TIDMSEPL
RNS Number : 5704N
SEPLAT Petroleum Development Co PLC
27 October 2016
Seplat Petroleum Development Company Plc
Interim management statement and consolidated interim financial
results for the nine months ended 30 September 2016
Lagos and London, 27 October 2016: Seplat Petroleum Development
Company Plc ("Seplat" or the "Company"), a leading Nigerian
independent oil and gas company listed on both the Nigerian Stock
Exchange and London Stock Exchange, today announces its results for
the for the nine months ended 30 September 2016 and provides an
operational update.
Average working interest production for the first nine months
stood at 26,233 boepd, down 34% year-on-year owing to the
disruption caused by the suspension of exports at the Forcados
terminal. However, working interest gas production was up 22%
year-on-year at 93 MMscfd as a result of the capacity expansion at
the Oben gas processing plant.
Total revenue in the period was US$203 million. Within this,
crude revenue after lifting adjustments was US$125 million, 66%
lower than the same period in 2015. Gas revenue increased by 48%
year-on-year to US$77 million as the step-change in gas production
and higher pricing continue to take effect. Gross profit stood at
US$74 million and net loss after tax US$98 million, reflecting the
shut-in of the Forcados terminal and lower realised oil price.
Capital investments incurred during the first nine months
totaled US$27 million against cash generated from operations of
US$106 million. With the support of its lenders the Company has
successfully concluded the re-profiling of its seven-year secured
term facility over the period to the end of 2017, reducing
principal service obligations by US$150 million with no adjustments
to the existing tenor of the loan. Cash at bank was US$137 million
and net debt US$571 million at 30 September 2016, down from the
US$598 million reported at half-yearly results.
The Company has continued to utilise the alternative liquids
evacuation route established via the Warri refinery jetty, which in
turn permitted gas deliveries into the domestic market during the
third quarter to be de-constrained to a gross rate of 243 MMscfd.
Phase II of the Oben gas processing plant expansion remains
on-track and is set to increase total gross Company operated
processing capacity to a minimum of 525 MMscfd. Meanwhile, although
the Forcados terminal remains under force majeure a part cargo of
Seplat equity crude oil was lifted from the terminal post period
end.
"Whilst the obvious challenges we have been confronted with are
reflected in our results for the first nine months, we have
responded by delivering on what is within our control and by
implementing a range of solutions. An alternative liquids export
route has been established via the Warri refinery jetty where we
are making good progress towards establishing a regular offtake
schedule. This in turn has been the enabling factor that has
permitted gas production to be de-constrained and can be used going
forward as a means of improving security of gas supply to the
domestic market. Elsewhere, we are on-track to deliver the Phase II
expansion of the Oben gas processing plant and in the coming months
step up gas production further to help meet domestic demand" said
Austin Avuru, Seplat's Chief Executive Officer.
"Financially, the approval to re-profile our seven-year term
loan facility underscores the strength of our relationship with our
lenders based on strong business fundamentals, which reflect the
quality of our portfolio and strong operating track record. The
smoothing of the repayment profile will assist in ensuring that we
preserve a sufficient liquidity buffer to operate under prevailing
business conditions, at the same time enabling us to invest on a
fully discretionary basis in our portfolio of production
opportunities" he added.
Information contained within this announcement is un-audited and
is subject to further review. The information contained within this
announcement is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulation. Upon
the publication of this announcement via Regulatory Information
Service, this inside information is now considered to be in the
public domain.
Production update
-- Average total working interest production for the first nine
months stood at 26,233 boepd, down 34% year-on-year (2015: 40,012
boepd) due to the shut-in and suspension of oil exports at the
Forcados terminal from mid-February to mid-October as a result of
damage to pipeline infrastructure at the loading arm. Prior to
this, the Company's working interest production was averaging over
52,000 boepd.
- average liquids production down 61% year-on-year at 10,701 bopd
- average gas production up 22% year-on-year at 93.2 MMscfd
-- Although the Forcados terminal still remains under force
majeure, a part cargo of Seplat equity crude oil was lifted from
the terminal post period end. The terminal operator is currently in
the process of returning the terminal to steady state which will
enable Seplat to establish a regular pattern of production into the
Trans Forcados Pipeline and loading from the terminal.
-- The Company has continued to utilise an interim export
solution whereby crude oil and condensate production from OMLs 4,38
and 41 is sent via the joint venture's own 100,000 bopd capacity
pipeline to available storage tanks at the Warri refinery and sold
FOB to Seplat's off-taker Mecuria at the Warri refinery jetty. At
period end a net volume of 782,417 barrels had been monetised via
this route (Seplat's equity barrels), with the target being to
export a gross average of 30,000 bopd on a longer-term basis. The
Company is also working on upgrades to the jetty and liquid
treatment infrastructure to be able to secure a reliable continuous
export route.
-- As a direct result of the alternative liquids export route
via the Warri refinery jetty the Company was able to de-constrain
gas production during the third quarter to 243 MMscfd on a gross
basis, all of which was supplied to the domestic market.
-- It is Seplat's intention to keep this alternative export
route available for the foreseeable future. Exports via the Warri
refinery jetty will not be subject to the reconciliation losses
(typically in the order of 10% to 12%) or crude handling charges,
to which the Company is subject when exporting via the Trans
Forcados System ("TFS"). Availability of the alternative export
route will greatly improve security of gas supply to the domestic
market.
-- Liquid production transported via the TFS in year-to-date was
subject to an average reconciliation loss of 10%.
-- Average oil price realisation of US$42.82/bbl (2015:
US$49.30/bbl) and an average gas price of US$3.03/Mscf (2015:
US$2.53/Mscf).
Working interest production for the first nine months of
2016(1)
Gross Working Interest
=============================== ===============================
Liquids Gas Oil equivalent Liquids Gas Oil equivalent
Seplat Bopd MMscfd Boepd Bopd MMscfd boepd
%
=========== ====== ======= ====== ============== ======= ====== ==============
OMLs 4,
38 & 41 45.0% 17,263 207.1 51,777 7,768 93.2 23,300
----------- ------ ------- ------ -------------- ------- ------ --------------
OPL 283 40.0% 1,548 - 1,548 619 - 619
----------- ------ ------- ------ -------------- ------- ------ --------------
OML 53 40.0% 2,962 - 2,962 1,185 - 1,185
----------- ------ ------- ------ -------------- ------- ------ --------------
OML 55 (2) n/a 5,017 - 5,017 1,129 - 1,129
----------- ------ ------- ------ -------------- ------- ------ --------------
Total 26,790 207.1 61,304 10,701 93.2 26,233
=========== ====== ======= ====== ============== ======= ====== ==============
(1) Liquid production volumes as measured at the LACT unit for
OMLs 4, 38 and 41 and OPL 283 flow station. Volumes stated are
subject to reconciliation and will differ from sales volumes within
the period.
(2) Volumes associated with Seplat's 56.25% in BelemaOil
producing Limited, equivalent to an effective 22.5% working
interest in OML 55 through H1 2016, deconsolidation effective July
1
Drilling and capital projects update
-- Phase II of the Oben Gas Plant Expansion ("OGPE") project
remains on track. Offsite fabrication of the new 3 x 75 MMscfd
processing modules and civil foundations was completed in Q3 and
installation and commissioning of the new processing modules is
expected to be completed in Q1 2017. This will take the Company's
gross operated gas processing capacity to a minimum of 525 MMscfd
(from the current level of 300 MMscfd). The Oben associated gas
("AG") compression station project, aimed at eliminating routing
flares and monetising AG in Oben, was further progressed in Q3
following completion of the foundations for the compressors and
award of various contracts. The project is expected to be delivered
by Q1 2017.
-- Following the fabrication and shipment of modules and
ancillaries for the Electrostatic Heater Treater ("EHT") in Q2, the
Company completed the MEI installation of the EHT and all
integration engineering works in Q3. Commissioning of the EHT is
expected to be completed in Q4. Upon completion, this project will
generate savings on crude handling charges by eliminating costs
incurred by injecting wet crude from OMLs 4, 38 and 41 into the
Trans Forcados System and freeing up additional capacity for dry
crude. In association with this project, the re-completion of
Sapele-4 in OML 41 as a water disposal well was completed in
Q3.
-- Site preparation works, rig-sourcing and drilling contracts
for the Pillar Oil operated Anagba-1 appraisal well on OPL 283
(Marginal Field Area) has been completed. The well is intended to
appraise a structure that straddles into the adjacent OML 60 (where
it has been on production). Due to contracting delays causing
schedule slippage, the well is now expected to spud in
November.
Finance update
-- Gross revenue for the first nine months was US$203 million
(N48 billion), down 51% year-on-year (2015: US$420 million (N83
billion)) reflecting the shut-in of the Forcados terminal and lower
oil price realisations, partially offset by increased gas sales
following completion of OGPE Phase I and higher gas pricing.
- Crude revenue (after lifting adjustments) was US$125 million
(N29 billion), down 66% year-on-year (2015: US$367 million (N73
billion))
- Gas revenue was US$77 million (N19 billion), up 48%
year-on-year (2015: US$53 million ((N10 billion))
-- Working interest sales volumes during the first nine months
stood at 6.4 MMboe (2015: 10.9 MMboe. The total volume of crude
lifted in the first nine months was 2.1 MMbbls (2015: 5.1 MMbbls).
Total gas volume sold was 4.3 MMboe (2015: 3.5 MMboe).
-- Whilst the Company awaits the outcome of a review by Nigerian
Investment Promotion Commission on whether an extension of the
pioneer tax incentive will be granted beyond the initial three year
period (which concluded at the end of 2015) the Company has
prepared its financial statements for the first nine months of 2016
excluding the effect of pioneer tax status which correspondingly
forms the basis of the current and deferred taxation of US$10
million (N3billion) compared to a tax credit of US$0.2 million (N43
million) for the same period in 2015.
-- Having acquired in 2015 a 56.25% shareholding in BelemaOil
Producing Limited ("BelemaOil"), a Nigerian company which in turn
acquired from Chevron Nigeria Limited a 40.00% interest in OML 55
located in the swamp to coastal zone of south eastern Niger Delta,
Seplat had prior to 30 June 2016 consolidated the accounts of
BelemaOil as Seplat believed it exercised control over this
subsidiary. At that time the minority shareholders of BelemaOil had
begun to dispute Seplat's majority shareholding and steps were
purportedly and illegally taken to unilaterally withdraw the shares
held by Seplat (through its wholly owned subsidiary Seplat East
Swamp Company Limited). Consequently the Company filed an action at
the Federal High Court challenging this purported withdrawal. On
3rd June 2016, Seplat received a letter from Chevron Nigeria
Limited stating that it had discontinued the provision of support
services on the production operations in OML 55 effective on 2nd
June 2016 and had handed over the custody of OML 55 operations to
BelemaOil. On 7th June 2016, Seplat filed a legal injunction
restraining Chevron from engaging with BelemaOil, in the capacity
of operator of OML 55, pending the case before the Federal High
Court. In a bid to settle the pending legal disputes,
representatives of both Seplat and BelemaOil have agreed to a new
arrangement, which provides for a discharge sum of US$330 million
to be paid to Seplat over a six-year period, through allocation of
crude oil reserves of OML 55. In turn, Seplat will no longer be a
shareholder in BelemaOil. The 40.00% operated interest in OML 55
will be jointly controlled by Seplat and BelemaOil over the period
of this arrangement through an Asset Management Team comprising
equal representatives of both parties. The Asset Management Team
makes all the key decisions regarding the technical and commercial
activities of the underlying asset, and unanimous consent of all
parties is required for decision making. As such, Seplat no longer
exercises control and has now deconsolidated BelemaOil in the
financial statements in accordance with IFRS 10 (par B97). Joint
control however will exist over OML 55 through the representation
on the Asset Management team. Seplat has recorded its rights to
receive the discharge sum from the crude oil reserves of OML 55 as
an investment in oil and gas assets within oil and gas properties.
Approval of this settlement remains subject to ministerial
consent.
-- Primarily as a consequence of the shut-in of the Forcados
terminal and suspension of exports from mid-February to
mid-October, combined with the effect of lower oil prices partially
offset by reductions in cost of sales and G&A, the Company is
reporting a net loss for the first nine months of US$98 million
(N24 billion) compared to a net profit of US$69 million (N14
billion) in 2015. Included in the loss is a US$30 million (N7
billion) unrealised loss on conversion of Naira balances to US
Dollars and US$17 million unrealised loss on hedging (N4
billion)
-- For the first nine months to 30 September 2016 the Company
had the protection of dated Brent puts covering 4.65 MMbbls at an
average strike of US$43.5/bbl. The Company has dated Brent puts
covering a further volume of 1.35 MMbbls hedged at a strike price
US$40.0/bbl over the fourth quarter and 1.99 MMbbls at a strike
price of US$47.0/bbl over the first half of 2017. The board and
management 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 at bank stood at US$137 million (N42 billion) at 30 September.
-- Taking into account the unforeseen extended force majeure
conditions where the Forcados terminal was shut-in, and the
inevitable impact on revenues, the Company adopted a prudent
approach and proactively engaged in discussions with its lenders in
the US$700 million seven-year term facility (the "term loan") to
re-align near-term debt service obligations within the existing
tenor. Having re-financed in January 2015 and set a sculpted
repayment schedule which was front-ended (i.e. three years average
life for a seven-year facility) the Company has received approvals
from its lenders and successfully concluded the re-profiling to set
a more evenly balanced repayment schedule over the remaining loan
life which runs out to 2021. The lenders in the term loan have
approved the deferment of H2 2016 and 2017 principal repayment
obligations totaling US$150 million until the end of 2017, thereby
reducing the Company's principal debt service obligations during
this period to US$57 million. Under the terms of the agreed
re-profiling, the deferred principal obligations will be repayable
over a 30-month period between Q1 2018 and the end of Q2 2020,
during which time principal repayments will amount to US$37 million
per quarter. From Q2 2020 onwards the principal payments will
return to the original schedule as
at the time of the refinancing. All other terms under the facility remain unchanged.
-- Debt principal repayments of US$155 million were made in the first nine months.
- Gross debt at 30 September US$708 million
- Net debt at 30 September US$571 million
-- Capital investments of US$27 million were incurred in the
first nine months whilst cash flows from operations stood at US$106
million.
-- The outstanding NPDC net receivable at 30 September, after
offsetting NPDC's share of gas revenue (pursuant to the signed
agreement entered into during July 2015 with NPDC on terms for the
payment of receivables) and further adjusting for crude handling
charges that have also been withheld, was US$328 million (N100
billion) representing a reduction of US$133 million from the
outstanding net receivable of US$461 million (N92 billion) at the
same point in 2015. Confirmation has also been received from
Minister of State for Petroleum that 2016 cash calls will be paid
current by NPDC. Furthermore, a new funding protocol has also been
agreed between NPDC, its funding partner Seven Energy and Seplat
whereby an additional crude oil allocation equivalent to around
US$100 million is due to Seplat in 2016 that will also be offset
against the legacy receivables balance. The new protocol will also
see an additional oil entitlement assigned to Seplat from 2017
onwards which the Company expects to monetise through its off-taker
Mercuria to fund future cash calls as well as retiring legacy costs
(initial arrangement to run for period of up to two years).
Interim dividend
-- Owing to the exceptional circumstances as a direct result of
force majeure events at the Forcados terminal no interim dividend
is being declared. During a period in which Seplat is focusing on
preservation of liquidity and selective capital allocation to
ensure the Company maintains a necessary level of financial
flexibility the Board believes that the Company and its
shareholders are better served at this point in time by selectively
deploying available capital (on a discretionary basis) into the
portfolio of production opportunities and preserving a liquidity
buffer
Enquiries:
Seplat Petroleum Development Company
Plc.
Roger Brown, CFO +44 203 725 6500
Andrew Dymond, Head of Investor Relations
Chioma Nwachuku, GM - External Affairs
and Communications +234 12 770 400
------------------------------------------ ----------------
FTI Consulting
Ben Brewerton / Sara Powell / George
Parker
seplat@fticonsulting.com +44 203 727 1000
------------------------------------------ ----------------
Citigroup Global Markets Limited
Tom Reid / Luke Spells +44 207 986 4000
------------------------------------------ ----------------
RBC Capital Markets
Matthew Coakes +44 207 653 4000
========================================== ================
Notes to editors
Seplat Petroleum Development Company Plc is a leading indigenous
Nigerian oil and gas exploration and production company with a
strategic focus on Nigeria, listed on the Main Market of the London
Stock Exchange ("LSE") (LSE:SEPL) and Nigerian Stock Exchange
("NSE") (NSE:SEPLAT). The Company has interests in six blocks
onshore the Niger Delta and since inception has consistently
delivered year-on-year reserves and production growth.
Seplat is pursuing a Nigeria focused growth strategy and is
well-positioned to participate in future divestment programmes by
the international oil companies, farm-in opportunities and future
licensing rounds. The Company is also one of the leading suppliers
of processed natural gas to the Nigerian domestic market. For
further information, please refer to the company website,
http://seplatpetroleum.com/
Disclaimer
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, not all of which 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.
Interim condensed consolidated statement of profit or loss and
other comprehensive income
for the third quarter ended 30 September 2016.
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Unaudited Unaudited Unaudited Unaudited
-------------- -------------- -------------- --------------
Note $'000 $'000 $'000 $'000
================================================ ==== ============== ============== ============== ==============
Revenue 6 202,689 419,866 59,666 172,280
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Cost of sales 7 (128,727) (227,855) (44,985) (88,892)
================================================ ==== ============== ============== ============== ==============
Gross profit 73,962 192,011 14,681 83,388
------------------------------------------------ ---- -------------- -------------- -------------- --------------
General and administrative expenses 8 (76,685) (84,214) (27,093) (33,476)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss)/gains on foreign exchange (net) 9 (30,047) 7,602 (1,717) (5,761)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Gain on deconsolidation of subsidiary 10c 681 - 681 -
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Fair value (loss)/gain 11 (24,615) (623) (1,269) 6
================================================ ==== ============== ============== ============== ==============
Operating profit (56,704) 114,776 (14,717) 44,157
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Finance income 12 27,142 15,649 1,256 4,769
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Finance charges 12 (58,083) (61,962) (16,651) (21,724)
================================================ ==== ============== ============== ============== ==============
(Loss) /profit before taxation (87,645) 68,463 (30,112) 27,202
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Taxation 13 (10,129) 215 (6,497) -
================================================ ==== ============== ============== ============== ==============
(Loss) /profit after taxation (97,774) 68,678 (36,609) 27,202
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Profit attributable to:
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss)/profit attributable to equity holders of
parent (96,270) 62,123 (33,764) 28,454
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss)/profit attributable to non-controlling
interest (1,504) 6,555 (2,845) (1,252)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Other comprehensive income - - - -
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Total comprehensive (loss) /income for the
period / year (97,774) 68,678 (36,609) 27,202
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss)/profit attributable to equity holders of
parent (96,270) 62,123 (33,764) 28,454
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss)/profit attributable to non-controlling
interest (1,504) 6,555 (2,845) (1,252)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss) /earnings per share ($) 14 (0.17) 0.11 (0.06) 0.05
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Diluted (loss) /earnings per share ($) 14 (0.17) 0.11 (0.06) 0.05
================================================ ==== ============== ============== ============== ==============
Interim condensed consolidated statement of financial
position
As at 30 September 2016
As at 30 Sept As at 31 Dec
2016 2015
------------- ------------
Unaudited Audited
------------- ------------
Note $'000 $'000
====================================== ==== ============= ============
Assets
-------------------------------------- ---- ------------- ------------
Non-current assets
-------------------------------------- ---- ------------- ------------
Oil and gas properties 1,433,746 1,436,951
-------------------------------------- ---- ------------- ------------
Property, plant and equipment 8,810 11,602
-------------------------------------- ---- ------------- ------------
Goodwill - 2,000
-------------------------------------- ---- ------------- ------------
Deferred tax asset 4,469 -
-------------------------------------- ---- ------------- ------------
Prepayments 33,957 36,754
-------------------------------------- ---- ------------- ------------
Total non-current assets 1,480,982 1,487,307
====================================== ==== ============= ============
Current assets
-------------------------------------- ---- ------------- ------------
Inventories 108,625 82,468
-------------------------------------- ---- ------------- ------------
Trade and other receivables 16 602,708 811,255
-------------------------------------- ---- ------------- ------------
Prepayments 3,622 11,639
-------------------------------------- ---- ------------- ------------
Derivatives not designated as hedges 300 23,194
-------------------------------------- ---- ------------- ------------
Cash and short-term deposits 136,546 326,029
====================================== ==== ============= ============
Total current assets 851,801 1,254,585
====================================== ==== ============= ============
Total assets 2,332,783 2,741,892
====================================== ==== ============= ============
Equity and liabilities
-------------------------------------- ---- ------------- ------------
Equity attributable to shareholders
-------------------------------------- ---- ------------- ------------
Share capital 17a 1,821 1,821
-------------------------------------- ---- ------------- ------------
Capital contribution 17c 40,000 40,000
-------------------------------------- ---- ------------- ------------
Share premium 497,457 497,457
-------------------------------------- ---- ------------- ------------
Share equity reserve 11,232 8,734
-------------------------------------- ---- ------------- ------------
Retained earnings 746,681 865,485
-------------------------------------- ---- ------------- ------------
Foreign currency translation reserve 325 325
-------------------------------------- ---- ------------- ------------
Non-controlling interest - (745)
====================================== ==== ============= ============
Total equity 1,297,516 1,413,077
====================================== ==== ============= ============
Non-current liabilities
-------------------------------------- ---- ------------- ------------
Interest bearing loans & borrowings 558,351 608,846
-------------------------------------- ---- ------------- ------------
Deferred tax liabilities - 21,233
-------------------------------------- ---- ------------- ------------
Contingent consideration 11,615 21,900
-------------------------------------- ---- ------------- ------------
Provision for decommissioning 1,982 3,869
-------------------------------------- ---- ------------- ------------
Defined benefit plan 6,519 6,926
====================================== ==== ============= ============
Total non-current liabilities 578,467 662,774
====================================== ==== ============= ============
Current liabilities
-------------------------------------- ---- ------------- ------------
Trade and other payables 18 297,152 375,033
-------------------------------------- ---- ------------- ------------
Current taxation 13 23,148 239
-------------------------------------- ---- ------------- ------------
Interest bearing loans and borrowings 136,500 290,769
====================================== ==== ============= ============
Total current liabilities 456,800 666,041
====================================== ==== ============= ============
Total liabilities 1,035,267 1,328,815
====================================== ==== ============= ============
Total equity and liabilities 2,332,783 2,741,892
====================================== ==== ============= ============
Interim condensed consolidated statement of financial position
continued
As at 30 September, 2016
The financial statements on pages 7 to 26 were approved and
authorised for issue by the board of directors on 27 October 2016
and were signed on its behalf by
A. B. C. Orjiako A. O. Avuru R.T. Brown
FRC/2013/IODN/00000003161 FRC/2013/IODN/00000003100 FRC/2014/IODN/00000007983
Chairman Chief Executive Officer Chief Financial
Officer
27 October 2016 27 October 2016 27 October 2016
Interim condensed consolidated statement of changes in
equity
for the third quarter ended 30 September 2016
Share Share Capital Share Foreign Retained Total Non-controlling Total
Capital premium contribution based currency earnings equity interest
payment translation
reserves reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2016 1,821 497,457 40,000 8,734 325 865,485 1,413,822 (745) 1,413,077
(Loss)/profit
for the
period - - - - - (96,270) (96,270) (1,504) (97,774)
Share based
payments - - - 2,498 - - 2,498 - 2,498
Dividend to
equity
holders
of the
company - - - - - (22,534) (22,534) - (22,534)
Derecognition
of subsidiary - - - - - - - 2,249 2,249
At 30
September
2016
(unaudited) 1,821 497,457 40,000 11,232 325 746,681 1,297,516 - 1,297,516
============== ======= ======= ============ ======== =========== ======== ========= =============== =========
for the third quarter ended
30 September 2015
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2015 1,798 497,457 40,000 - 26 869,861 1,409,142 - 1,409,142
Profit for the
period - - - - - 62,123 62,123 6,555 68,678
Dividend to
equity
holders
of the
company - - - - - (49,701) (49,701) - (49,701)
Acquisition
of subsidiary - - - - - - - 1,409 1,409
============== ======= ======= ============ ======== =========== ======== ========= =============== =========
At 30
September
2015
(unaudited) 1,798 497,457 40,000 - 26 882,283 1,421,564 7,964 1,429,528
============== ======= ======= ============ ======== =========== ======== ========= =============== =========
Interim condensed consolidated statement of cash flow
for the third quarter ended 30 September 2016
9 months 9 months
ended ended
30 Sept 30 Sept
------------ ------------
2016 2015
------------ ------------
$'000 $'000
------------ ------------
Note Unaudited Unaudited
========================================================================================== ============ ============
Cash Flows from Operations Activities
------------------------------------------------------------------------------------------ ------------ ------------
Cash generated from operations 22 106,327 10,820
========================================================================================== ============ ============
Net cash inflows from operating activities 106,327 10,820
========================================================================================== ============ ============
Cash Flow from Investing Activities
------------------------------------------------------------------------------------------ ------------ ------------
Investment in oil and gas properties (25,592) (407,613)
------------------------------------------------------------------------------------------ ------------ ------------
Acquisition of property, plant and equipment (1,380) (2,215)
------------------------------------------------------------------------------------------ ------------ ------------
Acquisition of subsidiaries - (2,000)
------------------------------------------------------------------------------------------ ------------ ------------
Refunds from deposit for investment - 368,160
------------------------------------------------------------------------------------------ ------------ ------------
Interest received 760 7,023
========================================================================================== ============ ============
Net cash inflows/(outflows) from investing activities (26,212) (36,645)
========================================================================================== ------------ ============
Cash Flows from Financing Activities
------------------------------------------------------------------------------------------ ------------ ------------
Proceeds from bank financing - 967,101
------------------------------------------------------------------------------------------ ------------ ------------
Repayments of bank financing (155,250) (673,607)
------------------------------------------------------------------------------------------ ------------ ------------
Dividends paid (22,534) (49,701)
------------------------------------------------------------------------------------------ ------------ ------------
Interest paid (57,363) (58,692)
========================================================================================== ============ ============
Net cash (outflows)/inflows from financing activities (235,147) 185,101
========================================================================================== ============ ============
Net (decrease)/increase in cash and cash equivalents (155,032) 159,276
------------------------------------------------------------------------------------------ ------------ ------------
Cash and cash equivalents at beginning of period 326,029 285,298
------------------------------------------------------------------------------------------ ------------ ------------
Exchange losses on cash and cash equivalents (34,451) -
------------------------------------------------------------------------------------------ ------------ ------------
Cash and cash equivalents at end of period 136,546 444,574
========================================================================================== ============ ============
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 Company and Allied
Matters Act 2004. The Company commenced operations on 1 August
2010. The Company is principally engaged in oil and gas exploration
and production.
The Company's registered address is: 25a Lugard Avenue, 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 percent participating interest in the following producing
assets:
OML 4, OML 38 and OML 41 located in Nigeria. The total purchase
price for these assets was US$340 million paid at the completion of
the acquisition on 31 July 2010 and a contingent payment of US$33
million payable 30 days after the second anniversary, 31 July 2012,
if the average price per barrel of Brent Crude oil over the period
from acquisition up to 31 July 2012 exceeds US$80 per barrel.
US$358.6 million was allocated to the producing assets including
US$18.6 million as the fair value of the contingent consideration
as calculated on acquisition date. The contingent consideration of
US$33 million was paid on 22 October 2012.
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 percent
Participant interest in producing assets: the Umuseti/Igbuku
marginal field area located within OPL 283 (the "Umuseti/Igbuku
Fields"). The total purchase price for these assets was US$50
million paid at the completion of the acquisition in June 2014 and
a contingent payment of US$10 million (US$5 million when average
daily production of 10,500 bopd of liquid hydrocarbon sustained
over a period of one (1) month is achieved and another US$5 million
when cumulative production of 10 million barrels of liquid
hydrocarbons from all fields within OML 56 is achieved) by
mid-2015. The fair value of US$7.731 million was capitalised to the
cost of the asset and a corresponding liability recorded based on
the probability. These milestones were not achieved as at mid-2015
and as such the liability was de-recognised during the year.
In 2015, the Group purchased a 40% working interest in OML 53,
onshore north eastern Niger Delta, from Chevron Nigeria Ltd. for
US$259.4 million. It also concluded negotiations to buy 56.25% of
BelemaOil Producing Ltd., a Nigerian special purpose vehicle that
bought a 40% interest in the producing OML 55, located in the swamp
to coastal zone of south eastern Niger Delta. NNPC holds the
remaining 60.00% interest in OML 55, and Seplat's effective working
interest in OML 55 as a result of the acquisition was 22.50%.
Seplat paid US$182 million to Chevron on behalf of the BelemaOil
entity, including its 22.50% interest in OML 55. It advanced
certain loans and costs of US$43 million to the other shareholders
of BelemaOil to meet their share of investments and costs
associated with BelemaOil. Seplat also paid interest of US$11.25m
as service fees towards bank debts taken by BelemaOil to fund their
share of the asset.
As at 30 June 2016, the minority shareholders of BelemaOil had
begun to dispute the Group's majority shareholding in the entity.
Based on management's judgement, the Group continued to consolidate
BelemaOil as it believed it exercised control over this
subsidiary.
Subsequently, and in a bid to settle the pending legal disputes,
representatives of both Seplat and BelemaOil have agreed to a new
arrangement which provides for a discharge sum of US$330 million,
fair valued at US$250 million, to be paid to Seplat over a six-year
period, through allocation of crude oil reserves of OML 55. In
turn, Seplat relinquishes all claims to its shareholding of
BelemaOil as an entity. The 40% stake in OML 55 will be jointly
controlled by Seplat and BelemaOil over the period of this
arrangement through an Asset Management Team comprising equal
representatives of both parties. The Asset Management Team makes
all the key decisions regarding the relevant activities of the
underlying asset, and unanimous consent of all parties is required
for decision making.
Furthermore, Seplat no longer exercises control and has now
deconsolidated BelemaOil in the financial statements in accordance
with IFRS 10 (par B97). Joint control however now exists over OML
55 through the representation on the Asset Management team. Seplat
has recorded its rights to receive the discharge sum from the crude
oil reserves of OML 55 as an investment in oil and gas assets
within oil and gas properties.
Notes to the interim condensed consolidated financial
statements
The agreements have been signed by both parties but are subject
to ministerial consent. The Group however believes consent will be
received as the agreements were brokered by the Ministry of
Petroleum Resources.
The Company together with its subsidiary, Newton Energy, and
four wholly owned subsidiaries, namely, Seplat Petroleum
Development Company UK Limited ("Seplat UK"), which was
incorporated on 21 August 2014; Seplat East Onshore Limited
("Seplat East"), which was incorporated on 12 December 2014; Seplat
East Swamp Company Limited ("Seplat Swamp"), which was incorporated
on 12 December 2014; and Seplat Gas Company Limited ("Seplat
Gas"), which was incorporated on 12 December 2014, is referred to as the Group.
Subsidiary Location Shareholding %
================================== ================= ==============
Newton Energy Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
Seplat Petroleum Development UK (United Kingdom) 100%
---------------------------------- ----------------- --------------
Seplat East Onshore Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
Seplat East Swamp Company Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
Seplat Gas Company Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
2. Accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements of the
Group have been prepared in accordance with accounting standard IAS
34 Interim financial reporting. The financial information has been
prepared under the going concern assumption and historical cost
convention, except for contingent consideration, borrowings on
initial recognition and financial instruments - derivatives not
designated as hedges that have been measured at fair value. The
historical financial information is presented in US dollars and all
values are rounded to the nearest thousand ($000), except when
otherwise indicated. The accounting policies are applicable to both
Company and Group.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the estimation of income tax (see note 13) and the
adoption of new and amended standards as set out below:
(a) New and amended standards adopted by the group
A number of amendments and improvements to existing standards
became effective and were adopted by the Group during the current
reporting period. None of these had a material impact on the
financial statements of the Group.
(b) Impact of standards issued but not yet applied by the entity
(i) IFRS 9 Financial instruments
IFRS 9 Financial instruments addresses the classification,
measurement and de-recognition of financial assets and financial
liabilities, the standard introduces new rules for hedge accounting
and a new impairment model for financial assets. The standard does
not need to be applied until 1 January 2018 but is available for
early adoption. The group is currently assessing whether it should
adopt IFRS 9 before its mandatory date.
While the group has yet to undertake a detailed assessment of
the classification and measurement of financial assets, the Group
does not expect the new guidance to have a significant impact on
the classification and measurement of its financial assets.
There will be no impact on the group's accounting for financial
liabilities, as the new requirements only affect
accounting for financial liabilities that are designated at fair
value through profit or loss and the group does not have
any such liabilities.
The de-recognition rules have been transferred from IAS 39
Financial Instruments: Recognition and Measurement and
have not been changed.
Notes to the interim condensed consolidated financial statements
continued
The new hedge accounting rules will align the accounting for
hedging instruments more closely with the group's risk management
practices. As a general rule, more hedge relationships might be
eligible for hedge accounting, as the standard introduces a more
principles-based approach. The group does not expect a significant
impact on the accounting for its hedging relationships.
The new impairment model requires the recognition of impairment
provisions based on expected credit losses (ECL) rather than only
incurred credit losses as is the case under IAS 39. It applies to
financial assets classified at amortised cost, debt instruments
measured at FVOCI, contract assets under IFRS 15 Revenue from
Contracts with Customers, lease receivables, loan commitments and
certain financial guarantee contracts. While the group has not yet
undertaken a detailed assessment of how its impairment provisions
would be affected by the new model, it may result in earlier
recognition of credit losses.
The new standard also introduces expanded disclosure
requirements and changes in presentation. These are expected to
change the nature and extent of the group's disclosures about its
financial instruments particularly in the year of the adoption of
the new standard.
(ii) IFRS 15 Revenue from contracts with customers
The IASB has issued a new standard for the recognition of
revenue. This will replace IAS 18 which covers revenue arising from
the sale of goods and the rendering of services and IAS 11 which
covers construction contracts.
The new standard is based on the principle that revenue is
recognised when control of a good or service transfers to a
customer.
The standard permits either a full retrospective or a modified
retrospective approach for the adoption. The new standard is
effective for first interim periods within annual reporting periods
beginning on or after 1 January 2018, and will allow early
adoption.
At this stage, the group is not able to estimate the effect of
the new rules on the group's financial statements. The group will
make more detailed assessments of the effect over the next twelve
months. The group does not expect to adopt the new standard before
1 January 2018.
(iii) IFRS 16 Leases
This standard eliminates the classification of leases as either
operating or finance leases for a lessee. Instead, all leases are
treated in a similar way to finance leases under IAS 17. Leases are
'capitalised' by recognising the present value of the lease
payments and showing them either as lease assets (right-of-use
assets) or together with property, plant and equipment. If lease
payments are made over time, the Group also recognises a financial
liability representing its obligation to make future lease
payments. IFRS 16 does not require a lessee to recognise assets and
liabilities for (a) short term leases (b) leases of low-value
assets. The Group is yet to assess the full impact of IFRS 16 and
intends to adopt IFRS 16 no later than 1 January 2019.
At this stage, the Group is not able to estimate the effect of
the new rules on the group's financial statements. The group will
make more detailed assessments of the effect over the next twelve
months. The Group does not expect to adopt the new standard before
1 January 2019.
2.2 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 30 September
2016.
This basis is the same adopted for the last audited financial
statement as at 31 December 2015.
2.3 Functional and presentation currency
Functional and presentation currency
The Group's financial statements are presented in United States
Dollars, which is also the Company's functional currency and the
Nigerian Naira as required by the Financial Reporting Council of
Nigeria. For each entity the Group determines the functional
currency and items included in the financial statements of each
entity are measured using that functional currency.
Notes to the interim condensed consolidated financial statements
continued
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of foreign currency transactions and from the
translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the
statement of comprehensive income within the line item gain/(loss)
on foreign exchange, net.
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into the presentation currency at the
rate of exchange prevailing at the reporting date and their income
statements are translated at average exchange rates for the
reporting period except when there is a significant change in
foreign exchange, in this case a more appropriate rate is used. The
exchange differences arising on translation for consolidation 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.
3. Segment reporting
The Group operates one segment, being the exploration,
development and production of oil and gas related products located
in Nigeria. Therefore, no segment reporting has been prepared.
4. Critical accounting estimates and judgements
4.1 Impairment of financial assets
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred loss event)
and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include
indications that the debtor or a group of debtors is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and observable
data indicating that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Management has made certain assumptions about the recoverability
of financial assets exposed to credit risk from NPDC. These are
based on management's past experiences with NPDC, current
discussions with NPDC and financial capacity of NPDC. However,
wherever these assumptions do not hold, it might have a significant
impact on the Group's profit or loss in future.
4.2 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. All assumptions are reviewed at each
reporting date. The parameter most subject to change is discount
and inflation 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.
The defined benefit obligation recognised in 2015 has been based
on the same assumptions as in the previous financial year. The
subsequent financial year end balance was estimated as at 31
December 2015 and has been recognised in the period to date on a
pro rata basis. Therefore, no actuarial gains or losses have been
recognised given that last year's assumptions have been
adopted.
4.3 Deconsolidation of subsidiary
Following the restructuring of the arrangement with BelemaOil
with respect to OML 55, as described in Note 1, the Group has now
deconsolidated BelemaOil in these financial statements in
accordance with IFRS 10 (par B97), as it no longer exercises
control over the entity.
Notes to the interim condensed consolidated financial statements
continued
BelemaOil's 40% stake in OML 55 will be jointly controlled by
Seplat and BelemaOil over the period of this arrangement through an
Asset Management Team comprising of equal representatives of both
parties. The Asset Management Team makes all the key decisions
regarding the technical and commercial activities of the underlying
asset, and unanimous consent of all parties is required for
decision making. Asset management team guidelines and other
agreements that will govern the operations of the AMT are in
process and yet to be finalized. The Group therefore believes it
exercises joint control over OML 55 through its representation on
the Asset Management team. Seplat has recorded its rights to
receive the discharge sum of US$330 million from the crude oil
reserves of OML 55 as an investment in oil and gas assets within
oil and gas properties. The fair value of the discharge sum on the
date of deconsolidation is US$250 million and has been determined
using the income approach in line with IFRS 13 (Discounted Cash
Flow). The gain on deconsolidation recognized amounted to US$
681,000 and has been recognized in the income statement (see note
10).
5. Financial risk management
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.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group manages
liquidity risk by ensuring that sufficient funds are available to
meet its commitments as they fall due.
The Group uses both long-term and short-term cash flow
projections to monitor funding requirements for activities and to
ensure there are sufficient cash resources to meet operational
needs. Cash flow projections take into consideration the Group's
debt financing plans and covenant compliance. Surplus cash held is
transferred to the treasury department which invests in interest
bearing current accounts, 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.
US$ '000
Effective interest Less than 1 year 1 -2 2 - 3 3 - 5 After 5 years Total
rate % years years years
--------------------- ---------------- ------- ------- ------- ------------- -------
30 September 2016
==================== ===================== ================ ======= ======= ======= ============= =======
Variable interest
rate borrowings:
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Bank loans:
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Zenith Bank Plc 8.5%+LIBOR 14,975 50,178 59,656 52,640 30,874 208,323
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
First Bank of
Nigeria 8.5%+LIBOR 9,360 31,361 37,285 32,900 19,296 130,202
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
United Bank of
Africa Plc 8.5%+LIBOR 9,360 31,361 37,285 32,900 19,296 130,202
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Stanbic IBTC Bank
Plc 8.5%+LIBOR 1,403 4,700 5,588 4,930 2,892 19,513
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
The Standard Bank of
South Africa
Limited 8.5%+LIBOR 1,403 4,700 5,588 4,930 2,892 19,513
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Standard Chartered
Bank 6.0%+LIBOR 15,000 15,000 - - - 30,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Natixis 6.0%+LIBOR 15,000 15,000 - - - 30,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Citibank Nigeria Ltd 6.0%+LIBOR 15,000 15,000 - - - 30,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Bank of America
Merrill Lynch Int'l
Ltd 6.0%+LIBOR 10,000 10,000 - - - 20,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
First Rand Bank
(Merchant Bank
Division) 6.0%+LIBOR 10,000 10,000 - - - 20,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
JP Morgan Chase Bank
NA, London Branch 6.0%+LIBOR 10,000 10,000 - - - 20,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Ned Bank Ltd London
Branch 6.0%+LIBOR 10,000 10,000 - - - 20,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Stanbic IBTC Bank
Plc 6.0%+LIBOR 7,500 7,500 - - - 15,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
The Standard Bank of
South Africa
Limited 6.0%+LIBOR 7,500 7,500 - - - 15,000
-------------------- --------------------- ---------------- ------- ------- ------- ------------- -------
Trade payables 78,792 78,792
------------------------------------------- ---------------- ------- ------- ------- ------------- -------
Contingent consideration 11,615 11,615
------------------------------------------- ---------------- ------- ------- ------- ------------- -------
215,293 222,300 145,402 139,915 75,250 798,160
========================================== ================ ======= ======= ======= ============= =======
Notes to the interim condensed consolidated financial statements
continued
US$ '000
Effective interest Less than 1 year 1 -2 2 - 3 3 - 5 After 5 years Total
rate % years years years
------------------ ---------------- ------- ------- ------- ------------- -----------
31 December 2015
=================== ================== ================ ======= ======= ======= ============= ===========
Variable interest
rate borrowings:
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Bank loans:
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Zenith Bank Plc 8.5%+LIBOR 81,976 70,418 51,200 74,753 24,104 302,451
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
First Bank of
Nigeria 8.5%+LIBOR 51,235 44,012 32,000 46,721 15,065 189,033
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
United Bank of
Africa Plc 8.5%+LIBOR 51,235 44,012 32,000 46,721 15,065 189,033
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Stanbic IBTC Bank
Plc 8.5%+LIBOR 7,678 6,596 4,796 7,002 2,258 28,330
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
The Standard Bank
of South Africa
Limited 8.5%+LIBOR 7,678 6,596 4,796 7,002 2,258 28,330
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Standard Chartered
Bank 6.0%+LIBOR 17,534 27,711 - - - 45,245
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Natixis 6.0%+LIBOR 17,534 27,711 - - - 45,245
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Citibank Nigeria
Ltd 6.0%+LIBOR 17,534 27,711 - - - 45,245
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Bank of America
Merrill Lynch
Int'l Ltd 6.0%+LIBOR 11,689 18,474 - - - 30,163
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
First Rand Bank
(Merchant Bank
Division) 6.0%+LIBOR 11,689 18,474 - - - 30,163
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
JP Morgan Chase
Bank NA, London
Branch 6.0%+LIBOR 11,689 18,474 - - - 30,163
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Ned Bank Ltd London
Branch 6.0%+LIBOR 11,689 18,474 - - - 30,163
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Stanbic IBTC Bank
Plc 6.0%+LIBOR 8,767 13,856 - - - 22,623
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
The Standard Bank
of South Africa
Limited 6.0%+LIBOR 8,767 13,856 - - - 22,623
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Sterling Bank Loan - 52,500 - - - - 52,500
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Trade and other
payables - 375,033 - - - - 375,033
------------------- ------------------ ---------------- ------- ------- ------- ------------- -----------
Contingent
consideration - - - - 21,900 - 21,900
=================== ================== ================ ======= ======= ======= ============= ===========
744,227 356,375 124,792 204,099 58,750 1,488,243
=================== ================== ================ ======= ======= ======= ============= =========
Fair value measurements
Financial instruments measured at fair value were based on the
same assumptions as determined in the 31 December 2015 financial
statements. There were no updates on the judgements and estimates
made by the group in determining the fair values of the financial
instruments since the last annual financial report. There were no
transfers of financial instruments between fair value hierarchy
levels during the third quarter.
Notes to the interim condensed consolidated financial statements
continued
6. Revenue
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
================ ============== ============== ============== ==============
Crude oil sales 86,367 282,669 26,414 147,040
---------------- -------------- -------------- -------------- --------------
Underlift 38,925 84,425 2,995 (1,029)
================ ============== ============== ============== ==============
125,292 367,094 29,409 146,011
---------------- -------------- -------------- -------------- --------------
Gas Sales 77,397 52,772 30,257 26,269
================ ============== ============== ============== ==============
Total revenue 202,689 419,866 59,666 172,280
================ ============== ============== ============== ==============
The off-takers for crude oil are Shell Western Supply and
Trading Limited and Mercuria.
7. Cost of sales
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
========================================= ============== ============== ============== ==============
Crude handling fees 7,940 49,134 3,160 13,002
----------------------------------------- -------------- -------------- -------------- --------------
Barging costs 10,268 - 4,215 -
----------------------------------------- -------------- -------------- -------------- --------------
Royalties 25,108 69,134 11,732 31,274
----------------------------------------- -------------- -------------- -------------- --------------
Depletion, Depreciation and Amortisation 42,999 58,021 14,490 26,554
----------------------------------------- -------------- -------------- -------------- --------------
Niger Delta Development Commission 4,265 7,346 1,304 1,086
----------------------------------------- -------------- -------------- -------------- --------------
Other Rig related Expenses 2,649 6,203 836 706
----------------------------------------- -------------- -------------- -------------- --------------
Operations & Maintenance Costs 35,498 38,017 9,248 16,270
========================================= ============== ============== ============== ==============
128,727 227,855 44,985 88,892
----------------------------------------- -------------- -------------- -------------- --------------
8. General and administrative expenses
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
================================== ============== ============== ============== ==============
Depreciation 4,172 4,131 1,428 1,565
---------------------------------- -------------- -------------- -------------- --------------
Employee benefit expense 15,119 14,069 4,654 4,310
---------------------------------- -------------- -------------- -------------- --------------
Professional & Consulting Fees 18,247 38,599 7,073 18,523
---------------------------------- -------------- -------------- -------------- --------------
Audit fee 56 267 - -
---------------------------------- -------------- -------------- -------------- --------------
Directors Emoluments (Execs) 2,461 2,738 848 1,165
---------------------------------- -------------- -------------- -------------- --------------
Directors Emoluments (Non- Execs) 2,796 2,595 401 831
---------------------------------- -------------- -------------- -------------- --------------
Rentals 1,422 1,540 414 740
---------------------------------- -------------- -------------- -------------- --------------
Impairment loss 18,467 - 7,926 -
---------------------------------- -------------- -------------- -------------- --------------
Other General and Admin Expenses 13,945 20,275 4,349 6,342
================================== ============== ============== ============== ==============
76,685 84,214 27,093 33,476
================================== ============== ============== ============== ==============
Notes to the interim condensed consolidated financial statements
continued
Directors' emoluments have been split between Executive &
Non-Executive directors' emoluments and includes share based
benefits recognised in 2016.
There were no non-audit services rendered by the group's
auditors during the period.
Impairment loss relates to the impairment of NPDC receivables of
$ 18.5 million (see details in note 16 on trade and other
receivables).
Other general expenses relate to costs such as office
maintenance costs, telecommunication costs, logistics costs and
others.
9. (Losses)/gains on foreign exchange (net)
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
======================================= ============== ============== ============== ==============
Foreign exchange (losses) /gains (net) (30,047) 7,602 (1,717) (5,761)
--------------------------------------- -------------- -------------- -------------- --------------
(30,047) 7,602 (1,717) (5,761)
======================================= ============== ============== ============== ==============
This is principally as a result of translation of naira
denominated monetary assets and liabilities.
10. Deconsolidation of subsidiary
The details of the deconsolidation of subsidiary has been
disclosed in Note 1 - Corporate structure and business and Note 4 -
Critical accounting estimates and judgments. A summary of assets
and liabilities derecognised and the resulting gain on
deconsolidation are shown below.
10a. Summary of assets and liabilities derecognised
9 months ended
30 Sept 2016
--------------
$'000
============================== ==============
Non-current assets
------------------------------ --------------
Producing assets 235,888
------------------------------ --------------
Goodwill 2,000
------------------------------ --------------
Current assets
------------------------------ --------------
Trade and other receivables 86,340
------------------------------ --------------
Underlift 38,555
------------------------------ --------------
Total assets 362,783
------------------------------ --------------
Equity
------------------------------ --------------
Non-controlling interest (2,249)
------------------------------ --------------
Non-current liabilities
------------------------------ --------------
Deferred tax liability 12,803
------------------------------ --------------
Contingent consideration 12,474
------------------------------ --------------
Provision for decommissioning 32
------------------------------ --------------
Current liabilities
------------------------------ --------------
Short term borrowings 52,500
------------------------------ --------------
Trade and other payables 37,701
------------------------------ --------------
Current tax 113
------------------------------ --------------
Total liabilities 115,623
------------------------------ --------------
Total equity and liabilities 113,374
------------------------------ --------------
Net asset derecognised 249,409
============================== ==============
Notes to the interim condensed consolidated financial statements
continued
10b.Summary of assets and liabilities recognised
9 months ended
30 Sept 2016
--------------
$'000
================================= ==============
Investment in oil and gas assets 250,090
--------------------------------- --------------
Assets recognized 250,090
================================= ==============
Investment discharge sum agreed amounts to $ 330 million. This
is recognized at its fair value of $250 million.
10c. Gain on deconsolidation of subsidiary 9 months ended
30 Sept 2016
--------------
$'000
========================================================== ==============
Summary of assets and liabilities derecognised (note 10a) (249,409)
---------------------------------------------------------- --------------
Summary of assets and liabilities recognised (note 10b) 250,090
---------------------------------------------------------- --------------
Gain on deconsolidation of BelemaOil 681
========================================================== ==============
11. Fair value (loss)/gain
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
=================================================== ============== ============== ============== ==============
Fair value (loss)/gain on commodity derivatives (22,426) - (1,639) -
--------------------------------------------------- -------------- -------------- -------------- --------------
Fair value (loss)/gain on contingent consideration (2,189) (623) 370 6
--------------------------------------------------- -------------- -------------- -------------- --------------
(24,615) (623) (1,269) 6
=================================================== ============== ============== ============== ==============
Fair value loss on commodity derivatives represents the losses
on crude oil price hedge charged to profit or loss. Fair value loss
on contingent consideration loss arises in relation to the Group's
acquisition of participating interest in its OMLs. The contingency
criteria are the achievement of certain production milestones.
12. Finance income/charges
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
====================================================== ============== ============== ============== ==============
Finance income
------------------------------------------------------ -------------- -------------- -------------- --------------
Interest income 27,142 15,649 1,256 4,769
------------------------------------------------------ -------------- -------------- -------------- --------------
Finance charges
------------------------------------------------------ -------------- -------------- -------------- --------------
Interest on bank loan and other bank charges 57,363 61,942 16,147 22,440
------------------------------------------------------ -------------- -------------- -------------- --------------
Unwinding of discount on provision for decommissioning 720 20 504 (716)
====================================================== ============== ============== ============== ==============
58,083 61,962 16,651 21,724
====================================================== ============== ============== ============== ==============
Notes to the interim condensed consolidated financial statements
continued
13. 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 ended 30 September 2016 is 65.75% for crude oil
activities and 30% for gas activities, compared to 0% for oil and
0% for gas activities estimated for the third quarter ended 30
September 2015. The zero tax rate in prior years was as a result of
tax incentives granted.
14. Earnings per share
Basic EPS
Basic earnings per share is calculated on the Group's profit or
loss after taxation attributable to the parent entity and on the
basis of weighted average of issued and fully paid ordinary shares
at the end of the period.
Diluted EPS is calculated by dividing the profit or loss
attributable to ordinary equity holders of the parent (after
adjusting for outstanding share options arising from the share
based payment scheme) by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number
of ordinary shares that would be issued on conversion of all the
dilutive potential ordinary shares into ordinary shares.
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
====================================================== ============== ============== ============== ==============
(Loss)/Profit for the period attributable to equity
holders of the parent ($'000) (96,270) 62,123 (33,764) 28,454
====================================================== ============== ============== ============== ==============
Weighted average number of ordinary shares in issue
(in 000) 560,576 553,310 560,576 553,310
------------------------------------------------------ -------------- -------------- -------------- --------------
Share Options (in 000) 3,276 - 3,276 -
------------------------------------------------------ -------------- -------------- -------------- --------------
Weighted average number of ordinary shares adjusted
for the effect of dilution (in 000) 563,852 553,310 563,852 553,310
====================================================== ============== ============== ============== ==============
$ $ $ $
------------------------------------------------------ -------------- -------------- -------------- --------------
Basic (loss)/earnings per share (0.17) 0.11 (0.06) 0.05
------------------------------------------------------ -------------- -------------- -------------- --------------
Diluted (loss)/earnings per share (0.17) 0.11 (0.06) 0.05
------------------------------------------------------ -------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
====================================================== ============== ============== ============== ==============
(Loss)/profit attributable to equity holders of the
parent (96,270) 62,123 (33,764) 28,454
====================================================== ============== ============== ============== ==============
(Loss)/profit used in determining diluted earnings per
share (96,270) 62,123 (33,764) 28,454
====================================================== ============== ============== ============== ==============
15. Dividend
As at 30 September 2016, no dividend was proposed (2015: $49.7
million)
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
================================ ============== ============== ============== ==============
Dividend paid during the period 22,534 49,701 - 16,070
-------------------------------- -------------- -------------- -------------- --------------
Dividend per share 0.04 0.09 - 0.03
================================ ============== ============== ============== ==============
Notes to the interim condensed consolidated financial statements
continued
16. Trade and other receivables
As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
$'000 $'000
========================================================== ============= ============
Trade receivables 81,743 133,905
---------------------------------------------------------- ------------- ------------
Nigerian Petroleum Development Company (NPDC) receivables 404,307 491,974
---------------------------------------------------------- ------------- ------------
Deposit for Investments 85,272 85,236
---------------------------------------------------------- ------------- ------------
Advances to other parties - 53,175
---------------------------------------------------------- ------------- ------------
Under lift 27,433 27,063
---------------------------------------------------------- ------------- ------------
Advances to suppliers 8,998 2,597
---------------------------------------------------------- ------------- ------------
Hedging receivables - 7,585
---------------------------------------------------------- ------------- ------------
Interest receivable from shareholders of BelemaOil - 9,546
---------------------------------------------------------- ------------- ------------
Other receivables 13,422 174
---------------------------------------------------------- ------------- ------------
Impairment loss on (NPDC) receivables (18,467) -
========================================================== ============= ============
602,708 811,255
========================================================== ============= ============
Trade receivables / NPDC receivables:
Trade receivables:
Included in trade receivables are crude receivables from
Chevron/NAPIMS of $10 million (2015: $36 million), Mercuria of Nil
(2015: $17 million), Shell $ 0.261 million (2015: $15 million) and
gas receivables NGC $59 million (2015: $62 million).
NPDC receivables:
NPDC receivables represent the outstanding cash calls due from
the Nigerian National Petroleum Corporation (NNPC). The receivables
have been discounted to reflect the impact of time value of money.
The resulting adjustment has been recognized in the statement of
comprehensive income. As at 30 September 2016, the undiscounted
value of this receivables is $404.3 million (2015: $491.97
million)
Deposit for investment:
By a consortium agreement made amongst parties, Newton Energy
Limited (a subsidiary of Seplat) agreed to make payments of
$453million towards an investment in 2014. In 2015, $367 million
was received from an Escrow account set up for this purpose in
respect of this investment.
a) $45m refundable deposit made towards the investment in 2014
remains with the potential vendors. As at period-end, the
investment was not consummated, this remains a deposit whilst
negotiation between the parties continue.
b) $36.5m was placed in an escrow account in London related to
the same investment pending agreements of final terms. Out of this
and in the period under review $7.5m has been paid out in
consortium fees, $8.5 million has been returned to Seplat and the
balance of $20.5 million remains in Escrow. The deal is still
ongoing with the parties concerned.
Notes to the interim condensed consolidated financial statements
continued
17. Share capital
17a Authorised and issued share capital As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
$'000 $'000
======================================================================================== ============= ============
Authorised ordinary share capital
---------------------------------------------------------------------------------------- ------------- ------------
1,000,000,000 ordinary shares denominated in Naira of 50 kobo per share 3,335 3,335
======================================================================================== ============= ============
Issued and fully paid
---------------------------------------------------------------------------------------- ------------- ------------
560,576,101 (2015: 560,576,101) issued shares denominated in Naira of 50 kobo per share 1,821 1,821
======================================================================================== ============= ============
17b Share options
In 2015, the Company gave share options (14,939,102 shares) to
certain employees and senior executives in line with its share
based incentive scheme. During the third quarter ended 30 September
2016 no shares were vested (31 December 2015: 7,265,788 shares had
vested, resulting in an increase in number of issued and fully paid
ordinary shares of 50k each from 553 million to 561 million).
17c.Capital contribution
As at 30 Sept As at 31 Dec
------------------ --------------
2016 2015
------------------ --------------
$'000 $'000
================== ==============
Cash Contribution 40,000 40,000
=================== ====== ======
40,000 40,000
=================== ====== ======
This represents M&P additional cash contribution to the
Company. In accordance with the Shareholders Agreement, the amount
was used by the Company for working capital as was required at the
commencement of operations. Subsequently, the interest held by
M&P was transferred to MPI. All terms and conditions previously
held by M&P were re-assigned to MPI.
18. Trade and other payables
As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
$'000 $'000
============================ ============= ============
Trade payable 78,792 125,408
---------------------------- ------------- ------------
Accruals and other payables 178,415 216,265
---------------------------- ------------- ------------
NDDC levy 15,724 6,272
---------------------------- ------------- ------------
Deferred revenue 1,420 1,420
---------------------------- ------------- ------------
Royalties 22,801 25,668
---------------------------- ------------- ------------
297,152 375,033
============================ ============= ============
Notes to the interim condensed consolidated financial statements
continued
19. Related party transactions
The Group is controlled by Seplat Petroleum Development Company
Plc (the parent company). The parent company is owned 21.37% by
Maurel & Prom (MPI), 15.19% either directly or by entities
controlled by A.B.C Orjiako (Shebah petroleum Development Company
Limited) and members of his family and 13.15% either directly or by
entities controlled by Austin Avuru (Professional Support Limited,
Abtrust Integrated Services and Platform Petroleum Limited). The
remaining shares in the parent company are widely held.
19a. Transactions
The Service provided by related parties are:
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.
Abtrust Integrated Services: The Chief Executive Officer of
Seplat's wife is shareholder and director. The company provides
bespoke gift hampers to Seplat.
Berwick Nigeria Limited: The chairman of Seplat is a shareholder
and director. The company provides construction services to Seplat
in relation to a field base station in Sapele.
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.
Helko Nigeria Limited: The chairman of Seplat is shareholder and
director. The company owns the lease to Seplat's main office at 25A
Lugard Avenue, Lagos, Nigeria.
Keco Nigeria Enterprises: The Chief Executive Officer's sister
is shareholder and director. The company provides diesel supplies
to Seplat in respect of its rig operations.
Montego Upstream Services Limited: The chairman's nephew is
shareholder and director. The company provides drilling and
engineering services to Seplat.
M&P (MPI SA): is a shareholder of Seplat. The Company
provides consultancy and management services to the Group.
Nabila Resources & Investment Ltd: The chairman's in-law is
a shareholder and director. The company provides lubricant to
Seplat.
Ndosumili Ventures Limited: is a subsidiary of Platform
Petroleum Limited. The company provides transportation services to
Seplat.
Nerine Support Services Limited: is owned by common shareholders
with the parent company. The company provides agency and contract
workers to Seplat.
Oriental Catering Services Limited: The Chief Executive Officer
of Seplat's spouse is shareholder and director. The company
provides catering services to Seplat at the staff canteen.
Platform Petroleum Limited: The Chief Executive Officer of
Seplat is a director and shareholder of this company. The company
seconded support staff to Seplat.
ResourcePro Inter Solutions Limited: The Chief Executive Officer
of Seplat's in-law is its UK representative. The company supplies
furniture to Seplat.
Shebah Exploration and Production Company Limited ('SEPCOL'):
The Chairman of Seplat is a director and shareholder of SEPCOL.
SEPCOL provided consulting services to Seplat.
Notes to the interim condensed consolidated financial statements
continued
The following transactions were carried by Seplat with related
parties:
Purchases of goods and services 9 months ended 9 months ended
30 Sept 2016 30 Sept 2015
-------------- --------------
$'000 $'000
================================================ ============== ==============
Shareholders of the parent company
------------------------------------------------ -------------- --------------
M&P (MPI SA) 37 -
------------------------------------------------ -------------- --------------
Shebah Petroleum Development Company Limited 689 1,011
------------------------------------------------ -------------- --------------
Platform Petroleum Limited - 176
================================================ ============== ==============
726 1,187
================================================ ============== ==============
Entities controlled by key management personnel
------------------------------------------------ -------------- --------------
Abbey Court Trading Company Limited 370 2,264
------------------------------------------------ -------------- --------------
Cardinal Drilling Services Limited 5,331 13,851
------------------------------------------------ -------------- --------------
Keco Nigeria Enterprises 191 1,815
------------------------------------------------ -------------- --------------
Ndosumili Ventures Limited 1,036 1,350
------------------------------------------------ -------------- --------------
Oriental Catering Services Limited 385 754
------------------------------------------------ -------------- --------------
ResourcePro Inter Solutions Limited 78 1,686
------------------------------------------------ -------------- --------------
Berwick Nigeria Limited 28 -
------------------------------------------------ -------------- --------------
Montego Upstream Services Limited 11,770 8,740
------------------------------------------------ -------------- --------------
Nerine Support Services Limited 8,021 16,939
------------------------------------------------ -------------- --------------
Nabila Resources & Investment Ltd 5 226
------------------------------------------------ -------------- --------------
D.D Dodo & Co - 322
------------------------------------------------ -------------- --------------
Helko Nigeria Limited 411 222
------------------------------------------------ -------------- --------------
27,626 48,169
================================================ ============== ==============
19b. Balances
The following balances were receivable from or payable to
related parties as at 30 September 2016:
Prepayments / receivables 9 months ended 9 months ended
30 Sept 2016 30 Sept 2015
-------------- --------------
$'000 $'000
================================================ ============== ==============
Entities controlled by key management personnel
------------------------------------------------ -------------- --------------
Cardinal Drilling Services Limited 7,027 9,466
------------------------------------------------ -------------- --------------
7,027 9,466
================================================ ============== ==============
Payables 9 months ended 9 months ended
30 Sept 2016 30 Sept 2015
-------------- --------------
$'000 $'000
================================================ ============== ==============
Shareholders of the parent company
------------------------------------------------ -------------- --------------
MPI 2 -
------------------------------------------------ -------------- --------------
Entities controlled by key management personnel
------------------------------------------------ -------------- --------------
Abbey Court Trading Company Limited 50 -
------------------------------------------------ -------------- --------------
Cardinal Drilling Services Limited 1,081 -
------------------------------------------------ -------------- --------------
Keco Nigeria Enterprises 64 -
------------------------------------------------ -------------- --------------
Berwick Nigeria Limited 29 -
------------------------------------------------ -------------- --------------
Montego Upstream Services Limited 5,190 -
------------------------------------------------ -------------- --------------
Nerine Support Services Limited 577 -
------------------------------------------------ -------------- --------------
6,993 -
================================================ ============== ==============
Notes to the interim condensed consolidated financial statements
continued
20. Commitments and contingencies
There was no significant commitments during this third
quarter.
The Group is involved in a number of legal suits as defendant.
The possible liabilities arising from these court proceedings
amount to Nil (31 December 2015: $299.9 million). Management and
the Group's solicitors are of the opinion that the Group will
suffer no loss from these claims.
21. Events after the reporting date
There was no significant event after the statement of financial
position date which could have a material effect on the state of
affairs of the Group as at 30 September 2016 and on the profit or
loss for the third quarter ended on that date, which have not been
adequately provided for or disclosed in these financial
statements.
22. Reconciliation of net profit to cash from operating
activities
9 months ended 9 months ended
30 Sept 2016 30 Sept 2015
-------------- ----------------
Cash provided by operating activities $'000 $'000
================================================================================== ============== ================
(Loss)/profit before taxation (87,645) 68,463
================================================================================== ============== ==============
Adjusted for:
---------------------------------------------------------------------------------- -------------- --------------
Depreciation and amortization 47,171 62,158
---------------------------------------------------------------------------------- -------------- --------------
Impairment loss 18,467 -
---------------------------------------------------------------------------------- -------------- --------------
Interest expense 58,083 61,962
---------------------------------------------------------------------------------- -------------- --------------
Interest income (27,142) (15,649)
---------------------------------------------------------------------------------- -------------- --------------
Fair value loss/(gain) 24,615 (623)
---------------------------------------------------------------------------------- -------------- --------------
Unrealised foreign exchange loss/(gains) 30,047 (7,721)
---------------------------------------------------------------------------------- -------------- --------------
Non-cash employee benefits expense - share based payments 2,498 -
---------------------------------------------------------------------------------- -------------- --------------
Decommissioning liabilities (2,575) -
Defined benefit obligation (407) -
Gain on deconsolidation of subsidiary (681) -
Changes in working capital (excluding the effects of exchange differences and
deconsolidation):
---------------------------------------------------------------------------------- -------------- --------------
Trade and other receivables and prepayments 83,813 (145,007)
---------------------------------------------------------------------------------- -------------- --------------
Trade and other payables (13,760) 8,562
---------------------------------------------------------------------------------- -------------- --------------
Inventory (26,157) (21,325)
================================================================================== ============== ==============
Net cash provided by operating activities 106,327 10,820
================================================================================== ============== ==============
Interim condensed consolidated statement of profit or loss and
other comprehensive income
For the third quarter ended 30 September 2016
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Note Unaudited Unaudited Unaudited Unaudited
================================================ ==== ============== ============== ============== ==============
Nmillion Nmillion Nmillion Nmillion
================================================ ==== ============== ============== ============== ==============
Revenue 6 47,672 83,004 18,367 34,243
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Cost of sales 7 (30,702) (45,045) (13,848) (17,677)
================================================ ==== ============== ============== ============== ==============
Gross profit 16,970 37,959 4,519 16,566
------------------------------------------------ ---- -------------- -------------- -------------- --------------
General and administrative expenses 8 (18,674) (16,648) (8,341) (6,655)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss)/gain on foreign exchange (net) 9 (6,911) 1,503 (529) (1,129)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Gain on deconsolidation of subsidiary 10c 210 - 210 -
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Fair value (loss) /gain 11 (5,693) (123) (391) 1
================================================ ==== ============== ============== ============== ==============
Operating profit (14,098) 22,691 (4,532) 8,783
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Finance income 12 6,081 3,094 387 951
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Finance charges 12 (13,447) (12,249) (5,126) (4,324)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss)/profit before taxation (21,464) 13,536 (9,271) 5,410
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Taxation 13 (2,615) 43 (2,000) -
================================================ ==== ============== ============== ============== ==============
(Loss)/profit after taxation (24,079) 13,579 (11,271) 5,410
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Profit attributable to:
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss) /profit attributable to equity holders of
parent (23,616) 12,283 (10,535) 5,652
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss) /profit attributable to non-controlling
interests (463) 1,296 (736) (242)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Other comprehensive income:
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Items that may be reclassified to profit or
loss:
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Foreign currency translation differences 141,638 17,383 28,384 36,112
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Other comprehensive income/(loss) for the period 141,638 17,383 28,384 36,112
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Total comprehensive income for the period 117,559 30,962 17,113 41,522
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Total comprehensive income attributable to
equity holders of parent 118,095 29,666 19,659 41,764
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Total comprehensive income attributable to
non-controlling interests (536) 1,296 (2,546) (242)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
(Loss) /earnings per share (N) 14 (42.13) 22.20 (18.79) 10.21
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Diluted (loss) /earnings per share (N) 14 (41.88) 22.20 (18.68) 10.21
================================================ ==== ============== ============== ============== ==============
Interim condensed consolidated statement of financial
position
As at 30 September 2016
As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
Unaudited Audited
------------- ------------
Note Nmillion Nmillion
====================================== ==== ============= ============
Assets
-------------------------------------- ---- ------------- ------------
Non-current assets
-------------------------------------- ---- ------------- ------------
Oil and gas properties 435,858 285,723
-------------------------------------- ---- ------------- ------------
Property, plant and equipment 2,678 2,307
-------------------------------------- ---- ------------- ------------
Goodwill - 398
-------------------------------------- ---- ------------- ------------
Deferred tax asset 1,359 -
-------------------------------------- ---- ------------- ------------
Prepayments 10,323 7,308
====================================== ==== ============= ============
Total non-current assets 450,218 295,736
====================================== ==== ============= ============
Current assets
-------------------------------------- ---- ------------- ------------
Inventories 33,022 16,398
-------------------------------------- ---- ------------- ------------
Trade and other receivables 16 183,223 161,310
-------------------------------------- ---- ------------- ------------
Prepayments 1,101 2,315
-------------------------------------- ---- ------------- ------------
Derivatives not designated as hedges 91 4,612
-------------------------------------- ---- ------------- ------------
Cash and short-term deposits 41,510 64,828
====================================== ==== ============= ============
Total current assets 258,947 249,463
====================================== ==== ============= ============
Total assets 709,165 545,199
====================================== ==== ============= ============
Equity and liabilities
-------------------------------------- ---- ------------- ------------
Equity attributable to shareholders
-------------------------------------- ---- ------------- ------------
Share capital 17a 282 282
-------------------------------------- ---- ------------- ------------
Capital contribution 17c 5,932 5,932
-------------------------------------- ---- ------------- ------------
Share premium 82,080 82,080
-------------------------------------- ---- ------------- ------------
Share equity reserve 2,325 1,729
-------------------------------------- ---- ------------- ------------
Retained earnings 105,930 134,919
-------------------------------------- ---- ------------- ------------
Foreign currency translation reserve 197,893 56,182
-------------------------------------- ---- ------------- ------------
Non-controlling interest - (148)
====================================== ==== ============= ============
Total equity 394,442 280,976
====================================== ==== ============= ============
Non-current liabilities
-------------------------------------- ---- ------------- ------------
Interest bearing loans & borrowings 169,739 121,063
-------------------------------------- ---- ------------- ------------
Deferred tax liabilities - 4,222
-------------------------------------- ---- ------------- ------------
Contingent consideration 3,531 4,355
-------------------------------------- ---- ------------- ------------
Provision for decommissioning 603 769
-------------------------------------- ---- ------------- ------------
Defined benefit plan 1,982 1,377
====================================== ==== ============= ============
Total non-current liabilities 175,855 131,786
====================================== ==== ============= ============
Current liabilities
-------------------------------------- ---- ------------- ------------
Trade and other payables 18 90,335 74,572
-------------------------------------- ---- ------------- ------------
Current taxation 13 7,037 48
-------------------------------------- ---- ------------- ------------
Interest bearing loans and borrowings 41,496 57,817
-------------------------------------- ---- ------------- ------------
Total current liabilities 138,868 132,437
====================================== ==== ============= ============
Total liabilities 314,723 264,223
====================================== ==== ============= ============
Total equity and liabilities 709,165 545,199
====================================== ==== ============= ============
Interim condensed consolidated statement of financial position
continued
As at 30 September 2016
The financial statements on pages 28 to 48 were approved and
authorised for issue by the board of directors on 27 October 2016
and were signed on its behalf by
A. B. C. Orjiako A. O. Avuru R.T. Brown
FRC/2013/IODN/00000003161 FRC/2013/IODN/00000003100 FRC/2014/IODN/00000007983
Chairman Chief Executive Officer Chief Financial
Officer
27 October 2016 27 October 2016 27 October 2016
Interim condensed consolidated statement of changes in
equity
For the third quarter ended 30 September 2016
Share Share Capital Share Foreign Retained Total Non-controlling Total
capital premium contribution based currency earnings equity interest
payment translation
reserves reserve
Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion
At 1 January
2016 282 82,080 5,932 1,729 56,182 134,919 281,124 (148) 280,976
(Loss)/profit
for the
period - - - - - (23,616) (23,616) (463) (24,079)
Other
comprehensive
income/(loss) - - - 141,711 - 141,711 (73) 141,638
Share based
payments - - - 596 - - 596 - 596
Dividend to
equity
holders
of the
company - - - - (5,373) (5,373) - (5,373)
Derecognition
of subsidiary - - - - - - - 684 684
At 30
September
2016
(unaudited) 282 82,080 5,932 2,325 197,893 105,930 394,442 - 394,442
============== ======== ======== ============ ======== =========== ======== ======== =============== ========
For the third quarter ended
30 September 2015
Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion Nmillion
At 1 January
2015 277 82,080 5,932 - 35,642 135,727 259,658 - 259,658
Profit for
the period - - - - - 12,283 12,283 1,296 13,579
Other
comprehensive
income/(loss) - - - - 17,383 - 17,383 - 17,383
Dividend to
equity
holders
of the
company - - - - - (9,825) (9,825) - (9,825)
Acquisition
of subsidiary - - - - - - - 219 219
============== ======== ======== ============ ======== =========== ======== ======== =============== ========
At 30
September
2015
(unaudited) 277 82,080 5,932 - 53,025 138,185 279,499 1,515 281,014
============== ======== ======== ============ ======== =========== ======== ======== =============== ========
Interim condensed consolidated statement of cash flow
For the third quarter ended 30 September 2016
9 months 9 months
ended ended
30 Sept 30 Sept
--------- ---------
2016 2015
--------- ---------
Nmillion Nmillion
--------- ---------
Note Unaudited Unaudited
======================================================================================================== ========= =========
Cash Flows from Operations Activities
-------------------------------------------------------------------------------------------------------- --------- ---------
Cash generated from operations 22 24,652 2,139
======================================================================================================== ========= =========
Net cash inflows from operating activities 24,652 2,139
======================================================================================================== ========= =========
Cash Flow from Investing Activities
-------------------------------------------------------------------------------------------------------- --------- ---------
Investment in oil and gas properties (6,102) (80,582)
-------------------------------------------------------------------------------------------------------- --------- ---------
Acquisition of property, plant and equipment (329) (438)
-------------------------------------------------------------------------------------------------------- --------- ---------
Acquisition of subsidiaries - (395)
-------------------------------------------------------------------------------------------------------- --------- ---------
Refunds from deposit for investment 72,782
-------------------------------------------------------------------------------------------------------- --------- ---------
Interest received 6,081 1,389
======================================================================================================== ========= =========
Net cash (outflows) from investing activities (350) (7,244)
======================================================================================================== ========= =========
Cash Flows from Financing Activities
-------------------------------------------------------------------------------------------------------- --------- ---------
Proceeds from bank financing - 191,187
-------------------------------------------------------------------------------------------------------- --------- ---------
Repayments of bank financing (37,019) (133,166)
-------------------------------------------------------------------------------------------------------- --------- ---------
Dividends paid (5,373) (9,825)
-------------------------------------------------------------------------------------------------------- --------- ---------
Interest paid 13,269 (11,603)
======================================================================================================== ========= =========
Net cash (outflows)/inflows from financing activities (29,123) 36,593
======================================================================================================== ========= =========
Net (decrease)/ increase in cash and cash equivalents (4,821) 31,488
-------------------------------------------------------------------------------------------------------- --------- ---------
Cash and cash equivalents at beginning of period 64,828 52,571
-------------------------------------------------------------------------------------------------------- --------- ---------
Net foreign currency exchange differences (18,497) 4,522
======================================================================================================== ========= =========
Cash and cash equivalents at end of period 41,510 88,581
======================================================================================================== ========= =========
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 Company and Allied
Matters Act 2004. The Company commenced operations on 1 August
2010. The Company is principally engaged in oil and gas exploration
and production.
The Company's registered address is: 25a Lugard Avenue, 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 per cent participating interest in the following producing
assets:
OML 4, OML 38 and OML 41 located in Nigeria. The total purchase
price for these assets was $340 million paid at the completion of
the acquisition on 31 July 2010 and a contingent payment of $33
million payable 30 days after the second anniversary, 31 July 2012,
if the average price per barrel of Brent Crude oil over the period
from acquisition up to 31 July 2012 exceeds $80 per barrel. $358.6
million was allocated to the producing assets including $18.6
million as the fair value of the contingent consideration as
calculated on acquisition date. The contingent consideration of $33
million was paid on 22 October 2012.
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 per cent
Participant interest in producing assets: the Umuseti/Igbuku
marginal field area located within OPL 283 (the "Umuseti/Igbuku
Fields"). The total purchase price for these assets was $50 million
paid at the completion of the acquisition in June 2014 and a
contingent payment of $10 million ($5 million when average daily
production of 10,500 bopd of liquid hydrocarbon sustained over a
period of one (1) month is achieved and another $5 million when
cumulative production of 10 million barrels of liquid hydrocarbons
from all fields within OML 56 is achieved) by mid-2015. The fair
value of $7.731 million was capitalised to the cost of the asset
and a corresponding liability recorded based on the probability.
These milestones were not achieved as at mid-2015 and as such the
liability was de-recognised during the year.
In 2015, the Group purchased a 40% working interest in OML 53,
onshore north eastern Niger Delta, from Chevron Nigeria Ltd. for
US$259.4 million. It also concluded negotiations to buy 56.25% of
BelemaOil Producing Ltd., a Nigerian special purpose vehicle that
bought a 40% interest in the producing OML 55, located in the swamp
to coastal zone of south eastern Niger Delta. NNPC holds the
remaining 60.00% interest in OML 55, and Seplat's effective working
interest in OML 55 as a result of the acquisition was 22.50%.
Seplat paid US$182 million to Chevron on behalf of the BelemaOil
entity, including its 22.50% interest in OML 55. It advanced
certain loans and costs of US$43 million to the other shareholders
of BelemaOil to meet their share of investments and costs
associated with BelemaOil. Seplat also paid interest of US$11.25m
as service fees towards bank debts taken by BelemaOil to fund their
share of the asset.
As at 30 June 2016, the minority shareholders of BelemaOil had
begun to dispute the Group's majority shareholding in the entity.
Based on management's judgement, the Group continued to consolidate
BelemaOil as it believed it exercised control over this
subsidiary.
Subsequently, and in a bid to settle the pending legal disputes,
representatives of both Seplat and BelemaOil have agreed to a new
arrangement which provides for a discharge sum of US$330 million,
fair valued at US$250 million, to be paid to Seplat over a six-
year period, through allocation of crude oil reserves of OML 55. In
turn, Seplat relinquishes all claims to its shareholding of
BelemaOil as an entity. The 40% stake in OML 55 will be jointly
controlled by Seplat and BelemaOil over the period of this
arrangement through an Asset Management Team comprising equal
representatives of both parties. The Asset Management Team makes
all the key decisions regarding the relevant activities of the
underlying asset, and unanimous consent of all parties is required
for decision making.
Furthermore, Seplat no longer exercises control and has now
deconsolidated BelemaOil in the financial statements in accordance
with IFRS 10 (par B97). Joint control however now exists over OML
55 through the representation on the Asset Management team. Seplat
has recorded its rights to receive the discharge sum from the crude
oil reserves of OML 55 as an investment in oil and gas assets
within oil and gas properties.
Notes to the Interim condensed consolidated financial statements
continued
The agreements have been signed by both parties but are subject
to ministerial consent. The Group however believes consent will be
received as the agreements were brokered by the Ministry of
Petroleum Resources.
The Company together with its subsidiary, Newton Energy, and
four wholly owned subsidiaries, namely, Seplat Petroleum
Development Company UK Limited ("Seplat UK"), which was
incorporated on 21 August 2014; Seplat East Onshore Limited
("Seplat East"), which was incorporated on 12 December 2014; Seplat
East Swamp Company Limited ("Seplat Swamp"), which was incorporated
on 12 December 2014; and Seplat Gas Company Limited ("Seplat Gas"),
which was incorporated on 12 December 2014, is referred to as the
Group.
Subsidiary Location Shareholding %
================================== ================= ==============
Newton Energy Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
Seplat Petroleum Development UK (United Kingdom) 100%
---------------------------------- ----------------- --------------
Seplat East Onshore Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
Seplat East Swamp Company Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
Seplat Gas Company Limited (Nigeria) 100%
---------------------------------- ----------------- --------------
2. Accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements of the
Group have been prepared in accordance with accounting standard IAS
34 Interim financial reporting. The financial information has been
prepared under the going concern assumption and historical cost
convention, except for contingent consideration, borrowings on
initial recognition and financial instruments - derivatives not
designated as hedges that have been measured at fair value. The
historical financial information is presented in Nigerian Naira and
all values are rounded to the nearest million (N'm), except when
otherwise indicated. The accounting policies are applicable to both
Company and Group.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the estimation of income tax (see note 13) and the
adoption of new and amended standards as set out below:
(a) New and amended standards adopted by the group
A number of amendments and improvements to existing standards
became effective and were adopted by the Group during the current
reporting period. None of these had a material impact on the
financial statements of the Group.
(b) Impact of standards issued but not yet applied by the entity
(i) IFRS 9 Financial instruments
IFRS 9 Financial instruments addresses the classification,
measurement and derecognition of financial assets and financial
liabilities, the standard introduces new rules for hedge accounting
and a new impairment model for financial assets. The standard does
not need to be applied until 1 January 2018 but is available for
early adoption. The group is currently assessing whether it should
adopt IFRS 9 before its mandatory date.
While the group has yet to undertake a detailed assessment of
the classification and measurement of financial assets, the Group
does not expect the new guidance to have a significant impact on
the classification and measurement of its financial assets.
There will be no impact on the group's accounting for financial
liabilities, as the new requirements only affect accounting for
financial liabilities that are designated at fair value through
profit or loss and the group does not have any such
liabilities.
The de-recognition rules have been transferred from IAS 39
Financial Instruments: Recognition and Measurement and have not
been changed.
The new hedge accounting rules will align the accounting for
hedging instruments more closely with the group's risk management
practices. As a general rule, more hedge relationships might be
eligible for hedge accounting, as the standard introduces a more
principles-based approach. The group does not expect a significant
impact on the accounting for its hedging relationships.
Notes to the interim condensed consolidated financial statements
continued
The new impairment model requires the recognition of impairment
provisions based on expected credit losses (ECL) rather than only
incurred credit losses as is the case under IAS 39. It applies to
financial assets classified at amortised
cost, debt instruments measured at FVOCI, contract assets under
IFRS 15 Revenue from Contracts with Customers, lease receivables,
loan commitments and certain financial guarantee contracts. While
the group has not yet undertaken a detailed assessment of how its
impairment provisions would be affected by the new model, it may
result in earlier recognition of credit losses.
The new standard also introduces expanded disclosure
requirements and changes in presentation. These are expected to
change the nature and extent of the group's disclosures about its
financial instruments particularly in the year of the adoption of
the new standard.
(ii) IFRS 15 Revenue from contracts with customers
The IASB has issued a new standard for the recognition of
revenue. This will replace IAS 18 which covers revenue arising from
the sale of goods and the rendering of services and IAS 11 which
covers construction contracts.
The new standard is based on the principle that revenue is
recognised when control of a good or service transfers to a
customer.
The standard permits either a full retrospective or a modified
retrospective approach for the adoption. The new standard is
effective for first interim periods within annual reporting periods
beginning on or after 1 January 2018, and will allow early
adoption.
At this stage, the group is not able to estimate the effect of
the new rules on the group's financial statements. The group will
make more detailed assessments of the effect over the next twelve
months. The group does not expect to adopt the new standard before
1 January 2018.
(iii) IFRS 16 Leases
This standard eliminates the classification of leases as either
operating or finance leases for a lessee. Instead, all leases are
treated in a similar way to finance leases under IAS 17. Leases are
'capitalised' by recognising the present value of the lease
payments and showing them either as lease assets (right-of-use
assets) or together with property, plant and equipment. If lease
payments are made over time, the Group also recognises a financial
liability representing its obligation to make future lease
payments. IFRS 16 does not require a lessee to recognise assets and
liabilities for (a) short term leases (b) leases of low-value
assets.
The Group is yet to assess the full impact of IFRS 16 and
intends to adopt IFRS 16 no later than 1 January 2019.
At this stage, the Group is not able to estimate the effect of
the new rules on the group's financial statements. The Group will
make more detailed assessments of the effect over the next twelve
months. The Group does not expect to adopt the new standard before
1 January 2019.
2.2 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 30 September
2016.
This basis is the same adopted for the last audited financial
statement as at 31 December 2015.
2.3 Functional and presentation currency
Functional and presentation currency
The Group's financial statements are presented in United States
Dollars, which is also the Company's functional currency and the
Nigerian Naira as required by the Financial Reporting Council of
Nigeria. For each entity the Group determines the functional
currency and items included in the financial statements of each
entity are measured using that functional currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of foreign currency transactions and from the
translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the
statement of comprehensive income within the line item gain/(loss)
on foreign exchange, net.
Notes to the Interim condensed consolidated financial statements
continued
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into the presentation currency at the
rate of exchange prevailing at the reporting date and their income
statements are translated at average exchange rates for the
reporting period except when there is a significant change in
foreign exchange, in this case a more appropriate rate is used. The
exchange differences arising on translation for consolidation 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.
For statutory reporting purposes, the Naira components of the
consolidated financial statements are derived from the US dollar
financial statements translation in which all monetary assets and
liabilities are translated at the closing rate, share capital at
historical rate while comprehensive income is translated at the
average rate for the period. The resulting exchange differences are
recognised in other comprehensive income and included as a separate
component of equity.
3. Segment reporting
The Group operates one segment, being the exploration,
development and production of oil and gas related products located
in Nigeria. Therefore, no segment reporting has been prepared.
4. Critical accounting estimates and judgements
4.1 Impairment of financial assets
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred loss event)
and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include
indications that the debtor or a group of debtors is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and observable
data indicating that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Management has made certain assumptions about the recoverability
of financial assets exposed to credit risk from NPDC. These are
based on management's past experiences with NPDC, current
discussions with NPDC and financial capacity of NPDC. However,
wherever these assumptions do not hold, it might have a significant
impact on the Group's profit or loss in future
4.2 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. All assumptions are reviewed at each
reporting date. The parameter most subject to change is the
discount rate and inflation 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.
The defined benefit obligation recognised in 2015 was based on
the same assumptions as in the previous financial year. The
subsequent financial year end balance was estimated as at 31
December 2015 and has been recognised in the period to date on a
pro rata basis. Therefore, no actuarial gains or losses have been
recognised given that last year's assumptions have been
adopted.
4.3 Deconsolidation of subsidiary
Following the restructuring of the arrangement with BelemaOil
with respect to OML 55, as described in Note 1, the Group has now
deconsolidated BelemaOil in these financial statements in
accordance with IFRS 10 (par B97), as it no longer exercises
control over the entity.
BelemaOil's 40% stake in OML 55 will be jointly controlled by
Seplat and BelemaOil over the period of this arrangement through an
Asset Management Team comprising of equal representatives of both
parties. The Asset Management Team makes all the key decisions
regarding the technical and commercial activities of the underlying
asset, and unanimous consent of all parties is required for
decision making. Asset management team guidelines and other
agreements that will govern the operations of the AMT are in
process and yet to be finalized. The Group therefore believes it
exercises joint control over OML 55 through its representation on
the Asset Management team. Seplat has recorded its rights to
receive the discharge sum of $330 million from the crude oil
reserves of OML 55 as an investment in oil and gas assets within
oil and gas properties. The fair value of the discharge sum on the
date of deconsolidation is $250 million as has been determined
using the income approach in line with IFRS 13 (Discounted Cash
Flow). The gain on deconsolidation recognized amounted to $ 681,000
and has been recognized in the income statement (see note 10).
5. Financial risk management
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.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group manages
liquidity risk by ensuring that sufficient funds are available to
meet its commitments as they fall due.
The Group uses both long-term and short-term cash flow
projections to monitor funding requirements for activities and to
ensure there are sufficient cash resources to meet operational
needs. Cash flow projections take into consideration the Group's
debt financing plans and covenant compliance. Surplus cash held is
transferred to the treasury department which invests in interest
bearing current accounts, 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.
Notes to the interim condensed consolidated financial statements
continued
Nigerian N million
Effective interest rate
% Less than 1 year 1 -2 2 - 3 3 - 5 After 5
years years years years Total
----------------------- ------------------ ------- ------- ------- --------- -------
30 September 2016
========================== ======================= ================== ======= ======= ======= ========= =======
Variable interest rate
borrowings:
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Bank loans:
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Zenith Bank Plc 8.5%+LIBOR 4,553 15,254 18,135 16,002 9,386 63,330
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
First Bank of Nigeria 8.5%+LIBOR 2,845 9,534 11,335 10,002 5,866 39,582
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
United Bank of Africa Plc 8.5%+LIBOR 2,845 9,534 11,335 10,002 5,866 39,582
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Stanbic IBTC Bank Plc 8.5%+LIBOR 426 1,429 1,699 1,499 879 5,932
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
The Standard Bank of South
Africa Limited 8.5%+LIBOR 426 1,429 1,699 1,499 879 5,932
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Standard Chartered Bank 6.0%+LIBOR 4,560 4,560 - - - 9,120
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Natixis 6.0%+LIBOR 4,560 4,560 - - - 9,120
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Citibank Nigeria Ltd 6.0%+LIBOR 4,560 4,560 - - - 9,120
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Bank of America Merrill
Lynch Int'l Ltd 6.0%+LIBOR 3,040 3,040 - - - 6,080
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
First Rand Bank (Merchant
Bank Division) 6.0%+LIBOR 3,040 3,040 - - - 6,080
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
JP Morgan Chase Bank NA,
London Branch 6.0%+LIBOR 3,040 3,040 - - - 6,080
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Ned Bank Ltd London Branch 6.0%+LIBOR 3,040 3,040 - - - 6,080
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Stanbic IBTC Bank Plc 6.0%+LIBOR 2,280 2,280 - - - 4,560
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
The Standard Bank of South
Africa Limited 6.0%+LIBOR 2,280 2,280 - - - 4,560
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Trade payables - 23,953 - - - 23,953
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
Contingent consideration - - - - 3,531 - 3,531
-------------------------- ----------------------- ------------------ ------- ------- ------- --------- -------
65,448 67,580 44,203 42,535 22,876 242,642
========================== ======================= ================== ======= ======= ======= ========= =======
Notes to the interim condensed consolidated financial statements
continued
Effective interest
rate Less than 1 year 1 -2 2 - 3 3 - 5 After 5
% years years years years Total
-------------------- ------------------ ------- ------- ------- --------- ---------
31 December 2015
===================== ==================== ================== ======= ======= ======= ========= =========
Variable interest
rate borrowings:
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Bank loans:
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Zenith Bank Plc 8.5%+LIBOR 16,300 14,002 10,181 14,864 4,793 60,140
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
First Bank of Nigeria 8.5%+LIBOR 10,188 8,751 6,363 9,290 2,996 37,588
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
United Bank of Africa
Plc 8.5%+LIBOR 10,188 8,751 6,363 9,290 2,996 37,588
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Stanbic IBTC Bank Plc 8.5%+LIBOR 1,527 1,312 954 1,392 449 5,634
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
The Standard Bank of
South Africa Limited 8.5%+LIBOR 1,527 1,312 954 1,392 449 5,634
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Standard Chartered
Bank 6.0%+LIBOR 3,486 5,510 - - - 8,996
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Natixis 6.0%+LIBOR 3,486 5,510 - - - 8,996
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Citibank Nigeria Ltd 6.0%+LIBOR 3,486 5,510 - - - 8,996
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Bank of America
Merrill Lynch Int'l
Ltd 6.0%+LIBOR 2,324 3,673 - - - 5,997
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
First Rand Bank
(Merchant Bank
Division) 6.0%+LIBOR 2,324 3,673 - - - 5,997
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
JP Morgan Chase Bank
NA, London Branch 6.0%+LIBOR 2,324 3,673 - - - 5,997
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Ned Bank Ltd London
Branch 6.0%+LIBOR 2,324 3,673 - - - 5,997
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Stanbic IBTC Bank Plc 6.0%+LIBOR 1,743 2,755 - - - 4,498
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
The Standard Bank of
South Africa Limited 6.0%+LIBOR 1,743 2,755 - - - 4,498
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Sterling Bank Loan - 10,439 - - - - 10,439
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Trade payables - 74,572 - - - - 74,572
--------------------- -------------------- ------------------ ------- ------- ------- --------- ---------
Contingent
consideration - - - - 4,355 - 4,355
===================== ==================== ================== ======= ======= ======= ========= =========
147,981 70,860 24,815 40,583 11,683 295,922
===================== ==================== ================== ======= ======= ======= ========= =======
Fair value measurements
Financial instruments measured at fair value were based on the
same assumptions as determined in the 31 December 2015 financial
statements. There were no updates on the judgements and estimates
made by the group in determining the fair values of the financial
instruments since the last annual financial report. There were no
transfers of financial instruments between fair value hierarchy
levels during the third quarter.
Notes to the interim condensed consolidated financial statements
continued
6. Revenue
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
================ ============== ============== ============== ==============
Crude oil sales 20,363 55,881 8,131 29,169
---------------- -------------- -------------- -------------- --------------
Underlift 8,403 16,691 922 (138)
================ ============== ============== ============== ==============
28,766 72,572 9,053 29,031
---------------- -------------- -------------- -------------- --------------
Gas sales 18,906 10,432 9,314 5,212
================ ============== ============== ============== ==============
Total revenue 47,672 83,004 18,367 34,243
================ ============== ============== ============== ==============
The off-takers for crude oil are Shell Western Supply and
Trading Limited and Mercuria.
7. Cost of sales
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
----------------------------------------- -------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
----------------------------------------- -------------- -------------- -------------- --------------
Crude handling fees 1,243 9,713 301 2,597
----------------------------------------- -------------- -------------- -------------- --------------
Barging costs 3,161 - 1,969 -
----------------------------------------- -------------- -------------- -------------- --------------
Royalties 6,305 13,667 3,612 6,211
----------------------------------------- -------------- -------------- -------------- --------------
Depletion, Depreciation and Amortisation 10,229 11,470 4,461 5,273
----------------------------------------- -------------- -------------- -------------- --------------
Niger Delta Development Commission 992 1,452 401 219
----------------------------------------- -------------- -------------- -------------- --------------
Other Rig related expenses 627 1,226 257 143
----------------------------------------- -------------- -------------- -------------- --------------
Operations & Maintenance costs 8,145 7,517 2,847 3,234
----------------------------------------- -------------- -------------- -------------- --------------
30,702 45,045 13,848 17,677
----------------------------------------- -------------- -------------- -------------- --------------
8. General and administrative expenses
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
================================== ============== ============== ============== ==============
Depreciation 1,000 817 440 311
---------------------------------- -------------- -------------- -------------- --------------
Employee benefit expense 3,587 2,781 1,433 858
---------------------------------- -------------- -------------- -------------- --------------
Professional & Consulting Fees 4,457 7,631 2,178 3,677
---------------------------------- -------------- -------------- -------------- --------------
Audit Fees 13 52 - -
---------------------------------- -------------- -------------- -------------- --------------
Directors Emoluments (Execs) 589 541 261 231
---------------------------------- -------------- -------------- -------------- --------------
Directors Emoluments (Non- Execs) 614 513 123 166
---------------------------------- -------------- -------------- -------------- --------------
Rentals 333 305 127 148
---------------------------------- -------------- -------------- -------------- --------------
Impairment loss 4,775 - 2,440
---------------------------------- -------------- -------------- -------------- --------------
Other General and Admin Expenses 3,306 4,008 1,339 1,264
================================== ============== ============== ============== ==============
18,674 16,648 8,341 6,655
================================== ============== ============== ============== ==============
Directors' emoluments have been split between Executive &
Non-Executive directors' emoluments and includes share based
benefits recognised in 2016.
There were no non-audit services rendered by the Group's
auditors during the period.
Impairment loss relates to the impairment of NPDC receivables of
$ N4.8 billion (see details in note 16 on trade and other
receivables).
Notes to the interim condensed consolidated financial statements
continued
Other general expenses relate to costs such as office
maintenance costs, telecommunication costs, logistics costs and
others.
9. (Losses)/gains on foreign exchange (net)
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
========================================= ============== ============== ============== ==============
(Losses)/gains on foreign exchange (net) (6,911) 1,503 (529) (1,129)
----------------------------------------- -------------- -------------- -------------- --------------
(6,911) 1,503 (529) (1,129)
========================================= ============== ============== ============== ==============
This is principally as a result of translation of foreign
currency denominated monetary assets and liabilities.
10. Deconsolidation of subsidiary
The details of the deconsolidation of subsidiary has been
disclosed in Note 1 - Corporate structure and business and Note 4 -
Critical accounting estimates and judgments. A summary of assets
and liabilities derecognised and the resulting gain on
deconsolidation are shown below.
10a. Summary of assets and liabilities derecognised
9 months ended
30 Sept 2016
--------------
Nmillion
============================== ==============
Non-current assets
------------------------------ --------------
Producing assets 71,946
------------------------------ --------------
Goodwill 610
------------------------------ --------------
Current assets
------------------------------ --------------
Trade and other receivables 26,334
------------------------------ --------------
Underlift 11,759
------------------------------ --------------
Total assets 110,649
------------------------------ --------------
Equity
------------------------------ --------------
Non-controlling interest (684)
------------------------------ --------------
Non-current liabilities
------------------------------ --------------
Deferred tax liability 3,905
------------------------------ --------------
Contingent consideration 3,805
------------------------------ --------------
Provision for decommissioning 10
------------------------------ --------------
Current liabilities
------------------------------ --------------
Short term borrowings 16,013
------------------------------ --------------
Trade and other payables 11,499
------------------------------ --------------
Current tax 34
------------------------------ --------------
Total liabilities 35,266
------------------------------ --------------
Total equity and liabilities 34,582
------------------------------ --------------
Net asset derecognised 76,067
============================== ==============
Notes to the interim condensed consolidated financial statements
continued
10b.Summary of assets and liabilities recognised
9 months ended
30 Sept 2016
--------------
Nmillion
================================= ==============
Investment in oil and gas assets 76,277
--------------------------------- --------------
Assets recognised 76,277
================================= ==============
Investment discharge sum agreed amounts to N100billion
($330million). This is recognized at its fair value of N76billion
($250million)
9 months ended
10c.Gain on deconsolidation of subsidiary 30 Sept 2016
--------------
Nmillion
========================================================== ==============
Summary of assets and liabilities derecognised (note 10a) (76,067)
---------------------------------------------------------- --------------
Summary of assets and liabilities recognised (note 10b) 76,277
---------------------------------------------------------- --------------
Gain on deconsolidation of BelemaOil 210
========================================================== ==============
11. Fair value (loss)/gain
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
=================================================== ============== ============== ============== ==============
Fair value (loss)/gain on commodity derivatives (5,247) - (455) -
--------------------------------------------------- -------------- -------------- -------------- --------------
Fair value (loss)/gain on contingent consideration (446) (123) 64 1
--------------------------------------------------- -------------- -------------- -------------- --------------
(5,693) (123) (391) 1
=================================================== ============== ============== ============== ==============
Fair value loss on commodity derivatives represents the losses
on crude oil price hedge charged to profit or loss. Fair value loss
on contingent consideration arises in relation to the Group's
acquisition of participating interest in its OMLs. The contingency
criteria are the achievement of certain production milestones.
12. Finance income/charges
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
====================================================== ============== ============== ============== ==============
Finance income
------------------------------------------------------ -------------- -------------- -------------- --------------
Interest income 6,081 3,094 387 951
------------------------------------------------------ -------------- -------------- -------------- --------------
Finance charges
------------------------------------------------------ -------------- -------------- -------------- --------------
Interest on bank loan and other bank charges 13,269 12,245 4,971 4,465
------------------------------------------------------ -------------- -------------- -------------- --------------
Unwinding of discount on provision for decommissioning 178 4 155 (141)
====================================================== ============== ============== ============== ==============
13,447 12,249 5,126 4,324
====================================================== ============== ============== ============== ==============
13. 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 ended 30 September 2016 is 65.75% for crude oil
activities and 30% for gas activities, compared to 0% for oil and
0% for gas activities estimated for the third quarter ended 30
September 2015. The zero tax rate in prior years was as a result of
tax incentives granted.
Notes to the interim condensed consolidated financial statements
continued
14. Earnings per share
Basic
Basic earnings per share is calculated on the Group's profit or
loss after taxation attributable to the parent entity and on the
basis of weighted average of issued and fully paid ordinary shares
at the end of the period.
Diluted EPS is calculated by dividing the profit or loss
attributable to ordinary equity holders of the parent (after
adjusting for outstanding share options arising from the share
based payment scheme) by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number
of ordinary shares that would be issued on conversion of all the
dilutive potential ordinary shares into ordinary shares.
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
==================================================== ============== ============== ============== ================
(Loss)/profit for the period attributable to equity
holders of the parent (23,616) 12,283 (10,535) 5,652
---------------------------------------------------- -------------- -------------- -------------- ----------------
Weighted average number of ordinary shares in issue
(in 000) 560,576 553,310 560,576 553,310
---------------------------------------------------- -------------- -------------- -------------- ----------------
Share Options (in 000) 3,276 - 3,276 -
---------------------------------------------------- -------------- -------------- -------------- ----------------
Weighted average number of ordinary shares adjusted
for the effect of dilution (in 000) 563,852 553,310 563,852 553,310
==================================================== ============== ============== ============== ================
N N N N
---------------------------------------------------- -------------- -------------- -------------- ----------------
Basic (loss)/earnings per share (42.13) 22.20 (18.79) 10.21
---------------------------------------------------- -------------- -------------- -------------- ----------------
Diluted (loss)/earnings per share (41.88) 22.20 (18.68) 10.21
---------------------------------------------------- -------------- -------------- -------------- ----------------
Nmillion Nmillion Nmillion Nmillion
==================================================== ============== ============== ============== ================
(Loss)/profit attributable to equity holders of the
parent (23,616) 12,283 (10,535) 5,652
==================================================== ============== ============== ============== ================
(Loss)/profit used in determining diluted earnings
per share (23,616) 12,283 (10,535) 5,652
==================================================== ============== ============== ============== ================
15. Dividend
As at 30 September 2016, no dividend was proposed (2015: N9.7
billion)
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2016 30 Sept 2015 30 Sept 2016 30 Sept 2015
-------------- -------------- -------------- --------------
Nmillion Nmillion Nmillion Nmillion
================================ ============== ============== ============== ==============
Dividend paid during the period 5,373 9,825 255 3,201
-------------------------------- -------------- -------------- -------------- --------------
N'000 N'000 N'000 N'000
-------------------------------- -------------- -------------- -------------- --------------
Dividend per share 9.58 17.76 0.45 5.79
================================ ============== ============== ============== ==============
Notes to the interim condensed consolidated financial statements
continued
16. Trade and other receivables
As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
Nmillion Nmillion
========================================================== ============= ============
Trade receivables 24,850 26,626
---------------------------------------------------------- ------------- ------------
Nigerian Petroleum Development Company (NPDC) receivables 122,070 97,824
---------------------------------------------------------- ------------- ------------
Deposit for Investments 25,923 16,948
---------------------------------------------------------- ------------- ------------
Advances to other parties - 10,573
---------------------------------------------------------- ------------- ------------
Under lift 8,340 5,381
---------------------------------------------------------- ------------- ------------
Advances to suppliers 2,735 516
---------------------------------------------------------- ------------- ------------
Receivables from commodity derivatives - 1,508
---------------------------------------------------------- ------------- ------------
Interest receivable from shareholders of BelemaOil - 1,898
---------------------------------------------------------- ------------- ------------
Other receivables 4,080 36
---------------------------------------------------------- ------------- ------------
Impairment loss on NPDC receivables (4,775) -
========================================================== ============= ============
183,223 161,310
========================================================== ============= ============
Trade receivables / NPDC receivables:
Trade receivables:
Included in trade receivables are receivables from
Chevron/NAPIMS of N3.04 billion (2015: N7.2 billion), Mercuria of
Nil (2015: N4.81billion), Shell N79.34 million (2015: N4.25billion)
and gas receivables from NGC N17.9 billion (2015:
N17.55billion).
NPDC receivables:
NPDC receivables represent the outstanding cash calls due from
the Nigerian National Petroleum Corporation (NNPC). The receivables
have been discounted to reflect the impact of time value of money.
The resulting adjustment has been recognized in the statement of
comprehensive income. As at 30 September 2016, the undiscounted
value of this receivables is N122.07 billion (2015: N97.82
billion)
Deposit for investment:
By a consortium agreement made amongst parties, Newton Energy
Limited (a subsidiary of Seplat) agreed to make payments of N137.7
billion towards an investment in 2014. In 2015, N111.6 billion was
received from an Escrow account set up for this purpose in respect
of this investment.
a) N13.7 billion refundable deposit made towards the investment
in 2014 remains with the potential vendors. As at period-end, the
investment was not consummated, this remains a deposit whilst
negotiation between the parties continue.
b) N11.1 billion was placed in an escrow account in London
related to the same investment pending agreements of final terms.
Out of this and in the period under review N2.3 billion has been
paid out in consortium fees, N2.6 billion has been returned to
Seplat and the balance of N6.2 billion remains in Escrow. The deal
is still ongoing with the parties concerned.
Notes to the interim condensed consolidated financial statements
continued
17. Share capital
17a. Authorised and issued share capital As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
Nmillion Nmillion
======================================================================================== ============= ============
Authorised ordinary share capital
---------------------------------------------------------------------------------------- ------------- ------------
1,000,000,000 ordinary shares denominated in Naira of 50 kobo per share 500 500
======================================================================================== ============= ============
Issued and fully paid
---------------------------------------------------------------------------------------- ------------- ------------
560,576,101 (2015: 560,576,101) issued shares denominated in Naira of 50 kobo per share 282 282
======================================================================================== ============= ============
17b. Share options
In 2015, the Company gave share options (14,939,102 shares) to
certain employees and senior executives in line with its share
based incentive scheme. During the third quarter ended 30 September
2016, no shares were vested (31 December 2015: 7,265,788 shares had
vested, resulting in an increase in number of issued and fully paid
ordinary shares of 50k each from 553 million to 561 million).
17c. Capital contribution
As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
Nmillion Nmillion
================== ============= ============
Cash Contribution 5,932 5,932
================== ============= ============
5,932 5,932
================== ============= ============
This represents M&P additional cash contribution to the
Company. In accordance with the Shareholders Agreement, the amount
was used by the Company for working capital as was required at the
commencement of operations. Subsequently, the interest held by
M&P was transferred to MPI. All terms and conditions previously
held by M&P were re-assigned to MPI.
18. Trade and other payables
As at 30 Sept As at 31 Dec
------------- ------------
2016 2015
------------- ------------
Nmillion Nmillion
============================ ============= ============
Trade payable 23,953 24,936
---------------------------- ------------- ------------
Accruals and other payables 54,238 43,003
---------------------------- ------------- ------------
NDDC levy 4,780 1,247
---------------------------- ------------- ------------
Deferred revenue 432 282
---------------------------- ------------- ------------
Royalties 6,932 5,104
---------------------------- ------------- ------------
90,335 74,572
============================ ============= ============
Notes to the interim condensed consolidated financial statements
continued
19. Related party transactions
The Group is controlled by Seplat Petroleum Development Company
Plc (the parent company). The parent company is owned 21.37% by
Maurel & Prom (MPI), 15.19% either directly or by entities
controlled by A.B.C Orjiako (Shebah petroleum Development Company
Limited) and members of his family and 13.15% either directly or by
entities controlled by Austin Avuru (Professional Support Limited,
Abtrust Integrated Services and Platform Petroleum Limited). The
remaining shares in the parent company are widely held.
19a. Transactions
The Service provided by related parties are:
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.
Abtrust Integrated Services: The Chief Executive Officer of
Seplat's wife is shareholder and director. The company provides
bespoke gift hampers to Seplat.
Berwick Nigeria Limited: The Chairman of Seplat is a shareholder
and director. The company provides construction services to Seplat
in relation to a field base station in Sapele.
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.
Helko Nigeria Limited: The Chairman of Seplat is shareholder and
director. The company owns the lease to Seplat's main office at 25A
Lugard Avenue, Lagos, Nigeria.
Keco Nigeria Enterprises: The Chief Executive Officer's sister
is shareholder and director. The company provides diesel supplies
to Seplat in respect of its rig operations.
Montego Upstream Services Limited: The Chairman's nephew is
shareholder and director. The company provides drilling and
engineering services to Seplat.
M&P (MPI SA): is a shareholder of Seplat. The Company
provides consultancy and management services to the Group.
Nabila Resources & Investment Ltd: The chairman's in-law is
a shareholder and director. The company provides lubricant to
Seplat.
Ndosumili Ventures Limited: is a subsidiary of Platform
Petroleum Limited. The company provides transportation services to
Seplat.
Nerine Support Services Limited: is owned by common shareholders
with the parent company. The company provides agency and contract
workers to Seplat.
Oriental Catering Services Limited: The Chief Executive Officer
of Seplat's spouse is shareholder and director. The company
provides catering services to Seplat at the staff canteen.
Platform Petroleum Limited: The Chief Executive Officer of
Seplat is a director and shareholder of this company. The company
seconded support staff to Seplat.
ResourcePro Inter Solutions Limited: The Chief Executive Officer
of Seplat's in-law is its UK representative. The company supplies
furniture to Seplat.
Shebah Exploration and Production Company Limited ('SEPCOL'):
The Chairman of Seplat is a director and shareholder of SEPCOL.
SEPCOL provided consulting services to Seplat.
Notes to the interim condensed consolidated financial statements
continued
The following transactions were carried out by Seplat with
related parties:
Purchases of goods and services 9 months ended 9 months ended
30 Sept 2016 30 Sept 2015
-------------- --------------
Nmillion Nmillion
================================================ ============== ==============
Shareholders of the parent company
------------------------------------------------ -------------- --------------
M&P (MPI SA) 9 -
------------------------------------------------ -------------- --------------
Shebah Petroleum Development Company Limited 164 202
------------------------------------------------ -------------- --------------
Platform Petroleum Limited - 35
================================================ ============== ==============
173 237
================================================ ============== ==============
Entities controlled by key management personnel
------------------------------------------------ -------------- --------------
Abbey Court Trading Company Limited 88 451
------------------------------------------------ -------------- --------------
Cardinal Drilling Services Limited 1,271 2,760
------------------------------------------------ -------------- --------------
Keco Nigeria Enterprises 45 362
------------------------------------------------ -------------- --------------
Ndosumili Ventures Limited 247 269
------------------------------------------------ -------------- --------------
Oriental Catering Services Limited 92 150
------------------------------------------------ -------------- --------------
ResourcePro Inter Solutions Limited 19 336
------------------------------------------------ -------------- --------------
Berwick Nigeria Limited 7 -
------------------------------------------------ -------------- --------------
Montego Upstream Services Limited 2,807 1,741
------------------------------------------------ -------------- --------------
Nerine Support Services Limited 1,913 3,375
------------------------------------------------ -------------- --------------
Nabila Resources & Investment Ltd 1 45
------------------------------------------------ -------------- --------------
D.D Dodo & Co 98 64
------------------------------------------------ -------------- --------------
Helko Nigeria Limited 44
================================================ ============== ==============
6,588 9,597
================================================ ============== ==============
19b. Balances
The following balances were receivable from or payable to
related parties as at 30 September 2016:
Prepayments / receivables 9 months ended 9 months ended
30 Sept 2016 30 Sept 2015
-------------- --------------
Nmillion Nmillion
================================================ ============== ==============
Entities controlled by key management personnel
------------------------------------------------ -------------- --------------
Cardinal Drilling Services Limited 2,136 1,886
------------------------------------------------ -------------- --------------
2,136 1,886
================================================ ============== ==============
Payables 9 months ended 9 months ended
30 Sept 2016 30 Sept 2015
------------------------------------------------ -------------- --------------
Nmillion Nmillion
------------------------------------------------ -------------- --------------
Shareholders of the parent company
------------------------------------------------ -------------- --------------
M&P (MPI SA) 1 -
------------------------------------------------ -------------- --------------
Entities controlled by key management personnel
------------------------------------------------ -------------- --------------
Abbey Court Trading Company Limited 15 -
------------------------------------------------ -------------- --------------
Cardinal Drilling Services Limited 329 -
------------------------------------------------ -------------- --------------
Keco Nigeria Enterprises 19 -
------------------------------------------------ -------------- --------------
Berwick Nigeria Limited 9 -
------------------------------------------------ -------------- --------------
Montego Upstream Services Limited 1,578 -
------------------------------------------------ -------------- --------------
Nerine Support Services Limited 176 -
------------------------------------------------ -------------- --------------
2,127 -
------------------------------------------------ -------------- --------------
Notes to the interim condensed consolidated financial statements
continued
20. Commitments and contingencies
There was no significant commitments during this third quarter.
The Group is involved in a number of legal suits as defendant. The
possible liabilities arising from these court proceedings amount to
Nil (31 December 2015: N59.6 billion). Management and the Group's
solicitors are of the opinion that the Group will suffer no loss
from these claims.
21. Events after the reporting date
There was no significant event after the statement of financial
position date which could have a material effect on the state of
affairs of the Group as at 30 September 2016 and on the profit or
loss for the third quarter ended on that date, which have not been
adequately provided for or disclosed in these financial
statements.
22. Reconciliation of net profit to cash from operating
activities
9 months ended Nine month ended
30 Sept 2016 30 Sept 2015
------------------------------------------------------------------------------------ -------------- ----------------
Cash provided by operating activities Nmillion Nmillion
------------------------------------------------------------------------------------ -------------- ----------------
(Loss)/profit before taxation (21,464) 13,536
------------------------------------------------------------------------------------ -------------- ----------------
Adjusted for:
------------------------------------------------------------------------------------ -------------- ----------------
Depreciation and amortization 11,229 12,288
------------------------------------------------------------------------------------ -------------- ----------------
Impairment loss 4,775 -
------------------------------------------------------------------------------------ -------------- ----------------
Interest expense 13,447 12,249
------------------------------------------------------------------------------------ -------------- ----------------
Interest income (6,081) (3,094)
------------------------------------------------------------------------------------ -------------- ----------------
Fair value loss/ (gain) 5,693 (188)
------------------------------------------------------------------------------------ -------------- ----------------
Unrealised foreign exchange loss/ (gains) 6,911 (1,526)
------------------------------------------------------------------------------------ -------------- ----------------
Non-cash employee benefits expense - share based payments 596 -
------------------------------------------------------------------------------------ -------------- ----------------
Decommissioning liabilities (614) -
------------------------------------------------------------------------------------ -------------- ----------------
Defined benefit obligation (97) -
------------------------------------------------------------------------------------ -------------- ----------------
Gain on deconsolidation of subsidiary (210) -
------------------------------------------------------------------------------------ -------------- ----------------
Changes in working capital (excluding the effect of exchange differences and
deconsolidation):
------------------------------------------------------------------------------------ -------------- ----------------
Trade and other receivables and prepayments 19,985 (28,602)
------------------------------------------------------------------------------------ -------------- ----------------
Trade and other payables (3,281) 1,692
------------------------------------------------------------------------------------ -------------- ----------------
Inventory (6,237) (4,216)
------------------------------------------------------------------------------------ -------------- ----------------
Net cash provided by operating activities 24,652 2,139
------------------------------------------------------------------------------------ -------------- ----------------
23. Exchange rates used in translating accounts to Naira
The table below shows the exchange rates used in translating the
accounts into Naira.
Basis N/$
================================ ====================== ====================
Fixed assets - opening balances Historical rate Historical
-------------------------------- ---------------------- --------------------
Fixed assets - additions Average rate 308.00
-------------------------------- ---------------------- --------------------
Fixed assets - closing balances Closing rate 304.00
-------------------------------- ---------------------- --------------------
Current assets Closing rate 304.00
-------------------------------- ---------------------- --------------------
Current liabilities Closing rate 304.00
-------------------------------- ---------------------- --------------------
Equity Historical rate On the date of issue
-------------------------------- ---------------------- --------------------
Income and Expenses:
-------------------------------- ---------------------- --------------------
Jan- May Average rate 199.17
-------------------------------- ---------------------- --------------------
June Average rate for June 227.00
-------------------------------- ---------------------- --------------------
July - Sept Average rate 308.00
-------------------------------- ---------------------- --------------------
Jan - Sept Overall average rate 238.00
================================ ====================== ====================
General information
Company secretary Mirian Kene Kachikwu
--------------------- ---------------------------
Registered office and
business
--------------------- ---------------------------
Address of directors 25a Lugard Avenue
Ikoyi
Lagos
Nigeria
--------------------- ---------------------------
Registered number RC No. 824838
--------------------- ---------------------------
FRC number FRC/2015/NBA/00000010739
--------------------- ---------------------------
Auditors Ernst & Young
(Chartered Accountants)
10(th) & 13th Floor,
UBA House
57 Marina Lagos.
--------------------- ---------------------------
Registrars DataMax Registrars
Limited
7 Anthony Village Road
Anthony
P.M.B 10014
Shomolu
Lagos, Nigeria
--------------------- ---------------------------
Solicitors Olaniwun Ajayi LP
Adepetun Caxton-Martins
Agbor & Segun ("ACAS-Law")
Herbert Smith Freehills
LLP
Freshfields Bruckhaus
Deringer LLP
Norton Rose Fulbright
LLP
Winston & Strawn London
LLP
Chief J.A. Ororho &
Co.
Ogaga Ovrawah & Co.
Consolex LP
J.E. Okodaso & Company
O. Obrik. Uloho and
Co.
V.E. Akpoguma & Co.
Thompson Okpoko & Partners
G.C. Arubayi & Co.
Jakpa Edoge & Co.
Abraham Uhunmwagho
& Co
K.S. Sogo & Co.
Winston & Strawn London
LLP
Bankers First Bank of Nigeria
Limited
Skye Bank Plc
Stanbic IBTC Bank Plc
United Bank for Africa
Plc
Zenith Bank Plc
Citibank Nigeria Limited
Standard Chartered
Bank
HSBC Bank
===================== ===========================
This information is provided by RNS
The company news service from the London Stock Exchange
END
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