TIDMSEPL
RNS Number : 6184X
Seplat Energy PLC
27 April 2023
Please see the Full Audited Results in attached PDF
http://www.rns-pdf.londonstockexchange.com/rns/6184X_1-2023-4-26.pdf
Unaudited results for the three months ended
31 March 2023
27 April 2023
Lagos and London, 27 April 2023: Seplat Energy PLC ("Seplat
Energy" or "the Company"), a leading Nigerian independent energy
company listed on both the Nigerian Exchange and the London Stock
Exchange, announces its unaudited results for the three months
ended 31 March 2023.
Financial highlights
-- Revenues up 37% to $331.0 million (including overlift of
$75.4 million), driven by higher production volumes
-- Strong cash generation of $139.9 million, capex of $44.7 million
-- Balance sheet strengthened with $459.7 million cash at bank,
net debt down to $288.2 million ($128.3 million MPNU cash deposit
not included)
-- Unit production opex of $9.0/boe
-- Average realised oil price of $82.32/bbl
-- Average realised gas price climbed to $2.88/Mscf following
price renegotiation with clients leading to upward price
adjustments
Operational highlights
-- Working interest production increased by 8.6% to 51,720
boepd, in upper half of guidance range
-- Amukpe-Escravos Pipeline (AEP) supporting higher export volumes from key Western Assets
-- New OP-15 well boosting liquids production at OML 40, with
Oben-34 well boosting gas production
-- Achieved more than 3.8 million hours without Lost Time Injury (LTI) at Seplat-operated assets
-- Full-year guidance retained at 45-55 kboepd
-- Carbon intensity figure of 26.4kg/boe
Corporate updates
-- Core annual dividend target raised by 20% to US 12 cents; Q1
dividend declared of US 3 cents per share
-- Applications submitted for conversion of Oil Mining Leases under the new PIA regime
-- The Company announced its Board of Directors' Succession Forward Plan on 25 April 2023
Update on proposed acquisition of Mobil Producing Nigeria
Unlimited (MPNU)
-- We remain confident that the proposed acquisition will be
brought to a successful conclusion and continue to engage with all
relevant parties
Basil Omiyi, Independent Chairman, said:
"Seplat Energy's management and staff have once again delivered
excellent performance, with production volumes up, unit production
cost down and strong cash generation enabling the Board to increase
our annual core dividend target from US 10 cents to US 12 cents per
share, paid in equal quarterly dividends. As a result, we have
declared a Q1 2023 dividend of US 3 cents per share.
"The year has started strongly, and we are now seeing the
benefits of the AEP, through which we are exporting significant
amounts of oil. On the ANOH gas plant, our partners have made good
progress in the quarter on delivering the OB3 and Spur pipelines,
as well as the necessary gas wells, and we maintain Q4 2023 for
first gas. We continue to engage with all relevant parties in the
proposed acquisition of MPNU and are confident of a successful
outcome.
"I wish to thank all our staff for remaining focused on
delivering this strong performance, united in their support of
Seplat's management team, against a backdrop of unnecessary
distractions that will not derail our progress and ambition to
become Nigeria's leading energy supplier.
"The Board announced its Succession Forward Plan earlier this
month and I look forward to steering this national energy champion
in my final year as Chairman, fully resolved to implement the
strong corporate governance that will enable Seplat Energy to grow
and achieve its ambition to create a sustainable business that
maximises returns for all stakeholders, while delivering an energy
transition that drives social and economic benefits for all
Nigerians."
Summary of performance
$ million billion
Q1 2023 Q1 2022 % Change Q1 2023 Q1 2022
Revenue 331.0 241.8 36.9% 152.0 100.6
Gross profit 198.3 117.3 69.0% 91.1 48.8
EBITDA * 140.2 147.8 -5.1% 64.4 61.3
Operating profit (loss) 103.7 102.1 1.6% 47.6 42.5
Profit (loss) before tax 86.1 83.4 3.2% 39.5 34.7
Cash generated from operations 139.9 178.7 -21.7% 64.2 74.4
Working interest production (boepd) 51,720 47,628 8.6%
Volumes lifted (MMbbls) 3.6 2.2 63.6%
Average realised oil price ($/bbl.) $82.32 $97.53 -15.6%
Average realised gas price ($/Mscf) $2.88 $2.76 4.4%
===================================== ======== ======== ========= ======== ========
* Adjusted for non-cash items
Responsibility for publication
This announcement has been authorised for publication on behalf
of Seplat Energy by Emeka Onwuka, Chief Financial Officer, Seplat
Energy PLC.
Signed:
Emeka Onwuka
Chief Financial Officer
Important notice
The information contained within this announcement is unaudited and deemed by the Company
to constitute inside information as stipulated under Market Abuse Regulations. Upon the publication
of this announcement via Regulatory Information Services, this inside information is now considered
to be in the public domain.
Certain statements included in these results contain forward-looking information concerning
Seplat Energy's strategy, operations, financial performance or condition, outlook, growth
opportunities or circumstances in the countries, sectors, or markets in which Seplat Energy
operates. By their nature, forward-looking statements involve uncertainty because they depend
on future circumstances and relate to events of which not all are within Seplat Energy's control
or can be predicted by Seplat Energy. Although Seplat Energy believes that the expectations
and opinions reflected in such forward-looking statements are reasonable, no assurance can
be given that such expectations and opinions will prove to have been correct. Actual results
and market conditions could differ materially from those set out in the forward-looking statements.
No part of these results constitutes, or shall be taken to constitute, an invitation or inducement
to invest in Seplat Energy or any other entity and must not be relied upon in any way in connection
with any investment decision. Seplat Energy undertakes no obligation to update any forward-looking
statements, whether because of new information, future events or otherwise, except to the
extent legally required.
Enquiries:
Seplat Energy Plc
Emeka Onwuka, Chief Financial Officer +234 1 277 0400
Eleanor Adaralegbe, Vice President, Finance
Carl Franklin, Head of Investor Relations
Ayeesha Aliyu, Investor Relations
Chioma Nwachuku, Director, External Affairs & Sustainability
============================================================== ================================
FTI Consulting
Ben Brewerton / Christopher Laing +44 203 727 1000
seplatenergy@fticonsulting.com
============================================================== ================================
Citigroup Global Markets Limited
Tom Reid / Luke Spells +44 207 986 4000
============================================================== ================================
Investec Bank plc
Chris Sim / Charles Craven / Jarrett Silver +44 207 597 4000
============================================================== ================================
About Seplat Energy
Seplat Energy PLC (Seplat) is Nigeria's leading indigenous
energy company. Listed on the Nigerian Exchange Limited (NGX:
SEPLAT) and the Main Market of the London Stock Exchange (LSE:
SEPL), we are pursuing a Nigeria-focused growth strategy in oil and
gas, as well as developing a Power & New Energy business to
lead Nigeria's energy transition.
Seplat's energy portfolio consists of seven oil and gas blocks
in the prolific Niger Delta region of Nigeria, which we operate
with partners including the Nigerian Government and other oil
producers. We also have a revenue interest in OML 55. We operate a
465MMscfd gas processing plant at Oben, in OML4, and are building
the 300MMscfd ANOH Gas Processing Plant in OML53 and a new 85MMscfd
gas processing plant at Sapele in OML41, to augment our position as
a leading supplier of gas to the domestic power generation market.
https://www.seplatenergy.com/
Operating review
Upstream business performance
Working interest production for the three months ended 31 March
2023
Q1 2023 Q1 2022
Liquids Gas Total Liquids Gas Total
Seplat bopd MMscfd boepd bopd MMscfd boepd
%
============ ======= ======== ======= ======= ======== ======= =======
OMLs 4, 38
& 41 45% 17,613 124.1 39,002 17,656 107.4 36,179
OML 40 45% 9,568 - 9,568 7,420 - 7,420
OML 53 40% 1,280 - 1,280 2,712 - 2,712
OPL 283 40% 1,870 - 1,870 1,317 - 1,317
Total 30,331 124.1 51,720 29,105 107.4 47,628
Liquid production volumes as measured at the LACT (Lease
Automatic Custody Transfer) unit for OMLs 4, 38 and 41; OML 40 and
OML 56 flow station.
Gas conversion factor of 5.8 boe per scf.
Volumes stated are subject to reconciliation and may differ from
sales volumes within the period.
Overall, oil and gas production for the period totalled 4.7
MMboe compared to 4.3 MMboe in the same period in 2022.
Seplat Energy's liquids (oil and condensate) operations produced
2.7 MMbbls on a working interest basis in Q1 2023 (Q1 2022: 2.6
MMbbls). Average working interest production continued to improve
in Q1 2023, closing in the upper half of the guidance range (set at
45-55 kboepd) at 51,720 boepd, 8.6% higher than Q1 2022 of 47,628
boepd. The split across liquids and gas was 59% liquids and 41%
gas, as liquids grew by 4.2% to 30,331 bopd (Q1 2022: 29,105 bopd)
while gas grew 15.5% to 124.1 MMscfd (Q1 2022: 107.4 MMscfd). The
increase was largely driven by the new Oben-34 gas well coming on
stream. In addition, the use of AEP has provided a significant
boost to production, adding an export route that has optimised oil
and gas production from the western assets resulting in third-party
downtime of 7% in the period. Third-party deferment for the Group
was 20%, which was majorly impacted by the high deferments rate on
Ohaji, mainly caused by tank top issues triggered by election
restrictions at the Waltersmith refinery and the TEP outage
affecting production in OML 40.
Drilling and other capital projects
The Group's 2023 drilling programme has 18 wells planned to
arrest the decline and grow production across the assets (including
non-operated assets). In the first quarter of the year, OP-17,
which was accelerated into the 2022 programme and spudded in
December was completed and producing at a gross rate of c.3,000
bopd. The Sibiri-2 well in OML 40 has been drilled to TD, with
target reservoirs completed and currently awaiting approval to
stream the well. The drilling of the remaining three wells planned
for Q1 (Ovhor DMFU-03, Orogho 8, and GB-J) is ongoing and upon
completion expected to produce a combined gross rate of c.4000 bopd
and 20 MMscfd of gas.
Construction of the 9km flowline to connect the Ethiope-2 well
completed in 2022 with expected production of c. 1000 bopd and 0.6
MMscfd gas is progressing well and scheduled to be completed by May
2023.
Midstream Gas business performance
Working interest gas volumes for the period were 124.1 MMscfd
(9M 2021: 107.4 MMscfd). The Gas business contributed 41% of the
Group's volumes on a boepd basis and 10% of Group revenues. Gas
sales volumes in the period were supported by the new Oben-34 well,
which increased gas sales to customers. In addition, improvement in
oil evacuation during the period led to a recovery in associated
gas volumes.
ANOH Gas Processing Plant
To date, the IJV (AGPC) has achieved 100% installation of all
equipment necessary for mechanical completion of the gas plant and
progressed overall mechanical project completion at the gas plant
site to 92%; we expect the plant to be mechanically complete in Q3
2023. On safety, AGPC recently achieved 8 million man-hours without
lost time injury on the project.
Our government partner, NGIC, is delivering the pipelines that
will take the gas from ANOH to the demand centres, namely the 23km
spur line and the Obiafu-Obrikom-Oben (OB3) pipeline. As previously
reported, the OB3 pipeline had been affected by the collapsing of
the HDD wall in a section of a river crossing. However, the
grouting process has since commenced and six holes have been
grouted successfully so far. In addition, all grouting rigs are now
onsite. Drilling and pipe installation operations will resume after
completion of grouting at the island section. The target completion
of tunnelling, equipment demobilisation and tie-ins of both ends is
Q3 2023. The project was at 97% completion prior to suspension of
work on the project.
On the spur line project, our government partner has confirmed
the revised completion target as Q3 2023. Line pipes required to
complete all sections of the 23.3km spur line have now been
delivered to the project site. The first phase of the spur line
(5.5km length) has been completed with another 4.5km ongoing.
Activities on the spur line will commence in the first week of May,
following remobilisation engagement with community. The project was
at 69% completion at the end of FY 2022.
Despite estimated completion for the pipeline infrastructure
being Q3 2023, we have taken a cautious approach to guidance and
further risked the completion dates, moving our guidance on first
gas to Q4 2023. Once completed, ANOH will deliver two income
streams for Seplat Energy: from OML 53's wet gas sales to the
plant, and from dividends returned to Seplat Energy from the joint
venture ANOH Gas Processing Company, which will operate the
plant.
The upstream development, including the drilling of two wells
additional to the two already completed in 2022, is expected to be
delivered by the upstream unit operator SPDC in 2023.
New Energy business
The key investment opportunities being considered include
selective entry to off-grid power generation using gas-fired
generation integrated with solar and offset possibilities on a wide
range of emission reduction activities in various global carbon
markets. We have commenced commercial due diligence and third-party
validation of the identified opportunities towards FID target of
before the end of 2023.
HSE Performance
Safe and responsible operations are critical to the delivery of
Seplat Energy's strategy. We achieved more than 3.8 million hours
without Lost Time Injury (LTI) on our operated assets.
Staff and contractors worked 1.9 million hours without
fatalities or LTI for the period. There were 16 HSE incidents in
total, compared to 23 incidents in Q1 2022. Notably, we have not
recorded any spills in the first quarter.
The estimated carbon intensity for our operated assets was 26.4
kgCO2/boe. We continue to implement initiatives to bring emissions
lower such as the Flares Out project and we have completed a
72-hour reliability run of units 1 and 2 of the Sapele Accelerated
AG solutions. The AG solution is expected to process c.26 MMscfd
and will make a significant contribution to flared gas utilisation,
reducing emissions and carbon intensity.
Proposed acquisition of MPNU
The Board remains confident that the transaction will be
approved, and we continue to work with all parties to achieve a
successful outcome. We will provide further updates as
appropriate.
Board changes
Ms. Koosum P. Kalyan was appointed as an Independent
Non-Executive Director effective 28 February 2023. Professor Fabian
Ajogwu notified the Board of his intention to step down on 21
October 2023.
Outlook
We retain our working interest production guidance of 45,000 to
55,000 boepd for the rest of 2023 (which excludes any expected
contribution from MPNU or ANOH) and capital expenditure for 2023 is
expected to be around $160 million.
Financial review
Revenue
In Q1 2023, oil prices trended lower on the back of rising
concerns about the global economy and any consequent impact on
demand for crude oil. As a result, the average price of Brent crude
fell 16% to $82.06/bbl across the period. This impacted our average
realised oil price for the quarter, which fell by 15.6% to
$82.32/bbl in Q1 2023 (Q1 2022: $97.53/bbl.).
Revenue from oil and gas sales was $330.9 million in Q1 2023, a
36.9% increase from the $241.8 million achieved in Q1 2022.
Crude oil revenue was 37.8% higher than for the same period last
year, at $297.9 million (Q1 2022: $216.2 million), reflecting
increased liquids production, limiting the impact of lower oil
prices. The total crude volume lifted for the period was 3.6
MMbbls, up 63.6% from the 2.2 MMbbls lifted in Q1 2022. The average
pipeline loss factor for the group was 3.5%.
Similarly, gas revenue rose by 29.1% to $33.0 million (Q1 2022:
$25.6 million) driven by the simultaneous increase in realised gas
prices and sales volume. The average realised gas price was higher
at $2.88/Mscf (Q1 2022: $2.76/Mscf), while gas production increased
by 15.5% to 11.2 Bscf (Q1 2022: 9.7 Bscf). The improvement in
average realised gas price reflects the impact of upward price
revisions with gas customers. Overall, improved production across
gas and liquids reflects positive impact of the Amukpe-Escravos
Pipeline (AEP), which has reduced downtime and enabled stronger
liquids and associated gas production. In addition, the completed
Oben-34 gas well provided further boost to gas production.
Gross profit
Gross profit increased by 69.0% to $198.3 million in Q1 2023,
from $117.3 million in Q1 2022, supported primarily by robust
revenue growth and efficient cost management, as growth in cost of
sales (Q1 2023: +6.6%) trailed revenue growth and production volume
growth. Non-production costs consisted primarily of $47.4 million
in royalties and DD&A of $36.2 million, compared to $50.2
million in royalties and $33.8 million DD&A in the prior year.
The lower royalties were the result of lower oil prices during the
period.
Direct operating costs, which include crude-handling charges
(CHC), barging/trucking, operations, and maintenance costs,
amounted to $45.3 million in Q1 2023, 21.2% higher than $37.4
million incurred in Q1 2022. This increase in direct operating cost
was largely due to higher CHC costs arising from the utilisation of
the Amukpe-Escravos Pipeline (AEP) which has a higher tariff than
the Trans Forcados Pipeline (TFP). We however note that this is
partly mitigated by lower losses on AEP (Q1 2023: 5.8%), compared
to TFP (Q1 2022: 8.0%).
On a cost-per-barrel equivalent basis, the production opex was
$9.0/boe (Q1 2022: $8.7/boe).
Operating profit
The operating profit for the period was $103.7 million, an
increase of 1.6%, compared to $102.1 million in Q1 2022. Operating
profit grew during the period despite the overlift of $75.4 million
which was accounted for as a deduction in other income. As
highlighted earlier, the overlift represents Seplat's excess
liquids lifting above working interest production share for the
period. This will be adjusted for in subsequent quarters as JV
partners recover production share.
General and administrative expenses of $20.5 million were 7.9%
higher than the Q1 2022 costs of $19.0 million, driven by a 24.1%
increase in employee benefits, reflecting cost of living
adjustments on staff salaries and emoluments, which was not matched
by a decrease in the ruling USD/Naira exchange rate. We continue to
put efforts in place to cut down on G&A expenses and have set
up cost champions to identify cost pressure points and implement
measures to control expenditure on those cost pressure points.
EBITDA closed the quarter at $140.2 million, after adjusting for
non-cash items, which include impairment, fair value, and exchange
losses, equating to a margin of 42.4% for the period (Q1 2022:
$147.8 million; 61.1%).
Taxation
The income tax expense of $28.5 million includes a current tax
charge of $28.0 million and a deferred tax charge of $0.5 million.
The lower deferred tax charge is because of the overlift position
in Q1 2023, a normalisation in subsequent quarters will lead to an
increase in tax expense. The effective tax rate for the period was
33% (Q1 2022: 76%).
Effective tax rate analysis Income tax expense Tax rate
Profit before tax ($'million) Current Deferred Total ETR Current
(Effective Tax rate
Tax Rate)
86.1 28.0 0.5 28.5 33.2% 27.7%
Net result
The profit before tax was 3.2% higher at $86.1 million (Q1 2022:
$83.4 million). As a result of lower taxation for the period, the
profit for the period increased by 189.1% to $57.5 million (Q1
2022: $19.9 million), with a resultant basic earnings per share of
$0.10 in Q1 2023, compared to $0.03 per share in Q1 2022.
Cash flows from operating activities
Cash generated from operations was $143.1 million (Q1 2022:
$180.9 million). Net cash flows from operating activities were
$139.9 million (Q1 2023: $178.7 million) after accounting for tax
payments of $2.1 million (Q1 2022: $0.4 million) and a hedging
premium paid of $1.2 million (Q1 2022: $1.8 million).
The Company continued to record improvements in the recovery of
receivables from the major JV partner and received $96 million in
Q1 2023 towards the settlement of cash calls from NEPL on OML 4,
38, & 41, and OML 40. As a result, the net NEPL receivable
balance now stands at $72 million, down from $90 million at the end
of 2022. The majority of the outstanding cash calls became due in
Q1 2023.
Cash flows from investing activities
Total net cash outflow in Q1 2023 was $39.7 million (Q1 2022:
$154.3 million). The net capital expenditure was $44.7 million (Q1
2022: $26.0 million) and included $29.6 million invested in
drilling and $14.3 million in engineering projects. During the
period, we received payment of $3.3 million dollars from All Grace
Energy in in respect of the divestment from the Ubima field
bringing the total received to $21.9 million (total settlement sum
is $55.0 million).
Cash flows from financing activities
Net cash outflows from financing activities were $45.3 million
(Q1 2022: $30.6 million) including $37.6 million paid out for
interest on loans & borrowings, and $4.6 million commitment fee
on various credit facilities ($350 million RCF, $110 million RBL
Facility, and $50 million junior facility).
Liquidity
The balance sheet continues to remain healthy with a solid
liquidity position.
Net debt reconciliation $ million $ million Coupon Maturity
31 March 2023 drawn
Senior notes* 661.1 650.0 7.75% April 2026
Westport RBL* 77.3 110.0 SOFR rate+8% March 2026
Off-take facility* 9.5 11.0 SOFR rate+10.5% April 2027
Total borrowings 747.9 771.0
Cash and cash equivalents (exclusive
of restricted cash) 459.7 459.7
2 88
Net debt .2
* Including amortised interest
Seplat Energy ended the first quarter with gross debt of $747.9
million (with maturities in 2026 and 2027) and cash at bank of
$459.7 million, leaving net debt at $288.2 million. The restricted
cash balance of $25.8 million includes $8.0 million and $14.4
million set aside in the stamping reserve and debt service reserve
accounts for the revolving credit facility; in addition to $0.8
million and $1 million for rent deposit and unclaimed dividend,
respectively.
Dividend
Seplat Energy has a strongly cash generative business model, a
robust cash balance and relatively low debt compared to its EBITDA.
Taking these factors into account, as well as the Company's capital
allocation needs and future prospects, the Board is recommending a
20% increase in Seplat's core dividend to US12 cents per share,
payable to shareholders as four quarterly dividends of US3 cents
per share.
Therefore, a dividend of US3 cents per share (subject to
appropriate WHT) will be paid to shareholders on 16 June 2023.
Hedging
Seplat's hedging policy aims to guarantee appropriate levels of
cash flow assurance in times of oil price weakness and volatility.
For Q1 2023, 1.5mmbbls was protected at $50/bbl. (at a cost of
$1.20/bbl.). For Q2 2023, 1.5mmbbls are protected at $50/bbl. (at a
cost of $0.94/bbl.). For Q3 2023, 1.0mmbbls protected at $50/bbl.
(at a cost of $0.82/bbl.).
Oil put options Q1 2023 Q2 2023 Q3 2023
Volume hedged (MMbbls) 1.5 1.5 1.0
Price hedged ($/bbl.) 50 50 50
Additional barrels are expected to be hedged for the fourth
quarter of 2023, in line with the approach to target hedging two
quarters in advance. The Board and management team 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.
Petroleum Industry Act (PIA) Implementation Status
Following the conditional application to convert all our assets
to the PIA regime in February 2023, our multi-disciplinary team
continues to work on the Company's readiness for compliance with
the various aspects of the PIA as the regulator completes the
guidelines for conversion. As a result, the initial long-stop date
of 30 April 2023 may no longer be feasible, and we expect an update
from NUPRC by this date.
Share dealing policy
We confirm that, to the best of our knowledge, there has been
compliance with the Company's share dealing policy during the
period.
Free float
The Company's free float on 27 April 2023 was 36%.
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