Seplat Petroleum Development Company Plc, a leading Nigerian independent oil and gas company listed on both the Nigerian Stock Exchange (NSE) and the London Stock Exchange (LSE), has assured that its increasing revenue from gas, low oil price hedging and good cash standing, provide strong resilience to the current oil price volatility.
The first quarter financials show revenue of $130.5million in Q1’20 as against $159.5million same period in 2019, representing 18.2percent decline. In naira terms it is N42.4billion in Q1’20 against N48.9billion in Q1’19.
Gross profit was $33.1million in Q1’20 down from $81.4 million in Q1’19, representing 59.3percent decline. In naira terms it is N10.8billion in Q1’20 against N24.9billion in Q1’19.
The company reported operating loss of $77million in Q1’20 against operating profit of $32.5million in Q1’19, which implies 336.9percent decline.
In naira terms it’s operating loss was N25billion in Q1’20 against operating profit of N9.9billion in Q1’19. Seplat Q1’20 loss before deferred tax stood at $105.8million against profit before deferred tax of $35.8million in Q1’19, representing decline of 395.5percent.
In naira terms it the loss before deferred tax stood high at N34.3billion in Q1’20 as against profit before deferred tax of N10.9billion in Q1’19.
Austin Avuru, Chief Executive Officer, SEPLAT, was quoted in the release as saying that: “The business is hedged against low oil prices and a significant proportion of our revenues now come from gas, which offers further protection from oil price volatility. The Company has low production costs and can remain profitable even at lower oil prices.
“We have significant cash resources available and will continue to manage our finances prudently in 2020, expecting now to invest US$120 million of capital expenditure across the year, including two new gas wells and associated infrastructure.”
The company’s cash at bank stood $336 million, net debt of $458 million; revenue of $130 million; non-current asset impairment provision of $146 million in line with IAS 36 COVID-19 impact assessment; impairment provision reduces non-current assets from $2.34 billion to $2.20 billion and total capital expenditure of $46 million.
Seplat cash flow from operations stood at $65 million in Q1 2020.
On its outlook, Seplat expects production of 47-57 kboepd (including Eland 6-10kbopd) for full year, subject to market conditions; 1.5MMbbls/quarter hedged at $45/bbl from Q1 to Q3 2020; significant cash balance available; low cost of production enables profitability at levels below current oil price; 2020 capex revised upwards to $120 million from $100 million, with two additional gas wells and related infrastructure.
The emergence of the COVID-19 pandemic in the first quarter of 2020, as well as pressure on oil prices in March, have placed a premium on solid financial management that focuses upon low-cost production, robust cash management, a strong balance sheet and focused investment in high-return projects for sustainable future growth.
At present the company is targeting 2020 production of between 47-57 kboepd, including Eland production of 6-10 kbopd, subject to continuous evacuation being possible.
This position is contained in the company’s unaudited results for the three months ended March 31, 2020 released to the NSE and LSE on Wednesday.
Avuru added: “Against the twin crises of significantly reduced oil demand and the price war, Seplat continues to demonstrate its resilience because of its ongoing philosophy of prudent financial management, the careful mitigation of risk and a keen focus on managing factors of the business that are within our control.
“We have the benefit of long-term contracted gas revenues that are insulated from oil market volatility. We are achieving substantial cost reductions from our suppliers and managing our own costs even more carefully in this unprecedented and challenging period. We are in constant dialogue with partners on monies owed and are pleased to report that our cash flow remains robust and we have significant cash in reserve. This, coupled with the majority of our debt repayment obligations extending beyond 2021, gives us confidence that we can continue to operate comfortably within the covenants on all lines of debt.
“To assist with the COVID-19 pandemic, we have provided medical and food donations as part of our ongoing commitment to our local and state communities and we will continue to do whatever we can to support those upon whom we depend for our business.
The challenges before us remain significant, but through our extensive scenario planning, we are confident that the resilience and discipline of our business will help us through this unprecedented time and strengthen our position as Nigeria’s leading independent oil and gas producer,” he said.
Highlights of the company’s operational scorecards show low unit cost of production at $7.7/boe, with cost cutting initiatives now in force; working interest production within guidance at 48,491 boepd; liquids production of 33,368 bopd; gas production of 88 MMscfd; COVID-19 impact and mitigating actions; business continuity plan working successfully; oil field operations now working 28-day rotations (previously 14 days), with regular health checks; and substantial support for local communities, donations of medical and protective equipment and food.
Seplat has been tested in previous adverse conditions and is confident that the stronger and more diverse business it operates today will be even more resilient against these unprecedented market events.