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RNS Number : 0028U
Seplat Energy PLC
28 July 2022
 

Please see the Full Audited Results in attached PDF

 

 http://www.rns-pdf.londonstockexchange.com/rns/0028U_1-2022-7-27.pdf

 

Seplat Energy Plc

 

Unaudited results for the six months ended 30 June 2022

 

 

Lagos and London, 28 July 2022: Seplat Energy PLC ("Seplat Energy" or "the Company"), a leading Nigerian independent energy company listed on both the Nigerian Exchange and the London Stock Exchange, announces its unaudited results for the six months ended 30 June 2022.

Financial highlights   

·    Revenues up 71% from 6M 2021 to $527.0 million, higher realised oil prices of $107/bbl

·    EBITDA up 92% to $342.7 million (adjusted for non-cash items)

·    Strong cash generation of $330.1 million, capex of $70.7 million

·    Strong balance sheet with $350.0 million cash at bank, net debt of $418.6 million     

·    Lower production opex of $8.1/boe achieved

·    Average realised gas pricing sustained at $2.76 despite pricing pressure on domestic gas delivery obligation

·    Q2 dividend of US$2.5 cents per share, taking 6M 2022 total to US$5.0 cents per share   

Operational highlights

·    Strong safety record extended to 28.4 million man-hours without lost-time injury from Seplat Energy-operated assets

·    Working interest production improved to 52.4 kboepd in Q2 (liquids 30.3 kbopd, gas 22.1 kboepd),
6M average of 49.9 kboepd (excludes volumes from Ubima, which was divested in Q1)

·    Amukpe-Escravos Pipeline commercial agreements signed, continuous injection expected from first week of August

·    Exit from Ubima completed for consideration of $55 million, with initial payment of $6.4 received in July

·    Agreement for 95% equity farm-in to the Abiala Marginal Field carved out of OML 40

·    Five wells drilled

·    Full-year guidance narrowed to 50-54 kboepd (excludes Ubima)  

Update on proposed acquisition of Mobil Producing Nigeria Unlimited (MPNU)

·    Transformational acquisition announced in February 2022 will almost triple production and boost reserves

·    Seplat Energy reiterates that the Sales & Purchase Agreement (SPA) signed on 25 February 2022 to acquire Exxon's shallow water operations in Nigeria, MPNU, remains valid and the Company remains confident that the proposed acquisition will be brought to a successful conclusion in accordance with the law

Q2 corporate updates

·    Ongoing strengthening of governance continues with transition from founder Chairman to Independent Chairman, Basil Omiyi, appointed 18 May; three new Board members announced during the period

·    Samson Ezugworie joins Board in newly created role of Chief Operating Officer  

·    'Tree for Life' decarbonisation initiative launched in May with a commitment to plant five million trees in five years across five states in Nigeria

·    Seplat West (OMLs 4,38 &41) recommended for ISO 55001 (Asset Management), a first for African E&P  

Roger Brown, Chief Executive Officer, said:

"Production increased strongly in the second quarter, achieving 52.4 kboepd across our operations, and we expect to maintain higher volumes for the rest of the year now that we plan to export liquids through the more secure Amukpe-Escravos Pipeline. Having divested our interest in Ubima because of its high production costs and export difficulties, we recently acquired a 95% interest in the Abiala marginal field and plan to begin operations there next year using existing infrastructure in OML 40. This is consistent with the strategy for low-cost, low-risk upstream growth we announced last year."

"We remain confident that our transformational acquisition of MPNU will be approved, adding significant reserves and production capacity that will strongly reinforce Seplat Energy's position as Nigeria's leading indigenous oil and gas producer."    

"We have recently launched a roadmap for decarbonisation, with a clear path to ending routine flaring by 2024. In addition, our 'Tree for Life' initiative will plant five million saplings to sequester carbon across five states. All of these initiatives demonstrate our strategic commitment to build a sustainable company that delivers energy transition for the benefit of all Nigerians."  

 

Summary of performance

 

$ million


billion


6M 2022

6M 2021

% Change

6M 2022

6M 2021

Revenue

527.0

308.8

70.7%

219.2

120.4

Gross profit

274.3

88.9

208.5%

114.1

34.7

EBITDA *

342.7

178.9

91.6%

142.6

75.0

Operating profit (loss)

245.3

109.4

124.2%

102.0

42.7

Profit (loss) before tax

209.9

62.1

238.0%

87.3

24.2

Cash generated from operations

330.1

125.6

162.8%

137.3

49.1

Working interest production (boepd)

49,924

**50,786

-1.7%



Average realised oil price ($/bbl.)

$107.35

$64.69

65.9%



Average realised gas price ($/Mscf)

$2.76

$2.86

-3.5%











* Adjusted for non-cash items **includes Ubima production

 

Responsibility for publication

This announcement has been authorised for publication on behalf of Seplat Energy by Emeka Onwuka, Chief Financial Officer, Seplat Energy PLC.

 

Signed:

 

Letter Description automatically generated with medium confidence

 

Emeka Onwuka

Chief Financial Officer       

Investor call

 

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

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

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

 

Event title:

Seplat Energy Half year results

Event date

9.00am (BST/WAT) Thursday 28 July 2022

Webcast live link

https://secure.emincote.com/client/seplat/seplat014

Conference call and pre-register link

 

https://secure.emincote.com/client/seplat/seplat014/vip_connect

 

Archive link

https://secure.emincote.com/client/seplat/seplat014

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

Enquiries:

Seplat Energy Plc

 

Emeka Onwuka, Chief Financial Officer

+234 1 277 0400

Carl Franklin, Head of Investor Relations

 

Ayeesha Aliyu, Investor Relations

 

Chioma Nwachuku, Director External Affairs & Sustainability

 

 

 

FTI Consulting

 

Ben Brewerton / Christopher Laing

+44 203 727 1000

seplatenergy@fticonsulting.com

 

 

Citigroup Global Markets Limited

 

Tom Reid / Luke Spells

+44 207 986 4000

 

 

Investec Bank plc

 

Chris Sim / Charles Craven / Jarrett Silver

+44 207 597 4000

 

Notes to editors

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

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

 

Operating review

Working interest production for the six months ended 30 June 2022

 

 

 6M 2022



Q2 2022



6M 2021

Liquids (1)

Gas

Total

 

Liquids

Gas

Total

 

Liquids

Gas

Total

 

 

Seplat %

bopd

MMscfd

boepd

 

bopd

MMscfd

boepd

 

bopd

MMscfd

boepd

 

OMLs 4, 38 & 41

45%

17,386

117.7

37,681

 

17,119

127.9

39,166

 

19,618

120

40,376

 

OML 40

45%

8,688

-

8,688

 

10,150

-

10,150

 

5,211

-

5,211

 

OML 53

40%

2,139

-

2,139

 

-

1,573

 

3,275

-

3,275

 

OPL 283

40%

1,416

-

1,416

 

1,496

-

1,496

 

1,159

-

1,159

 

Total


29,629

117.7

49,924


30,338

127.9

52,385


29,263

120

50,021




















Liquid production volumes as measured at the LACT (Lease Automatic Custody Transfer) unit for OMLs 4, 38 and 41; OML 40 and OPL 283 flow station.
Following the decision to exit from the Ubima asset in April 2022, volumes from the marginal field have not been reported
Volumes stated are subject to reconciliation and may differ from sales volumes within the period.

 

Production

Working interest production for 6M 2022 averaged 49,924 boepd, (6M 2021: 50,021 boepd, excluding Ubima), with an oil / gas mix of 59% and 41%, respectively. Within this, liquids production was up 1.3% year-on-year, to 29,629 bopd. Second-quarter total production averaged 52,385 boepd, up 10.0% from the previous quarter (Q1 2022). The higher overall production in Q2 was from higher oil and gas volumes, up 4.3% and 19.1%, respectively, because of an improvement in overall uptime.

Compared to the first half of 2021, lower volumes from OMLs 4, 38 and 41 were primarily due to outages in the Trans Forcados System that resulted in a third-party downtime of 16%, exacerbated by scheduled and unscheduled maintenance activities leading to a total downtime of 23%. However, the impact of future FOT (Forcados Oil Terminal) outages on production from OMLs 4, 38 and 41 is expected to be alleviated by our use of the Amukpe-Escravos Pipeline from August 2022, which will deliver liquids to the alternative Escravos terminal through more secure underground pipeline.

Despite evacuation constraints, significantly higher volumes of 8,688 bopd were achieved from OML 40 (6M 2021: 5,211 bopd) and following the deployment of additional vessels, 10,150 bopd production was achieved in the second quarter of 2022.

At our smaller OML 53 operation, which contributed less than 11% of liquids in 2021, production was affected by major disruption to export operations in Eastern Nigeria, although we continue to export 2,000 bopd to the nearby Waltersmith Refinery.

Six-month gas volumes were down 1.9% year-on-year to 117.7 MMscfd, impacted by lower gas supply in Q1 2022 when price renegotiation with customers and issues with a hot oil burner at the Oben Gas Plant affected production. However, following successful conclusion of these price discussions and installation of a new burner, gas production improved significantly to 127.9 MMscfd in Q2 2022.

Overall, the Group's oil and gas production for the period totalled 9.0 MMboe compared to 9.1 MMboe in the same period in 2021 (excluding Ubima).

Drilling activities

The Group's ongoing drilling programme has a minimum of ten wells planned for 2022 to arrest decline and grow production across the assets. We completed three oil wells (Amukpe-05, Opuama-12 and Gbetiokun-13 well, which was spudded late 2021) and concluded drilling on the Sibiri exploration well. The Owu-02 (appraisal well), Opuama-13 and Oben-52 oil wells were spudded in the second quarter with drilling progressing according to plan.

As reported in the 3M 2022 results, the Sibiri exploration well has been drilled to TD, with initial indications it has encountered eight oil-bearing reservoirs with 353 ft of gross hydrocarbon pay, net pay of 229 ft.  
We continue to work with our partners to secure regulatory approval to carryout extended well testing (EWT) to confirm producibility, among other parameters critical to full field development.

We have successfully moved all four rigs acquired from Cardinal Drilling to Seplat Energy well locations. Following a post-rig move survey of all rig equipment, two rig inspection vendors were selected to carry out the Rig Inspection and Certification work. The Company expects that the recommended repairs will be concluded, and the rigs commissioned by the end of 2023.

Upstream business performance

Seplat Energy's liquids (oil and condensate) operations produced 5.3 MMbbls on a working interest basis in 6M 2022
(6M 2021: 5.4 MMbbls). Production in the period was affected by evacuation constraints, Ubima exit, and other deferments tied to maintenance activities. Production downtime for the Group in the period was 23%.

Seplat West, which holds the working interest and operates our major assets (OML 4, 38 & 41), has been recommended for ISO 55001 Asset Management Systems certification, reflecting our commitment to operational excellence across the Group. We believe this is the first African oil and gas operation to achieve such certification. 

Pipeline vandalism in Eastern Nigeria, on the route that evacuates oil from OML 53, has led to a full production shut-in of around 1,000 bopd (gross) at Jisike since February. However, the Company continues to evacuate produced volumes of around 2,000 bopd from Ohaji to the Waltersmith Refinery. Overall, OML 53 contributes less than 11% of total liquids based on 2021 volumes. We have engaged with our JV partner (NAPIMS) to operationalise an alternative evacuation option of trucking/barging for Jisike and Ohaji South fields.

Ubima marginal field exit

A settlement agreement was reached in Q1 2022 with the JV Partner All Grace Energy Ltd. (AGEL) to divest our subsidiary Wester Ord Oil and Gas Nigeria Ltd.'s (WON) rights in the Ubima Marginal Field for a consideration of $55 million. In accordance with agreement, AGEL began payments to WON in July, with a payment of $6.4 million.  

Ubima is in a high operating cost environment with major evacuation challenges and substantial capital expenditure would have been required to create more secure evacuation routes for production from the field. The decision to exit will enable the Company to invest in other parts of its business that generate higher returns. Following the execution of settlement agreements and transfer of rights in the asset to AGEL, WON derecognised both asset and liabilities in H1 2022 (Ubima's current reserves of approximately 2 MMbbls). Ubima's production has been removed from the average daily production stated in these results.

Farm-in to Abiala marginal field

Following the 2020 Marginal Field Bid Round in Nigeria, Naphta Global E&P Ltd. (Naphta) was awarded 100% equity in the Abiala marginal field carved out of OML 40 by the NUPRC. The marginal field contains 2C gross oil resources of around 23 MMbbls and 2U gross resources of around 54 MMbbls.

Elcrest (45% owned by Seplat Energy) has entered into an agreement with Naphta for a 95% equity farm-in into the Abiala marginal field, while Naphta will have a 5% carried interest. Elcrest will also assume the role of Operator and Technical & Financial Partner in the Elcrest/Naphta Joint Venture. The Heads of Agreement was executed with a signature bonus of $12 million paid to NUPRC. The transaction represents a consolidation of the Company's strategic position on the OML 40 block and provides an early monetisation opportunity using existing OML 40 facilities, subject to agreement with NPDC (Nigerian Petroleum Development Company), which operates the OML 40 Asset.

In developing the field, Elcrest is targeting first oil by end of Q2 2023 and plans to focus on low-cost development with early monetisation opportunities that leverage existing contractual positions to accelerate the field's development. Seplat Energy will also explore how to optimise its tax position to the extent possible under the new PIA.

Amukpe-Escravos pipeline

Following mechanical completion of the pipeline, Seplat Energy has signed all the necessary offtake and crude handling agreements. Dewatering of the AEP line has commenced and the continuous injection of crude is expected by the first week of August. This therefore allows us to commence lifting from the Chevron terminal during this quarter. The mostly underground pipeline will provide greater revenue assurance through reduction in losses and downtime.

Midstream Gas business performance

Working interest gas volumes for the period were 117.7 MMscfd (6M 2021: 120 MMscfd). The Gas business contributed 41% of the Group's volumes on a boepd basis and 10.9% of Group revenues. Price renegotiation with customers was concluded in the period and following the DGDO gas pricing revision in August 2021, the average gas price achieved was $2.76/Mscf. During the period we signed short-term gas sales agreements (GSAs) with three new customers, two of which commenced offtake at a combined rate of 66 MMscfd in January and March. The third customer will commence offtake of 20 MMscfd in Q4 when conditions precedent to commence are expected to have been satisfied.

In the second quarter, gas sales volumes were impacted by network pressure affecting offtake by our customers downstream, by the shutdown of the Oben gas plant for repairs of critical equipment and by the well testing campaign carried out.

ANOH Gas Processing Plant

Seplat Energy continues to make progress on the ANOH plant and has achieved 87% overall project completion at the gas plant site. The government partner, the Nigerian Gas Company (NGC), is delivering the pipelines that will take the gas from ANOH to Oben, namely the 23km spur line and the Obiafu-Obrikom-Oben (OB3) pipeline. 

Drilling on the 1.85km River Niger crossing has encountered some technical issues on a small section of the crossing, and this is needed to complete the OB3 pipeline project. The partner, NGC, is confident of resolving this and Seplat is engaging constantly as resolution options are considered.

In addition, on the separate spur line project, the Company has been informed that the milling and coating of the outstanding line pipes for the spur line project, which is being undertaken in China, is nearing completion. Shipping out of China is expected in Q3 2022.

The latest schedule provided by NGC shows completion of both OB3 and Spur Line in Q1 2023, and therefore the Company maintains its timeline of first gas in H1 2023.

NERC initiative to assure gas supply and revenue collection

To secure the sustainability of gas supply to the Generation Companies (Gencos), the Nigerian Electricity Regulatory Commission (NERC) has established a pathway to reactivate partial securitisation of Gas Contracts for the Nigerian Electricity Supply Industry.

The commission facilitated contractual agreements between the generation, transmission, and distribution companies to guarantee a daily average of 5,000 MW of electricity to consumers. The order, which became effective on 1 July 2022, proposes a payment waterfall to address the current issue of the non-collection of full revenue for gas sales for Domestic Gas Delivery Obligation (DGDO Customers). In addition, the order gives the gas suppliers and gas transporters priority over the Gencos in terms of payments. This is a positive development that will guarantee offtake, improve revenue collection and reduce trade receivables, which currently stands at $27 million for the Company's existing DGDO GSAs.  

ESG developments

Seplat Energy is committed to environmental protection and is in step with global objectives to reduce carbon greenhouse gas emissions. Through investments in decarbonisation projects, the Company has developed a road map with defined operational targets towards eliminating flares from Seplat Energy operations over the next two years. We hope to reduce routine flaring by 40% by the end of 2022 (exit rate compared to a start-of-year baseline) primarily through the installation of gas compressors at Sapele. Flare reduction initiatives are also ongoing at the Oben and Amukpe stations and in June 2022, daily flares at Oben and Amukpe were reduced by 8.2% and 23.5%, respectively.

Aside from ending routine flares, we are investing in other ways to decarbonise our operations, such as replacing diesel with LPG (Liquefied Petroleum Gas) and onsite solar energy generation.

To offset the residual carbon emissions, the Seplat Energy 'Tree for Life' initiative was launched in May and is a commitment to plant five million trees in five years across Nigeria, starting with the five states of Edo, Delta, Imo and two Northern states.

HSE performance

Safe and responsible operations are critical to the delivery of Seplat Energy's strategy. The Company has now achieved more than 28.4 million man-hours without LTI on its operated assets.

Staff and contractors worked a total of 4.2 million man-hours with no fatalities or lost-time injuries. There was one major injury incident in the period, which was managed according to the Company's governing processes. Improvements have been implemented and learnings shared to enable continuous improvement and improve mitigating actions.

There were 24 HSE incidents in total, compared to 21 incidents in the first six months of 2021, including five reportable oil spills and four gas leaks, all of which were remediated with limited environmental impact.

The Group established appropriate processes and safeguards for its people and operations against Covid-19. A spike in positive cases was observed in the second quarter, prompting the Company to re-enforce all Covid-19 control protocols at our field operations and offices. These measures will be kept in place for as long as necessary.

Board changes

On 22 April 2022, the Company announced the appointment of three new Directors, effective 18 May 2022: Mrs. Bashirat Odunewu (Independent Non-Executive Director); Mr. Kazeem Raimi (Non-Executive Director); and Mr. Ernest Ebi (Non-Executive Director).

Following the decision of the founding Chairman ABC Orjiako to step down from the Board at the 2022 AGM, Basil Omiyi was appointed Independent Non-Executive Chairman on 18 May 2022. Charles Okeahalam was appointed Senior Independent Non-Executive Director.

On 30 June 2022, the Company announced the appointment of Mr. Samson (Sam) Chibogwu Ezugworie as the new Chief Operating Officer and Executive Director on the Board of the Company effective 1 July 2022. Mr. Ezugworie comes with over 30 years' extensive industry experience, the last 25 years being with Royal Dutch Shell in Nigeria and overseas. Mr. Ezugworie has built a strong reputation as a business / safety / ethical leader and integrator.

Mr. Effiong Okon, the Operations Director and Executive Director on the Board of Seplat Energy, stepped down from the Board on 1 July 2022. Mr. Okon assumed a new position as the Director New Energy to significantly accelerate the development of the new energy business and advance the Company's agenda on energy transition.

Update on proposed acquisition of MPNU

The Company announced on 11 July that the Nigerian National Petroleum Company Limited (NNPC) commenced an action at the State High Court of the Federal Capital Territory in Abuja, Nigeria (State High Court) in relation to the acquisition of the entire shares of MPNU. MPNU, its shareholders (Mobil Development Nigeria, Inc. and Mobil Exploration Nigeria, Inc.), and the NUPRC are named as defendants in the action. This follows NNPC's request to the State High Court to declare that a dispute has occurred between itself and MPNU in relation to the interpretation of pre-emption rights under their Joint Operating Agreement (JOA) and order NNPC and MPNU to arbitration as required by the JOA.

The State High Court made an ex-parte order of interim injunction restraining the defendants from completing any divestment in MPNU, including the SPA signed with Seplat Energy Offshore Limited, while the matter was before the Court.

Neither Seplat Energy nor Seplat Energy Offshore Limited is a party to the suit. The Company cannot provide further comments as the matter is awaiting resolution by the State High Court and is therefore sub judice. Seplat Energy reiterates that the SPA is still valid and subsisting, and the we remain confident that the proposed acquisition will be brought to a successful conclusion in accordance with the law. We will provide further updates as and when applicable.

Outlook

Full-year production guidance for 2022 reflects expected third party downtime and the derecognition of Ubima and has been narrowed to 50,000 to 54,000 boepd on a working interest basis, comprising 30,000 to 33,000 bopd liquids and 116 to 121 MMscfd (around 20,000 to 21,000 boepd) gas production.

Capital expenditure expectation for 2022 remains at around $160 million. The Company expects to drill four additional oil wells in the coming quarter to arrest decline and support production growth across the asset base, complete ongoing projects, invest in maintenance capex to secure the existing assets and continue investments in gas.

Financial review

Revenue

Revenue from oil and gas sales in 6M 2022 was $527.0 million, a 70.7% increase from the $308.8 million achieved in 6M 2021. Adjusted for an underlift (shortfalls of crude lifted below Seplat Energy's share of production, which is priced at the date of lifting and recognised as other income) of $42.7 million representing 463 kbbls, total revenues were $569.7 million.

Crude oil revenue was 91.7% higher than for the same period last year at $469.2 million (6M 2021: $244.8 million), reflecting higher average realised oil prices of $107.35/bbl. for the period (6M 2021: $64.69/bbl.), the increase being mostly attributable to the impact of the conflict in Ukraine on global energy prices. The total volume of crude lifted in the period was 4.4 MMbbls, higher than the 3.9 MMbbls lifted in 6M 2021. In addition, the Group's 6M 2022 produced liquid volumes were subject to reconciliation losses of 12.2%. We expect these to improve from August, when we begin to evacuate the bulk of our crude through the new Amukpe-Escravos underground pipeline.

Gas sales revenue decreased by 9.5% to $57.8 million (6M 2021: $63.9 million), due to lower gas sales volumes of 21.3 Bscf compared to 21.7 Bscf in 6M 2021, because of lower customer offtake, production stoppages at Oben, as well as outages on the Trans Forcados Pipeline. In addition, the average realised gas price was lower at $2.76/Mscf (6M 2021: 2.86 Mscf), reflecting the reduction applied to the DGDO (Domestic Gas Delivery Obligation) gas-to-power volumes from August 2021.

Gross profit

Gross profit increased by 208.5% to $274.3 million (6M 2021: $88.9 million) and benefitted from higher realised oil prices. Non-production costs consisted primarily of $108.8 million royalties and DD&A of $70.4 million, compared to $63.4 million royalties and $64.5 million DD&A in the prior year. The higher royalties were the result of higher oil prices.

Direct operating costs, which include crude-handling charges (CHC), barging/trucking, operation and maintenance costs, amounted to $67.6 million in 6M 2022, 23.7% lower than $88.6 million incurred in 2021. This was partly because of a $5.3 million (net) credit note arising from 2020 & 2021 reconciliation of CHC invoices that offset fees incurred in the period as well as lower operation and maintenance costs.

On a cost-per-barrel equivalent basis, the normalised production opex (excluding the above credit note) was $8.1/boe, 16.5% lower than $9.7/boe incurred in 2021 when extensive asset integrity works were carried out.

Operating profit

The operating profit for the period was $245.3 million, compared to $109.4 million in 6M 2021, an increase of 124.1%.

An impairment charge of $14.9 million was recognised in the period. This includes a non-financial asset charge of $8.5 million reflecting a provision for long outstanding line pipes and a $6.4 million provision for the ageing of some government receivables. We expect these to reverse once recoveries are secured.  

General and administrative expenses of $46.4 million were 27.1% higher than the H1 2021 costs of $36.5 million. The increase was driven by higher travel and training costs, following relaxation of travel restrictions, and other increases to staff salaries and emoluments.

An EBITDA of $342.7 million adjusts for non-cash items, which include impairment and exchange losses, equating to a margin of 65.0% for the period (6M 2021: $178.9 million; 57.9%).

Net result

The profit before tax was 238% higher at $209.9 million (6M 2021: $62.1 million). The income tax expense of $126.6 million includes a current tax charge (cash tax paid) of $36.4 million and deferred tax charge of $90.2 million. The deferred tax charge is driven by the unwinding of previously unutilised capital allowances and movements in underlift/overlifts in the current year. The effective tax rate for the period was 60% (6M 2021: 42%).

The profit for the period was $83.3 million (6M 2021: $36.2 million) with a resultant basic earnings per share of $0.14 in 6M 2022, compared to $0.10 per share in 6M 2021.

Cash flows from operating activities

Cash generated from operations in 6M 2022 was $330.1 million (6M 2021: $125.6 million). Net cash flows from operating activities were $284.3 million (6M 2021: $109.9 million), after accounting for tax payments of $41.1 million (6M 2021: $12.4 million) and a hedge premium of $4.7 million (6M 2021: $3.4 million).

The Group continued to record improvements in the recovery of receivables from the major JV partner and in H1 2022 received $141 million towards the settlement of cash calls. The major JV receivable balance now stands at $55.5 million, down from $83.9 million at the end of 2021.

Cash flows from investing activities

Net capital expenditure of $70.7 million included $42.1 million invested in drilling and $28.6 million in engineering projects.

Deposits for investment of $140.3 million include a deposit for the proposed acquisition of Mobil Producing Nigeria Unlimited, announced in February of $128.3 million and the $12.0 million farm-in fee for the Abiala marginal field carved out of OML 40.

The Group received total proceeds of $10.8 million in the period under the revised OML 55 commercial arrangement with BelemaOil for the monetisation of 298.4 kbbls of crude oil. In 2022, recovery has been affected by sabotage along the Nembe Creek Trunk Line and the Trans Niger Pipeline, with theft factors ranging from 30% to 90%.

Cash flows from financing activities

The Company paid $28.2 million dividends to shareholders in the period. Other financing charges of $9.4 million reflect the commitment fee on the $350 million Revolving Credit Facility and $26.1 million reflects interest paid on loans and borrowings.

Liquidity

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

Net debt reconciliation
31 March 2022

$ million

$ million drawn

Coupon

Maturity

Senior notes*

661.7

650.0

7.75%

April 2026

Westport RBL*

98.3

110.0

Libor+8%

March 2026

Off-take facility*

8.6

11.0

Libor+10.5%

April 2027

Total borrowings

768.6

771.0



Cash and cash equivalents (exclusive of restricted cash)

350.0

350.0



Net debt

418.6




* Including amortised interest

Seplat Energy ended the first half of the year with gross debt of $768.6 million (with maturities in 2026 and 2027) and cash at bank of $350.0 million, leaving net debt at $418.6 million. Included in the restricted cash balance is $8.0 million and $6.2 million set aside in the stamping reserve account and debt service reserve account respectively for the revolving credit facility.

Dividend

The Board has approved a Q2 dividend of US2.5 cents per share (subject to appropriate WHT) to be paid to shareholders whose names appear in the Register of Members as at the close of business on 12 August 2022. This takes H1 dividend payments to US5.0 cents per share, in line with the Company's dividend policy.

Hedging

Seplat's hedging policy aims to guarantee appropriate levels of cash flow assurance in times of oil price weakness and volatility. Total volumes hedged in 2022 was 7.5 MMbbls and the program for the remainder of 2022 consists of dated Brent put options of 3.5 MMbbls at an average premium of $1.32/bbl. as follows: (i) for Q3, 1.0 MMbbls are protected at a strike price of $55/bbl. and 1.0 MMbbls at $60/bbl. and (ii) for Q4, 1.5 MMbbls at a strike price of $65/bbl. Further barrels are expected to be hedged for 2023 in the coming months in line with the approach to target hedging two quarters in advance.

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

PIA 2021

The Petroleum Industry Act (PIA) was signed into law on 16 August 2021. The Group is required to notify the NUPRC of the decision to either convert to the PIA tax regime or remain in the existing PPTA regime in October 2022. The conversion deadline is February 2023. The Group has reviewed the fiscal provisions of the PIA and a preliminary impact analysis across all assets has just been concluded resulting in an overall favourable position for Seplat Energy to convert to the PIA regime for all its assets. However, certain issues such as relinquishing parts of the existing acreages are still under consideration by the Board.

There are some compliance requirements of the PIA that are applicable to all companies in the industry irrespective of conversion and a multi-disciplinary team is managing the Group's readiness to comply with the various aspects.

Share dealing policy

We confirm that, to the best of our knowledge, there has been compliance with the Company's share dealing policy during the period.

Free float

The Company's free float on 27 July 2022 was 36.2%.

Directors' interest in shares

In accordance with Section 301 of the Companies and Allied Matters Act, 2020, the interests of the Directors (and of persons connected with them) in the share capital of the Company (all of which are beneficial unless otherwise stated) are as follows:

 

31-Dec-20

 

31-Dec-21

 

27-July-22

 

 

No. of Ordinary Shares

 

No. of Ordinary Shares

 

As a percentage of Ordinary Shares in issue

No. of Ordinary Shares

As a percentage of Ordinary Shares in issue

Roger Brown

2,840,585


3,224,702


0.55%

4,296,462

0.73%

Samson Ezugworie

n/a


n/a


0.00%

0

0.00%

Bello Rabiu

n/a


20,000


0.00%

20,000

0.00%

Emeka Onwuka

0


0


0.00%

0

0.00%

Oliver De Langavant

0


0


0.00%

0

0.00%

Charles Okeahalam

495,238


495,238


0.08%

699,990

0.12%

Basil Omiyi

495,238


495,238


0.08%

495,238

0.08%

Nathalie Delapalme

0


0


0.00%

0

0.00%

Arunma Oteh, OON

0


0


0.00%

0

0.00%

Emma Fitzgerald

0


0


0.00%

0

0.00%

Kazeem Raimi

n/a


n/a


n/a

0

0.00%

Bashirat Odunewu

n/a


n/a


n/a

0

0.00%

Ernest Ebi

n/a


n/a


n/a

0

0.00%

Fabian Ajogwu

0


0


0.00%

0

0.00%

Total

3,831,061

 

4,235,178

 

0.71%

5,511,690

0.93%

 

Substantial interest in shares

On 27 July 2022, the following shareholders held more than 5.0% of the issued share capital of the Company:

Shareholder

Number of holdings

%

MPI

120,400,000

20.46

Petrolin Group

81,015,319

13.77

Professional Support

47,929,438

8.15

Sustainable Capital                           

45,850,413

7.79

Allan Gray Investment Management

44,212,357

7.51

Principal risks and uncertainties

The Board of Directors is responsible for setting the overall risk management strategy of the Company and the determination of what level of risk is acceptable for Seplat Energy to bear. The principal risks and uncertainties facing Seplat Energy at the year-end are detailed in the risk management section of the 2021 Annual Report and Accounts.

The Board has identified the principal risks for the remainder of 2022 to be:

·    Infectious diseases outbreak

·    Niger Delta stability, security, and other Geopolitical risks

·    Field operations and project deliverability

·    Low oil price

·    OPEC quota restrictions

·    Climate Change

·    JV receivables and future cash call funding

·    Liquidity risk

 


 

Responsibility Statement

The Directors confirm that to the best of their knowledge:

a) The condensed set of financial statements have been prepared in accordance with lAS 34 'Interim Financial Report';

b) The interim management report includes a fair review of the information required by UK DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) The interim management report includes a fair review of the information required by UK DTR 4.2.8R disclosure of related parties' transactions and changes therein.

The Directors of Seplat Energy Plc are as listed in the Group's 2021 Annual Report and Accounts. A list of current Directors is included on the company website: www.seplatenergy.com.

By order of the Board,

Chart, line chart Description automatically generated                                                     A picture containing text Description automatically generated

B. Omiyi

 

R.T. Brown

E. Onwuka


FRC/2016/IODN/00000014093

 

FRC/2014/ANAN/00000017939

FRC/2020/003/00000020861


Chairman

 

Chief Executive Officer

Chief Financial Officer


28 July 2022

 

28 July 2022

28 July 2022


 

 

 

 

 

 

 

Important notice

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

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

 

 

 

 

 

 

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