REG - Seplat Energy PLC - Q1 2022 Results
28/04/2022 07:00
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RNS Number : 6155J Seplat Energy PLC 28 April 2022
Seplat Energy
Unaudited results for the three months ended 31 March 2022
Lagos and London, 28 April 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
unaudited results for the three months ended 31 March 2022.
Operational highlights
• Strong safety record extended to 26.1 million hours without LTI from Seplat
Energy operated assets
(2.0m hours in Q1 2022)
• Working interest production averaged 47,603 boepd (liquids 29,079 bopd, gas
18,524 boepd)
• Full-year guidance remains unchanged at 50-60 kboepd
• Amukpe-Escravos Pipeline mechanically completed, all commercial terms have
been agreed and are moving through counterparty approval processes for
signature. Expected to be fully operational by end of Q2 2022.
• Sibiri exploration well drilled and successful, data analysis underway,
working with partner to secure regulatory approval for Extended Well Test
• Decision to exit Ubima to focus on more profitable assets; agreement reached
to sell Seplat Energy's share to its JV partner for $55 million. 2P reserves
reduce by 2 MMboe from 457mmboe to 455 MMboe.
Financial highlights
• Revenues up 58.6% to $241.8 million
• EBITDA up 81.6% to $147.4 million (adjusted for non-cash items)
• Strong cash generation of $178.7 million, capex of $25.7 million
• Strong balance sheet with $312.2 million cash at bank, net debt of $442.6
million
• Q1 interim dividend of US2.5 cents per share
Update on proposed acquisition of Mobil Producing Nigeria Unlimited
• Sales & Purchase Agreement signed on 25 February to acquire Exxon's
shallow water operations in Nigeria, Mobil Producing Unlimited, Nigeria (MPNU)
• Acquisition remains on track and awaiting necessary approvals, expected to
complete in H2 2022
Roger Brown, Chief Executive Officer, said:
"Seplat Energy delivered a good quarter that benefited from higher oil
pricing, which offset lower production owing to continuing problems with the
Trans Forcados Pipeline. However, the alternative Amukpe-Escravos Pipeline is
mechanically complete and once we have signed the commercial agreements, we
expect Chevron to be lifting our oil through the Escravos Terminal in the
third quarter.
Our proposed acquisition of MPNU remains on course. We are awaiting the
necessary approvals from government and regulators and expect the transaction
to complete in the second half of this year. The effective date of 1 January
2021 means we will benefit from higher recent oil prices and as we have
previously reported, the addition of MPNU will nearly treble our production
and double our reserves on a pro forma 2020 basis. The acquisition will
reinforce 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. It
will also bring 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.
We announce the decision to divest the Group's interest in the Ubima marginal
field for a consideration of $55million, which marginally reduces the
company's 2P reserves by 2 MMboe to 455 MMboe.
We have proven we have the financial strength and credibility to attract
international finance into Nigeria's energy sector and this will help us in
our aim to deliver energy transition and provide cleaner, more reliable and
more affordable energy for Nigeria's young and growing population."
Summary of performance
$ million ₦ billion
3M 2022 3M 2021 % change 3M 2022 3M 2021
Revenue 241.8 152.448 58.6% 100.6 57.9
Gross profit 117.3 52.8 122.3% 48.8 20.1
EBITDA * 147.4 81.2 81.6% 61.3 30.8
Operating profit (loss) 102.1 44.4 130.0% 42.5 16.9
Profit (loss) before tax 83.4 28.0 197.8% 34.7 10.6
Cash generated from operations 178.7 4.4 3,961% 74.4 1.7
Working interest production (boepd) 47,603 48,239 (1.3%)
Average realised oil price ($/bbl) $97.53 $60.76 60.5%
Average realised gas price ($/Mscf) $2.76 $2.76 0%
* Adjusted for non-cash items
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 as a result of new information, future
events or otherwise, except to the extent legally required.
Enquiries:
Seplat Energy Plc
Emeka Onwuka, Chief Financial Officer +234 1 277 0400
Carl Franklin, Head of Investor Relations
Ayeesha Aliyu, Investor Relations
Chioma Nwachuku, Director External Affairs & Sustainability
FTI Consulting
Ben Brewerton / Christopher Laing +44 203 727 1000
seplatenergy@fticonsulting.com
Citigroup Global Markets Limited
Tom Reid / Luke Spells +44 207 986 4000
Investec Bank plc
Chris Sim / Charles Craven / Jarrett Silver +44 207 597 4000
Notes to editors
Seplat Energy Plc is Nigeria's leading indigenous energy company. It is listed
on the Nigerian Exchange Limited (NGX: SEPLAT) and the Main Market of the
London Stock Exchange (LSE: SEPL).
Seplat Energy is pursuing a Nigeria-focused growth strategy through
participation in asset divestments by international oil companies, farm-in
opportunities, and future licensing rounds. The Company is a leading supplier
of gas to the domestic power generation market. For further information please
refer to the Company website, http://seplatenergy.com/
(http://seplatenergy.com/)
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 2.0 million
man-hours with no fatalities, lost-time injuries, or major injuries in the
period.
The Company has now achieved more than 26 million man-hours without LTI on its
operated assets. There were 20 HSE incidents in total, compared to 22
incidents in the first three months of 2021, including one reportable spill
and two 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 March 2022, we had conducted nearly 18,000 Covid-19 tests since
the start of the pandemic, with a positivity rate of 2.8%. 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.
Working interest production for the three months ended 31 March 2022
3M 2022 3M 2021
Liquids((1)) Gas Total Liquids Gas Total
Seplat % bopd MMscfd boepd bopd MMscfd boepd
OMLs 4, 38 & 41 45% 17,655 107.4 36,180 19,842 114 39,540
OML 40 45% 7,420 - 7,420 3,615 - 3,615
OML 53 40% 2,712 - 2,712 3,570 - 3.570
OPL 283 40% 1,291 - 1,291 1,178 - 1,178
Ubima 82% - - - 337 - 337
Total 29,078 107.4 47,603 28,541 114 48,239
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.
Working interest production for 3M 2022 averaged 47,603 boepd, (3M 2021:
48,239), with an oil and gas mix of 61% and 39% respectively. Within this,
liquids production was up 1.9% year-on-year, to 29,078 bopd, with
significantly higher volumes from OML 40 slightly offsetting lower volumes
from OML 4, 38 and 41 due to further outages in the Trans Forcados System,
which experienced higher than planned downtime of 18% in the first three
months of this year. The impact of future FOT outages on production from OMLs
4, 38 and 41 will be alleviated by our use of the long-delayed Amukpe-Escravos
Pipeline, which, having been completed mechanically, awaits finalisation of
commercial agreements. We expect to be using the AEP in the third quarter.
Despite 23% downtime as a result of outages on the TEP and the TFP, produced
volumes from OML 40 were higher than Q1 2021, as the four Gbetiokun wells
drilled in the previous year came onstream. We expect to sustain higher
production throughout the year.
Gas volumes were down 6.1% year-on-year to 107.4 impacted by lower gas offtake
due to price renegotiation and issues with the hot oil burner at Oben that
affected production. Price discussions with customers have been concluded and
a new Burner-C was installed and commissioned late February, and gas
production volumes have subsequently improved in March.
We have not reported any production for Ubima in Q1 2022 as the Seplat Energy
Board approved an exit from the Ubima asset in April 2022. The Ubima asset,
operated by All Grace Energy Limited (AGEL) was acquired in 2019 as part of
the Eland acquisition. A settlement agreement of $55 million has been agreed
with AGEL and we expect to receive payments in due course.
Ubima is in a high operating cost environment, with major evacuation
challenges currently being experienced in the Niger Delta. Because substantial
capital expenditure would be required to create more secure evacuation routes,
the decision to exit will enable us to invest in other parts of our business
that generate higher returns. Current reserves in Ubima stand at approximately
2 MMbbls and necessary adjustments to the financial statements will be made in
the second quarter and reported in the 6M 2022 results.
Drilling activities
During the period, we spudded two wells (Amukpe and Sibiri) and completed a
Gbetiokun well that was spudded in 2021.
In OML 38, the Amukpe-05 drilling commenced and is expected to be completed by
the end of April 2022. In OML 53, we spudded the Owu appraisal well in early
April and drilling operations are progressing.
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. We are working with our partners to
secure regulatory approval to carryout extended well testing (EWT), to confirm
producibility, among other parameters critical to full field development.
The Gbetiokun-09 well, drilled late 2021 came onstream in the first quarter
and is producing c.3.5 kbopd from both long and short strings, taking the
Gbetiokun field to a production rate of c.21 kbopd IPSC. For the three-infill
development wells campaign, the first Opuama well (OP-12) was spudded in April
2022 with drilling progressing according to plan with on stream date estimated
to be late May 2022.
Oil business performance
Seplat Energy's liquids (oil and condensate) operations produced 2.6 MMbbls on
a working interest basis in 3M 2022
(3M 2021: 2.6 MMbbls). The average realised price per barrel in the period was
$97.53 (3M 2021: $60.76), the increase being mostly attributable to the impact
of the Ukraine conflict on global energy prices.
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. Commercial terms have been agreed and are moving through
counterparty approval processes for signature. Once we have signed the
commercial agreements, we expect Chevron to be lifting our oil through the
Escravos Terminal in the third quarter.
Gas business performance
Working interest gas volumes for the period was 107.4 MMscfd at an average
selling price of $2.76/Mscf (3M 2021: 114 MMscfd, $2.76/Mscf). The Gas
business contributed 38.9% of the Group's volumes on a boepd basis and 10.6%
of Group revenues. During the period we signed GSAs with three new customers,
two of which commenced offtake at a combined rate of 66 MMscfd in January and
March.
ANOH Gas Processing Plant
We have made progress on the ANOH plant but have seen some delays in shipments
and releasing equipment essential to the project from the ports. To date, we
have achieved 85% 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 around 25%
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 in Nigeria until later this year. The latest schedule provided by NGC
shows completion in 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.
Outlook and update on MPNU acquisition
The proposed acquisition of MPNU remains on track and necessary regulatory
approvals are anticipated. We expect completion to occur in the second half of
2022 and MPNU will then operate as a standalone subsidiary of Seplat Energy.
Full-year production guidance for 2022 remains 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.
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
completed and the Owu appraisal well already spudded; we plan to 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.
Financial review
Revenue and other income
Revenue from oil and gas sales in 3M 2022 was $241.8 million, a 58.6% increase
from the $152.4 million achieved in 3M 2021. Adjusted for an underlift of
$13.6 million, total revenues were $255.5 million.
Crude oil revenue was 74.2% higher at $216.2 million (3M 2021: $124.1
million), reflecting higher average realised oil prices of $97.53/bbl for the
period (3M 2021: $60.76/bbl). The total volume of crude lifted in the year was
2.2 MMbbls, higher than the 2.1 MMbbls lifted in 3M 2021. In addition, the
Group's 3M 2022 produced liquid volumes were subject to reconciliation losses
of 10.2%. We expect these to improve when we evacuate the bulk of our crude
through the Amukpe-Escravos underground pipeline.
Gas sales revenue decreased by 9.7% to $25.6million (3M 2021: $28.4 million),
due to lower gas sales volumes of 9.7 Bscf compared to 10.3 Bscf in 3M 2021,
as a result of lower customer offtake, production stoppages at Oben in
February and March, as well as TFP outages during the same months.
The average realised gas price was unchanged at $2.76/Mscf and this reflects
the reduction applied to the DSO gas-to-power volumes from August 2021.
Other income of $8.9 million includes an underlift of $13.6 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 214
kbbls, as well as a $0.4 million tariff income generated from the use of the
Company's pipelines, offset by an unrealised $6.0 million loss on foreign
exchange.
Gross profit
Gross profit increased by 122.3% to $117.3 million (3M 2021: $52.8million).
Non-production costs consisted primarily of $50.2 million royalties and
DD&A of $33.8 million, compared to $28.4 million royalties and $30.9
million DD&A in the prior year. The higher royalties were the result of
higher oil prices.
Direct operating costs, which include crude-handling fees and operation and
maintenance costs, amounted to $37.4 million in 3M 2022 (3M 2021: $37.4
million).
On a cost-per-barrel equivalent basis, production opex was $8.7/boe, in line
with 3M 2021.
Operating profit
The operating profit for the first quarter was $102.1 million, compared to
$44.4 million in 3M 2021, an increase of 130%.
General and administrative expenses remained largely flat at $19.0 million (3M
2021: $18.2 million).
An EBITDA of $147.8 million adjusts for non-cash items which include
impairment and exchange losses, equating to a margin of 60.9% for the year (3M
2021: $81.2 million; 53.2%).
Net result
The profit before tax was $83.4 million (3M 2021: $28.0 million). The income
tax expense of $63.5 million includes a current tax charge of $17.9 million
and deferred tax charge of $45.6 million. The deferred tax charge is mainly
driven by the unwinding of previously unutilised capital allowances and higher
under-lift in current year. The effective tax rate for the period was 76%
(2021: 11%)
The profit for the period was $19.9 million (3M 2021: $24.9 million) with a
resultant basic earnings per share of $0.03 in 3M 2022, compared to $0.06 per
share in 3M 2021.
Cash flows from operating activities
Cash generated from operations in 3M 2022 was $180.9 million (3M 2021: $5.6
million). Net cash flows from operating activities were $178.7 million (3M
2021: $4.4 million), after accounting for tax payments of $0.4 million (3M
2021: $0.3 million) and a hedge premium of $1.8 million (3M 2021: $1.5
million).
In Q1 2022 the Group received $95.0 million from the JV partners towards the
settlement of cash calls. The major JV receivable balance now stands at $51.0
million, down from $83.9 million at the end of 2021.
Cash flows from investing activities
Net capital expenditure of $26.0 million included $16.0 million invested in
drilling and $8.6 million in engineering projects.
An outflow of $128.3 million was recorded as deposit for the Company's
proposed acquisition of Mobil Producing Nigeria Unlimited, announced in
February.
Cash flows from financing activities
Net cash outflows from financing activities were $30.6 million (3M 2021: $20.4
million), including $28.4 million interest paid on loans and $2.1 million
commitment fee incurred on the $350 million revolving credit facility.
Liquidity
The balance sheet continues to remain healthy with a solid liquidity
position.
Net debt reconciliation $ million $ million drawn Coupon Maturity
at 31 March 2022
Senior notes* 636.1 650.0 7.75% April 2026
Westport RBL* 108.4 110.0 Libor+8% March 2026
Off-take facility* 10.3 11.0 Libor+10.5% April 2027
Total borrowings 754.8 771.0
Cash and cash equivalents (exclusive of restricted cash) 312.2 312.2
Net debt 442.6
* Including amortised interest
Seplat Energy ended the first quarter with gross debt of $754.8 million (with
maturities in 2026 and 2027) and cash at bank of $312.2 million, leaving net
debt at $442.6 million.
Dividend
The Board has approved the Q1 2022 interim dividend of US2.5 cents per share
(subject to appropriate WHT) to be paid to shareholders whose names appear in
the Register of Members as at the close of business on 30 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 2022, the Group
has dated Brent put options of 6.0 MMbbls through Q3 2022 at an average
premium of $1.42/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 and 1.0mmbbls are protected at $60/bbl. Further barrels are
expected to be hedged for 2022 in the coming months in line with the approach
to target hedging two quarters in advance.
The Board and management team continue to closely monitor prevailing oil
market dynamics and will consider further measures to provide appropriate
levels of cash flow assurance in times of oil price weakness and volatility.
Elimination of related-party transactions
In our continuous efforts to promote world-class governance, related-party
transactions (RPT) were eliminated from
1 January 2022.
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.
Board appointments
On 22 April 2022, the Company announced the appointment of three new
directors: Mrs. Bashirat Odunewu will join as an Independent Non-Executive
Director of the Company; Mr. Kazeem Raimi will join as a Non-Executive
Director and nominee of Platform Petroleum Limited replacing Mr. Austin Avuru,
who stepped down from the Board of Seplat Energy on 1(st) March 2022; and Mr.
Ernest Ebi will join as a Non-Executive Director and a nominee of Shebah
Petroleum Development Company Limited (BVI), replacing Dr. A.B.C. Orjiako who
will step down from the Board on 18(th) May 2022 after the Annual General
Meeting. The three appointees will join the Seplat Energy Board with effect
from 18 May 2022.
The Board is pleased to welcome the new Directors and looks forward to the
contributions they will make to the Group.
Interim Consolidated Financial Statements (Unaudited)
For the three months ended 31 March 2022
(Expressed in Nigerian Naira and US Dollars)
Interim condensed consolidated statement of profit or loss and other
comprehensive income
For the three months ended 31 March 2022
3 Months ended 3 Months ended 31 March 2021 3 Months ended 3 Months ended 31 March 2021
31 March 2022 31 March 2022
Unaudited Unaudited Unaudited Unaudited
Notes ₦ million ₦ million $'000 $'000
Revenue from contracts with customers 7 100,618 57,930 241,837 152,448
Cost of sales 8 (51,785) (37,871) (124,490) (99,659)
Gross profit 48,833 20,059 117,347 52,789
Other income 9 3,710 5,781 8,916 15,214
General and administrative expenses 10 (7,913) (6,919) (19,018) (18,220)
Impairment loss on financial assets 11 (509) (269) (1,223) (707)
Fair value loss 12 (1,639) (1,776) (3,941) (4,676)
Operating profit 42,482 16,876 102,081 44,400
Finance income 13 13 3 32 7
Finance cost 13 (7,731) (6,391) (18,582) (16,817)
Finance cost-net (7,718) (6,388) (18,550) (16,810)
Share of (loss)/profit from joint venture accounted for using the equity (52) 159 (124) 418
method
Profit before taxation 34,712 10,647 83,407 28,008
Income tax expense 14 (26,422) (1,198) (63,505) (3,152)
Profit for the period 8,290 9,449 19,902 24,856
Attributable to:
Equity holders of the parent 6,868 13,550 16,484 35,647
Non-controlling interests 1,422 (4,101) 3,418 (10,791)
8,290 9,449 19,902 24,856
Other comprehensive income:
Items that may be reclassified to profit or loss:
Foreign currency translation difference 7,374 - - -
Total comprehensive income for the period (net of tax) 15,664 9,449 19,902 24,856
Earnings per share attributable to the equity shareholders:
Basic earnings per share ₦/$ 26 11.76 23.29 0.03 0.06
Diluted earnings per share ₦/$ 26 11.70 23.03 0.03 0.06
The above interim condensed consolidated statement of profit or loss and other
comprehensive income should be read in conjunction with the accompanying
notes.
Interim condensed consolidated statement of financial position
As at 31 March 2022
31 March 2022 31 December 31 March 2022 31 December
2021 2021
Unaudited Audited Unaudited Audited
Notes ₦ million ₦ million $'000 $'000
Assets
Non-current assets
Oil & gas properties 15 665,025 660,745 1,597,662 1,604,025
Other property, plant and equipment 10,902 11,228 26,190 27,255
Right-of-use assets 2,685 3,050 6,450 7,404
Intangible assets 16 54,291 54,045 130,430 131,200
Other assets 46,849 46,363 112,551 112,551
Investment accounted for using equity accounting 17 93,722 92,795 225,158 225,270
Prepayments 27,814 27,512 66,820 66,788
Deferred tax asset 14.1 433,485 428,986 1,041,406 1,041,406
Total non-current assets 1,334,773 1,324,724 3,206,667 3,215,899
Current assets
Inventories 30,884 30,878 74,196 74,957
Trade and other receivables 18 140,464 105,274 337,455 255,557
Prepayments 1,063 711 2,554 1,726
Contract assets 19 3,298 1,679 7,922 4,076
Cash and cash equivalents 21 129,973 133,667 312,242 324,490
Restricted cash 21.1 6,732 6,603 16,172 16,029
Total current assets 312,414 278,812 750,541 676,835
Total assets 1,647,187 1,603,536 3,957,208 3,892,734
Equity and Liabilities
Equity
Issued share capital 22 296 296 1,862 1,862
Share premium 22 90,383 90,383 520,138 520,138
Share based payment reserve 22 5,454 4,914 23,487 22,190
Treasury shares (2,027) (2,025) (4,920) (4,915)
Capital contribution 5,932 5,932 40,000 40,000
Retained earnings 246,372 239,429 1,201,747 1,185,082
Foreign currency translation reserve 392,722 385,348 1,933 1,933
Non-controlling interest (19,491) (20,913) (55,386) (58,804)
Total shareholders' equity 719,641 703,364 1,728,861 1,707,486
Non-current liabilities
Interest bearing loans and borrowings 23 288,950 290,803 694,174 705,953
Lease Liabilities 607 198 1,459 481
Provision for decommissioning obligation 64,620 63,709 155,244 154,659
Deferred tax liabilities 14.1 365,755 343,179 878,693 833,101
Defined benefit plan 4,900 4,181 11,772 10,149
Total non-current liabilities 724,832 702,070 1,741,342 1,704,343
Current liabilities
Interest bearing loans and borrowings 23 25,250 24,988 60,661 60,661
Lease Liabilities 871 1,273 2,092 3,090
Derivative financial instruments 20 1,848 1,543 4,439 3,745
Trade and other payables 24 148,162 151,204 355,949 367,058
Current tax liabilities 26,583 19,094 63,864 46,351
Total current liabilities 202,714 198,102 487,005 480,905
Total liabilities 927,546 900,172 2,228,347 2,185,248
Total shareholders' equity and liabilities 1,647,187 1,603,536 3,957,208 3,892,734
The above interim condensed consolidated statement of financial position
should be read in conjunction with the accompanying notes.
The Group financial statements of Seplat Energy Plc and its subsidiaries (The
Group) for three months ended 31 March 2022 were authorised for issue in
accordance with a resolution of the Directors on 28 April 2022 and were signed
on its behalf by:
A. B. C. Orjiako R.T. Brown E. Onwuka
FRC/2013/IODN/00000003161 FRC/2014/ANAN/00000017939 FRC/2020/003/00000020861
Chairman Chief Executive Officer Chief Financial Officer
28 April 2022 28 April 2022 28 April 2022
Interim condensed consolidated statement of changes in equity
For the three months ended 31 March 2022
Share Share Treasury shares Capital contribution Retained Foreign Total equity
premium
based payment
earnings currency
reserve
Issued translation Non- controlling interest
share
capital reserve
₦ million ₦ million ₦ million ₦ million ₦ million ₦ million ₦ million ₦ million ₦ million
At 1 January 2021 293 86,917 7,174 - 5,932 211,790 331,289 (11,058) 632,337
Profit/(Loss) for the period - - - - - 13,550 - (4,101) 9,449
Other comprehensive income - - - - - - - -
Total comprehensive income/(loss) for the period - - - - - 13,550 - (4,101) 9,449
Transactions with owners in their capacity as owners:
Unclaimed dividend - - - - - 46 - - 46
Share based payments - - 544 - - - - - 544
Vested shares - - (760) - - - - - (760)
Total - - (216) - - 46 - - (170)
At 31 March 2021 (unaudited) 293 86,917 6,958 225,386 331,289 (15,159) 641,616
- 5,932
At 1 January 2022 296 90,383 4,914 (2,025) 5,932 239,429 385,348 (20,913) 703,364
Profit for the period - - - - - 6,868 - 1,422 8,290
Other comprehensive income - - - - - - 7,374 - 7,374
Total comprehensive income for the period - - - - - 6,868 7,374 1,422 15,664
Transactions with owners in their capacity as owners:
Unclaimed dividend - - - - - 75 - - 75
Share based payments - - 540 - - - - - 540
Vested shares - - - - - - - -
Shares re-purchased - - - (2) - - - - (2)
Total - - 540 (2) - 75 - - 613
At 31 March 2022 (unaudited) 296 90,383 (2,027) 5,932 246,372 392,722 (19,491) 719,641
5,454
The above interim condensed consolidated statement of changes in equity should
be read in conjunction with the accompanying notes.
Issued Share Share Treasury shares Capital contribution Retained Foreign Non-controlling interest Total
share
premium
based payment
capital
earnings currency equity
reserve
translation
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2021 1,855 511,723 27,592 - 40,000 1,116,079 992 (34,196) 1,664,045
Profit/(Loss) for the period - - - - - 35,647 - (10,791) 24,856
Other comprehensive income - - - - - - - - -
Total comprehensive income/(loss) for the period - - - - - 35,647 - (10,791) 24,856
Transactions with owners in their capacity as owners:
Unclaimed dividend - - - - - 120 - - 120
Share based payments - - 1,431 - - - - - 1,431
Vested shares - - (2,000) - - - - - (2,000)
Total - - (569) - - 120 - - (449)
At 31 March 2021(Unaudited) 1,855 511,723 27,023 1,151,846 992 (44,987) 1,688,452
- 40,000
At 1 January 2022 1,862 520,138 22,190 (4,915) 40,000 1,185,082 1,933 (58,804) 1,707,486
Profit for the period - - - - - 16,484 - 3,418 19,902
Other comprehensive income - - - - - - - - -
Total comprehensive income for the period - - - - - 16,484 - 3,418 19,902
Transactions with owners in their capacity as owners:
Unclaimed dividend - - - - - 181 - - 181
Share based payments - - 1,297 - - - - - 1,297
Vested shares - - - - - - - - -
Shares re-purchased - - - (5) - - - - (5)
Total - - 1,297 (5) - 181 - - 1,473
At 31 March 2022(Unaudited) 1,862 520,138 23,487 (4,920) 40,000 1,201,747 1,933 (55,386) 1,728,861
The above interim condensed consolidated statement of changes in equity should
be read in conjunction with the accompanying notes.
Interim condensed consolidated statement of cash flows
For the three months ended 31 March 2022
3 months ended 3 months ended 3 months ended 3 months ended
31-Mar-22 31-Mar-21 31-Mar-22 31-Mar-21
Note ₦ million ₦ million $'000 $'000
Cash flows from operating activities
Cash generated from operations 25 75,280 2,127 180,906 5,586
Hedge premium paid (743) (562) (1,787) (1,480)
Income tax (paid)/credit (166) 95 (400) 251
Net cash inflows from operating activities 74,371 1,660 178,719 4,357
Cash flows from investing activities
Payment for acquisition of oil and gas properties (10,721) (12,382) (25,767) (32,585)
Deposit for investment (53,405) - (128,300) -
Payment for acquisition of other property, plant and equipment (114) (17) (273) (45)
Proceeds from disposal of other property, plant and equipment 2 - 4 -
Receipts from other assets - 1,861 - 4,897
Interest received 13 3 32 7
Net cash outflows from investing activities (64,225) (10,535) (154,304) (27,726)
Cash flows from financing activities
Shares purchased for employees* (2) - (5) -
Interest paid on lease liability (20) - (47) -
Lease payment (21) (2) (51) (4)
Payments for other financing charges** (874) - (2,100) -
Interest paid on loans (11,821) (7,746) (28,412) (20,384)
Net cash outflows from financing activities (12,738) (7,748) (30,615) (20,388)
Net decrease in cash and cash equivalents (2,592) (16,623) (6,200) (43,757)
Cash and cash equivalents at beginning of the year 133,667 85,554 324,490 225,137
Effects of exchange rate changes on cash and cash equivalents (1,102) 225 (6,048) 607
Cash and cash equivalents at end of the period 129,973 69,156 312,242 181,987
Included in the restricted cash balance is $8 million, ₦3.3 billion and $6.2
million, ₦2.6 billion set aside in the stamping reserve account and debt
service reserve account respectively for the revolving credit facility. Also
included in the restricted cash balance is $0.9 million, ₦0.4 billion and
$1.1 million, ₦0.4 billion for rent deposit and unclaimed dividend
respectively.
*Shares purchased for employees of $5,000, ₦2 million represent shares
purchased in the open market for employees for the long-term incentive plan of
the Group.
**Other financing charges include $2.1 million commitment fee incurred on the
$350 million Revolving Credit Facility.
The above interim condensed consolidated statement of cashflows should be read
in conjunction with the accompanying notes.
Notes to the interim condensed consolidated financial statement
1. Corporate Structure and business
Seplat Energy Plc (hereinafter referred to as 'Seplat' or the 'Company'), the
parent of the Group, was incorporated on 17 June 2009 as a private limited
liability company and re-registered as a public company on 3 October 2014,
under the Companies and Allied Matters Act, CAP C20, Laws of the Federation of
Nigeria 2004. The Company commenced operations on 1 August 2010. The Company
is principally engaged in oil and gas exploration and production and gas
processing activities. The Company's registered address is: 16a Temple Road
(Olu Holloway), Ikoyi, Lagos, Nigeria.
The Company acquired, pursuant to an agreement for assignment dated 31 January
2010 between the Company, SPDC, TOTAL and AGIP, a 45% participating interest
in OML 4, OML 38 and OML 41 located in Nigeria.
In 2013, Newton Energy Limited ('Newton Energy'), an entity previously
beneficially owned by the same shareholders as Seplat, became a subsidiary of
the Company. On 1 June 2013, Newton Energy acquired from Pillar Oil Limited
('Pillar Oil') a 40% Participant interest in producing assets: the
Umuseti/Igbuku marginal field area located within OPL 283 (the 'Umuseti/Igbuku
Fields').
On 21 August 2014, the Group incorporated a new subsidiary, Seplat Petroleum
Development UK Limited. The subsidiary provides technical, liaison and
administrative support services relating to oil and gas exploration
activities.
On 12 December 2014, Seplat Gas Company Limited ('Seplat Gas') was
incorporated as a private limited liability company to engage in oil and gas
exploration and production and gas processing. On 12 December 2014, the Group
also incorporated a new subsidiary, Seplat East Swamp Company Limited with the
principal activity of oil and gas exploration and production.
In 2015, the Group purchased a 40% participating interest in OML 53, onshore
north eastern Niger Delta (Seplat East Onshore Limited), from Chevron Nigeria
Ltd for $259.4 million.
On 16 January 2018, the Group incorporated a subsidiary, Seplat West Limited
('Seplat West'). Seplat West was incorporated to manage the producing assets
of Seplat Energy Plc.
In 2017, the Group incorporated a new subsidiary, ANOH Gas Processing Company
Limited. The principal activity of the Company is the processing of gas from
OML 53 using the ANOH gas processing plant.
In order to fund the development of the ANOH gas processing plant, on 13
August 2018, the Group entered into a shareholder's agreement with Nigerian
Gas Processing and Transportation Company (NGPTC). Funding is to be provided
by both parties in equal proportion representing their ownership share and
will be used to subscribe for the ordinary shares in ANOH. The agreement was
effective on 18 April 2019, which was the date the Corporate Affairs
Commission (CAC) approval was received. Given the change in ownership
structure as at 31 December 2019, the Group no longer exercises control and
has deconsolidated ANOH in the consolidated financial statements. However, its
retained interest qualifies as a joint arrangement and has been recognised
accordingly as investment in joint venture.
On 31 December 2019, Seplat Energy Plc acquired 100% of Eland Oil and Gas
Plc's issued and yet to be issued ordinary shares. Eland is an independent oil
and gas company that holds interest in subsidiaries and joint ventures that
are into production, development and exploration in West Africa, particularly
the Niger Delta region of Nigeria.
On acquisition of Eland Oil and Gas Plc (Eland), the Group acquired indirect
interest in existing subsidiaries of Eland.
Eland Oil & Gas (Nigeria) Limited, is a subsidiary acquired through the
purchase of Eland and is into exploration and production of oil and gas.
Westport Oil Limited, which was also acquired through purchase of Eland is a
financing company.
Elcrest Exploration and Production Company Limited (Elcrest) who became an
indirect subsidiary of the Group purchased a 45 percent interest in OML 40 in
2012. Elcrest is a Joint Venture between Eland Oil and Gas (Nigeria) Limited
(45%) and Starcrest Nigeria Energy Limited (55%). It has been consolidated
because Eland is deemed to have power over the relevant activities of Elcrest
to affect variable returns from Elcrest at the date of acquisition by the
Group. The principal activity of Elcrest is exploration and production of oil
and gas.
Wester Ord Oil & Gas (Nigeria) Limited, who also became an indirect
subsidiary of the Group acquired a 40% stake in a licence, Ubima, in 2014 via
a joint operations agreement. The principal activity of Wester Ord Oil &
Gas (Nigeria) Limited is exploration and production of oil and gas.
Other entities acquired through the purchase of Eland are Tarland Oil Holdings
Limited (a holding company), Brineland Petroleum Limited (dormant company) and
Destination Natural Resources Limited (dormant company).
On 1 January 2020, Seplat Energy Plc transferred its 45% participating
interest in OML 4, OML 38 and OML 41 ("transferred assets") to Seplat West
Limited. As a result, Seplat ceased to be a party to the Joint Operating
Agreement in respect of the transferred assets and became a holding company.
Seplat West Limited became a party to the Joint Operating Agreement in respect
of the transferred assets and assumed its rights and obligations.
On 20 May 2021, following a special resolution by the Board in view of the
Company's strategy of transitioning into an energy Company promoting renewable
energy, sustainability, and new energy, the name of the Company was changed
from Seplat Petroleum Development Company Plc to Seplat Energy Plc under
Companies and Allied Matters Act 2020.
On 7 February 2022, the Group incorporated a subsidiary, Seplat Energy
Offshore Limited. The Company was incorporated for oil and gas exploration and
production.
The Company together with its subsidiaries as shown below are collectively
referred to as the Group.
Subsidiary Date of incorporation Country of incorporation and place of business Percentage Principal activities Nature of holding
holding
Newton Energy Limited 1 June 2013 Nigeria 99.9% Oil & gas exploration Direct
and production
Seplat Energy UK Limited 21 August 2014 United Kingdom 100% Corporate, technical, liaison and administrative support services relating to Direct
oil & gas exploration and production
Seplat Gas Company Limited 12 December 2014 Nigeria 99.9% Oil & gas exploration and production and gas processing Direct
Seplat East Onshore Limited 12 December 2014 Nigeria 99.9% Oil & gas exploration and production Direct
Seplat East Swamp Company Limited 12 December 2014 Nigeria 99.9% Oil & gas exploration and production Direct
Seplat West Limited 16 January 2018 Nigeria 99.9% Oil & gas exploration and production Direct
Eland Oil & Gas Limited 28 August 2009 United Kingdom 100% Holding company Direct
Eland Oil & Gas (Nigeria) Limited 11 August 2010 Nigeria 100% Oil and Gas Exploration and Production Indirect
Elcrest Exploration and Production Nigeria Limited 6 January 2011 Nigeria 45% Oil and Gas Exploration and Production Indirect
Westport Oil Limited 8 August 2011 Jersey 100% Financing Indirect
Tarland Oil Holdings Limited 16 July 2014 Jersey 100% Holding Company Indirect
Brineland Petroleum Limited 18 February 2013 Nigeria 49% Dormant Indirect
Elandale Nigeria Limited 17 January 2019 Nigeria 40% Receive, store, handle, transport, deliver $ discharge petroleum and petroleum Indirect
products
Wester Ord Oil & Gas (Nigeria) Limited 18 July 2014 Nigeria 100% Oil and Gas Exploration Indirect
and Production
Wester Ord Oil and Gas Limited 16 July 2014 Jersey 100% Holding Company Indirect
Destination Natural Resources Limited - Dubai 70% Dormant Indirect
Seplat Energy Offshore Limited 7 February 2022 Nigeria 100% Oil and Gas exploration and production Direct
MSP Energy Limited 27 March 2013 Nigeria 100% Oil and Gas exploration and production Direct
2. Significant changes in the current reporting period
The following significant changes occurred during the reporting period ended
31 March 2022:
· During the period, Seplat Energy Offshore Limited was incorporated on
7 February 2022. The percentage ownership of the Company is 100%.
· The Group made a deposit of $128.3 million to Exxon Mobil
Corporation, Delaware as part of the consideration to acquire the entire share
capital of Mobil Producing Nigeria Unlimited. The completion of the
transaction is subject to ministerial consent and other required regulatory
approvals.
3. Summary of significant accounting policies
3.1 Introduction to summary of significant accounting policies
This note provides a list of the significant accounting policies adopted in
the preparation of these interim condensed consolidated financial statements.
These accounting policies have been applied to all the periods presented,
unless otherwise stated. The interim financial statements are for the Group
consisting of Seplat Energy Plc and its subsidiaries.
3.2 Basis of preparation
The interim condensed consolidated financial statements of the Group for the
first quarter ended 31 March 2022 have been prepared in accordance with the
accounting standard IAS 34 Interim financial reporting. This interim condensed
consolidated financial statement does not include all the notes normally
included in an annual financial statement of the Group. Accordingly, this
report is to be read in conjunction with the annual report for the year ended
31 December 2021 and any public announcements made by the Group during the
interim reporting period.
The financial statements have been prepared under the going concern assumption
and historical cost convention, except for financial instruments measured at
fair value on initial recognition, defined benefit plans - plan assets
measured at fair value. The financial statements are presented in Nigerian
Naira and United States Dollars, and all values are rounded to the nearest
million (₦'million) and thousand ($'000) respectively, except when otherwise
indicated.
Nothing has come to the attention of the directors to indicate that the Group
will not remain a going concern for at least twelve months from the date of
these financial statements.
The accounting policies adopted are consistent with those of the previous
financial year end corresponding interim reporting period, except for the
adoption of new and amended standard which is set out below.
3.3 New and amended standards adopted by the Group
The Group applied for the first-time certain standards and amendments, which
are effective for annual periods beginning on or after 1 January 2022. The
Group has not early adopted any other standard, interpretation or amendment
that has been issued but is not yet effective.
a) Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS
37
An onerous contract is a contract under which the unavoidable costs (i.e., the
costs that the Group cannot avoid because it has the contract) of meeting the
obligations under the contract exceed the economic benefits expected to be
received under it.
The amendments specify that when assessing whether a contract is onerous or
loss-making, an entity needs to include costs that relate directly to a
contract to provide goods or services include both incremental costs (e.g.,
the costs of direct labour and materials) and an allocation of costs directly
related to contract activities (e.g., depreciation of equipment used to fulfil
the contract as well as costs of contract management and supervision). General
and administrative costs do not relate directly to a contract and are excluded
unless they are explicitly chargeable to the counterparty under the contract.
In accordance with the transitional provisions, the Group applies the
amendments to contracts for which it has not yet fulfilled all its obligations
at the beginning of the annual reporting period in which it first applies the
amendments (the date of initial application) and has not restated its
comparative information.
b) Reference to the Conceptual Framework - Amendments to IFRS 3
The amendments replace a reference to a previous version of the IASB's
Conceptual Framework with a reference to the current version issued in March
2018 without significantly changing its requirements.
The amendments add an exception to the recognition principle of IFRS 3
Business Combinations to avoid the issue of potential 'day 2' gains or losses
arising for liabilities and contingent liabilities that would be within the
scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or
IFRIC 21 Levies, if incurred separately. The exception requires entities to
apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the
Conceptual Framework, to determine whether a present obligation exists at the
acquisition date. The amendments also add a new paragraph to IFRS 3 to clarify
that contingent assets do not qualify for recognition at the acquisition
date.
These amendments had no impact on the interim condensed consolidated financial
statements of the Group as there were no contingent assets, liabilities and
contingent liabilities within the scope of these amendments arisen during the
period.
c) Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16
The amendment prohibits entities from deducting from the cost of an item of
property, plant and equipment, any proceeds of the sale of items produced
while bringing that asset to the location and condition necessary for it to be
capable of operating in the manner intended by management. Instead, an entity
recognises the proceeds from selling such items, and the costs of producing
those items, in profit or loss.
These amendments had no impact on the interim condensed consolidated financial
statements of the Group as there were no sales of such items produced by
property, plant and equipment made available for use on or after the beginning
of the earliest period presented.
d) IFRS 1 First-time Adoption of International Financial Reporting
Standards - Subsidiary as a first-time adopter
The amendment permits a subsidiary that elects to apply paragraph D16(a) of
IFRS 1 to measure cumulative translation differences using the amounts
reported in the parent's consolidated financial statements, based on the
parent's date of transition to IFRS, if no adjustments were made for
consolidation procedures and for the effects of the business combination in
which the parent acquired the subsidiary. This amendment is also applied to an
associate or joint venture that elects to apply paragraph D16(a) of IFRS 1.
These amendments had no impact on the interim condensed consolidated financial
statements of the Group as it is not a first-time adopter.
e) IFRS 9 Financial Instruments - Fees in the '10 per cent' test for
derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing
whether the terms of a new or
modified financial liability are substantially different from the terms of the
original financial liability. These fees include only those paid or received
between the borrower and the lender, including fees paid or received by either
the borrower or lender on the other's behalf. There is no similar amendment
proposed for IAS 39 Financial Instruments: Recognition and Measurement.
These amendments had no impact on the interim condensed consolidated financial
statements of the Group as there were no modifications of the Group's
financial instruments during the period.
3.4 Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group's interim financial
statements are disclosed below. The Group intends to adopt these new and
amended standards and interpretations, if applicable, when they become
effective. Details of these new standards and interpretations are set out
below:
• IFRS 17 Insurance Contracts - Effective for annual periods beginning on or
after 1 January 2023
• Amendments to IAS 1: Classification of Liabilities as Current or Non-current -
Effective for annual periods beginning on or after 1 January 2023
• Amendments to IAS 8 Accounting Policies and Accounting Estimates: Definition
of Accounting Estimates - Effective date for annual periods beginning on or
after 1 January 2023
• Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2- Effective date for annual periods beginning on or after 1 January
2023
• Amendments regarding deferred tax on leases and decommissioning obligations -
Effective date for annual periods beginning on or after 1 January 2023
3.5 Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Company and its subsidiaries as at 31 March 2022.
This basis of consolidation is the same adopted for the last audited financial
statements as at 31 December 2021.
3.6 Functional and presentation currency
Items included in the financial statements of each of the Group's subsidiaries
are measured using the currency of the primary economic environment in which
the subsidiaries operate ('the functional currency'), which is the US dollar
except the UK subsidiary which is the Great Britain Pound. The interim
condensed consolidated financial statements are presented in Nigerian Naira
and the US Dollars.
The Group has chosen to show both presentation currencies and this is
allowable by the regulator.
i. Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated in foreign
currencies at year end are generally recognised in profit or loss. They are
deferred in equity if attributable to net investment in foreign operations.
Foreign exchange gains and losses that relate to borrowings are presented in
the statement of profit or loss, within finance costs. All other foreign
exchange gains and losses are presented in the statement of profit or loss on
a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value was
determined. Translation differences on assets and liabilities carried at fair
value are reported as part of the fair value gain or loss or other
comprehensive income depending on where fair value gain or loss is reported.
ii. Group companies
The results and financial position of foreign operations that have a
functional currency different from the presentation currency are translated
into the presentation currency as follows:
• assets and liabilities for each statement of financial position presented are
translated at the closing rate at the date of the reporting date.
• income and expenses for statement of profit or loss and other comprehensive
income are translated at average exchange rates (unless this is not - a
reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are translated at the
dates of the transactions), and all resulting exchange differences are
recognised in other comprehensive income.
On disposal of a foreign operation, the component of other comprehensive
income relating to that particular foreign operation is recognised in profit
or loss. Goodwill and fair value adjustments arising on the acquisition of a
foreign operation are treated as assets and liabilities of the foreign
operation and translated at the closing rate.
4. Significant accounting judgements estimates and assumptions
4.1 Judgements
Management judgements at the end of the first quarter are consistent with
those disclosed in the 2021 Annual financial statements. The following are
some of the judgements which have the most significant effect on the amounts
recognised in this interim consolidated financial statement.
i. OMLs 4, 38 and 41
OMLs 4, 38, 41 are grouped together as a cash generating unit for the purpose
of impairment testing. These three OMLs are grouped together because they each
cannot independently generate cash flows. They currently operate as a single
block sharing resources for generating cash flows. Crude oil and gas sold to
third parties from these OMLs are invoiced when the Group has an unconditional
right to receive payment.
ii. Deferred tax asset
Deferred income tax assets are recognised for tax losses carried forward to
the extent that the realisation of the related tax benefit through future
taxable profits is probable.
iii. Lease liabilities
In 2018, the Group entered into a lease agreement for its new head office
building. The lease contract contains an option to purchase and right of first
refusal upon an option of sales during the initial non-cancellable lease term
of five (5) years.
In determining the lease liability/right-of-use assets, management considered
all fact and circumstances that create an economic incentive to exercise the
purchase option. Potential future cash outflow of $45 million, which
represents the purchase price, has not been included in the lease liability
because the Group is not reasonably certain that the purchase option will be
exercised. This assessment will be reviewed if a significant event or a
significant change in circumstances occurs which affects the initial
assessment and that is within the control of the management.
iv. Foreign currency translation reserve
The Group has used the CBN rate to translate its Dollar currency to its Naira
presentation currency. Management has determined that this rate is available
for immediate delivery. If the rate used was 10% higher or lower, revenue in
Naira would have increased/decreased by ₦10 billion, 2021: ₦5.8 billion.
v. Consolidation of Elcrest
On acquisition of 100% shares of Eland Oil and Gas Plc, the Group acquired
indirect holdings in Elcrest Exploration and Production (Nigeria) Limited.
Although the Group has an indirect holding of 45% in Elcrest, Elcrest has been
consolidated as a subsidiary for the following basis:
• Eland Oil and Gas Plc has power over Elcrest through due representation of
Eland in the board of Elcrest, and clauses contained in the Share Charge
agreement and loan agreement which gives Eland the right to control 100% of
the voting rights of shareholders.
• Eland Oil and Gas Plc is exposed to variable returns from the activities of
Elcrest through dividends and interests.
• Eland Oil and Gas Plc has the power to affect the amount of returns from
Elcrest through its right to direct the activities of Elcrest and its exposure
to returns.
vi. Revenue recognition
Performance obligations
The judgments applied in determining what constitutes a performance obligation
will impact when control is likely to pass and therefore when revenue is
recognised i.e. over time or at a point in time. The Group has determined that
only one performance obligation exists in oil contracts which is the delivery
of crude oil to specified ports. Revenue is therefore recognised at a point in
time.
For gas contracts, the performance obligation is satisfied through the
delivery of a series of distinct goods. Revenue is recognised over time in
this situation as gas customers simultaneously receives and consumes the
benefits provided by the Group's performance. The Group has elected to apply
the 'right to invoice' practical expedient in determining revenue from its gas
contracts. The right to invoice is a measure of progress that allows the Group
to recognise revenue based on amounts invoiced to the customer. Judgement has
been applied in evaluating that the Group's right to consideration corresponds
directly with the value transferred to the customer and is therefore eligible
to apply this practical expedient.
Significant financing component
The Group has entered into an advance payment contract with Mercuria for
future crude oil to be delivered. The Group has considered whether the
contract contains a financing component and whether that financing component
is significant to the contract, including both of the following;
a) The difference, if any, between the amount of promised consideration and cash
selling price and;
b) The combined effect of both the following:
• The expected length of time between when the Group transfers the crude to
Mercuria and when payment for the crude is received and;
• The prevailing interest rate in the relevant market.
The advance period is greater than 12 months. In addition, the interest
expense accrued on the advance is based on a comparable market rate. Interest
expense has therefore been included as part of finance cost.
Transactions with Joint Operating arrangement (JOA) partners
The treatment of underlift and overlift transactions is judgmental and
requires a consideration of all the facts and circumstances including the
purpose of the arrangement and transaction. The transaction between the Group
and its JOA partners involves sharing in the production of crude oil, and for
which the settlement of the transaction is non-monetary. The JOA partners have
been assessed to be partners not customers. Therefore, shortfalls or excesses
below or above the Group's share of production are recognised in other income/
(expenses) - net.
Exploration and evaluation assets
The accounting for exploration and evaluation ('E&E') assets require
management to make certain judgements and assumptions, including whether
exploratory wells have discovered economically recoverable quantities of
reserves. Designations are sometimes revised as new information becomes
available. If an exploratory well encounters hydrocarbon, but further
appraisal activity is required in order to conclude whether the hydrocarbons
are economically recoverable, the well costs remain capitalised as long as
sufficient progress is being made in assessing the economic and operating
viability of the well. Criteria used in making this determination include
evaluation of the reservoir characteristics and hydrocarbon properties,
expected additional development activities, commercial evaluation and
regulatory matters. The concept of 'sufficient progress' is an area of
judgement, and it is possible to have exploratory costs remain capitalised for
several years while additional drilling is performed or the Group seeks
government, regulatory or partner approval of development plans.
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker.
The Board of directors has appointed a steering committee which assesses the
financial performance and position of the Group and makes strategic decisions.
The steering committee, which has been identified as being the chief operating
decision maker, consists of the chief financial officer, the Vice President
(Finance), the Director (New Energy) and the financial reporting manager. See
further details in note 6.
4.2. Estimates and assumptions
The key assumptions concerning the future and the other key source of
estimation uncertainty that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities are disclosed in
the most recent 2021 annual financial statements.
The following are some of the estimates and assumptions made.
i. Defined benefit plans
The cost of the defined benefit retirement plan and the present value of the
retirement obligation are determined using actuarial valuations. An actuarial
valuation involves making various assumptions that may differ from actual
developments in the future. These include the determination of the discount
rate, future salary increases, mortality rates and changes in inflation rates.
Due to the complexities involved in the valuation and its long-term nature, a
defined benefit obligation is highly sensitive to changes in these
assumptions. The parameter most subject to change is the discount rate. In
determining the appropriate discount rate, management considers market yield
on federal government bonds in currencies consistent with the currencies of
the post-employment benefit obligation and extrapolated as needed along the
yield curve to correspond with the expected term of the defined benefit
obligation.
The rates of mortality assumed for employees are the rates published in 67/70
ultimate tables, published jointly by the Institute and Faculty of Actuaries
in the UK.
ii. Oil and gas reserves
Proved oil and gas reserves are used in the units of production calculation
for depletion as well as the determination of the timing of well closure for
estimating decommissioning liabilities and impairment analysis. There are
numerous uncertainties inherent in estimating oil and gas reserves.
Assumptions that are valid at the time of estimation may change significantly
when new information becomes available. Changes in the forecast prices of
commodities, exchange rates, production costs or recovery rates may change the
economic status of reserves and may ultimately result in the reserves being
restated.
iii. Share-based payment reserve
Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which depends on the
terms and conditions of the grant.
This estimate also requires determination of the most appropriate inputs to
the valuation model including the expected life of the share award or
appreciation right, volatility and dividend yield and making assumptions about
them. The Group measures the fair value of equity-settled transactions with
employees at the grant date.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. Such estimates and assumptions are continually evaluated and are
based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
iv. Provision for decommissioning obligations
Provisions for environmental clean-up and remediation costs associated with
the Group's drilling operations are based on current constructions,
technology, price levels and expected plans for remediation. Actual costs and
cash outflows can differ from estimates because of changes in public
expectations, prices, discovery and analysis of site conditions and changes in
clean-up technology.
v. Property, plant and equipment
The Group assesses its property, plant and equipment, including exploration
and evaluation assets, for possible impairment if there are events or changes
in circumstances that indicate that carrying values of the assets may not be
recoverable, or at least at every reporting date.
If there are low oil prices or natural gas prices during an extended period,
the Group may need to recognise significant impairment charges. The assessment
for impairment entails comparing the carrying value of the cash-generating
unit with its recoverable amount, that is, higher of fair value less cost to
dispose and value in use. Value in use is usually determined on the basis of
discounted estimated future net cash flows. Determination as to whether and
how much an asset is impaired involves management estimates on highly
uncertain matters such as future commodity prices, the effects of inflation on
operating expenses, discount rates, production profiles and the outlook for
regional market supply-and-demand conditions for crude oil and natural gas.
The Group uses the higher of the fair value less cost to dispose and the value
in use in determining the recoverable amount of the cash-generating unit. In
determining the value, the Group uses a forecast of the annual net cash flows
over the life of proved plus probable reserves, production rates, oil and gas
prices, future costs (excluding (a) future restructurings to which the entity
is not yet committed; or (b) improving or enhancing the asset's performance)
and other relevant assumptions based on the year end Competent Persons Report
(CPR). The pre-tax future cash flows are adjusted for risks specific to the
forecast and discounted using a pre-tax discount rate which reflects both
current market assessment of the time value of money and risks specific to the
asset.
Management considers whether a reasonable possible change in one of the main
assumptions will cause an impairment and believes otherwise.
vi. Useful life of other property, plant and equipment
The Group recognises depreciation on other property, plant and equipment on a
straight-line basis in order to write-off the cost of the asset over its
expected useful life. The economic life of an asset is determined based on
existing wear and tear, economic and technical ageing, legal and other limits
on the use of the asset, and obsolescence. If some of these factors were to
deteriorate materially, impairing the ability of the asset to generate future
cash flow, the Group may accelerate depreciation charges to reflect the
remaining useful life of the asset or record an impairment loss.
vii. Income taxes
The Group is subject to income taxes by the Nigerian tax authority, which does
not require significant judgement in terms of provision for income taxes, but
a certain level of judgement is required for recognition of deferred tax
assets. Management is required to assess the ability of the Group to generate
future taxable economic earnings that will be used to recover all deferred tax
assets. Assumptions about the generation of future taxable profits depend on
management's estimates of future cash flows. The estimates are based on the
future cash flow from operations taking into consideration the oil and gas
prices, volumes produced, operational and capital expenditure.
viii. Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk
of default, expected loss rates and maximum contractual period. The Group uses
judgement in making these assumptions and selecting the inputs to the
impairment calculation, based on the Group's past history, existing market
conditions as well as forward looking estimates at the end of each reporting
period.
ix. Intangible asset
The contract based intangible assets were acquired as part of a business
combination. They are recognised at their fair value at the date of
acquisition and are subsequently amortised on a straight-line bases over their
estimated useful lives which is also the economic life of the asset.
The fair value of contract based intangible assets is estimated using the
multi period excess earnings method. This requires a forecast of revenue and
all cost projections throughout the useful life of the intangible assets. A
contributory asset charge that reflects the return on assets is also
determined and applied to the revenue but subtracted from the operating cash
flows to derive the pre-tax cash flow. The post-tax cashflows are then
obtained by deducting out the tax using the effective tax rate.
Discount rates represent the current market assessment of the risks specific
to each CGU, taking into consideration the time value of money. The discount
rate calculation is based on the specific circumstances of the Group and its
operating segments and is derived from its weighted average cost of capital
(WACC). The WACC takes into account both debt and equity. The cost of equity
is derived from the expected return on investment by the Group's investors.
The cost of debt is based on the interest-bearing borrowings the Group is
obliged to service.
5. Financial risk management
5.1 Financial risk factors
The Group's activities expose it to a variety of financial risks such as
market risk (including foreign exchange risk, interest rate risk and commodity
price risk), credit risk and liquidity risk. The Group's risk management
programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by the treasury department under policies
approved by the Board of Directors. The Board provides written principles for
overall risk management, as well as written policies covering specific areas,
such as foreign exchange risk, interest rate risk, credit risk and investment
of excess liquidity.
Risk Exposure arising from Measurement Management
Market risk - foreign exchange Future commercial transactions Cash flow Match and settle foreign denominated cash inflows with foreign denominated
cash outflows.
Recognised financial assets and liabilities not denominated in US dollars. forecasting
Sensitivity analysis
Market risk - interest rate Interest bearing loans and borrowings at variable rate Sensitivity analysis Review refinancing opportunities
Market risk - commodity prices Future sales transactions Sensitivity analysis Oil price hedges
Credit risk Cash and bank balances, trade receivables and derivative financial Aging analysis Diversification of bank deposits.
instruments.
Credit ratings
Liquidity risk Borrowings and other liabilities Rolling cash flow forecasts Availability of committed credit lines and borrowing facilities
5.1.1 Credit risk
Credit risk refers to the risk of a counterparty defaulting on its contractual
obligations resulting in financial loss to the Group. Credit risk arises from
cash and bank balances as well as credit exposures to customers (i.e.
Mercuria, Shell western, Pillar, Azura, Geregu Power, Sapele Power and
Nigerian Gas Marketing Company (NGMC) receivables), and other parties (i.e.
NAPIMS receivables, NPDC receivables and other receivables).
a) Risk management
The Group is exposed to credit risk from its sale of crude oil to Mercuria and
Shell western. There is a 30-day payment term after Bill of Lading date in the
off-take agreement with Mercuria (OMLs 4, 38 &41) which expired in
February 2022. The Group also has an off-take agreement with Shell Western
Supply and Trading Limited which expires in September 2023. The Group is
exposed to further credit risk from outstanding cash calls from Nigerian
Petroleum Development Company (NPDC) and Nigerian National Petroleum
Corporation (NNPC).
In addition, the Group is exposed to credit risk in relation to its sale of
gas to its customers.
The credit risk on cash and cash balances is managed through the
diversification of banks in which the balances are held. The risk is limited
because the majority of deposits are with banks that have an acceptable credit
rating assigned by an international credit agency. The Group's maximum
exposure to credit risk due to default of the counterparty is equal to the
carrying value of its financial assets.
b) Estimation uncertainty in measuring impairment loss
The table below shows information on the sensitivity of the carrying amounts
of the Group's financial assets to the methods, assumptions and estimates used
in calculating impairment losses on those financial assets at the end of the
reporting period. These methods, assumptions and estimates have a significant
risk of causing material adjustments to the carrying amounts of the Group's
financial assets.
i. Significant unobservable inputs
The table below demonstrates the sensitivity of the Group's profit before tax
to movements in the loss given default (LGD) for financial assets, with all
other variables held constant:
Effect on profit before tax Effect on other components of equity before tax Effect on profit before tax Effect on other components of equity before tax
31 March 2022 31 March 2022 31 March 2022 31 March 2022
₦ million ₦ million $'000 $'000
Increase/decrease in loss given default
+10% (179) - (450) -
-10% 179 - 450 -
Effect on profit before tax Effect on other components of equity before tax Effect on profit before tax Effect on other components of equity before tax
31 Dec 2021 31 Dec 2021 31 Dec 2021 31 Dec 2021
₦ million ₦ million $'000 $'000
Increase/decrease in loss given default
+10% (717) - (1,800) -
-10% 717 - 1,800 -
The table below demonstrates the sensitivity of the Group's profit before tax
to movements in probabilities of default, with all other variables held
constant:
Effect on profit before tax Effect on other components of equity before tax Effect on profit before tax Effect on other components of equity before tax
31 March 2022 31 March 2022 31 March 2022 31 March 2022
₦ million ₦ million $'000 $'000
Increase/decrease in probability of default
+10% (170) - (426) -
-10% 170 - 426 -
Effect on profit before tax Effect on other components of equity before tax Effect on profit before tax Effect on other components of equity before tax
31 Dec 2021 31 Dec 2021 31 Dec 2021 31 Dec 2021
₦ million ₦ million $'000 $'000
Increase/decrease in probability of default
+10% (679) - (1,704) -
-10% 679 - 1,704 -
The table below demonstrates the sensitivity of the Group's profit before tax
to movements in the forward-looking macroeconomic indicators, with all other
variables held constant:
Effect on profit before tax Effect on other components of equity before tax Effect on profit before tax Effect on other components of equity before tax
31 March 2022 31 March 2022 31 March 2022 31 March 2022
₦ million ₦ million $'000 $'000
Increase/decrease in forward looking macroeconomic indicators
+10% (5) - (12) -
-10% 5 - 12 -
Effect on profit before tax Effect on other components of equity before tax Effect on profit before tax Effect on other components of equity before tax
31 Dec 2021 31 Dec 2021 31 Dec 2021 31 Dec 2021
₦ million ₦ million $'000 $'000
Increase/decrease in forward looking macroeconomic indicators
+10% (19) - (48) -
-10% 19 - 48 -
5.1.2 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group manages liquidity risk by
ensuring that sufficient funds are available to meet its commitments as they
fall due.
The Group 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 Group's debt financing plans and covenant compliance.
Surplus cash held is transferred to the treasury department which invests in
interest bearing current accounts and time deposits.
The following table details the Group's remaining contractual maturity for its
non-derivative financial liabilities with agreed maturity periods. The table
has been drawn based on the undiscounted cash flows of the financial
liabilities based on the earliest date on which the Group can be required to
pay.
Effective interest rate Less than 1 - 2 2 - 3 3 - 6 Total
1 year
year
years
years
% ₦ million ₦ million ₦ million ₦ million ₦ million
31 March 2022
Non - derivatives
Fixed interest rate borrowings
Senior notes 7.75% 10,776 21,260 21,318 302,481 355,835
Variable interest rate borrowings
The Mauritius Commercial Bank Ltd 8.00% + USD LIBOR 1,322 4,452 6,539 7,738 20,051
The Stanbic IBTC Bank Plc 8.00% + USD LIBOR 1,350 4,545 6,675 7,899 20,469
The Standard Bank of South Africa Limited 8.00% + USD LIBOR 771 2,597 3,814 4,514 11,696
First City Monument Bank Limited 8.00% + USD LIBOR 344 1,159 1,703 2,015 5,222
Shell Western Supply and Trading Limited 10.5% + USD LIBOR 495 940 892 4,479 6,806
Total variable interest borrowings 4,282 13,695 19,623 26,644 64,243
Other non - derivatives
Trade and other payables** 157,015 - - - 157,015
Lease liability 1,970 67 28 - 2,065
158,985 67 28 - 159,081
Total 174,043 35,021 40,969 329,125 579,159
Effective interest rate Less than 1 - 2 2 - 3 3 - 5 Total
1 year
year
years
years
% ₦ million ₦ million ₦ million ₦ million ₦ million
31 December 2021
Non - derivatives
Fixed interest rate borrowings
Senior notes 7.75% 20,751 20,751 20,751 298,881 361,134
Variable interest rate borrowings
The Mauritius Commercial Bank Ltd 8.00% + USD LIBOR 1,298 4,390 6,456 7,650 19,794
The Stanbic IBTC Bank Plc 8.00% + USD LIBOR 1,324 4,481 6,590 7,810 20,205
The Standard Bank of South Africa Limited 8.00% + USD LIBOR 757 2,561 3,766 4,463 11,547
First City Monument Bank Limited 8.00% + USD LIBOR 338 1,143 1,681 1,992 5,154
Shell Western Supply and Trading Limited 10.5% + USD LIBOR 486 924 876 4,422 6,708
Total variable interest borrowings 4,203 13,499 19,369 26,337 63,408
Other non - derivatives
Trade and other payables** 151,204 - - - 151,204
Lease liability 1,950 66 28 - 2,044
153,154 66 28 - 153,248
Total 178,108 34,316 40,148 325,218 577,790
Effective Less than 1 - 2 2 - 3 3 - 6 Total
interest rate
1 year
year
years
years
% $'000 $'000 $'000 $'000 $'000
31 March 2022
Non - derivatives
Fixed interest rate borrowings
Senior notes 7.75% 25,887 51,075 51,215 726,682 854,858
Variable interest rate borrowings
The Mauritius Commercial Bank Ltd 8.00% + USD LIBOR 3,176 10,697 15,709 18,589 48,170
The Stanbic IBTC Bank Plc 8.00% + USD LIBOR 3,242 10,919 16,036 18,976 49,174
The Standard Bank of South Africa Limited 8.00% + USD LIBOR 1,853 6,240 9,164 10,843 28,099
First City Monument Bank Limited 8.00% + USD LIBOR 827 2,786 4,091 4,841 12,544
Shell Western Supply and Trading Limited 10.5% + USD LIBOR 1,189 2,259 2,143 10,760 16,350
Total variable interest borrowings 10,286 32,900 47,142 64,009 154,338
Other non - derivatives
Trade and other payables** 377,217 - - - 377,217
Lease liability 4,733 160 67 - 4,960
381,950 160 67 - 382,177
Total 418,123 84,135 98,424 790,691 1,391,373
Effective Less than 1 - 2 2 - 3 3 - 5 Total
interest rate
1 year
year
years
years
% $'000 $'000 $'000 $'000 $'000
31 December 2021
Non - derivatives
Fixed interest rate borrowings
Senior notes 7.75% 50,375 50,375 50,375 725,563 876,688
Variable interest rate borrowings
The Mauritius Commercial Bank Ltd 8.00% + USD LIBOR 3,150 10,656 15,672 18,572 48,050
The Stanbic IBTC Bank Plc 8.00% + USD LIBOR 3,215 10,878 15,998 18,959 49,050
The Standard Bank of South Africa Limited 8.00% + USD LIBOR 1,837 6,216 9,142 10,834 28,029
First City Monument Bank Limited 8.00% + USD LIBOR 820 2,775 4,081 4,836 12,512
Shell Western Supply and Trading Limited 10.5% + USD LIBOR 1,179 2,243 2,126 10,734 16,282
Total variable interest borrowings 10,201 32,768 47,019 63,935 153,923
Other non - derivatives
Trade and other payables** 367,058 - - - 367,058
Lease liability 4,733 160 67 - 4,960
371,791 160 67 - 372,018
Total 432,367 83,303 97,461 789,498 1,402,629
** Trade and other payables (exclude non-financial liabilities such as
provisions, taxes, pension and other non-contractual payables).
5.1.3 Fair value measurements
Set out below is a comparison by category of carrying amounts and fair value
of all financial instruments:
Carrying amount Fair value
As at 31 March As at 31 Dec As at 31 March As at 31 Dec
2022 2021 2022 2021
₦ million ₦ million ₦ million ₦ million
Financial assets at amortised cost
Trade and other receivables* 71,449 78,869 71,449 78,869
Contract assets 3,298 1,679 3,298 1,679
Cash and bank balances 129,973 133,667 129,973 133,667
204,720 214,215 204,720 214,215
Financial liabilities at amortised cost
Interest bearing loans and borrowings 314,200 315,791 318,143 307,447
Trade and other payables** 142,464 136,619 142,464 136,619
456,664 452,410 460,607 444,066
Financial liabilities at fair value
Derivative financial instruments (Note 20) 1,848 1,543 1,848 1,543
1,848 1,543 1,848 1,543
Carrying amount Fair value
As at 31 March As at 31 Dec As at 31 March As at 31 Dec
2022 2021 2022 2021
$'000 $'000 $'000 $'000
Financial assets at amortised cost
Trade and other receivables* 171,651 191,463 171,651 191,463
Contract assets 7,922 4,076 7,922 4,076
Cash and bank balances 312,242 324,490 312,242 324,490
491,815 520,029 491,815 520,029
Financial liabilities at amortised cost
Interest bearing loans and borrowings 754,835 766,614 764,308 746,358
Trade and other payables** 342,260 331,655 342,260 331,655
1,097,095 1,098,269 1,106,568 1,078,013
Financial liabilities at fair value
Derivative financial instruments (Note 20) 4,439 3,745 4,439 3,745
4,439 3,745 4,439 3,745
* Trade and other receivables exclude Geregu power, Sapele power, NGMC VAT
receivables, cash advances and advance payments.
** Trade and other payables (exclude non-financial liabilities such as
provisions, taxes, pension and other non-contractual payables), trade and
other receivables (excluding non-financial assets), contract assets and cash
and bank balances are financial instruments whose carrying amounts as per the
financial statements approximate their fair values. This is mainly due to
their short-term nature.
5.1.4 Fair Value Hierarchy
As at the reporting period, the Group had classified its financial instruments
into the three levels prescribed under the accounting standards. There were no
transfers of financial instruments between fair value hierarchy levels during
the year.
• Level 1 - Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
• Level 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
• Level 3 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
The fair value of the financial instruments is included at the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
The fair value of the Group's derivative financial instruments has been
determined using a proprietary pricing model that uses marked to market
valuation. The valuation represents the mid-market value and the actual
close-out costs of trades involved. The market inputs to the model are derived
from observable sources. Other inputs are unobservable but are estimated based
on the market inputs or by using other pricing models. The derivative
financial instruments are in level 2.
The fair value of the Group's interest-bearing loans and borrowings is
determined by using discounted cash flow models that use market interest rates
as at the end of the period. The interest-bearing loans and borrowings are in
level 2.
The fair value of the Group's contingent consideration is determined using the
discounted cash flow model. The cash flows were determined based on probable
future oil prices. The estimated future cash flow was discounted to present
value using a discount rate.
The valuation process
The finance & planning team of the Group performs the valuations of
financial and non-financial assets required for financial reporting purposes.
This team reports directly to the General Manager (GM) Commercial who reports
to the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussions
of valuation processes and results are held between the GM and the valuation
team at least once every quarter, in line with the Group's quarterly reporting
periods.
6. Segment reporting
Business segments are based on the Group's internal organisation and
management reporting structure. The Group's business segments are the two core
businesses: Oil and Gas. The Oil segment deals with the exploration,
development and production of crude oil while the Gas segment deals with the
production and processing of gas. These two reportable segments make up the
total operations of the Group.
For the period ended 31 March 2022, revenue from the gas segment of the
business constituted 11% of the Group's revenue. Management is committed to
continued growth of the gas segment of the business, including through
increased investment to establish additional offices, create a separate gas
business operational management team and procure the required infrastructure
for this segment of the business. The gas business is positioned separately
within the Group and reports directly to the (chief operating decision maker).
As the gas business segment's revenues, results and cash flows are largely
independent of other business units within the Group, it is regarded as a
separate segment.
The result is two reporting segments, Oil and Gas. There were no intersegment
sales during the reporting periods under consideration, therefore all revenue
was from external customers.
Amounts relating to the gas segment are determined using the gas cost centres,
with the exception of depreciation. Depreciation relating to the gas segment
is determined by applying a percentage which reflects the proportion of the
Net Book Value of oil and gas properties that relates to gas investment costs
(i.e., cost for the gas processing facilities).
The Group accounting policies are also applied in the segment reports.
6.1 Segment profit disclosure
3 Months ended 3 Months ended 31 March 2021 3 Months ended 3 Months ended 31 March 2021
31 March 2022 31 March 2022
₦'million ₦'million $'000 $'000
Oil 2,400 3,895 5,746 10,240
Gas 5,890 5,554 14,156 14,616
Total profit from continued operations for the period 8,290 9,449 19,902 24,856
Oil
3 Months ended 3 Months ended 31 March 2021 3 Months ended 3 Months ended 31 March 2021
31 March 2022 31 March 2022
₦'million ₦'million $'000 $'000
Revenue from contract with customers
Crude oil sales 89,955 47,152 216,209 124,084
Operating profit before depreciation, depletion
and amortisation 49,051 20,092 117,865 52,862
Depreciation and impairment (15,172) (12,311) (36,460) (32,398)
Operating profit 33,879 7,781 81,405 20,464
Finance income 13 3 32 7
Finance costs (7,731) (6,391) (18,582) (16,817)
Profit before taxation 26,161 1,393 62,855 3,654
Income tax (expense)/credit (23,761) 2,502 (57,109) 6,586
Profit for the period 2,400 3,895 5,746 10,240
Gas
3 Months ended 3 Months ended 31 March 2021 3 Months ended 3 Months ended 31 March 2021
31 March 2022 31 March 2022
₦'million ₦'million $'000 $'000
Revenue from contract with customer
Gas sales 10,663 10,778 25,628 28,364
Operating profit before depreciation, depletion 8,868
and amortisation 9,112 21,314 23,980
Depreciation, amortization and impairment (265) (17) (638) (44)
Operating profit 8,603 9,095 20,676 23,936
Share of (loss)/profit from joint venture accounted 159 (124) 418
for using equity accounting (52)
Profit before taxation 8,551 9,254 20,552 24,354
Income tax expense (2,661) (3,700) (6,396) (9,738)
Profit for the period 5,890 5,554 14,156 14,616
6.1.1 Disaggregation of revenue from contracts with customers
The Group derives revenue from the transfer of commodities at a point in time
or over time and from different geographical regions.
3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended
March 2022 March 2022 March 2022 March 2021 March 2021 March 2021
Oil Gas Total Oil Gas Total
₦'million ₦'million ₦'million ₦'million ₦'million ₦'million
Geographical markets
Bahamas 10,022 - 10,022 - - -
Nigeria - 10,663 10,663 11,587 10,778 22,365
Switzerland 69,564 - 69,564 35,565 - 35,565
United Kingdom 10,369 - 10,369 - - -
Revenue from contract with customers 89,955 10,663 100,618 47,152 10,778 57,930
Timing of revenue recognition
At a point in time 89,955 - 89,955 47,152 - 47,152
Over time - 10,663 10,663 - 10,778 10,778
Revenue from contract with customers 89,955 10,663 100,618 47,152 10,778 57,930
3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended
March 2022 March 2022 March 2022 March 2021 March 2021 March 2021
Oil Gas Total Oil Gas Total
$'000 $'000 $'000 $'000 $'000 $'000
Geographical markets
Bahamas 24,088 - 24,088 - - -
Nigeria - 25,628 25,628 30,492 28,364 58,856
Switzerland 167,199 - 167,199 93,592 - 93,592
United Kingdom 24,922 - 24,922 - - -
Revenue from contract with customers 216,209 25,628 241,837 124,084 28,364 152,448
Timing of revenue recognition
At a point in time 216,209 - 216,209 124,084 - 124,084
Over time - 25,628 25,628 - 28,364 28,364
Revenue from contract with customers 216,209 25,628 241,837 124,084 28,364 152,448
The Group's transactions with its major customer, Mercuria, constitutes more
than 69% (₦69.6 billion, $167 million) of the total revenue from the oil
segment and the Group as a whole. Also, the Group's transactions with Geregu
Power, Sapele Power, NGMC and Azura (₦10.7 billion, $25.6 million) accounted
for the total revenue from the gas segment.
6.1.2 Impairment loss on financial assets by reportable segments
3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended
March 2022 March 2022 March 2022 March 2021 March 2021 March 2021
Oil Gas Total Oil Gas Total
₦'million ₦'million ₦'million ₦'million ₦'million ₦'million
Impairment loss 82 427 509 252 17 269
3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended 3 Months ended
March 2022 March 2022 March 2022 March 2021 March 2021 March 2021
Oil Gas Total Oil Gas Total
$'000 $'000 $'000 $'000 $'000 $'000
Impairment loss 196 1,027 1,223 663 44 707
6.2 Segment assets
Segment assets are measured in a manner consistent with that of the financial
statements. These assets are allocated based on the operations of the
reporting segment and the physical location of the asset. The Group had no
non-current assets domiciled outside Nigeria.
Oil Gas Total Oil Gas Total
Total segment assets ₦'million ₦'million ₦'million $'000 $'000 $'000
31 March 2022 1,417,916 229,271 1,647,187 3,406,408 550,800 3,957,208
31 December 2021 1,393,987 209,549 1,603,536 3,384,033 508,701 3,892,734
6.3 Segment liabilities
Segment liabilities are measured in a manner consistent with that of the
financial statements. These liabilities are allocated based on the operations
of the segment.
Oil Gas Total Oil Gas Total
Total segment liabilities ₦'million ₦'million ₦'million $'000 $'000 $'000
31 March 2022 786,267 141,279 927,546 1,888,937 339,410 2,228,347
31 December 2021 775,644 124,528 900,172 1,882,945 302,203 2,185,248
7. Revenue from contracts with customers
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦ million $'000 $'000
Crude oil sales 89,955 47,152 216,209 124,084
Gas sales 10,663 10,778 25,628 28,364
100,618 57,930 241,837 152,448
The major off takers for crude oil are Mercuria and Shell West. The major off
takers for gas are Geregu Power, Sapele Power, Nigerian Gas Marketing Company
and Azura.
8. Cost of sales
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦ million $'000 $'000
Royalties 20,883 10,793 50,195 28,404
Depletion, depreciation and amortisation 14,083 11,748 33,848 30,915
Crude handling fees 5,370 4,749 12,908 12,498
Nigeria Export Supervision Scheme (NESS) fee 90 55 217 145
Niger Delta Development Commission Levy 1,193 977 2,867 2,571
Barging/Trucking 1,230 824 2,957 2,167
Operational & maintenance expenses 8,936 8,725 21,498 22,959
51,785 37,871 124,490 99,659
Operational & maintenance expenses mainly relates to maintenance costs,
warehouse operations expenses, security expenses, community expenses, clean-up
costs, fuel supplies and catering services. Also included in operational and
maintenance expenses is gas flare penalty of ₦686 million, $1.7 million.
Barging and Trucking costs relates to costs on the OML 40 Gbetiokun field and
OML 17 Ubima field respectively under Eland Group.
9. Other income.
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦'million $'000 $'000
Underlift 5,666 3,115 13,618 8,198
(Loss)/gains on foreign exchange (2,517) 114 (6,048) 301
Others 375 25 900 66
Tariffs 186 2,527 446 6,649
3,710 5,781 8,916 15,214
Underlifts are shortfalls of crude lifted below the share of production. It
may exist when the crude oil lifted by the Group during the period is less
than its ownership share of production. The shortfall is initially measured at
the market price of oil at the date of lifting and recognised as other income.
At each reporting period, the shortfall is remeasured at the current market
value. The resulting change, as a result of the remeasurement, is also
recognised in profit or loss as other income.
(Loss)/gains on foreign exchange are principally as a result of translation of
Naira, Pounds and Euro denominated monetary assets and liabilities.
Tariffs which is a form of crude handling fee, relate to income generated from
the use of the Group's pipeline.
10. General and administrative expenses
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦'million $'000 $'000
Depreciation 435 532 1,042 1,404
Depreciation of right-of-use assets 410 315 985 830
Professional and consulting fees 972 1,082 2,336 2,848
Directors' emoluments (executive) 319 263 766 692
Directors' emoluments (non-executive) 561 548 1,348 1,441
Employee benefits 4,432 3,975 10,657 10,467
Loss on disposal of property, plant & equipment 5 - 12 -
Donation 11 - 26 -
Flights and other travel costs 702 198 1,687 522
Rentals 66 6 159 16
7,913 6,919 19,018 18,220
Directors' emoluments have been split between executive and non-executive
directors.
11. Impairment loss
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦ million $'000 $'000
Impairment loss on financial assets 509 269 1,223 707
509 269 1,223 707
12. Fair value loss
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦ million $'000 $'000
Realised fair value loss on derivatives 743 562 1,787 1,480
Unrealised fair value loss on derivatives 896 1,214 2,154 3,196
1,639 1,776 3,941 4,676
Fair value loss on derivatives represents changes arising from the valuation
of the crude oil economic hedge contracts charged to profit or loss.
13. Finance income/(cost)
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦ million $'000 $'000
Finance income
Interest income 13 3 32 7
Finance cost
Interest on bank loans (7,468) (6,222) (17,950) (16,373)
Interest on lease liabilities (20) (57) (47) (149)
Unwinding of discount on provision for decommissioning (243) (112) (585) (295)
(7,731) (6,391) (18,582) (16,817)
Finance (cost) - net (7,718) (6,388) (18,550) (16,810)
Finance income represents interest on short-term fixed deposits.
14. Taxation
Income tax expense is recognised based on management's estimate of the
weighted average effective annual income tax rate expected for the full
financial year. The estimated average annual tax rate used for the period to
31 March 2022 is 85% for crude oil activities and 30% for gas activities.
The effective tax rate for the period was 76% (2021: 11.25%)
The major components of income tax expense in the interim condensed
consolidated statement
3 months ended 3 months ended 3 months ended 3 months ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦ million $'000 $'000
Current tax:
Current tax expense on profit for the period (6,347) (2,565) (15,255) (6,750)
Education tax (1,106) (456) (2,658) (1,199)
Total current tax (7,453) (3,021) (17,913) (7,949)
Deferred tax:
Deferred tax (expense)/credit in profit or loss (18,969) 1,823 (45,592) 4,797
Total tax expense in statement of profit (26,422) (1,198) (63,505) (3,152)
14.1 Deferred tax
The analysis of deferred tax assets and deferred tax liabilities is as
follows:
As at As at As at As at
31 March 2022
31 Dec 2021
31 March 2022
31 Dec 2021
₦'million ₦'million $'000 $'000
Deferred tax assets
Deferred tax asset to be recovered in less than 12 months 40,703 40,280 97,785 97,785
Deferred tax asset to be recovered after more than 12 months 392,782 388,706 943,621 943,621
433,485 428,986 1,041,406 1,041,406
As at As at As at As at
31 March 2022
31 Dec 2021
31 March 2022
31 Dec 2021
₦'million ₦'million $'000 $'000
Deferred tax liabilities
Deferred tax liabilities to be settled in less than 12 months (117,085) (281,286) (296,156)
(121,995)
Deferred tax liabilities to be settled after more than 12 months (248,670) (597,406) (536,945)
(221,184)
(365,755) (343,179) (878,693) (833,101)
Net deferred tax asset 67,730 85,807 162,713 208,305
15. Oil & Gas properties
During the three months ended 31 March 2022, the Group acquired assets
amounting to ₦10.7 billion, $25.8 million (Dec 2021: ₦54.6 billion,
$136.4 million).
16. Intangible Asset
License Total License Total
Cost ₦ million ₦ million $'000 $'000
At 1 January 2022 60,435 60,435 146,713 146,713
Additions - - - -
Exchange difference 634 634 - -
At 31 March 2022 61,069 61,069 146,713 146,713
Amortisation
At 1 January 2022 6,390 6,390 15,513 15,513
Charge for the period 320 320 770 770
Exchange difference 68 68 - -
At 31 March 2022 6,778 6,778 16,283 16,283
Net Book Value (NBV)
At 31 March 2022 54,291 54,291 130,430 130,430
At 31 December 2021 54,045 54,045 131,200 131,200
17. Investment accounted for using equity method
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦ million ₦ million $'000 $'000
Investment in Joint venture (ANOH) 93,722 92,795 225,158 225,270
Total 93,722 92,795 225,158 225,270
18. Trade and other receivables
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦ million ₦ million $'000 $'000
Trade receivables 15,860 25,923 38,101 62,929
Nigerian Petroleum Development Company (NPDC) receivables 21,247 34,571 51,046 83,924
Nigerian National Petroleum Corporation (NNPC) receivables 12,637 10,154 30,359 24,650
Underlift 24,018 20,657 57,702 50,147
Advances to suppliers 6,312 5,746 15,163 13,947
Receivables from ANOH 5,154 5,259 12,382 12,766
Other receivables 55,236 2,964 132,702 7,194
Total 140,464 105,274 337,455 255,557
18.1 Trade receivables
Included in trade receivables is an amount due from Geregu Power ₦8.17
billion, $19.6 million (Dec 2021: ₦7.1 billion, $17.1 million), Sapele Power
₦2.25 billion, $5.40 million (Dec 2021: ₦ 2.4 billion, $5.9 million)
and Nigerian Gas Marketing Company (NGMC) ₦4.23 billion, $10.2 million (Dec
2021: ₦3 billion, $7.3 million) totalling ₦14.65 billion, $35.17 million
(Dec 2021: ₦12.5 billion, $30.3 million) with respect to the sale of gas.
Also included in trade receivables is an amount of ₦1.67 million (Dec 2021:
₦3.04 billion) $4 thousand (Dec 2021: $7.4 million) and nil (Dec 2021:
₦11.6 billion) nil (Dec 2021: $28.1 million) million due from Mercuria and
Shell Western for sale of crude respectively.
18.2 NPDC receivables
The outstanding cash calls due to Seplat from its JOA partner, NPDC is ₦21.2
billion (Dec 2021: ₦ 34.6 billion) $51 million (Dec 2021: $83.9 million).
18.3 Other receivables
Other receivables include a deposit of $128.3 million transferred to Exxon
Mobil Corporation, Delaware as part of the consideration to acquire the entire
share capital of Mobil Producing Nigeria Unlimited. All other receivables are
amounts outside the usual operating activities of the Group.
18.4 Reconciliation of trade receivables
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦ million ₦ million $'000 $'000
Gross carrying amount 24,616 34,698 59,136 84,230
Less: Impairment allowance (8,756) (8,775) (21,035) (21,301)
Balance as at 31 March 2022 15,860 25,923 38,101 62,929
18.5 Reconciliation of NPDC receivables
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦ million ₦ million $'000 $'000
Gross carrying amount 26,255 39,514 63,077 95,924
Less: Impairment allowance (5,008) (4,943) (12,031) (12,000)
Balance as at 31 March 2022 21,247 34,571 51,046 83,924
18.6 Reconciliation of NNPC receivables
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦ million ₦ million $'000 $'000
Gross carrying amount 13,465 10,819 32,348 26,265
Less: Impairment allowance (828) (665) (1,989) (1,615)
Balance as at 31 March 2022 12,637 10,154 30,359 24,650
18.7 Reconciliation of other receivables
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦ million ₦ million $'000 $'000
Gross carrying amount 74,100 21,632 178,021 52,513
Less: Impairment allowance (18,864) (18,668) (45,319) (45,319)
Balance as at 31 March 2022 55,236 2,964 132,702 7,194
19. Contract assets
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦'million ₦'million $'000 $'000
Revenue on gas sales 3,298 1,679 7,923 4,077
Impairment on contract assets - - (1) (1)
3,298 1,679 7,922 4,076
A contract asset is an entity's right to consideration in exchange for goods
or services that the entity has transferred to a customer. The Group has
recognised an asset in relation to a contract with Geregu power, Sapele power
and NGMC for the delivery of gas supplies which the three Companies has
received but which has not been invoiced as at the end of the reporting
period.
The terms of payments relating to the contract is between 30- 45 days from the
invoice date. However, invoices are raised after delivery between 14-21 days
when the receivable amount has been established and the right to the
receivables crystallizes. The right to the unbilled receivables is recognised
as a contract asset. At the point where the final billing certificate is
obtained from Geregu power, Sapele Power and NGMC authorising the quantities,
this will be reclassified from contract assets to trade receivables.
19.1 Reconciliation of contract assets
The movement in the Group's contract assets is as detailed below:
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦'million ₦'million $'000 $'000
Balance as at 1 January 1,679 2,343 4,076 6,167
Addition during the period 3,296 44,849 7,923 111,987
Receipts for the period (1,696) (45,662) (4,077) (114,017)
Price Adjustments - (24) - (60)
Impairment - - - (1)
Exchange difference 19 173 - -
Balance as at 31 December 3,298 1,679 7,922 4,076
20. Derivative financial instruments
The Group uses its derivatives for economic hedging purposes and not as
speculative investments. Derivatives are measured at fair value through profit
or loss. They are presented as current liability to the extent they are
expected to be settled within 12 months after the reporting period.
The fair value has been determined using a proprietary pricing model which
generates results from inputs. The market inputs to the model are derived from
observable sources. Other inputs are unobservable but are estimated based on
the market inputs or by using other pricing models.
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦'million ₦'million $'000 $'000
Foreign currency options-crude oil hedges 1,848 1,543 4,439 3,745
1,848 1,543 4,439 3,745
21. Cash and bank equivalents
Cash and bank balances in the statement of financial position comprise of cash
at bank and on hand, short-term deposits with a maturity of three months or
less.
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦'million ₦'million $'000 $'000
Cash on hand 12,583 5,916 30,233 14,361
Short-term fixed deposits 203 29,040 488 70,498
Cash at bank 117,289 98,812 281,767 239,877
Gross cash and cash equivalent 130,075 133,768 312,488 324,736
Loss allowance (102) (101) (246) (246)
Net Cash and cash equivalents 129,973 133,667 312,242 324,490
21.1 Restricted cash
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦'million ₦'million $'000 $'000
Restricted cash (Current) 6,732 6,603 16,172 16,029
6,732 6,603 16,172 16,029
Included in the restricted cash balance is $8 million, ₦3.3 billion and $6.2
million, ₦2.6 billion set aside in the stamping reserve account and debt
service reserve account respectively for the revolving credit facility. The
amount is to be used for the settlement of all fees and costs payable for the
purposes of stamping and registering the Security Documents at the stamp
duties office and at the Corporate Affairs Commission (CAC).
Also included in the restricted cash balance is $0.9 million, ₦0.4 billion
and $1.1 million, ₦0.4 billion for rent deposit and unclaimed dividend
respectively.
These amounts are subject to legal restrictions and are therefore not
available for general use by the Group.
22. Share Capital
22.1 Authorised and issued share capital
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦'million ₦'million $'000 $'000
Authorised ordinary share capital
1,000,000,000 ordinary shares denominated in 500 500 3,335 3,335
Naira of 50 kobo per share
Issued and fully paid
584,035,845 (2021: 584,035,845) issued shares 296 296 1,862 1,862
denominated in Naira of 50 kobo per share
Fully paid ordinary shares carry one vote per share and the right to
dividends. There were no restrictions on the Group's share capital.
22.2 Movement in share capital and other reserves
Number of Issued share capital Share Share based payment reserve Treasury shares Total
shares Premium
Shares ₦'million ₦'million ₦'million ₦'million ₦'million
Opening balance as at 1 January 2022 584,035,845 296 90,383 4,914 (2,025) 93,568
Share based payments - - - 540 - 540
Share re-purchased - - - - (2) (2)
Closing balance as at 31 March 2022 584,035,845 296 90,383 5,454 (2,027) 94,106
Number of Issued share capital Share Share based payment reserve Treasury shares Total
shares Premium
Shares $'000 $'000 $'000 $'000 $'000
Opening balance as at 1 January 2022 584,035,845 1,862 520,138 22,190 (4,915) 539,275
Share based payments - - - 1,297 - 1,297
Share re-purchased - - - - (5) (5)
Closing balance as at 31 March 2022 584,035,845 1,862 520,138 23,487 (4,920) 540,567
22.3 Employee share-based payment scheme
As at 31 March 2022, the Group had awarded 79,272,577 shares (Dec 2021:
73,966,540 shares) to certain employees and senior executives in line with its
share-based incentive scheme. During the three months ended 31 March 2022, no
new shares were vested (Dec 2021: 7,151,098 shares).
22.4 Treasury shares
This relates to Share buy-back programme for Group's Long-Term Incentive Plan.
The programme commenced from 1 March 2021 and are held by the Trustees under
the Trust for the benefit of the Group's employee beneficiaries covered under
the Trust.
23. Interest bearing loans and borrowings
23.1 Net debt reconciliation
Below is the net debt reconciliation on interest bearing loans and borrowings
for 31 March 2022:
Borrowings due within Borrowings due above Total Borrowings due within Borrowings due above Total
1 year
1 year
1 year
1 year
₦ million ₦ million ₦ million $'000 $'000 $'000
Balance as at 1 January 2022 24,988 290,803 315,791 60,661 705,953 766,614
Addition - - - - - -
Interest accrued 7,468 - 7,468 17,950 - 17,950
Interest capitalized 326 - 326 783 - 783
Principal repayment - - - - - -
Interest repayment (11,821) - (11,821) (28,412) - (28,412)
Other financing charges (874) - (874) (2,100) - (2,100)
Transfers 4,901 (4,901) - 11,779 (11,779) -
Exchange differences 262 3,048 3,310 - - -
Carrying amount as at 31 March 2022 25,250 288,950 314,200 60,661 694,174 754,835
Below is the net debt reconciliation on interest bearing loans and borrowings
for 31 December 2021:
Borrowings due within Borrowings due above Total Borrowings due within Borrowings due above Total
1 year
1 year
1 year
1 year
₦ million ₦ million ₦ million $'000 $'000 $'000
Balance as at 1 January 2021 35,518 229,880 265,398 93,468 604,947 698,415
Additions 268,725 - 268,725 671,000 - 671,000
Interest accrued 29,765 - 29,765 74,322 - 74,322
Interest capitalized 4,995 - 4,995 12,473 - 12,473
Principal repayment (240,291) - (240,291) (600,000) - (600,000)
Interest repayment (27,728) - (27,728) (69,236) - (69,236)
Other financing charges (8,154) - (8,154) (20,360 - (20,360)
Transfers (40,451) 40,451 - (101,006) 101,006 -
Exchange differences 2,609 20,472 23,081 - - -
Carrying amount as at 31 December 2021 24,988 290,803 315,791 60,661 705,953 766,614
650 million Senior notes - April 2021
In March 2021, the Group offered 7.75% senior notes with an aggregate
principal of $650 million due in April 2026. The notes, which were priced on
25 March and closed on 1 April 2021, were issued by the Group in March 2021
and guaranteed by certain of its subsidiaries.
The gross proceeds of the Notes were used to redeem the existing $350 million
9.25% senior notes due in 2023, to repay in full drawings of $250 million
under the existing $350 million revolving credit facility for general
corporate purposes, and to pay transaction fees and expenses. The amortised
cost for the senior notes as at the reporting period is $636.1 million,
although the principal is $650 million.
$110 million Reserved based lending (RBL) facility - March 2021
The Group through its subsidiary Westport on 5th December 2019 entered into a
five-year loan agreement with interest payable semi-annually. The RBL facility
has an initial contractual interest rate of 8% + USD LIBOR as at March 2022
(8.2%) and a settlement date of 29 November 2023.
The RBL is secured against the Group's producing assets in OML 40 via the
Group's shares in Elcrest, and by way of a debenture which creates a charge
over certain assets of the Group, including its bank accounts.
The available facility is capped at the lower of the available commitments and
the borrowing base. The current borrowing base is more than $100 million, with
the available commitments at $100 million. The commitments were scheduled to
reduce to $87.5 million on 31 March 2021. The first reduction in the
commitments occurred on 31(st) December 2019 in line with the commitment
reduction schedule contained within the Facility Agreement. This resulted in
the available commitments reducing from $125.0 million to $122.5million, with
a further reduction to $100.0 million as at December 2020.
The RBL is secured against the Group's producing assets in OML 40 via the
Group's shares in Elcrest, and by way of a debenture which creates a charge
over certain assets of the Group, including its bank accounts.
The RBL has a maturity of five years, the repayments of principal are due on a
semi-annual basis so that the outstanding balance of the RBL will not exceed
the lower of (a) the borrowing base amount and (b) the total commitments.
Interest rate payable under the RBL is USD LIBOR plus 8%, as long as more than
50% of the available facility is drawn.
On 4th February 2020 Westport drew down a further $10 million increasing the
debt utilised under the RBL from $90 million to $100 million.
The interest rate of the facility is variable. The interest accrued at the
reporting period is $2.2 million using an effective interest rate of 8.2%. The
interest paid was determined using 6-month USD LIBOR rate + 8 % on the last
business day of the reporting period.
On 17th March 2021, Westport signed an amendment and restatement agreement
regarding the RBL. As part of the new agreement, the debt utilised and
interest rate remain unchanged at $100 million and 8% + USD LIBOR
respectively, however, the maturity date was extended by either five years
after the effective date of the loan (March 2026) or by the reserves tail date
(expected to be March 2025). Due to the modification of the original agreement
and based on the facts and circumstances, it was determined that the loan
modifications were substantial. Therefore, the existing facility was
derecognised, and a new liability was recognised, and the present value of the
loan commitment was moved to long term liabilities (Borrowings due above 1
year).
On 24 May 2021 Westport drew down a further $10 million increasing the debt
utilized under the RBL from $100 million to $110 million. The amortized cost
for this as at the reporting period is $108.4 million (Dec 2021: $108.8
million), although the principal is $110 million.
$50 million Reserved based lending (RBL) facility - July 2021
In July 2021, the Group raised a $50 million offtake line to the Reserved
Based Lending Facility. The Facility has a 6-year tenor, maturing in 2027. The
amortised cost for this as at the reporting period is $10.3 million, although
the principal is $11 million.
24. Trade and other payables
31 March 2022 31 Dec 2021 31 March 2022 31 Dec 2021
₦ million ₦ million $'000 $'000
Trade payable 27,933 49,607 67,107 120,426
Accruals and other payables 76,878 67,630 184,694 164,175
NDDC levy 6,133 5,283 14,734 12,826
Royalties payable 25,005 14,100 60,073 34,228
Overlift 12,213 14,584 29,341 35,403
148,162 151,204 355,949 367,058
Included in accruals and other payables are field accruals of ₦17.1 billion
(Dec 2021: ₦34.4 billion) $41.2 million (Dec 2021: $83.5 million), and other
vendor payables of ₦33.33 billion (Dec 2021: ₦6.4 billion) $80.07 million
(Dec 2021: $15.6 million). Royalties payable include accruals in respect of
crude oil and gas production for which payment is outstanding at the end of
the period.
Overlifts are excess crude lifted above the share of production. It may exist
when the crude oil lifted by the Group during the period is above its
ownership share of production. Overlifts are initially measured at the market
price of oil at the date of lifting and recognised in profit or loss. At each
reporting period, overlifts are remeasured at the current market value. The
resulting change, as a result of the remeasurement, is also recognised in
profit or loss and any amount unpaid at the end of the year is recognised in
overlift payable.
25. Computation of cash generated from operations
3 months ended 3 months ended 3 months ended 3 months ended
31-Mar-22 31-Mar-21 31-Mar-22 31-Mar-21
₦ million ₦ million $'000 $'000
Profit before tax 34,712 10,647 83,407 28,008
Adjusted for:
Depletion, depreciation and amortization 14,518 12,281 34,890 32,319
Depreciation of right-of-use asset 410 315 985 830
Impairment losses on financial assets 509 269 1,223 707
Interest income (13) (3) (32) (7)
Interest expense on bank loans 7,468 6,222 17,950 16,373
Interest on lease liabilities 20 57 47 149
Unwinding of discount on provision for decommissioning 243 112 585 295
Unrealised fair value loss on derivatives 896 1,214 2,154 3,196
Realised fair value loss on derivatives 743 562 1,787 1,480
Unrealised foreign exchange loss/(gain) 2,517 (114) 6,048 (301)
Loss on disposal of property, plant & equipment 5 - 12 -
Share based payment expenses 540 544 1,297 1,431
Share of loss/(profit) in joint venture 52 (159) 124 (418)
Defined benefit expenses 675 - 1,623 -
Changes in working capital:
Trade and other receivables 18,308 (11,844) 44,004 (31,169)
Prepayments (358) (1,148) (860) (3,022)
Contract assets (1,601) (919) (3,847) (2,419)
Trade and other payables (4,622) (7,647) (11,109) (20,124)
Restricted Cash (59) (7,955) (143) (20,935)
Inventories 317 (307) 761 (807)
Net cash inflow from operating activities 75,280 2,127 180,906 5,586
26. Earnings per share (EPS)
Basic
Basic EPS is calculated on the Group's profit after taxation attributable to
the parent entity and on the basis of weighted average number of issued and
fully paid ordinary shares at the end of the year.
Diluted
Diluted EPS is calculated by dividing the profit after taxation attributable
to the parent entity by the weighted average number of ordinary shares
outstanding during the year plus all the dilutive potential ordinary shares
(arising from outstanding share awards in the share-based payment scheme) into
ordinary shares.
31 March 2022 31 March 2021 31 March 2022 31 March 2021
₦ million ₦ million $'000 $'000
Profit attributable to Equity holders of the parent 6,868 13,550 16,484 35,647
(Loss) attributable to Non-controlling interests 1,422 (4,101) 3,418 (10,791)
Profit for the year 8,290 9,449 19,902 24,856
Shares '000 Shares '000 Shares '000 Shares '000
Weighted average number of ordinary shares in issue 584,036 581,841 584,036 581,841
Outstanding share-based payments (shares) 2,801 6,604 2,801 6,604
586,837 588,445 586,837 588,445
Weighted average number of ordinary shares adjusted for the effect of dilution
Basic earnings per shares ₦ ₦ $ $
Total basic earnings per share attributable to the ordinary equity holders of 11.76 23.29 0.03 0.06
the Group
Diluted earnings per shares ₦ ₦ $ $
Total diluted earnings per share attributable to the ordinary equity holders 11.70 23.03 0.03 0.06
of the Group
The weighted average number of issued shares was calculated as a proportion of
the number of months in which they were in issue during the reporting period.
The decrease in the weighted average number of ordinary shares adjusted for
the effect of dilution was due to the shares forfeited (share award scheme) in
2021.
27. Proposed dividend
The Group's directors proposed an interim dividend of 2.5 cents per share for
the reporting period (2021: 2.5 cents).
28. 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 and 12.19% either directly or
by entities controlled by Austin Avuru (Professional Support Limited and
Platform Petroleum Limited). The remaining shares in the parent Company are
widely held.
The goods and services provided by the related party is disclosed below. The
outstanding balances payable to/receivable from related parties are unsecured
and are payable/receivable in cash.
Shebah Petroleum Development Company Limited SPDCL ('BVI'): The Chairman of
Seplat is a director and shareholder of SPDCL (BVI). The company provided
consulting services to Seplat. Services provided to the Group during the
period amounted to $430,206, ₦179 million (2021: $203,661, ₦77.3 million).
Payables amounted to $532,037, ₦221 million (2021: $101.8 thousand, ₦41.9
million).
29. Commitments and contingencies
29.1 Contingent liabilities
The Group is involved in a number of legal suits as defendant. The estimated
value of the contingent liabilities is ₦11.5 billion, $27.6 million (Dec
2021: ₦7.9 billion, $19.2 million). The contingent liability for the year
is determined based on possible occurrences, though unlikely to occur. No
provision has been made for this potential liability in these financial
statements. Management and the Company's solicitors are of the opinion that
the Company will suffer no loss from these claims.
30. Events after the reporting period
During the period, the Group agreed a $55 million settlement with the operator
(All Grace Energy Limited) of Ubima asset which was acquired in 2019 during
the acquisition of Eland, the agreed settlement will be paid in due course.
The board approved an exit from the asset's operations in April 2022. The
current reserve of the asset stands at circa 2mmbbls. However, the Group did
not report any production under Ubima in the interim financial statements.
31. Exchange rates used in translating the accounts to Naira
The table below shows the exchange rates used in translating the accounts into
Naira.
Basis 31 March 2022 31 March 2021 31 Dec 2021
₦/$ ₦/$ ₦/$
Fixed assets - opening balances Historical rate Historical Historical Historical
Fixed assets - additions Average rate 416.06 380.00 400.48
Fixed assets - closing balances Closing rate 416.25 380.00 411.93
Current assets Closing rate 416.25 380.00 411.93
Current liabilities Closing rate 416.25 380.00 411.93
Equity Historical rate Historical Historical Historical
Income and Expenses: Overall Average rate 416.06 380.00 400.48
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