplat JV share of the OPEC quota stands at approximately 48
kbopd for the Western Assets and 11 kbopd for the Eastern Assets. Given the
decrease in Nigeria's crude oil production quota, it is possible that Seplat
Energy may also face a reduction in its production quota. However, the Company
does not anticipate any significant impact on its business due to the presence
of a reasonable head room.
Upstream business performance
Working interest production for the six months ended 30 June 2023
During the first half of 2023, the total working interest production increased
by 1.8% to 50,805 boepd (6M 2022: 49,924 boepd); the oil & gas mix was 59%
and 41% respectively. Average production in the first six months of 2023 sits
just above the mid-point of our 2023 guidance of 45,000-55,000 boepd, which
remains unchanged.
6M 2023 6M 2022
Liquids Gas Total Liquids Gas Total
Seplat % bopd MMscfd boepd bopd MMscfd boepd
OMLs 4, 38 & 41 45% 16,533 119.4 37,118 17,386 117.7 37,681
OML 40 45% 10,803 - 10,803 8,688 - 8,688
OML 53 40% 1,164 - 1,164 2,139 - 2,139
OPL 283 40% 1,721 - 1,721 1,416 - 1,416
Total 30,221 119.4 50,805 29,629 117.7 49,924
Liquid production volumes as measured at the LACT (Lease Automatic Custody
Transfer) unit for OMLs 4, 38 and 41; OML 40 and OPL 283 flow station.
Gas conversion factor of 5.8 boe per scf.
Volumes stated are subject to reconciliation and may differ from sales volumes
within the period.
Total liquids production increased by 1.8% compared to the same period in
2022. The production for the period was 5.5 MMbbls compared to 5.4 MMbbls in
2022. The higher production during the period, was supported by the improved
availability of the Forcados Oil Terminal, which achieved an uptime of 80% and
the availability of the Amukpe-Escravos Pipeline (AEP). Average daily gas
production was up 1.4% to 119.4 MMscfd (6M 2022: 117.7 MMscfd).
At OMLs 4, 38, & 41, working interest liquids production fell 4.9% to
16,533 bopd (6M 2022: 17,386 bopd) due to higher unscheduled deferment and
delays to the on-stream timing of new wells, which were planned to arrest the
natural decline on the assets. The AEP continued to provide an alternative
evacuation solution, helping to de-risk our Western Asset production and we
now evacuate crude via this route and the Trans Forcados Pipeline (TFP).
Our operations at OML 40 contributed the most significant growth in the
period. Working interest production from the asset grew by 24.3% to 10,803
bopd in 6M 2023 (6M 2022: 8,688 bopd). The strong growth in OML 40 volumes was
because of higher production uptime and delivery of new wells as planned.
At the smaller Eastern operations in OML 53, daily working interest production
fell 45.6% to 1,164 bopd in 6M 2023, with evacuation of these volumes to the
nearby Waltersmith Refinery. The ongoing production issues are primarily due
to evacuation challenges caused by the unavailability of key delivery lines.
Both the Antan-Ebocha delivery line, which supports the Jisike operations, and
the Trans Niger Pipeline (TNP), utilised for Ohaji operations, remain
unavailable.
We are actively working towards resolving these third-party evacuation issues
and are in final discussions with the Edo Refinery regarding an alternative
evacuation option. The plan entails supplying approximately 1,000 bopd of JV
crude from Ohaji to the Edo Refinery. By exploring alternative evacuation
options, we aim to mitigate the challenges faced in the Eastern operations and
maintain a consistent production flow.
We remain committed to resolving evacuation issues and optimising production
from our Eastern operations while actively exploring alternative solutions to
ensure efficient crude evacuation in the future.
Drilling and other Capital Projects
During the period, five wells in our drilling program were delivered:
Opuama-17, Sibiri-2, Gbetiokun 4 workover, Gbetiokun-10, and Assa North-05. In
the first quarter of the year, Opuama-17, was completed and is producing at a
gross rate of c. 3,000 bopd. Sibiri-2 well has been drilled to TD, with the
target reservoirs completed; we are currently awaiting regulatory approval to
commence production from the well. GB-10 well has been drilled and completed
ahead of the target date and is expected to add c.1,300 bopd to production
upon completion of flowline installation and well head construction. Lastly,
GB-4 W/O will add c. 2,200 bopd to production.
However, while completed wells have been supportive, overall, our drilling
program is moderately behind plan. Drilling of the Orogho-8 and Ovhor-21
wells, due for completion in 1Q and 2Q respectively are ongoing. A combination
of downhole challenges has been exacerbated by mechanical issues on the
contracted rigs. We now expect completion of both wells in 3Q23. Given slower
than planned progress year to date, we have initiated a drilling recovery
program and an accelerated contracting plan in alignment with the Joint
Venture partners and are confident of delivering the planned number of wells
for the year.
Drilling activities in ASSN-06 are ongoing and expected to complete by the end
of July.
Midstream Gas business performance
During the period, the average working interest gas volumes reached 119.4
million standard cubic feet per day (MMscfd), showing improvement compared to
117.7 MMscfd in the first half of 2022. This increase can be attributed to
enhanced well performance and the availability of condensate evacuation
routes.
We have successfully entered into a new Gas Sales Agreement (GSA) with a bulk
gas supplier for a volume of 50 MMscfd. Once all the necessary Conditions
Precedent are met by the new customer, we will commence gas supply under this
agreement. The execution of additional GSAs is part of our strategy to
optimise the capacity of the Oben gas plant. We are also actively working on
securing third-party gas to feed both the Oben and Sapele gas plants.
The execution of the plan for separating the midstream business from the
upstream operations has progressed according to schedule. We have completed
the internal transfer of midstream assets to Seplat Midstream Company (SMC).
Additionally, we have issued notices to our joint venture partners and
relevant regulators to inform them of these developments. We will continue to
keep the market updated on the progress of this separation process.
ANOH Gas Processing Plant
As of the latest update, the IJV (AGPC) has achieved significant progress in
installing all necessary equipment for the mechanical completion of the gas
plant, reaching a completion level of over 93%. The gas plant is still
expected to achieve mechanical completion later this year. Safety has been a
priority, and AGPC recently reached a milestone of 9 million man-hours without
any lost time injury on the project.
The government partner, NGIC, is responsible for delivering the pipelines
required to transport the gas from ANOH to the demand centres, including the
23km spur line and the Obiafu-Obrikom-Oben (OB3) pipeline.
Noteworthy progress has been made with completion of grouting operations for
the critical Island Section of the OB3 pipeline that had faced challenges due
to the collapsing of the HDD wall in a section of the river crossing. The
drilling and pipe installation crew has returned to the site, and preparations
are underway to resume tunnelling operations after the completion of grouting.
The target completion for both ends' tunnelling, equipment demobilisation, and
tie-ins is set for Q3 2023. The project was at 97% completion before the
suspension of work.
Regarding the Spur Line project, all line pipes required for all 23.3km spur
line sections are now in country and have been delivered to the project site.
The first phase of the spur line (5.5km length) has been completed, with
another 4.5km currently in progress. Our government partner has confirmed the
revised completion date of Q3 2023.
In terms of upstream development, the drilling of the third well has been
completed, and work on the fourth well is ongoing, with expected completion
before the end of Q3 2023. Additionally, work on surface facilities required
to deliver wet gas to the AGPC plant is in progress and expected to be
completed by the upstream unit operator, SPDC, in Q4 2023.
Once completed, ANOH will provide two income streams for Seplat Energy: wet
gas sales from OML 53 to the plant and dividends from the joint venture ANOH
Gas Processing Company, which will operate the plant.
New Energy Business
Strategic growth investment opportunities are being pursued for the New Energy
Business, with a particular focus on entry into off-grid power generation.
Such projects will increase the reliability, lower the cost and reduce the
carbon intensity of existing electricity consumption. We continue to work
through technical and commercial due diligence to evaluate these investment
opportunities.
HSE Performance
During the period, the Company achieved over 4.2 million hours without any
Lost Time Injury (LTI) on its operated assets, which reflects the Company's
strong focus on safety and the dedication of its workforce to maintaining a
secure work environment. In addition to the safety record, no major human
injuries were reported during this period. This accomplishment highlights the
effectiveness of the safety measures and procedures implemented by the
Company. However, there was one Tier 2 Process Safety Loss of Primary
Containment (LOPC) incident and efforts are being made to continuously
strengthen the robust safety framework in place and prevent such incidents
from occurring in the future. The Company has embarked on a journey to obtain
ISO 45001 and 14001 certifications. These certifications are internationally
recognised standards for occupational health and safety management systems and
environmental management systems, respectively. By pursuing these
certifications, the Company aims to ensure the highest standards of safety and
environmental performance.
Seplat Energy places a strong emphasis on safety and environmental
responsibility. As part of its commitment to biodiversity and sustainability,
the company is collaborating with the National Conservation Foundation (NCF)
to promote and support initiatives that protect and preserve the environment.
Reducing carbon intensity is crucial for the Company, and the flares-out
roadmap, which includes measures to minimise greenhouse gas emissions and
improve overall energy efficiency, is being implemented to eliminate routine
flares by Q4 2024
The carbon intensity recorded for the period was 26.3 kg/boe, higher than the
24.6 kg/boe recorded in 6M 2022. Currently, flare volumes make up around 80%
of the total emissions. Flare volumes in 6M 2023 were modestly higher (0.5%
increase), principally at our Sapele operations; the recorded flare volumes
were 4.40 bcf, compared to 4.38 bcf in the same period of 2022. An encouraging
development is the completion of the 72-hour reliability run test of the
Sapele Accelerated AG compressor, which will process c.26 MMscfd of otherwise
flared gas. With the resumption of unprocessed gas offtake by Sapele Power,
expected in the second half of the year, we anticipate a material reduction of
around 40% in absolute emissions.
Proposed acquisition of MPNU
On 24 May 2023, we announced that we have extended with Mobil Development
Nigeria Inc. and Mobil Exploration Nigeria Inc. (ExxonMobil) the Share Sale
and Purchase Agreement (SSPA) for the acquisition of ExxonMobil's share
capital of Mobil Producing Nigeria Unlimited (MPNU) to preserve the
transaction pending the resolution of certain legal proceedings and receipt of
applicable regulatory approvals.
The Board remains confident that the transaction will be approved, and all
associated legal issues will be resolved. We continue to work with all parties
to achieve a successful outcome and have been encouraged by recent
developments. We will provide further updates as appropriate.
Shareholder Actions
Seplat Energy is pleased that the Company's Chief Executive Officer ("CEO"),
Mr. Roger Brown has resumed his position as the CEO of Seplat Energy and can
validly enter and stay in Nigeria. This followed the Ministry of Interior
("Ministry") and the Nigeria Immigration Service ("NIS") restoration of
his Working Permit, Combined Expatriate Residence Permit and Aliens Card
("CERPAC") and other Visas for the entry or stay in Nigeria ("Immigration
Documents") of the Company's CEO.
The Company had previously announced that the Immigration Documents were
withdrawn by the Ministry, following baseless and false allegations of racism,
unfair prejudice, discrimination and improper immigration status made by
certain individuals parading as "concerned workers and stakeholders of Seplat
Energy Plc". The Company cooperated fully with the verification checks
conducted by the Immigration Authorities, which resulted in the restored
immigration status of Roger Brown.
The Company had also previously announced the striking out by the Federal High
Court sitting in Lagos, of the Petition commenced on 8th March 2023 by Moses
Igbrude and others in Suit No. FHC/L/CP/402/2023. The Court ordered the
Petitioners to pay NGN1 million in costs. This followed the filing of a Notice
of Discontinuance by the Petitioners.
Similarly, the Federal High Court in Abuja had struck out the criminal charge
brought by the Nigeria Immigration Service against the Company and some of its
Officers. The Court fully discharged all named defendants. The charge had
earlier been withdrawn by the Nigerian Immigration Service on the 20th April
2023 and was in relation to the immigration status of Mr. Roger Brown and the
withdrawal of his immigration visa by the Ministry of Interior.
The Court of Appeal also suspended the ex parte Interim Orders granted by
the Federal High Court (Abuja) in Suit No. FHC/ABJ/CS/626/2023 - Juliet Gbaka
& two others v. Seplat Energy Plc & thirteen others. The matter comes
up on 3rd October 2023 at the Federal High Court and 31st October 2023 at the
Court of Appeal.
Seplat Energy remains confident that the courts will appropriately address the
outstanding frivolous litigations brought by minority shareholders holding
less than 0.005% combined of the Company's issued shares.
Seplat, as a responsible corporate citizen, will continue to engage all its
stakeholders in accordance with applicable law and established corporate
governance best practices.
Outlook
Group production performance has improved in 2023, thanks to greater uptime on
OML40 and reduced losses on our Western Asset. We maintain our 2023 guidance
range at 45,000-55,000 boepd, which we are confident of meeting, given year to
date production and the expected benefit of new well stock as it becomes
available in the latter part of the year. We stress that our guidance does not
include any expected contribution from MPNU or ANOH projects.
Our capital expenditure guidance for 2023 is adjusted to a range of $160-190
million. Our commitment to meeting the planned drilling targets remains
steadfast, and we have a drilling plan in place to meet these targets in 2H
2023.
Financial review
Revenue
Oil prices have experienced a steady downward trend since the highs of 2022,
primarily due to mounting concerns about the global economy and its potential
impact on crude oil demand. Consequently, the average realised oil price for
the first six months of 2023 declined by 25.9% to $79.54/bbl compared to the
$107.35/bbl achieved during the same period in 2022.
Despite these challenging market conditions, oil and gas sales revenue in the
first half of 2023 reached $547.0 million, a 3.8% increase compared to the
$527.0 million generated in the first half of 2022. This growth can be
attributed to the positive effect of overlifts realised during the period.
However, upon adjusting for the overlift amounting to $59.4 million, revenue
stood at $487.6 million, reflecting the impact of the lower oil price during
the period despite the higher production.
Crude oil revenue was up 3.0% in 6M 2023 compared to the same period in the
previous year, $483.3 million in 6M 2023 (as opposed to $469.2 million in 6M
2022) for the abovementioned reasons. The total volume of crude lifted during
the period amounted to 6.1 million barrels, a 38.6% increase from the 4.4
million barrels lifted in the first half of 2022. Upon adjustment for the
previously highlighted overlifts of $59.4 million (equivalent to 845 kbbl),
crude oil revenue for the period stood at $423.9 million. A reconciliation
loss of 3.3% was recorded for the period.
Similarly, gas revenue experienced a 10.2% increase, reaching $63.7 million in
6M 2023 (compared to $57.8 million in 6M 2022). This growth is attributed to
increased realised gas prices and a rise in sales volume. The average realised
gas price rose by 4.4% to $2.87/Mscf, while gas production saw a moderate 1.4%
increase to 21.6 Bscf during the same period (compared to 21.3 Bscf in 6M
2022). The average realised gas price improvement reflects the impact of
upward gas price revisions implemented in the period.
Gross profit
In the first half of 2023, gross profit showed marginal growth, increasing by
0.7% to reach $276.3 million, compared to $274.3 million in 2022.
Non-production costs primarily included $94.1 million in royalties and $81.3
million in depreciation, depletion, and amortisation (DD&A), contrasting
with $108.8 million in royalties and $70.4 million in DD&A in the previous
year. The decrease in royalties was because of the lower oil prices realised
during the period, while the higher DD&A costs reflect the increased
production levels.
Direct operating costs, which encompass expenses related to crude-handling
charges (CHC), barging/trucking, operations and maintenance, amounted to $88.7
million in 6M 2023, marking a 31.2% increase from the $67.6 million incurred
in 6M 2022. This rise in direct operating costs is attributed to higher
costs on additional alternative evacuation routes secured by Seplat to
minimise outages and Third-party infrastructure downtime. On a cost/boe basis
overall costs are fair and remain comparable with prior period.
Considering the cost per barrel equivalent basis, production operating
expenses (opex) were $9.6/boe in 6M 2023, compared to $8.1/boe in 6M 2022.
Operating profit
During the period under review, our operating profit was $118.4 million,
showing a significant decrease of 51.7% compared to the $245.3 million
achieved in 6M 2022. This decline in operating profit was attributed to a
combination of lower oil prices and foreign exchange (FX) losses due to
changes in exchange rates. On June 14, 2023, the Central Bank of Nigeria (CBN)
implemented a major operational change in the foreign exchange (FX) market to
unify the multiple exchange rate windows. This change involved consolidating
all FX segments into the Investors and Exporters (I&E) window, which
became the sole approved and recognized window for setting the FX rate,
following the adoption of "willing buyer, willing seller" model.
Because of these new CBN guidelines, there was a significant adjustment in the
exchange rate between the Nigerian Naira (NGN) and the US Dollar (USD). The
closing rate for June 2023 was adjusted to NGN753.01/US$, representing a
notable difference from the May 2023 rate of NGN461.28/US$. The revaluation of
financial assets arising from this exchange rate resulted in a net (non-cash)
loss of $33.8 million.
Overall, there is no adverse effect on the company and summarised in the table
below are expected future impacts of Naira devaluations.
Component Impact Impact Notes
NGN USD
Gas revenue Increase Unchanged Gas sales are priced in dollars but invoiced in Naira at the prevailing
I&E rate. The same applies for crude sold to the Waltersmith refinery
G&A/Opex Unchanged Reduce Devaluation would lead to a reduction in Naira denominated costs when
expressed in Dollars
Cash balances Unchanged Minimal Naira revenue to closely match Naira expenses with percentage of Naira
balances in cash maintained at reasonable levels
Trade receivables Unchanged Reduce Exchange loss on Naira receivables
Other Naira financial assets Unchanged Reduce Exchange loss in US$ on the valuation and settlement of Naira-denominated
financial assets
Naira liabilities Unchanged Reduce Exchange gains in US$ upon revaluing or settling our Naira-based liabilities
The Company acknowledges the importance of effectively managing the impacts of
foreign exchange (FX) fluctuations. It recognizes that navigating the changing
currency dynamics is crucial to its financial stability and overall success.
Seplat will continue to utilise its Naira revenue (which will also increase in
quantum in line with new exchange rates since gas and some oil (OML53)
contract values are Dollar denominated although settled in Naira) to fund
local currency transactions and constantly manage our holding Naira which
usually doesn't exceed 20% of total cash holding. By proactively monitoring
this, the Company aims to mitigate potential risks arising from currency
volatility. This strategic approach will allow the Company to safeguard its
financial position, optimize its operations, and maintain resilience in the
face of currency uncertainties.
General and administrative expenses (G&A) amounted to $65.8 million, 42.0%
higher than the G&A costs of $46.4 million incurred in 6M 2022. This
increase in G&A costs was mainly due to professional fees associated with
the litigation costs in response to the unprecedented and intense period of
minority shareholder actions through the Courts and some costs associated with
the MPNU transaction. Excluding these exceptional items, G&A costs would
have closed relatively flat compared to the previous year. Nevertheless,
Seplat remains committed to reducing G&A expenses and has established cost
champions to identify cost pressure points and we are implementing measures to
control expenditure in those areas.
After adjusting for non-cash items such as impairment, fair value, and
exchange losses, the adjusted EBITDA for the period was $235.8 million (6M
2022: $342.7 million), resulting in a margin of 43.1% (6M 2022: 65.0%).
Taxation
The income tax expense of $2.8 million includes a current tax charge of $31.5
million and a deferred tax credit of $28.7 million. The deferred tax credit
recorded during the period was due to change in applicable tax rate on our
Elcrest assets which impacted deferred tax asset balance brought forward from
prior years. The effective tax rate for the period was 3% (6M 2022: 60%).
Effective tax rate analysis Income tax expense Tax rate
Profit before tax ($'million) Current Deferred Total ETR Current
(Effective Tax Rate) Tax rate
85.4 31.5 (28.7) 2.8 3.3% 36.9%
Net result
Profit before tax declined by 59.3%, amounting to $85.4 million, compared to
$209.9 million in 6M 2022. However, the profit decline was mitigated due to
lower taxation in the current period, resulting in a closing profit of $82.6
million, as opposed to $83.3 million in 6M 2022.
The profit attributable to equity holders of the parent company, representing
shareholders, was $43.5 million in 6M 2023, which resulted in basic earnings
per share of $0.07 for the period (6M 2022: $0.14/share).
Cash flows from operating activities
During the period, the Company generated $259.1 million in cash from its
operations, a decrease from the $330.1 million generated in 6M 2022 because of
lower oil prices.
Net cash flows from operating activities amounted to $209.4 million in 6M
2023, compared to $284.3 million in 6M 2022. This figure considers tax
payments of $47.0 million and a hedging premium of $2.7 million during the
current period, while in the previous year, tax payments were $41.1 million,
and the hedging premium paid was $4.7 million.
The Company received $172 million in the first half of 2023 towards settling
cash calls. This progress led to the reduction of the net NEPL receivable
balance, which now stands at $89 million.
Cash flows from investing activities
In the first half of 2023, the total net cash outflow from investing
activities was $81.4 million, which decreased from the $200.4 million recorded
in 6M 2022.
The capital expenditure during the period was $87.2 million, including $62.1
million invested in drilling activities and $25.1 million invested in
engineering projects.
The Company received $3.3 million from All Grace Energy regarding the
divestment from the Ubima field. This payment brought the total amount
received to $21.9 million out of the total settlement sum of $55.0 million.
Cash flows from financing activities
Net cash outflows from financing activities were $111.3 million, which
increased from the $64.2 million recorded in 6M 2022.
These outflows included $32.9 million for interest on loans and borrowings,
reflecting the cost of servicing the Company's debt obligations. Additionally,
a commitment fee of $2.4 million was incurred on our credit facilities.
The loan repayments of $11.0 million during the period represent the first
principal repayment of the Eland Senior RBL Facility.
During the period, shareholders were paid dividends amounting to $61.8 million
(6M 2022: $28.2 million paid).
Liquidity
The balance sheet continues to remain healthy with a solid liquidity position.
Net debt reconciliation $ million* Coupon Maturity
30 June 2023
Senior notes* 673.0 7.75% April 2026
Westport RBL* 78.5 SOFR rate+8% March 2026
Off-take facility* 9.5 SOFR rate+10.5% April 2027
Total borrowings 761.0
Cash and cash equivalents (exclusive of restricted cash) 380.7
Net debt 380.3
* Including amortised interest
Seplat Energy ended the first quarter with gross debt of $761.0 million (with
maturities in 2026 and 2027) and cash at bank of $380.7 million, leaving net
debt at $380.3 million. The restricted cash balance of $24.9 million includes
$8.0 million and $15.2 million set aside in the stamping reserve and debt
service reserve accounts for the revolving credit facility.
As the Company continuously reviews its funding and maturity profile, it
continues to monitor the market in ensuring that it is well positioned for any
refinancing and or buy back opportunities for the current debt facilities -
including potentially the US$650 million 7.75% 144A/Reg S bond maturing in
2026.
Dividend
The board has approved a Q2 2023 dividend of US3.0 cents per share (subject to
appropriate WHT) to be paid to shareholders whose names appear in the Register
of Members as at the close of business on 17 August 2023. This takes dividend
payments to US6.0 cents per share for the 2023 financial year to date, in line
with the Company's dividend policy.
Hedging
Seplat's hedging policy aims to guarantee appropriate levels of cash flow
assurance in times of oil price weakness and volatility. For Q3 2023,
1.0mmbbls are protected at $50/bbl. (at a cost of $0.82/bbl) and 0.5mmbbls are
protected at $55/bbl (at a cost of $0.51/bbl). For Q4 2023, 1.5mmbbls are
protected at $55/bbl. (at a cost of $0.73/bbl).
Oil put options Q3 2023 Q3 2023 Q4 2023
Volume hedged (MMbbls) 1.0 0.5 1.5
Price hedged ($/bbl.) 50 55 55
Additional barrels are expected to be hedged for the first quarter of 2024, in
line with the approach to target hedging two quarters in advance. The Board
and management team 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.
Petroleum Industry Act (PIA) Implementation Status
Since submitting the conditional application to convert all our assets to the
PIA regime in February 2023, our multi-disciplinary team has been diligently
preparing the Company for full compliance with the various aspects of the PIA.
Meanwhile, the regulator is finalising the guidelines for the conversion and
has shared concession contracts with converting companies to enable a thorough
review and understanding of the contractual terms and obligations that will be
applicable under the new PIA regime. Therefore, the Long-stop date has been
extended to September 30, 2023. Our internal review process is still underway,
aiming to enable a final decision on converting our assets to the PIA regime.
Share dealing policy
We confirm that, to the best of our knowledge, there has been compliance with
the Company's share dealing policy during the period.
Free float
The Company's free float on 30 June 2023 was 29%.
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