REG - Seplat PetDevCom Plc - Q1 2021 Results

Seplat EnergyAnnouncement

29/04/2021 07:05

RNS Number : 0424X
  
Seplat Petroleum Development Co PLC
  
29 April 2021
  
 

Seplat Petroleum Development Company Plc
Unaudited results for the three months ended 31 March 2021
 
Lagos and London, 29 April 2021: Seplat Petroleum Development Company Plc ("Seplat" or the "Company"), a leading Nigerian independent energy company listed on both the Nigerian Stock Exchange and the London Stock Exchange, today announces its unaudited results for the three months ended 31 March 2021.  
Operational highlights 
·      Working-interest oil and production within guidance at 48,239 boepd
·      Average daily volumes of nearly 54,000 boepd achieved in first 21 days of April  
·      Liquids production of 28,541 bopd in Q1 2021
·      Gas production of 114 MMscfd (19,698 boepd)
·      Low unit cost of production of $8.70/boe 
·      Oben-50 gas well now producing, Oben-51 drilled and completed with gas expected to flow in May
·      Safety record extended to more than 17 million hours without LTI on Seplat-operated assets
Financial highlights 
·      Board adopts quarterly dividend policy; declares Q1 2021 dividend of US2.5 cents per share
·      Revenue up 16.8% to $152.4 million 
·      EBITDA of $77.8 million 
·      Cash at bank $236.3 million, net debt of $458.1 million
·      Successful issue of $650 million 7.75% senior notes to redeem existing $350 million 9.25% senior notes

and repay $250 million drawn on $350 million RCF    
·      Refinanced $100 million Westport RBL facility 
·      Total capital expenditure of $32.6 million  
Corporate updates
·      Seeking shareholder approval at the AGM on 20 May 2021 to change name to Seplat Energy PLC to reflect evolving strategy
·      ANOH project now fully funded following successful $260 million debt issue
·      Plan to host Capital Markets Day on 29 July 2021
Outlook
·      Expected production unchanged at 48-55 kboepd for full year, subject to market conditions 
·      Capex guidance unchanged, expected to be $150 million for the full year
·      5.0MMbbls hedged at $35-$45/bbl from Q2 to Q4 2021
 
Roger Brown, Chief Executive Officer, said:
"We have made a progressive start to the year, delivering oil and gas production volumes of 48,239 boepd, within our guidance range. With the Gbetiokun field at OML40 now back in production, we are currently achieving average daily volumes of nearly 54 kboepd so far in April and we will build on this as we add additional oil and gas wells this year. 
Our flagship ANOH gas project is proceeding as planned and was fully funded in February when our joint venture company, AGPC successfully raised $260 million of debt financing. In addition, the success of our $650 million Eurobond issuance in March demonstrates investor confidence in our prudent financial management and the exciting future ahead for the Company and its stakeholders.
As we drive forward our strategy of being a low-cost energy provider delivering reliable, affordable and sustainable energy to the young, fast-growing population of Nigeria, energy transition - which delivers on Nigeria's social development goals in tandem with the climate agenda - is essential. This is the backbone of Seplat's strategy and we will be communicating how we plan to achieve this over the coming months. To that end, the Board took the decision to change our name to Seplat Energy PLC, which more adequately reflects our ambitions of providing a broader energy mix. We will present the name change to our shareholders for approval at the AGM on 20 May 2021."



Interim condensed consolidated statement of profit or loss and other comprehensive income
for the three months ended 31 March 2021
 
Summary of performance







US$ million






₦ billion








3M 2021


3M 2020


% change


3M 2021


3M 2020




Revenue


152.4


130.5


16.8%


57.9


42.4




Gross profit


52.8


33.1


59.5%


20.1


10.8




Operating profit (loss)


44.4


(77.0)






16.9


(25.0)




Profit before tax


28.0


(95.7)






10.6


(31.1)




Cash flow from operations  


5.3


64.5


(91.8%)


2.0


23.3




Working interest production (boepd)


48,239


47,986


0.5%












Average realised oil price (US$/bbl)


60.76


49.85


21.9%












Average realised gas price (US$/Mscf)


2.76


2.89


(4.5%)











 
Outlook for 2021
For 2021 we expect to produce an average of 48,000 - 55,000 boepd, taking into account the impact of OPEC+ quotas. We continue to hedge against oil price volatility and expect a higher proportion of revenues to come from long-term gas contracts at stable prices.    
We have significant cash resources and will continue to manage our finances prudently in 2021, expecting to invest $150 million of capital expenditure across the full year, with nearly $33 million already invested. We remain confident that our ongoing cost-cutting initiatives and prudent management of cash will enable further reductions in debt, whilst supporting dividend payments and investment for growth.   
Following its successful funding, the completion of the ANOH project remains a major priority. Although we expect some COVID-19 related delays to push completion into early 2022, following a cost optimisation programme we now expect the project to cost no more than $650 million, substantially below the $700 million budget previously stated at Final Investment Decision. 
Proposal to change name to Seplat Energy PLC
We are seeking shareholder approval to change our name to Seplat Energy PLC to reflect the future direction of the Company. The change of name will be accompanied by a new corporate brand identity that we plan to unveil at the Seplat Energy Summit in September. Before that, we intend to host a Capital Markets Day on 29 July 2021 to outline the Company's strategic direction and its plans to develop its New Energy business. 
Adoption of quarterly dividend
On 28 April 2021 the Board approved the payment of quarterly dividends, commencing with an interim dividend of US2.5 cents, in a change to Seplat's previous policy of declaring dividends twice a year in the Q3 results and the full-year results. The change in policy is intended to provide more frequent returns to shareholders.  
 
 




 
Enquiries:



Seplat Petroleum Development Company Plc
Emeka Onwuka, Chief Financial Officer
Carl Franklin, Head of Investor Relations
Ayeesha Aliyu, Investor Relations 
Chioma Nwachuku, General Manager, External Affairs & Communications 


+44 203 725 6500
 
 
+234 1 277 0400
+234 1 277 0400




FTI Consulting
Ben Brewerton / Sara Powell


+44 203 727 1000 
seplat@fticonsulting.com




Citigroup Global Markets Limited 
Tom Reid / Luke Spells


+44 207 986 4000




Investec Bank plc
Chris Sim / Rahul Sharma


+44 207 597 4000



 
Notes to editors
Seplat Petroleum Development Company Plc is a leading Nigerian energy company, listed on the Nigerian Stock Exchange (NSE: SEPLAT) and the Main Market of the London Stock Exchange (LSE: SEPL). For further information please refer to the Company website, http://seplatpetroleum.com/
 
Important notice
The information contained within this announcement is unaudited and deemed by the Company to constitute inside information as stipulated under Market Abuse Regulations. Upon the publication of this announcement via Regulatory Information Services, this inside information is now considered to be in the public domain.
Certain statements included in these results contain forward-looking information concerning Seplat's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors, or markets in which Seplat 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's control or can be predicted by Seplat. Although Seplat 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 or any other entity, and must not be relied upon in any way in connection with any investment decision. Seplat undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
 
Operating review
Group reserves
Total working-interest 2P reserves, as assessed independently by Ryder Scott Company, L.P., at 1 January 2021, stood at 499.4 MMboe, comprising 240.5 MMbbls of oil and condensate and 1,501.3 Bscf of natural gas. The change represents an organic decrease in overall 2P reserves of 1.9% year-on-year, due to production of 12.3 MMbbls but mitigated by upward revisions of previous estimates. Working-interest 2C resources stood at 94.8 MMboe, comprising 59.7 MMbbls of oil and condensate and 203.3 Bscf of natural gas.
Consequently, the Group's working-interest 2P reserves and 2C resources stood at 594.1 MMboe at 1 January 2021, comprising 300.2 MMbbls oil and condensate and 1,704.7 Bscf of natural gas. 
Drilling programme
During the first quarter of 2021 we completed the Oben-50 gas well, which is now producing as expected. We also drilled and completed Oben-51 and expect gas to be flowing in May. We plan workover activity at Oben-44 and Oben-46 as an alternative to new drilling. We also plan a development well and an appraisal well at our Eastern Asset in the second half of the year, as well as three wells at Gbetiokun and an exploration well at Sibiri (formerly called Amobe). Shell, the unitised operator, has commenced drilling the gas wells at ANOH, with a total of four wells being planned for this year. 
HSE performance
Staff and contractors worked a total of 1.9 million hours with no fatalities, lost-time injuries or minor injuries. The Company has achieved more than 17 million hours without LTI on Seplat-operated assets. There were 23 HSE incidents in total, compared to 26 in Q1 2020, including four spills and four gas leaks, all of which were remediated with limited environmental impact. By the end of March we had conducted 4,471 COVID-19 tests, with a positivity rate of 2%. We continue to enforce all infection control protocols at our field operations and offices.  
Working-interest production for the three months ended 31 March 2021
Average working-interest production for the first quarter of 2021 was within guidance at 48,239 boepd, which represents an overall increase of 0.5% year-on-year. Within this, liquids production was down 13.2% to 28,541 bopd because of delays in siting a new storage vessel at OML 40 to replace the MT Harcourt, which was damaged in November 2020. There was 84% uptime for the Trans Forcados Pipeline during the period and the produced liquid volumes from OMLs 4, 38 and 41 were subject to 12.6% reconciliation losses.
Working-interest gas production increased by nearly 30% to 114 MMscfd, compared to Q1 2020 in which maintenance was undertaken at the Oben Gas Processing plant.    











3M 2021






3M 2020












Liquids(1)


Gas


Oil equivalent






Liquids


Gas


Oil equivalent








Seplat %


bopd


MMscfd


boepd






bopd


MMscfd


boepd




OMLs 4, 38 & 41


45%


       19,842 


           114 


       39,540 






19,722


88


34,844




OML 40


45%


         3,615 


              -   


         3,615 






8,807






8,807




OML 53


40%


         3,570 


              -   


         3,570 






2,886


-


2,886




OPL 283


40%


         1,178 


              -   


         1,178 






705


-


705




Ubima


88%


337


-


337






744


-


744




Total






       28,541 


           114 


       48,239 






32,863


88


47,986
















1.  Liquid production volumes as measured at the LACT unit for OMLs 4, 38, 41 and OML40, and at the flow station for OPL 283.

Volumes stated are subject to reconciliation and will differ from sales volumes within the period.  
 
Oil business performance
Seplat's oil operations produced an average 28,541 bopd on a working-interest basis in Q1 2021. Although output increased at OMLs 4,38, 41, OML 53 and OPL 283, the delays at OML 40 noted above resulted in significantly lower volumes in the first quarter. Production at the Gbetiokun field on OML 40 resumed in March and we expect volumes to normalise in the second quarter. Similarly, the Extended Well Test at Ubima has been completed and the production phase commenced in March.
The average price realised per barrel in the first quarter of 2021 was $60.76 (2020: $49.85), following the recovery of Brent prices on the receding threat from the Covid-19 pandemic and a return to previous levels of economic activity. 
In accordance with the revised OML 55 commercial arrangement that was agreed in July 2016, which provides for a discharge sum of $330 million to be paid to Seplat over a six-year period through allocation of crude oil volumes produced from OML 55, Seplat received payments amounting to $4.9 million in Q1 2021.
Update on export route
The minor completion works on the 160,000 bopd Amukpe-Escravos Pipeline are not within Seplat's control and have been slower than anticipated due to a combination of challenges associated with access to the Escravos terminal owing to COVID-19 and issues relating to ownership of the pipeline. Our partner, the NPDC, now owns a direct stake in the pipeline and we understand they are working with the other pipeline owner and their banks to enable the completion of the project. We have consequently adjusted our plan and budgets to expect commencement of export of the initial permitted volume of 40,000 bopd through the Escravos terminal in the second half of 2021. Once completed, we believe it will significantly improve the assets' production uptime (84% in Q1 2021) and reduce losses from crude theft and reconciliation (12.6% in Q1 2021). 
Gas business performance  
Seplat's working interest production for the first quarter of 2021 was 114 MMscfd (19,698 boepd) at an average selling price of $2.76/Mscf. Gas volumes were higher than Q1 2020 (88 MMscfd), during which period we undertook turnaround maintenance at the Oben Gas Plant. Gas contributed 40.8% of Group volumes on a boepd basis, and 18.6% of Group revenues.      
Sapele Gas Plant
Work continues on the new Sapele Gas Plant with modules now being fabricated overseas and foundation work being conducted at the site. The project is expected to be completed in the second half of 2022, with Sapele's processing capacity increasing from 60 MMscfd to 75MMscfd. The upgraded facility will produce gas that meets export specifications, and the LPG processing unit module will enhance the economics of the plant, as well as ensuring that any gas flaring is eliminated. We are currently accelerating the installation of AG Booster Compressors at Sapele which will reduce the gas flare at the site. This is expected to be completed and operational in Q4 this year.
ANOH gas plant development
The ANOH Gas Processing Plant development at OML 53 (and adjacent OML 21 with which the upstream project is unitised) will drive the next phase of growth for Seplat's expanding gas business. The project will comprise a Phase One 300 MMscfd midstream gas processing plant. 
The ANOH plant, is being built by AGPC, which is an IJV owned equally between Seplat and the Nigerian Gas Company ("NGC"), a wholly owned subsidiary of Nigerian National Petroleum Corporation ("NNPC"). In February 2021, AGPC successfully raised $260 million in debt to fund completion of the ANOH project. The project is now fully funded following completion of equity investments of $210 million by each partner ($420 million combined). 
ANOH is one of Nigeria's most strategic gas projects. It will help Nigeria to accelerate its transition away from small-scale diesel generators to cleaner, less expensive fuels such as natural gas for power generation.
The upstream development, including the drilling of six production wells, will be delivered by the upstream unit operator Shell Petroleum Development Company (SPDC), with four wells expected to be completed in 2021. We have made excellent progress on the project despite the COVID-19 challenges, and we expect the major gas processing units to arrive in Nigeria in Q3 2021. We hope to commence installation before the end of the year, with mechanical completion and pre-commissioning in Q1 2022, and have first gas flowing to customers by the end of H1 2022. The initial total project cost was budgeted at $700 million. Following a cost optimisation programme, the AGPC construction cost is now expected to be no more than $650 million, inclusive of financing costs and taxes, significantly lower than the original projected cost at FID. 
 
Financial review
Revenue, production and commodity prices
On an average daily basis, Brent crude oil traded between $51.1/bbl and $69.6/bbl in the first quarter of 2021, ending the period at around $63.5/bbl. Brent prices averaged $61.3/bbl for the quarter, 20.5% higher compared to $50.9/bbl in Q1 2020, which was affected by the pandemic.
Total revenue for the period was $152.4 million, up 16.8% from the $130.5 million achieved in 2020. Crude oil revenue was $124.1 million (Q1 2020: $107.4 million) a 15.5% increase compared to 2020, reflecting higher realised oil prices. The average oil price realised in the first quarter of 2021 was $60.8/bbl (Q1 2020: $49.9/bbl). 
Average working-interest liquids production was 28,541 bopd, down 13.2% from 32,863 bopd in 2020, whilst the total volume of crude lifted in the period was 2.0 MMbbls compared to 2.1 MMbbls in 2020. The lower oil production in OML 40 was caused by a shut-in of production from Gbetiokun in January and February, after the MV Harcourt was damaged in November 2020, and there were delays in siting the replacement storage vessel for evacuating oil produced from the field.
Gas sales revenue increased by 22.8% to $28.4 million (Q1 2020: $23.1 million), due to higher gas sales volumes achieved of 10.3Bcf (Q1 2020: 7.9Bcf) reflective of the new gas wells brought onstream during the period. The average realised gas price was lower at $2.76/Mscf (Q1 2020: $2.89/Mscf).
Gas sales contributed 18.6% of total Group revenue in the period (Q1 2020: 17.7%).
Gross profit
Gross profit increased by 59.5% to $52.8 million (Q1 2020: $33.1 million) as a result of higher revenues. Cost of sales in the period totaling $99.7 million was comparable with $97.4 million in the same period last year. The higher production opex of $37.6 million includes maintenance costs to support asset integrity works carried out in the period, offset by lower crude handling charges as the Liquid Heater Treater became operational with minimal water volumes being evacuated through TFP. Consequently, production opex for the period was $8.7/boe (Q1 2020: $7.7/boe). Non-production costs primarily consisting of royalties and DDA, which were $59.3 million comparable to $59.8 million in the prior year reflect the lower production volumes from OML 40. 
The 43.1% reduction in general and administrative (G&A) expenses resulted from a combination of the effect of cost reduction initiatives (such as office maintenance, telecommunication, travel and logistics) across the business, one-off payments made for emoluments to former Eland directors in prior period and G&A costs correctly classified in Q3 2020.
Operating profit
The operating profit was $44.4 million after recognising other income from tariffs (fee from use of Group's pipeline to the Warri refinery) of $6.6 million and underlift (shortfalls of crude lifted below the share of production, which is priced at date of lifting) of $8.1 million. This compared to a $77.0 million operating loss in Q1 2020, which was impacted primarily by a $145.5 million IAS 36 impairment charge in the period. We achieved an EBITDA of $77.8 million in the period, when adjusted for non-cash items.
Tax
The Group's tax expense for the first quarter of 2021 was $3.2 million, compared to a tax expense of $10.8 million for the same period in 2020. The tax expense is made up of a deferred tax credit of $4.7 million and current tax charge of $7.9 million. The effective tax rate for the period was 11.3%.
Net profit
The profit before tax adjustments was $28.0 million (Q1 2020: $95.7 million loss). The net finance charge was $16.8 million, compared to $20 million in 2020. The net profit for Q1 2021 was $24.9 million (Q1 2020: $106.6 million net loss). 
The resultant basic EPS was $0.06 in Q1 2021, compared to a loss per share of $0.19 in Q1 2020.
Hedging
Seplat's hedging policy aims to guarantee appropriate levels of cash flow assurance in times of oil price weakness and volatility. The 2021 hedging programme consists of up-front premium put options as follows: for Q1, 1.0MMbbls at a strike price of $30/bbl and 1.0MMbbls at a strike price of $35/bbl; for Q2, 2.0MMbbls at a strike price of $35/bbl; for Q3, 1.0MMbbls at a strike price of $35/bbl and 1.0MMbbls at a strike price of $40/bbl; and for Q4, 1.0MMbls at a strike price of $45/bbl. The Board and management team continue to closely monitor prevailing oil market dynamics and will consider further measures to provide appropriate levels of cash flow assurance in times of oil price weakness and volatility.
Cash flows from operating activities
Operating cash flow before movements in working capital was $84.1 million (Q1 2020: $81.0 million). For the purposes of cash flow statements, restricted cash of $54.5 million has been excluded from the cash balance at the end of the period. Cash generated in the period was also affected by timing differences in the lifting dates that were scheduled towards the end of the quarter and resultant settlement dates that included $36.8 million for sale of crude oil in trade receivables. Consequently, net cash flows from operating activities, after movements in working capital, were $5.3 million (Q1 2020: $64.5 million).
Seplat received a total of $16.4 million towards the settlement of outstanding dollar-denominated cash calls and $51.0 million (Naira equivalent) to offset Naira cash calls, totalling $67.4 million in Q1 2021. The major JV receivable balance now stands at $97.2 million, down from $107.0 million in December 2020. Seplat has continued discussions with major partners to ensure that receivables are settled promptly. 
Cash flows from investing activities
Capital expenditures were $32.6 million in the period and included drilling costs of $18.7 million in relation to the completion of two gas development wells, pre-drill and ongoing batch drilling operations costs for two ANOH upstream gas wells at OML 53. Other expenditure included $8.7 million for costs associated with the Sapele Gas Plant upgrade and $5.2 million for other oil and gas facilities and engineering costs.
The Group received total proceeds of $4.9 million from partner BelemaOil under the revised commercial arrangement at OML 55, for the monetisation of 94.2 kbbls of crude oil during the period. 
After adjusting for interest receipts, the net cash outflow from investing activities for the period was $27.7 million (Q1 2020: $44.8 million). 
Cash flows from financing activities
Net cash outflows from financing activities were $20.4 million (Q1 2020: $15.9 million). This reflects lower interest paid on loans of $20.4 million, compared to the previous year, after $100 million was paid down on the RCF. 



Net debt reconciliation at 31 March 2021


$ million


Coupon


Maturity




Senior Notes


345.8


9.25%


June 2023




Revolving Credit Facility (RCF)


250.7


Libor+6.00%


June 2022 / December 2023




Westport RBL  


97.9


Libor+8%


March 2026




Total borrowings


694.4












Cash and cash equivalents


236.3












Net debt


458.1











Overall, Seplat's aggregate indebtedness at 31 March 2021 stood at $694.4 million, with cash at bank of $236.3 million, leaving net debt at $458.1 million. 
Reserve-Based Loan (RBL) Refinancing
Eland's existing RBL was consolidated into the Group's balance sheet in 2020. The initial RBL was entered into in November 2018, via the Group's subsidiary Westport, and was a five-year loan agreement with interest payable semi-annually. 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 that 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. 
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% + 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). 
Events after the reporting period 
During the period, 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 RCF for general corporate purposes, and to pay transaction fees and expenses. The RCF remains available for drawing if required.
 
Interim Condensed Consolidated Financial Statements (Unaudited)
for the three months ended 31 March 2021
(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 2021
 











3 Months ended
31 March 2021


3 Months ended 31 March 2020


3 Months ended
31 March 2021


3 Months ended 31 March 2020












Unaudited


Unaudited


Unaudited


Unaudited








Notes


₦ million


₦ million


$'000


$'000






























Revenue from contracts with customers


7


 57,930 


 42,408 


 152,448 


 130,493 




Cost of sales


8


 (37,871)


 (31,651)


 (99,659)


 (97,387)




Gross profit






 20,059 


 10,757 


 52,789 


 33,106 




Other income


9


 5,781 


 15,646 


 15,214 


 48,141 




General and administrative expenses


10


 (6,919)


 (10,396)


 (18,220)


 (31,994)




Impairment loss on financial assets


11


 (269)


 
(47,270)


 (707)


 
(145,453)




Fair value (loss)/gain


12


 (1,776)


 6,226 


 (4,676)


 19,158 




Operating profit/(loss)






 16,876 


 (25,037)


 44,400 


 (77,042)




Finance income 


13


 3 


 347 


 7 


 1,067 




Finance cost


13


 (6,391)


 (6,943)


 (16,817)


 (21,364)




Finance cost-net






 (6,388)


(6,596)


 (16,810)


(20,297)




Share of profit from joint venture accounted for using the equity method






 159 


 
 522 


 418 


 
 1,607 




Profit/(loss) before taxation






 10,647 


 (31,111)


 28,008 


 (95,732)




Income tax expense


14


 (1,198)


 (3,516)


 (3,152)


 (10,819)




Profit/(loss) for the period






 9,449 


 (34,627)


 24,856 


 (106,551)




Attributable to:
























Equity holders of the parent






 13,550 


 (34,627)


 35,647 


 (106,551)




Non-controlling interests






 (4,101)


 -   


 (10,791)


 -   












 9,449 


 (34,627)


 24,856 


 (106,551)




Other comprehensive income:
























Items that may be reclassified to profit or loss:
























Foreign currency translation difference






-


 93,911 


 -   


 -   






























Total comprehensive income/(loss) for the period (net of tax)






 9,449 


 59,284 


  24,856


 (106,551)



 



Earnings/(Loss) per share attributable to the equity shareholders:
























Basic earnings per share (₦) ($)


24


 23.29 


 (60.19)


 0.06 


 (0.19)




Diluted earnings per share (₦)/($)


24


 23.03 


 (59.95)


 0.06


 (0.18)




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 2021
 











31 March 2021


31 Dec 2020


31 March 2021


31 Dec 2020












Unaudited


Audited


Unaudited


Audited








Notes


₦ million


₦ million


$'000


$'000




Assets
























Non-current assets
























Oil & gas properties






 609,903 


609,475


 1,605,003 


1,603,888




Other property, plant and equipment






 4,814 


 5,330 


 12,667 


 14,027 




Right-of-use assets






 3,572 


 3,965 


 9,401 


 10,435 




Intangible assets






 22,301 


22,301


 58,687 


 58,687 




Other asset






 42,769 


44,630


 112,551 


 117,448 




Investment accounted for using equity accounting 






 84,800 


 84,642 


 223,159 


 222,741 




Prepayments






 24,777 


 23,463 


 65,202 


 61,744 




Deferred tax asset


14


 289,877 


289,877


 762,833 


762,833




Total non-current assets






 1,082,813 


1,083,683


 2,849,503 


2,851,803




Current assets
























Inventories






 28,643 


 28,337 


 75,377 


 74,570 




Trade and other receivables


15


 108,149 


 96,774 


 284,600 


 254,671 




Prepayments






 1,219 


 1,385 


 3,208 


 3,644 




Contract assets


16


 3,263 


 2,343 


 8,586 


 6,167 




Cash and cash equivalents


18


 89,779 


 98,315 


 236,257 


 258,718 




Total current assets






 231,053 


 227,154 


 608,028 


 597,770 




Total assets






 1,313,866 


1,310,837


 3,457,531 


3,449,573




Equity and Liabilities
























Equity
























Issued share capital


19


 293 


 293 


 1,855 


 1,855 




Share premium


19


 86,917 


 86,917 


 511,723 


 511,723 




Share based payment reserve


19


 6,958 


7,174


 27,023 


 27,592 




Capital contribution 






 5,932 


 5,932 


 40,000 


 40,000 




Retained earnings






 225,386 


 211,790 


 1,151,846 


 1,116,079 




Foreign currency translation reserve






 331,289 


 331,289 


 992 


 992 




Non-controlling interest






 (15,159)


 (11,058)


 (44,987)


 (34,196)




Total shareholders' equity






 641,616 


 632,337 


 1,688,452 


 1,664,045 




Non-current liabilities
























Interest bearing loans and borrowings


20


 242,606 


229,880


 638,436 


604,947




Lease Liabilities






 1,737 


 1,591 


 4,570 


 4,187 




Provision for decommissioning obligation






 61,941 


61,795


 163,002 


162,619




Deferred tax liabilities


14


 200,197 


202,020


 526,835 


531,632




Defined benefit plan






 4,453 


4,063


 11,718 


10,691




Total non-current liabilities






 510,934 


499,349


 1,344,561 


1,314,076




Current liabilities
























Interest bearing loans and borrowings


20


 21,268 


35,518


 55,968 


93,468




Lease Liabilities






 511 


 679 


 1,345 


 1,787 




Derivative financial instruments


17


 1,841 


626


 4,844 


1,648




Trade and other payables


21


 122,720 


130,468


 322,952 


343,340




Contract liabilities


22


 3,599 


 3,599 


 9,470 


 9,470 




Current tax liabilities






 11,377 


 8,261 


 29,939 


 21,739 




Total current liabilities






 161,316 


 179,151 


 424,518 


 471,452 




Total liabilities






 672,250 


678,500


 1,769,079 


1,785,528




Total shareholders' equity and liabilities






 1,313,866 


1,310,837


 3,457,531 


3,449,573



 
The above interim condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.
 
The Group financial statements of Seplat Petroleum Development Company Plc and its subsidiaries (The Group) for three months ended 31 March 2021 were authorised for issue in accordance with a resolution of the Directors on 28 April 2021 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




29 April 2021


29 April 2021


29 April 2021



 
Interim condensed consolidated statement of changes

in equity
for the three months ended 31 March 2021
 







 
 
Issued

share

capital


Share

premium


Share

based payment
reserve


Capital

contribution


Retained
earnings


Foreign
currency
translation
reserve


 
Non- controlling interest


Total equity








₦ million


₦ million


₦ million


₦ million


₦ million


₦ million


₦ million


₦ million




At 1 January 2020


 289 


 84,045 


 8,194 


 5,932 


 259,690 


 202,910 


 (7,252)


 553,808 




Loss for the period


 -   


-


 -   


 -   


 (34,627)


 -   


 -   


 (34,627)




Other comprehensive income


 -   


 -   


 -   


 -   


 -   


 93,911 


 -   


 93,911 




Total comprehensive income for the period


 - 


 - 


 - 


 - 


 (34,627) 


 93,911 


 -


 59,284 




Transactions with owners in their capacity as owners:




































Share based payments 


 -   


 -   


 636 


 -   


 -   


 -   


 -   


 636 




Total


 -   


 -   


 636 


 -   


 -   


 -   


 -   


 636 




At 31 March 2020 (unaudited)


 289 


 84,045 


 8,830 


 5,932 


 225,063 


 296,821 


 (7,252)


 613,728 




 
 
 




































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 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 


 5,932 


 225,386 


 331,289 


 (15,159)


 641,616 
























 
The above interim condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
 







Issued

share

capital


Share

premium


Share

based payment
reserve


Capital

contribution


Retained
earnings


Foreign
currency
translation
reserve


Non-controlling interest


Total 
equity 








$'000


$'000


$'000


$'000


$'000


$'000


$'000


$'000




At 1 January 2020


 1,845 


 503,742 


 30,426 


 40,000 


 1,249,156 


 2,391 


 (23,621)


 1,803,939 




Loss for the period


 -   


 -   


 -   


 -   


 (106,551)


 -   


 -   


 (106,551)




Other comprehensive income


 -   


 -   


 -   


 -   


 -   


 -   


-


-




Total comprehensive loss for the period


 - 


 - 


 - 


 - 


 (106,551) 


 - 


 -


 (106,551) 




Transactions with owners in their capacity as owners:




































Share based payments 


 -   


 -   


 1,957 


 -   


 -   


 -   






 1,957 




Total


 -   


 -   


 1,957 


 -   


 -   


 -   


 -   


 1,957 




At 31 March 2020(Unaudited)


1,845 


 503,742 


 32,383 


 40,000 


 1,142,605 


 2,391 


 (23,621)


 1,699,345 




 
 
 




































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 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 


 40,000 


 1,151,846 


 992 


 (44,987)


 1,688,452 



























 
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 2021
 











3 months ended 


3 months ended 


3 months ended 


3 months ended 












31-Mar-21


31-Mar-20


31-Mar-21


31-Mar-20








Note


₦ million


₦ million


$'000


$'000




Cash flows from operating activities
























Cash generated from operations


23


2,005 


23,326


 5,266 


64,508




Hedge premium paid






(441)


-


 (1,160)


-




Income tax credit






95 


-


 251 


-




Net cash inflows from operating activities






1,660


23,326


4,357


64,508




Cash flows from investing activities
























Payment for acquisition of oil and gas properties






 (12,382)


            (16,558)


 (32,585)


          (45,866)




Payment for acquisition of other property, plant and equipment






 (17)


                  -   


 (45)


                -   




Receipts from other assets






 1,861 


                  -   


 4,897 


-




 Interest received 






 3 


347


 7 


1,067




Net cash outflows from investing activities






 (10,535)


            (16,211)


 (27,726)


          (44,799)




Cash flows from financing activities
























Proceeds from loans






 -   


3,610


 -   


10,000




Lease payment






 (2)


(42)


 (4)


(117)




Payments for other financing charges






 -   


(941)


 -   


(2,606)




Interest paid on loans






 (7,746)


 (8,369)


 (20,384)


 (23,184)




Net cash outflows from financing activities






 (7,748)


             (5,742)


 (20,388)


          (15,907)




Net (decrease)/increase in cash and cash equivalents






 (16,623)


             1,373


 (43,757)


            
3,802 




Cash and cash equivalents at beginning of the year






 85,554 


           100,184 


 225,137 


         326,330 




Effects of exchange rate changes on cash and cash equivalents 






 225 


             17,337 


 607 


              (788)




Cash and cash equivalents at end of the period






 69,156 


           118,894 


 181,987 


         329,344 



 
For the purposes of the cash flow statements, the restricted cash balance of ₦5.1 billion ($13.5 million) has been excluded from the cash and cash equivalents at the end of the period. These amounts are subject to legal restrictions and are therefore not available for general use by the Group.
An additional ₦7.9 billion ($20.8 million) of funds deposited in Access bank Plc bank accounts in the ordinary course of business are being unilaterally restricted by Access bank Plc in connection with the court case between Seplat Petroleum Development Company Plc and Access Bank Plc.
Also included in the restricted cash balance is a cash-backed guarantee of ₦7.6 billion ($20 million) set aside with Zenith Bank Plc to fulfil the requirement of an order of the Court of Appeal, to seek the release of any order relating to the case between Seplat Development Petroleum Company Plc and Access Bank Plc.


The above interim condensed consolidated statement of cashflows should be read in conjunction with the accompanying notes.
 
Notes to the interim condensed consolidated financial statements
 
1.   Corporate Structure and business
Seplat Petroleum Development Company Plc ('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 was 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 ₦79.6 billion.
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 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 Petroleum Development Company 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. (See details in Note 4.1.vi) 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 Petroleum Development Company 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.
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

holding


Principal activities


Nature of holding




Newton Energy Limited


1 June 2013


Nigeria


100%


Oil & gas exploration

and production


Direct




Seplat Petroleum Development Company UK Limited


21 August 2014


United Kingdom


100%


Technical, liaison and administrative support services relating to oil & gas exploration and production


Direct




Seplat Gas Company Limited


12 December 2014


Nigeria


100%


Oil & gas exploration and production and gas processing


Direct




Seplat East Onshore Limited


12 December 2014


Nigeria


100%


Oil & gas exploration and production


Direct




Seplat East Swamp Company Limited


12 December 2014


Nigeria


100%


Oil & gas exploration and production


Direct




Seplat West Limited


16 January 2018


Nigeria


100%


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




Wester Ord Oil & Gas (Nigeria) Limited


 18 July 2014


Nigeria


100%


Oil and Gas Exploration
and Production


Indirect




Wester Ord Oil and Gas Limited


 16 July 2014


Jersey


100%


Holding Company


Indirect




Destination Natural Resources Limited


-


Dubai


70%


Dormant


Indirect







2.   Significant changes in the current reporting period
The following significant changes occurred during the reporting period ended 31 March 2021:
·    During the period, the Group offered 7.75% senior notes with an aggregate principal of $650 million (₦247 billion) due in April 2026. The notes, which were priced on 25 March and closed on 1 April 2021, were issued by the Group in March 2021 and guaranteed by certain of its subsidiaries. 
3.   Summary of significant accounting policies
3.1    Introduction to summary of significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these interim condensed consolidated financial statements. These accounting policies have been applied to all the periods presented, unless otherwise stated. The interim financial statements are for the Group consisting of Seplat Plc and its subsidiaries.
3.2    Basis of preparation  
The interim condensed consolidated financial statements of the Group for the first quarter ended 31 March 2021 have been prepared in accordance with the accounting standard IAS 34 Interim financial reporting. This interim condensed consolidated financial statement does not include all the notes normally included in an annual financial statement of the Group. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2020 and any public announcements made by the Group during the interim reporting period.
The financial statements have been prepared under the going concern assumption and historical cost convention, except for financial instruments measured at fair value on initial recognition, defined benefit plans - plan assets measured at fair value. The financial statements are presented in Nigerian Naira and United States Dollars, and all values are rounded to the nearest million (₦'million) and thousand ($'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 accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2020, except for the adoption of new standards effective as of 1 January 2021. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments and interpretations apply for the first time in 2021, but do not have an impact on the interim condensed consolidated financial statements of the Group.
a)   Amendments to IFRS 7, IFRS 9, IAS 39, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform - Phase 2
The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free rate (RFR). The amendments include a practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest. The practical expedient is required for entities applying IFRS 4 that are using the exemption from IFRS 9 (and, therefore, apply IAS 39) and for IFRS 16 Leases, to lease modifications required by IBOR reform. The amendments also permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued. Any gains or losses that could arise on transition are dealt with through the normal requirements of IFRS 9 and IAS 39 to measure and recognise hedge ineffectiveness. In addition, the amendments provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component. These amendments had no impact on the consolidated financial statements of the Group as it does not have any interest rate hedge relationships.
This amendment had no impact on the consolidated financial statements of the Group.
 
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
·    Classification of Liabilities as Current or Non-current - Amendments to IAS 1 - Effective for annual periods beginning on or after 1 January 2022.
·    Amendments to IAS 16 Property, Plant and Equipment - Effective date for annual periods beginning on or after 1 January 2022
·    Amendments to IAS 8 Accounting Policies and Accounting Estimates - Effective date for annual periods beginning on or after 1 January 2022
·    Amendments to IAS 37 Onerous Contracts - Costs of Fulfilling a Contract - Effective date for annual periods beginning on or after 1 January 2022
·    Amendments to IFRS 3 Business Combination - Reference to the Conceptual Framework - Effective date for annual periods beginning on or after 1 January 2022
·    Amendments to IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities - Effective date for annual periods beginning on or after 1 January 2022
·    Amendments to IAS 41 Agriculture - Taxation in fair value measurements - Effective date for annual periods beginning on or after 1 January 2022
3.5    Basis of consolidation          
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 March 2021.
This basis of consolidation is the same adopted for the last audited financial statements as at 31 December 2020.
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 2020 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.
iii.  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.  
iv.  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.
v.   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 (Seplat's 45% share of $100 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.
vi.  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 ₦5.8 billion, 2020: ₦4.2 billion. 
vii. 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.
viii.        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 general manager (Finance), the general manager (Gas) 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 2020 annual financial statements.
The following are some of the estimates and assumptions made.
i.  Defined benefit plans (pension benefits)
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
Recognised financial assets and liabilities not denominated in US dollars.


Cash flow forecasting
Sensitivity analysis


Match and settle foreign denominated cash inflows with foreign denominated cash outflows.




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 instruments.


Aging analysis
Credit ratings


Diversification of bank deposits.




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, Vitol, Eni Trading 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 runs for five years until 31 July 2021 and on Vitol off-take agreement (OML53 - Ohaji South Field) which expires in May 2021. While payment term is 10 days in the Eni off-take agreement (OML53 - Jisike Field) which expires in December 2021. The Group is exposed to further credit risk from outstanding cash calls from Nigerian Petroleum Development Company (NPDC) and National Petroleum Investment Management Services (NAPIMS).
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. 
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 deposit bearing current accounts, time deposits and money market 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 year


1 - 2

year


2 - 3

years


3 - 6

years


Total








%


₦ million


₦ million


₦ million


₦ million


₦ million




31 March 2021




























Non - derivatives




























Fixed interest rate borrowings




























Senior notes


9.25%


 -   


 -   


133,000


 -   


133,000




Variable interest rate borrowings




























Citibank, N.A., London Branch


6% + Libor


 5,790 


 5,067 


 -   


 -   


 10,857 




Nedbank Limited London


6% + Libor


 5,790 


 5,067 


 -   


 -   


 10,857 




Stanbic IBTC Bank Plc


6% + Libor


 2,895 


 2,533 


 -   


 -   


 5,428 




The Standard Bank of South Africa Limited


6% + Libor


 2,895 


 2,533 


 -   


 -   


 5,428 




RMB International (Mauritius) Limited


6% + Libor


 5,790 


 5,067 


 -   


 -   


 10,857 




The Mauritius Commercial Bank Ltd


6% + Libor


 5,790 


 5,067 


 -   


 -   


 10,857 




JPMorgan Chase Bank, N.A., London Branch


6% + Libor


 4,343 


 3,800 


 -   


 -   


 8,143 




Standard Chartered Bank


6% + Libor


 4,343 


 3,800 


 -   


 -   


 8,143 




Natixis 


6% + Libor


 4,343 


 3,800 


 -   


 -   


 8,143 




Société Générale, London Branch


6% + Libor


 2,171 


 1,900 


 -   


 -   


 4,071 




Zenith Bank Plc


6% + Libor


 2,171 


 1,900 


 -   


 -   


 4,071 




United Bank for Africa Plc


6% + Libor


 2,171 


 1,900 


 -   


 -   


 4,071 




First City Monument Bank Limited


6% + Libor


 2,172 


 1,900 


 -   


 -   


 4,072 




The Mauritius Commercial Bank Ltd 


8% + Libor


 -   


 -   


 2,918 


 11,674 


14,592




Stanbic IBTC Bank Plc


8% + Libor


 -   


 -   


 2,979 


 11,917 


14,896




Standard Bank of South Africa


8% + Libor


 -   


 -   


 1,702 


 6,810 


8,512


































Total variable interest borrowings






  50,664


  44,334


 7,599 


 30,401 


132,998




Other non - derivatives




























Trade and other payables**






122,720


-


-


-


122,720




Lease liability






 933 


 1,551 


 731 


 25 


 3,240 












 123,653 


 1,551 


 731 


 25 


 125,960




Total 






  174,317


45,885


141,330


30,426


 391,958 



 







Effective interest rate


Less than

1 year


1 - 2

year


2 - 3

years


3 - 5

years


Total








%


₦ million


₦ million


₦ million


₦ million


₦ million




31 December 2020




























Non - derivatives




























Fixed interest rate borrowings




























Senior notes


9.25%


 -   


 -   


133,000


 -   


133,000




Variable interest rate borrowings




























Citibank, N.A., London Branch


6% + Libor


 724 


 10,133 


 -   


 -   


 10,857 




Nedbank Limited London


6% + Libor


 724 


 10,133 


 -   


 -   


 10,857 




Stanbic IBTC Bank Plc


6% + Libor


 362 


 5,067 


 -   


 -   


 5,429 




The Standard Bank of South Africa Limited


6% + Libor


 362 


 5,067 


 -   


 -   


 5,429 




RMB International (Mauritius) Limited


6% + Libor


 724 


 10,133 


 -   


 -   


 10,857 




The Mauritius Commercial Bank Ltd


6% + Libor


 724 


 10,133 


 -   


 -   


 10,857 




JPMorgan Chase Bank, N.A., London Branch


6% + Libor


 543 


 7,600 


 -   


 -   


 8,143 




Standard Chartered Bank


6% + Libor


 543 


 7,600 


 -   


 -   


 8,143 




Natixis 


6% + Libor


 543 


 7,600 


 -   


 -   


 8,143 




Société Générale, London Branch


6% + Libor


 271 


 3,800 


 -   


 -   


 4,071 




Zenith Bank Plc


6% + Libor


 271 


 3,800 


 -   


 -   


 4,071 




United Bank for Africa Plc


6% + Libor


 271 


 3,800 


 -   


 -   


 4,071 




First City Monument Bank Limited


6% + Libor


 271 


 3,800 


 -   


 -   


 4,071 




First Bank of Nigeria


8% + Libor


 1,140 


 2,993 


 428 


 -   


 4,561 




The Mauritius Commercial Bank Ltd


8% + Libor


 3,268 


 8,579 


 1,226 


 -   


 13,073 




Stanbic IBTC Bank Plc/ The Standard Bank of South Africa Limited


8% + Libor


 5,092 


 13,367 


 1,910 


 -   


 20,369 


































Total variable interest borrowings






 15,833 


 113,605 


 3,564 


-


133,002




Other non - derivatives




























Trade and other payables**






 130,468 


-


-


-


 130,468 




Lease liability






 933 


 895 


 731 


 25 


 2,584 












 131,401 


 895 


 731 


 25 


 133,052 




Total 






 147,234 


 114,500 


 137,295 


 25 


 399,054 



 







Effective

interest rate


Less than

1 year


1 - 2

year


2 - 3

years


3 - 6

years


Total








%


$'000


$'000


$'000


$'000


$'000




31 March 2021




























Non - derivatives




























Fixed interest rate borrowings




























Senior notes


9.25%


 -   


 -   


350,000


 -   


350,000




Variable interest rate borrowings




























Citibank, N.A., London Branch


6% + Libor


 15,238 


 13,333 


 -   


 -   


 28,571 




Nedbank Limited London


6% + Libor


 15,238 


 13,333 


 -   


 -   


 28,571 




Stanbic IBTC Bank Plc


6% + Libor


 7,619 


 6,667 


 -   


 -   


 14,286 




The Standard Bank of South Africa Limited


6% + Libor


 7,619 


 6,667 


 -   


 -   


 14,286 




RMB International (Mauritius) Limited


6% + Libor


 15,238 


 13,333 


 -   


 -   


 28,571 




The Mauritius Commercial Bank Ltd


6% + Libor


 15,238 


 13,333 


 -   


 -   


 28,571 




JPMorgan Chase Bank, N.A., London Branch


6% + Libor


 11,429 


 10,000 


 -   


 -   


 21,429 




Standard Chartered Bank


6% + Libor


 11,429 


 10,000 


 -   


 -   


 21,429 




Natixis 


6% + Libor


 11,429 


 10,000 


 -   


 -   


 21,429 




Société Générale, London Branch


6% + Libor


 5,714 


 5,000 


 -   


 -   


 10,714 




Zenith Bank Plc


6% + Libor


 5,714 


 5,000 


 -   


 -   


 10,714 




United Bank for Africa Plc


6% + Libor


 5,714 


 5,000 


 -   


 -   


 10,714 




First City Monument Bank Limited


6% + Libor


 5,715


 5,000 


 -   


 -   


 10,715 




The Mauritius Commercial Bank Ltd 


8% + Libor


 -   


 -   


7,680


30,720


38,400




Stanbic IBTC Bank Plc


8% + Libor


 -   


 -   


7,840


31,360


39,200




Standard Bank of South Africa


8% + Libor


 -   


 -   


4,480


17,920


22,400
































































Total variable interest borrowings






  133,334


  116,666


 20,000 


80,000


350,000




Other non - derivatives


























 




Trade and other payables**


322,952


 -   


 -   


 -   


322,952




Lease liability


2,455


4,082


1,924


67


8,528








325,407


4,082


1,924


67


331,480




Total 


458,741


120,748


371,924


80,067


1,031,480




















 







Effective

interest rate


Less than

1 year


1 - 2

year


2 - 3

years


3 - 5

years


Total








%


$'000


$'000


$'000


$'000


$'000




31 December 2020




























Non - derivatives




























Fixed interest rate borrowings




























Senior notes


9.25%


 -   


 -   


350,000


 -   


350,000




Variable interest rate borrowings




























Citibank, N.A., London Branch


6% + Libor


 1,905 


 26,667 


 -   


 -   


 28,572 




Nedbank Limited London


6% + Libor


 1,905 


 26,667 


 -   


 -   


 28,572 




Stanbic IBTC Bank Plc


6% + Libor


 952 


 13,333 


 -   


 -   


 14,285 




The Standard Bank of South Africa Limited


6% + Libor


 952 


 13,333 


 -   


 -   


 14,285 




RMB International (Mauritius) Limited


6% + Libor


 1,905 


 26,667 


 -   


 -   


 28,572 




The Mauritius Commercial Bank Ltd


6% + Libor


 1,905 


 26,667 


 -   


 -   


 28,572 




JPMorgan Chase Bank, N.A., London Branch


6% + Libor


 1,429 


 20,000 


 -   


 -   


 21,429 




Standard Chartered Bank


6% + Libor


 1,429 


 20,000 


 -   


 -   


 21,429 




Natixis 


6% + Libor


 1,429 


 20,000 


 -   


 -   


 21,429 




Société Générale, London Branch


6% + Libor


 714 


 10,000 


 -   


 -   


 10,714 




Zenith Bank Plc


6% + Libor


 714 


 10,000 


 -   


 -   


 10,714 




United Bank for Africa Plc


6% + Libor


 714 


 10,000 


 -   


 -   


 10,714 




First City Monument Bank Limited


6% + Libor


 713 


 10,000 


 -   


 -   


 10,713 




First Bank of Nigeria


8% + Libor


 3,000 


 7,875 


 1,125 


 -   


 12,000 




The Mauritius Commercial Bank Ltd


8% + Libor


 8,600 


 22,575 


 3,225 


 -   


 34,400 




Stanbic IBTC Bank Plc/ The Standard Bank of South Africa Limited


8% + Libor


 13,400 


 35,175 


 5,025 


 -   


 53,600 


































Total variable interest borrowings






 41,666 


 298,959 


 9,375 


 -   


350,000




Other non - derivatives


























 




Trade and other payables**


343,341


 -   


 -   


 -   


343,324




Lease liability


2,455


2,354


1,924


67


6,800








345,796


2,354


1,924


67


350,141




Total 


387,462


301,313


361,299


67


1,050,142




















** 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
2021


As at 31 Dec
2020


As at 31 March
2021


As at 31 Dec
2020








₦ million


₦ million


₦ million


₦ million




Financial assets at amortised cost




















Trade and other receivables*


 102,963 


58,398


 102,963 


58,398




Contract assets


 3,263 


 2,343 


 3,263 


 2,343 




Cash and bank balances


 89,779 


98,315


 89,779 


98,315








 196,005 


159,056


 196,005 


159,056




Financial liabilities at amortised cost




















Interest bearing loans and borrowings


 263,874 


265,398


 273,776 


 277,170 




Trade and other payables**


 122,720 


 93,537 


 122,720 


 93,537 








 386,594 


 358,935 


 396,496 


 370,707 




Financial liabilities at fair value




















Derivative financial instruments (Note 17)


1,841


626


1,841


626








1,841


626


1,841


626



 







Carrying amount


Fair value








As at 31 March
2021


As at 31 Dec
2020


As at 31 March
2021


As at 31 Dec
2020








$'000


$'000


$'000


$'000




Financial assets at amortised cost




















Trade and other receivables*


 270,956 


153,680


 270,956 


153,680




Contract assets


 8,586 


 6,167 


 8,586 


 6,167 




Cash and bank balances


 236,257 


258,718


 236,257 


258,718








 515,799 


418,565


 515,799 


418,565




Financial liabilities at amortised cost




















Interest bearing loans and borrowings


 694,404 


698,415


 720,463 


729,395




Trade and other payables**


 322,952 


 246,150 


 322,952 


 246,150 








 1,017,356 


944,565 


 1,043,415 


 975,545 




Financial liabilities at fair value




















Derivative financial instruments (Note 17)


4,844


1,648


4,844


1,648








4,844


1,648


4,844


1,648












*  Trade and other receivables exclude 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 prepayments), 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 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 2021, revenue from the gas segment of the business constituted 19% of the Group's revenue. Management believes that the gas segment of the business will continue to generate higher profits in the foreseeable future. It also decided that more investments will be made toward building the gas arm of the business. This investment will be used in establishing more offices, creating a separate operational management and procuring 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 this business segment's revenues and results, and its cash flows, will be 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
31 March 2021


3 Months ended 31 March 2020


3 Months ended
31 March 2021


3 Months ended 31 March 2020




              


₦'million


₦'million


$'000


$'000




Oil 


 3,895


 (43,395)


 10,240


(133,530) 




Gas 


 5,554 


 8,768 


 14,616 


 26,979 




Total profit from continued operations for the period


 9,449 


(34,627)


 24,856 


(106,551) 



 
 
Oil                                                                                 







3 Months ended
31 March 2021


3 Months ended 31 March 2020


3 Months ended
31 March 2021


3 Months ended 31 March 2020




              


₦'million


₦'million


$'000


$'000




Revenue from contract with customers




















Crude oil sales  


 47,152 


 34,900 


 124,084 


 107,389 




Operating profit before depreciation, depletion 
and amortisation


 20,092 


 14,654 


 52,862 


 45,093 




Depreciation and impairment


 (12,311)


 (47,937)


 (32,398)


  (147,507)




Operating profit/(loss)


 7,781 


(33,283)


 20,464 


 (102,414) 




Finance income 


 3 


 347 


 7 


 1,067 




Finance costs


 (6,391)


 (6,943)


 (16,817)


 (21,364)




Profit/(Loss) before taxation


 1,393


(39,879) 


 3,654


(122,711) 




Income tax credit/(expense)


 2,502 


 (3,516)


 6,586 


 (10,820)




Profit/(Loss) for the period


 3,895


 (43,395) 


 10,240


(133,530)



 
Gas







3 Months ended
31 March 2021


3 Months ended 31 March 2020


3 Months ended
31 March 2021


3 Months ended 31 March 2020




              


₦'million


₦'million


$'000


$'000




Revenue from contract with customer




















Gas sales


 10,778 


 7,508 


 28,364 


 23,104 




Operating profit before depreciation, depletion 
and amortisation


 9,112 


 8,257 


 23,980 


 25,407 




Depreciation, amortization and impairment


 (17)


 (11)


 (44)


 (35)




Operating profit


 9,095


 8,246 


 23,936 


 25,372 




Finance income 


 -   


 -   


 -   


 -   




Finance cost


 -   


 -   


 -   


 -   




Share of profit from joint venture accounted 
for using equity accounting


 159 


 522 


 418 


 1,607 




Profit before taxation


 9,254 


 8,768 


 24,354


 26,979 




Taxation


 (3,700)


 -   


 (9,738)


 -   




Profit for the period


 5,554 


 8,768 


 14,616 


 26,979 



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
March 2021


3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2020


3 Months ended
March 2020


3 Months ended
March 2020








Oil


Gas 


Total


Oil


Gas 


Total








₦'million


₦'million


₦'million


₦'million


₦'million


₦'million




Geographical markets




























Nigeria


 11,587 


10,778


 22,365 


 9,246 


7,508


 16,754 




Switzerland


 35,565 






 35,565 


 25,654 






 25,654 




Revenue from contract with customers


 47,152 


10,778


 57,930 


 34,900 


7,508


42,408




Timing of revenue recognition




























At a point in time


 47,152 


 -   


 47,152 


 34,900 


 -   


 34,900 




Over time


 -   


10,778


 10,778 


 -   


 7,508 


 7,508 




Revenue from contract with customers


 47,152 


10,778


 57,930 


 34,900 


 7,508 


 42,408 















 







3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2020


3 Months ended
March 2020


3 Months ended
March 2020








Oil


Gas 


Total


Oil


Gas 


Total








$'000


$'000


$'000


$'000


$'000


$'000




Geographical markets




























Nigeria


 30,492 


28,364


 58,856 


 28,451 


23,104


 51,555 




Switzerland


 93,592 


 -   


 93,592 


 78,938 






 78,938 




Revenue from contract with customers


 124,084 


28,364


 152,448 


107,389


23,104


130,493




Timing of revenue recognition




























At a point in time


124,084


 -   


124,084


 107,389 


 -   


 107,389 




Over time


 -   


 28,364


28,364


 -   


 23,104 


 23,104 




Revenue from contract with customers


124,084


28,364


 152,448


 107,389 


 23,104 


 130,493 















The Group's transactions with its major customer, Mercuria, constitutes more than 10% (₦35.6 billion, $94 million) of the total revenue from the oil segment and the Group as a whole. Also, the Group's transactions with Azura (₦3.7 billion, $11.8 million) accounted for more than 10% of the total revenue from the gas segment and the Group as a whole.
6.1.2   Impairment loss/(reversal) on financial assets by reportable segments







3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2020


3 Months ended
March 2020


3 Months ended
March 2020








Oil


Gas 


Total


Oil


Gas 


Total








₦'million


₦'million


₦'million


₦'million


₦'million


₦'million




Impairment loss/(reversal) 


 252 


17   


 269 


 (187)


 -   


 (187)



 







3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2020


3 Months ended
March 2020


3 Months ended
March 2020








Oil


Gas 


Total


Oil


Gas 


Total








$'000


$'000


$'000


$'000


$'000


$'000




Impairment loss/(reversal) 


 663


 44   


 707


 (575)


 -   


 (575)



6.1.3   Impairment loss/(reversal) on non-financial assets by reportable segments







3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2020


3 Months ended
March 2020


3 Months ended
March 2020








Oil


Gas 


Total


Oil


Gas 


Total








₦'million


₦'million


₦'million


₦'million


₦'million


₦'million




Impairment loss/(reversal) 


 -   


 -   


 -   


 47,457 


 -   


 47,457 



 







3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2021


3 Months ended
March 2020


3 Months ended
March 2020


3 Months ended
March 2020








Oil


Gas 


Total


Oil


Gas 


Total








$'000


$'000


$'000


$'000


$'000


$'000




Impairment loss/(reversal) 


 -   


 -   


 -   


 146,028 


 -   


 146,028 



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 2021


 1,232,834 


 81,032 


 1,313,866 


 3,244,289 


 213,242 


 3,455,331 




31 December 2020


1,101,463


209,374


1,310,837


2,898,588


550,985


3,449,573



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 2021


 659,298 


 12,952


 672,250 


 1,734,996 


 34,083


 1,769,079 




31 December 2020


654,095


24,405


678,500


1,721,305


64,223


1,785,528



7.   Revenue from contracts with customers







3 months ended 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦ million


$'000


$'000




Crude oil sales  


 47,152 


34,900


 124,084 


107,389




Gas sales


 10,778 


7,508


 28,364 


23,104








 57,930 


42,408


 152,448 


130,493



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 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦ million


              $'000


$'000




Royalties


 10,793 


10,400


 28,404 


32,002




Depletion, depreciation and amortisation


 11,748 


9,021


 30,915 


27,758




Crude handling fees


 4,749 


6,575


 12,498 


20,230




Nigeria Export Supervision Scheme (NESS) fee


 55 


29


 145 


88




Niger Delta Development Commission Levy


 977 


1,132


 2,571 


3,484




Barging/Trucking


 824 


-


 2,167 


-




Operational & maintenance expenses


 8,725 


 4,494 


 22,959 


 13,826 








 37,871 


 31,651 


 99,659 


 97,387 



Operational & maintenance expenses mainly relates to maintenance costs, warehouse operations expenses, gas flare penalty fees, security expenses, community expenses, clean-up costs, fuel supplies and catering services.
9.   Other income/(losses)



              


3 months ended 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦'million


              $'000


$'000




Underlift/(Overlift)


 3,115 


 15,217 


 8,198 


 46,823 




Gains/(loss) on foreign exchange            


 114 


 425 


 301 


 1,308 




Others


 25 


4


 66 


10




Tariffs


 2,527 


-


 6,649 


-








 5,781 


15,646


 15,214 


48,141



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 as other expenses. 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.
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.
Gains on foreign exchange are principally as a result of translation of naira 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 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦'million


              $'000


$'000




Depreciation and amortisation


 532 


492


 1,404 


1,517




Depreciation of right-of-use assets 


 315 


186


 830 


572




Professional and consulting fees


 1,082 


 1,389 


 2,848 


 4,275 




Directors' emoluments (executive)


 263 


 824 


 692 


 2,534 




Directors' emoluments (non-executive)


 548 


 320 


 1,441 


 984 




Employee benefits


 3,975 


4,301


 10,467 


13,234




Flights and other travel costs


 198 


 266 


 522 


 817 




Rentals     


 6 


 45 


 16 


 140 




Other general expenses


 -   


 2,573 


 -   


 7,920 








 6,919 


 10,396 


 18,220 


 31,994 



Directors' emoluments have been split between executive and non-executive directors. Included in executive directors' emoluments are one-off termination payments of $2.3m made to the directors of Eland in respect of the acquisition of Eland in 2020. Included in the non-executive directors' emoluments are amounts paid to four new non-executive directors. Other general expenses relate to costs such as office maintenance costs, telecommunication costs, logistics costs and others.
11. Impairment (loss)/reversal







3 months ended 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦ million


$'000


$'000




Impairment (loss)/reversal on financial assets


(269)


187


(707)


575




Impairment loss on non-financial assets


-


(47,457)


-


(146,028)








(269)


(47,270)


       (707)


       (145,453)



Impairment reversal on financial assets relates to the reversal of previously recognised impairment losses on other receivables. 
12. Fair value gain/(loss)







3 months ended 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦ million


$'000


$'000




Realised fair value gain/(loss) on derivatives


 (562)


6,226


 (1,480)


19,158




Unrealised fair value loss on derivatives


 (1,214)


-


 (3,196)


-








 (1,776)


6,226


 (4,676)


           19,158



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 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦ million


$'000


$'000




Finance income




















Interest income


3


 347 


7


 1,067 




Finance cost




















Interest on bank loans


 (6,222)


 (6,584)


 (16,373)


 (20,259)




Interest on lease liabilities


 (57)


 (123)


 (149)


 (379)




Unwinding of discount on provision for decommissioning


 (112)


 (236)


 (295)


 (726)








 (6,391)


 (6,943)


 (16,817)


 (21,364)




Finance (cost) - net


 (6,388)


 (6,596)


 (16,810)


 (20,297)



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 2021 is 85% for crude oil activities and 30% for gas activities. As at 31 December 2020, the applicable tax rate was 85%, 65.75% and 30% respectively.
The effective tax rate for the period was 11.25% (2020: 101.5%)
The major components of income tax expense in the interim condensed consolidated statement







3 months ended 
31 March 2021


3 months ended 
31 March 2020


3 months ended 
31 March 2021


3 months ended 
31 March 2020








₦ million


₦ million


$'000


$'000




Current tax:




















Current tax expense on profit for the period


 (2,565)


 (219)


 (6,750)


 (674)




Education tax


 (456)


(35) 


 (1,199)


 (108) 




Total current tax


 (3,021)


 (254) 


 (7,949)


 (782) 




Deferred tax:




















Deferred tax income/(expense) in profit or loss


 1,823 


 (3,262)


 4,797 


 (10,037) 




Total tax expense in statement of profit


 (1,198)


 (3,516) 


 (3,152)


 (10,819) 



14.1  Deferred tax
The analysis of deferred tax assets and deferred tax liabilities is as follows:







As at

31 March 2021


As at

31 Dec 2020


As at

31 March 2021


As at

31 Dec 2020








₦'million


₦'million


$'000


$'000




Deferred tax assets




















Deferred tax asset to be recovered in less than 12 months


9,437   


9,437   


33,151   


33,151   




Deferred tax asset to be recovered after more than 12 months


 280,440 


 280,440 


729,682


729,682








289,877


289,877


762,833


762,833



 







As at

31 March 2021


As at

31 Dec 2020


As at

31 March 2021


As at

31 Dec 2020








₦'million


₦'million


$'000


$'000




Deferred tax liabilities


 






 








Deferred tax liabilities to be settled in less than 12 months


(459)


(2,282)


(2,659)   


(7,456)




Deferred tax liabilities to be settled after more than 12 months


(199,738)


(199,738)


(524,176)


(524,176)








(200,197)


(202,020)


(526,835)


(531,632)


























Net deferred tax asset


 89,680 


87,857


 235,998 


231,201



 
15. Trade and other receivables







    31 March 2021


31 Dec 2020


    31 March 2021


31 Dec 2020








₦ million


₦ million


$'000


$'000




Trade receivables 


 33,971 


 20,662 


 89,394 


 54,375 




Nigerian Petroleum Development Company (NPDC) receivables


 36,932 


40,681


 97,191 


107,053




National Petroleum Investment Management Services (NAPIMS) receivables 


 11,885 


 11,353 


 31,276 


29,876




Underlift


 10,473 


7,827


 27,561 


20,600




Advances to suppliers


 7,115 


10,280


 18,724 


27,053




Receivables from ANOH


 5,269 


 4,926 


 13,865 


12,963




Other receivables 


 2,504 


1,045


 6,589 


2,751




Total


 108,149 


96,774


 284,600 


254,671



15.1  Trade receivables
Included in trade receivables is an amount due from Geregu Power ₦8.7 billion, $23.1 million (Dec 2020: ₦8.6 billion, $22.9 million), Sapele Power ₦3 billion, $7.9 million (Dec 2020: ₦2.7 billion, $7 million) and Nigerian Gas Marketing Company (NGMC) ₦3.7 billion, $9.8 million (Dec 2020: ₦1.3 billion, $3.4 million) totalling ₦15.4 billion, $40.9 million (Dec 2020: ₦13.6 billion, $33.3 million) with respect to the sale of gas. Also included in trade receivables is an amount of ₦12.9 billion (Dec 2020: ₦0) $34.2 million (Dec 2020: $0) and ₦1 billion (Dec 2020: ₦7 billion) $2.6 million (Dec 2020: $19 million) million due from Mercuria and Shell Western for sale of crude respectively.
15.2  NPDC receivables
The outstanding cash calls due to Seplat from its JOA partner, NPDC is ₦36.9 billion (Dec 2020: ₦44 billion) $97.1 million (Dec 2020: $107 million). 
15.3  Other receivables
Other receivables are amounts outside the usual operating activities of the Group.
16. Contract assets







31 March 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦'million


₦'million


$'000


$'000




Revenue on gas sales 


 3,270 


 2,343 


 8,605 


  6,167




Impairment on contract assets


 (7)


 -   


 (19)


 -   








 3,263 


 2,343 


 8,586 


 6,167 



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 NGMC for the delivery of gas supplies which NGMC 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 NGMC authorising the quantities, this will be reclassified from contract assets to trade receivables.
16.1  Reconciliation of contract assets
The movement in the Group's contract assets is as detailed below:







  31 March 2021


31 Dec 2020


  31 March 2021


31 Dec 2020








₦'million


₦'million


$'000


$'000




Balance as at 1 January


 2,343 


 6,527 


 6,167 


 21,259 




Addition during the period


 3,279 


 29,200 


 8,628 


 91,115 




Receipts for the period


 (2,352)


 (32,895)


 (6,167)


 (106,161)




Price Adjustments


 -   


 (13)


 (23)


 (46)




Impairment


 (7)


 -   


 (19)


 -   




Exchange difference


-


 (476)


-


-




Balance as at 31 December


 3,263 


 2,343 


 8,586 


 6,167 



17. Derivative financial instruments
The Group uses its derivatives for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria, they are accounted for at fair value through profit or loss. They are presented as current liabilities.
The fair value of the derivative financial instrument as at 31 March 2021 is as a result of a fair value gain on crude oil hedges. 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 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦'million


₦'million


$'000


$'000




Foreign currency options-crude oil hedges


(1,841)


(626)


(4,844)


(1,648)








(1,841)


(626)


(4,844)


(1,648)



18. Cash and bank balances
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 and restricted cash balances.







  31 March 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦'million


₦'million


$'000


$'000




Cash on hand


 2,464 


2,620


 6,484 


6,896




Short-term fixed deposits


 66 


160


 175 


422




Cash at bank


 66,626 


82,867


 175,328 


218,065




Gross cash and cash equivalent


 69,156 


85,647


 181,987 


225,383




Loss allowance


 (93)


 (93)


 (246)


 (246)




Net cash and cash equivalents per cash flow statement


 69,063 


85,554


 181,741 


225,137




Restricted cash


 20,716 


12,761


 54,516 


33,581




Cash and bank balance


 89,779 


98,315


 236,257 


258,718



Included in restricted cash, is a balance of ₦5.1 billion ($13.5 million) set aside in the Stamping Reserve account for the revolving credit facility (RCF). 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). The amounts are restricted for a period of three (3) years, which is the contractual period of the RCF. These amounts are subject to legal restrictions and are therefore not available for general use by the Group. These amounts have therefore been excluded from cash and bank balances for the purposes of cash flow.
An additional ₦7.9 billion ($20.8 million) of funds deposited in Access bank Plc bank accounts in the ordinary course of business are being unilaterally restricted by Access bank Plc in connection with the court case between Seplat Petroleum Development Company Plc and Access Bank Plc.
Also included in the restricted cash balance is a cash-backed guarantee of ₦7.6 billion ($20 million) set aside with Zenith Bank Plc to fulfil the requirement of an order of the Court of Appeal, to seek the release of any order relating to the case between Seplat Development Petroleum Company Plc and Access Bank Plc.
19. Share Capital
19.1  Authorised and issued share capital



              


  31 March 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦'million


₦'million


$'000


$'000




Authorised ordinary share capital




















1,000,000,000 ordinary shares denominated in

Naira of 50 kobo per share


500


500


3,335


3,335




Issued and fully paid




















581,840,856 (2020: 581,840,856) issued shares

denominated in Naira of 50 kobo per share


293


293


1,856


1,856



The Group's issued and fully paid as at the reporting date consists of 581,840,856 ordinary shares (excluding the additional shares held in trust) of ₦0.50k each, all with voting rights. Fully paid ordinary shares carry one vote per share and the right to dividends. There were no restrictions on the Group's share capital.
19.2  Movement in share capital and other reserves











Number of shares


Issued share capital


Share Premium


Share based payment reserve


Total












Shares


₦'million


₦'million


₦'million


₦'million




Opening balance as at 1 January 2021






581,840,856


 293 


86,917


7,174


 94,384 




Share based payments






-


 -   


 -   


 544 


 544 




Vested shares






-


 -   


 -   


 (760)


 (760)




Closing balance as at 31 March 2021






581,840,856


 293 


86,917


6,958


 94,168 



 











Number of shares


Issued share capital


Share Premium


Share based payment reserve


Total












Shares


$'000


$'000


$'000


$'000




Opening balance as at 1 January 2021






581,840,856


 1,855 


511,723


27,592


541,170




Share based payments






-


 -   


-


 1,431 


 1,431 




Vested shares






-


 -   


-


 (2,000)


 (2,000)




Closing balance as at 31 March 2021






581,840,856


 1,855 


511,723


27,023


540,601



 
19.3  Employee share-based payment scheme
As at 31 March 2021, the Group had awarded 60,487,999 shares (Dec 2020: 60,487,999 shares) to certain employees and senior executives in line with its share-based incentive scheme. During the three months ended 31 March 2021, 1,809,857 shares were vested (Dec 2020: 6,519,258 shares).
 
20. Interest bearing loans and borrowings
20.1  Net debt reconciliation
Below is the net debt reconciliation on interest bearing loans and borrowings for 31 March 2021:







Borrowings due within

1 year


Borrowings due above

1 year


 Total 


Borrowings due within

1 year


Borrowings due above

1 year


 Total 








₦ million


₦ million


₦ million


$'000


$'000


$'000




Balance as at 1 January 2021


 35,518 


 229,880 


 265,398 


 93,468 


 604,947 


 698,415 




Addition


 -   


 -   


 -   


 -   


 -   


 -   




Interest accrued


 6,222 


 -   


 6,222 


 16,373 


 -   


 16,373 




Principal repayment


 -   


 -   


 -   


 -   


 -   


 -   




Interest repayment


 (7,746)


 -   


 (7,746)


 (20,384)


 -   


 (20,384)




Other financing charges


 -   


 -   


 -   


 -   


 -   


 -   




Transfers


 (12,726)


 12,726 


 -   


 (33,489)


 33,489 


 -   




Exchange differences


 -   


 -   


 -   


 -   


 -   


 -   




Carrying amount as at 31 March 2021


 21,268 


 242,606 


 263,874 


 55,968 


 638,436 


 694,404 




Below is the net debt reconciliation on interest bearing loans and borrowings for 31 December 2020:







Borrowings due within

1 year


Borrowings due above

1 year


 Total 


Borrowings due within

1 year


Borrowings due above

1 year


 Total 








₦ million


₦ million


₦ million


$'000


$'000


$'000




Balance as at 1 January 2020


 34,486 


 207,863 


 242,349 


 112,333 


 677,075 


 789,408 




Interest accrued


 17,504 


 -   


 17,504 


48,634


 -   


48,634




Interest capitalized


5,449






5,449


15,140






15,140




Principal repayment


 (35,991)


 -   


 (35,991)


 (100,000)


 -   


 (100,000)




Interest repayment


 (23,310)


 -   


 (23,310)


 (64,767)


 -   


 (64,767)




Proceeds from loan financing


 -   


 3,599 


 3,599 


 -   


 10,000 


 10,000 




Transfers


29,559


 (29,559)


 -   


82,128


 (82,128)


 -   




Exchange differences


 7,821 


 47,977 


 55,798 


 -   


 -   


 -   




Carrying amount as at 31 December 2020


35,518


 229,880 


265,398


93,468


604,947


698,415



 
$350 million Senior notes - March 2018
Interest bearing loans and borrowings include revolving loan facility and senior notes. In March 2018 the Group issued ₦107 billion, $350 million, senior notes at a contractual interest rate of 9.25% with interest payable on 1 April and 1 October, and principal repayable at maturity. The notes were expected to mature in April 2023. The interest accrued at the reporting date is ₦3.3 billion ($8.7 million) using an effective interest rate of 9.85%. Transaction costs of ₦2.1 billion ($7 million) have been included in the amortised cost balance at the end of the reporting period. The amortised cost for the senior notes at the reporting period is ₦131.4 billion (December 2020: ₦134.3 billion) $345.8 million (December 2020: $353.8 million).
$350 million Revolving credit facility - December 2019
The Group's parent company on 20 December 2019 also entered into a four-year revolving loan agreement with interest payable semi-annually. There is a two-year moratorium on the principal which ends on 1 July 2021 but will be extended to 1 July 2022 if the Notes are not refinanced before then. The revolving loan has an initial contractual interest rate of 6% +Libor (7.9%) and a settlement date of 31 December 2023.
The interest rate of the facility is variable. The interest accrued at the reporting period is ₦1.6 billion ($4.3 million) using an effective interest rate of 6.92%. The interest paid was determined using 3-month LIBOR rate + 6 % on the last business day of the reporting period. The outstanding amount of this borrowing as the reporting period is ₦95.2 billion (Dec 2020: ₦94.2 billion) $250.7 million (Dec 2020: $250 million).
 
$125 million Reserved based lending (RBL) facility - December 2018
The Group through its subsidiary Westport on 28 November 2018 entered into a five-year loan agreement with interest payable semi-annually. The RBL facility has an initial contractual interest rate of 8% +Libor as at half year (8.30%) and a final maturity 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 are scheduled to reduce to $87.5 million on 31 March 2021. The first reduction in the commitments occurred on 31st December 2019 in line with the commitment reduction schedule contained within the Facility Agreement. This resulted in the available commitments reducing from N45 billion ($125.0 million) to N40.6 billion ($112.5 million), with a further reduction to N36.1 billion ($100.0 million) as at December 2020. 
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 LIBOR plus 8%, so long as more than 50% of the available facility is drawn.
On 4th February 2020 Westport drew down a further ₦3.6 billion ($10 million) increasing the debt utilised under the RBL from ₦32.4 billion ($90 million) to ₦36.1 billion ($100 million). 
The interest rate of the facility is variable. The interest accrued at the reporting period is ₦1.3 billion ($3.5 million) using an effective interest rate of 8.3%. The interest paid was determined using 6-month 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 ₦38 billion ($100 million) and 8% + 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). The outstanding amount of this borrowing as at the reporting period is ₦37 billion (Dec 2020: ₦37.4 billion) $97.9 million (Dec 2020: $98.6 million).
21. Trade and other payables







  31 March 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦ million


₦ million


$'000


$'000




Trade payable


 45,908 


51,351


 120,810 


135,134




Accruals and other payables 


 57,614 


56,816


 151,619 


149,521




NDDC levy


 1,287 


4,780


 3,387 


12,578




Royalties payable


 11,361 


 10,500 


 29,898 


 27,632 




Overlift


 6,550 


7,021


 17,238 


18,475








 122,720 


130,468


 322,952 


343,340



Included in accruals and other payables are field accruals of ₦22.6 billion (Dec 2020: ₦41 billion) $59.4 million (Dec 2020: $109 million), and other vendor payables of ₦5.3 billion (Dec 2020: ₦19 billion) $14.1 million (Dec 2020: $49 million). Royalties payable include accruals in respect of crude oil and gas production for which payment is outstanding at the end of the period.
22. Contract liabilities
 







  31 March 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦ million


₦ million


$'000


$'000








3,599


3,599


9,470


9,470



 
22.1  Reconciliation of contract liabilities
The movement in the Group's contract liabilities is as detailed below:







  31 March 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦ million


₦ million


$'000


$'000




Opening balance 


3,599


5,005


9,470


16,301




Recognised as revenue during the year


-


(1,406)


-


(6,831)








3,599


3,599


9,470


9,470



Contract liabilities represents take or pay volumes contracted with Azura for 2019 which is yet to be utilized. In line with contract, Azura can make a demand on the makeup gas but only after they have taken and paid for the take or pay quantity for the respective year. The contract liability is accrued for two years after which the ability to take the makeup gas expires and any outstanding balances are recognised as revenue from contracts with customers.
23. Computation of cash generated from operations











3 months ended


3 months ended 


3 months ended 


3 months ended 












31-Mar-21


31-Mar-20


31-Mar-21


31-Mar-20












₦ million


₦ million


$'000


$'000




Profit/(Loss) before tax






10,647


 (31,111)


28,008


 (95,732)




Adjusted for:














   








Depletion, depreciation and amortization






 12,281 


9,513


 32,319 


29,275




Depreciation of right-of-use asset






 315 


186


 830 


572




Impairment losses/(reversal) on financial assets






 269 


(187)


 707 


(575)




Interest income






 (3)


(347)


 (7)


(1,067)




Interest expense on bank loans 






 6,222 


6,584


 16,373 


20,259




Interest on lease liabilities






 57 


123


 149 


379




Unwinding of discount on provision for decommissioning






 112 


236


 295 


726




Unrealised fair value (gain)/loss on derivatives






 1,214 


(6,226)


 3,196 


(18,673)




Realised fair value gain






 562 






 1,480 








Unrealised foreign exchange loss/(gain)   






 (114)


2,944


 (301)


(525)




Impairment loss on non-financial assets






 -   


47,457






146,028




Share based payment expenses






 544 


636


1431


1,957




Share of profit in joint venture






 (159)


(522)


 (418)


(1,607)




Defined benefit expenses






 -   


-






-




Changes in working capital:






 -   
















Trade and other receivables






  (11,966)


24,980


  (31,489)


69,196




Prepayments






 (1,148)


(945)


 (3,022)


(2,617)




Contract assets






 (919)


6,335


 (2,419)


17,549




Trade and other payables






  (7,647)


(34,525)


  (20,124)


(95,637)




Contract liabilities






 -   


(3,743)


 -   


(10,369)




Restricted Cash






 (7,955)


(3)


 (20,935)


(7)




Inventories






 (307)


1,941


 (807)


5,376




Net cash inflow from operating activities






 2,005 


23,326


 5,266 


64,508



24. 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 2021


31 Dec 2020


31 March 2021


31 Dec 2020








₦ million


₦ million


$'000


$'000




(Loss)/profit attributable to Equity holders of the parent


 13,550 


 (34,627)


 35,647 


 (106,551)




(Loss)/profit attributable to Non-controlling interests


 (4,101)


 -   


 (10,791)


 -   




(Loss)/profit for the year


 9,449 


 (34,627)


 24,856 


 (106,551)








Shares '000


Shares '000


Shares '000


Shares '000




Weighted average number of ordinary shares in issue


 581,841 


579,638


 581,841 


579,638




Outstanding share-based payments (shares)


 6,604 


8,807


 6,604 


8,807




Weighted average number of ordinary shares adjusted for the effect of dilution


 588,445 


588,445


 588,445 


588,445




Basic (loss)/earnings per shares


₦


₦


$


$




Total basic (loss)/earnings per share attributable to the ordinary equity holders of the Group


23.29


 (46.42)


0.06


 (0.13)




Diluted (loss)/earnings per shares


₦ 


₦ 


$


$




Total diluted (loss)/earnings per share attributable to the ordinary equity holders of the Group


23.03


 (45.72)


0.06


 (0.13)



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.
25. Proposed dividend
The Group's directors propose an interim dividend of 2.5 cents per share for the reporting period (2020: Nil).
26. Related party relationships and transactions
The Group is controlled by Seplat Petroleum Development Company Plc (the parent Company). The parent Company is owned 6.43% either directly or by entities controlled by A.B.C Orjiako (SPDCL(BVI)) and members of his family and 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 parties are disclosed below. The outstanding balances payable to/receivable from related parties are unsecured and are payable/receivable in cash. 
x.   Shareholders of the parent company
Shebah Petroleum Development Company Limited SPDCL ('BVI'): The Chairman of Seplat is a director and shareholder of SPDCL (BVI). The company provided consulting services to Seplat. Services provided to the Group during the period amounted to ₦77.3 million (2020: ₦408 million) $203.7 thousand (2020: $1.255 million).
xi.  Entities controlled by key management personnel (Contracts>$1million in 2021)
Cardinal Drilling Services Limited (formerly Caroil Drilling Nigeria Limited): Is owned by common shareholders with the parent Company. The company provides drilling rigs and drilling services to Seplat. Transactions with this related party amounted to nil (2020: ₦1.249 billion, $3.843 million). Payables amounted to nil in the current period (payables in 2020: ₦775million, $2.1 million).
xii. Entities controlled by key management personnel (Contracts<$1million in 2021)
Abbeycourt Trading Company Limited: The Chairman of Seplat is a director and shareholder. The company provides diesel supplies to Seplat in respect of Seplat's rig operations. This amounted to ₦30.4 million, $80 thousand during the period (2020: ₦20 million, $63 thousand).
Stage leasing (Ndosumili Ventures Limited): is a subsidiary of Platform Petroleum Limited. The company provides transportation services to Seplat. This amounted to ₦99.6 million, $262 thousand (2020: ₦111 million, $343 thousand). Receivables and payables were nil in the current period.
27. Commitments and contingencies 
27.1  Contingent liabilities
The Company is involved in a number of legal suits as defendant. The estimated value of the contingent liabilities is ₦152 million, $0.4 million (Dec 2020: ₦23.2 million, $0.61 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.
28. Events after the reporting period 
During the period, the Group offered 7.75% senior notes with an aggregate principal of $650 million (₦247 billion) 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.
29. 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 2021


31 March 2020


31 Dec 2020












₦/$


₦/$


₦/$




Fixed assets - opening balances


Historical rate


 Historical


 Historical


Historical




Fixed assets - additions


Average rate


380.00


324.98


359.91




Fixed assets - closing balances


Closing rate


380.00


361.00


380




Current assets


Closing rate


380.00


361.00


380




Current liabilities


Closing rate


380.00


361.00


380




Equity


Historical rate


Historical


Historical


Historical




Income and Expenses:


Overall Average rate


380.00


324.98


359.91



 

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