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 the London Stock Exchange, today announces its unaudited results for the three months ended 31 March 2020.
Highlights
Operational
- The low unit cost of production at US$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
- Substantial support for local communities, donations of medical and protective equipment and food
Financial
- Cash at bank US$336 million, net debt of US$458 million
- Revenue of US$130 million, down 18.2% due to a stock build at the terminal (underlift) of $47m and lower oil prices
- Non-current asset impairment provision of US$146 million in line with IAS 36 COVID-19 impact assessment
- Impairment provision reverses a profit for Q1 2020 of US$39 million into a loss for the period of US$107 million
- Impairment provision reduces non-current assets from US$2.34 billion to US$2.20 billion
- Total capital expenditure of US$46 million
- Cash flow from operations US$65 million
Outlook
- Expected production of 47-57 kboepd (inc. Eland 6-10kbopd) for full year, subject to market conditions
- 1.5MMbbls/quarter hedged at US$45/bbl from Q1 to Q3 2020
- Significant cash balance available
- Low cost of production enables profitability at levels below the current oil price
- 2020 CAPEX revised upwards to US$120 million from US$100 million, with two additional gas wells and related infrastructure
Austin Avuru, Chief Executive Officer, said:
“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 on 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.”
Outlook for 2020
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.
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 completion of the ANOH project remains a major priority and we recently launched a financing package with responses expected from lenders in the coming weeks.
At present we are targeting 2020 production of between 47-57 kboepd, including Eland production of 6-10 kbopd, subject to continuous evacuation is possible.
Seplat has been tested in previous adverse conditions and we are confident that the stronger and more diverse business we operate today will be even more resilient against these unprecedented market events.