Indigenous exploration and production independent company, Seplat Petroleum Development Company Plc has declared first quarter financial results, showing dedicated steps towards boost in oil and gas output with lower operating cost.
In the unaudited report, London listed Seplat declared a net profit of $33 million after adjusting for tax credit of $13 million though the figures could alter after an audit process.
“The results showed positive impact of the 2018 debt refinancing and subsequent deleveraging, which resulted in a 38 per cent year-on-year reduction in finance costs to US$16 million (2018: US$26 million),” the company which is also listed on Nigerian Stock Exchange said.
Chief Executive Officer, Mr. Austin Avuru, said: “Our operations have continued to perform in line with expectation, with the phasing of our 2019 work programme such that the production uplift will be felt throughout the second half of the year as we step up drilling activities to focus on capturing the numerous high margin and short-cycle cash return opportunities within our current portfolio.
“The next phase of growth for our gas business is now gathering pace following FID for the ANOH project, with government’s first tranche of equity investment received. We have continued to deleverage the balance sheet and self-fund investments into the existing portfolio from operational cash flow while retaining the financial flexibility and available resources that will enable Seplat to capitalize on what we expect to be an increasingly busy pipeline of inorganic growth opportunities that fit our acquisition criteria.”
The company stated that its first-quarter results show that operations are falling in line with projections for the year, with full-year production guidance stable at a range between 49,000 and 55,000 barrels of oil equivalent per day (boepd) on a working interest basis.
Target for oil production remains in the range between 24,000 and 27,000 barrels of hydrocarbon liquids per day. Gas production forecast remains in the range of 146 million standard cubic feet per day (MMscf/d) to 164 MMscfd or between 25,000 boepd and 28,000 boepd.
The company does not expect a significant change in production uptime and associated losses, explaining however that it was still working on the figures.
Seplat said it is driving growth with capital investment of $200 million in its sequenced 2019 work programme conceived to yield progressive production uplift from July. The 2019 guidance for capital expenditure does not include planned investments in a separate gas joint venture with the Nigeria National Petroleum Corporation (NNPC).
The company’s revenue in the past three months was $160 million, trailing a gross profit of $81 million or stable 51% gross profit margin year-on-year.
The company explained that the first quarter revenue reflects the lower oil production and oil price realization of $61.7 per barrel ($61.7/bbl), down from $65.78/bbl recorded in 2018. Revenue from gas was based on price of $3.24/Mscf in the period, up from $2.79/Mscf in 2018.
The report has it that operating profit dropped to $33 million from $84 million in 2018, reflecting adjustments for a $16 million overlift position and $12 million charge in relation to the company’s oil price hedges, comprising $5.0 million cost of hedges and $7.0 million fair value loss, which reverses the $9.0 million fair value gain booked at the end of 2018.
Despite the operating profit for the quarter, operations income rose 73% to $80 million from $46 million in 2018 while capital expenditure also rose to $16 million $3.0 million in 2018. Additional income of $17 million in the period flowed from liftings at OML 55, the company stated.
In providing details of its loan performance, Seplat declared settlement of “$100 million on the four-year RCF bringing balance drawn to zero while retaining significant headroom in the capital structure to fund growth initiatives.”
It added that $4.5 million RCF fees were written off in finance costs.
Thus, Seplat stated that its “gross debt of $350 million at 31 March 2019 solely comprised of the company’s bond issuance due 2023.”
The company’s cash at bank stood at US$644 million, including $100 million temporarily held on behalf of Nigerian Gas Company (NGC) as the government’s initial equity investment into ANOH Gas Processing Company (“AGPC”)).
“Therefore, normalized cash at bank stood at US$544 million with an effective resultant net cash position of US$194 million,” the result stated.
In providing outlook on its gas businesses, Seplat stated that the large scale ANOH gas and condensate project has achieved both final investment decision (FID) and $100 million equity investment from government; while first gas from the first 300 MMscfd midstream gas processing development is targeted for Q1, 2021.
The company declared that gas revenue from the existing business was up by five percent year-on-year at $42 million from $40 million in 2018.
Other projects driven with the company’s capital budget include the Amukpe to Escravos pipeline which is anticipated to be operational in the next three months with ramp up to initial permitted capacity of 40,000 bopd expected from October.
The Oracle Today reports that the management of Seplat has efficiently maintained a delicate balance between debts, costs and shrewd growth budgets while keeping faith with shareholders’ dividend aspirations.