Mr. Roger Brown, CEO of Seplat
-By Olufunke Afolami
The Seplat success story will not be complete without delving into how it got to the level where it is. it is one of the thriving indigenous companies in Nigeria. The company’s virile workforce is attributed to its monumental achievements in the last ten years. Thus, the flourishing progress lies on the shoulders of two major players in the management team, Mr. Austin Avuru, pioneer Chief Executive Officer (CEO) and co-founder of Seplat, who is also the outgoing CEO and Mr. Roger Brown, the Chief Financial Officer (CFO) who has been serving in that capacity for seven years and is the incoming CEO of Seplat.
At the Seplat Energy Summit, organized to show case the activities of the company and commemorate its ten years of existence in the energy sector. These two men were interviewed to give insight about the indigenous company.
Essentially, conversations in the interview were to evaluate past activities of Seplat and projecting the way forward for sustainability. The interview was moderated by Mr. Basil Omiyi, independent Executive Director of Seplat.
Excerpts:
QUESTION
I like to hear your view ten years running the affairs of the company, taking it from infancy to where Seplat is today. What are the highlights of this journey?
AVURU
It is really interesting it is like yesterday when Dr. ABC Orjiakor invited me to his office after Shell had directed both of us to form an SPV for the purpose of initiating discussions about acquiring three blocks that we consider as one asset. OML 38, 41 and 4, I still remember as yesterday driving over to Dr. ABC Orjiakor office to have the initial discussions and then we coined the word Seplat from ‘SEBCO and PLATFORM’ it sounded like a joke but here we are today from that initial meeting to all the discussions with Shell. Eventually, the discussions were fruitful with Shell and we were invited to raise the fund, pay for the asset and we did that successfully.
The next hurdle was getting all the approvals, again, all the shuttles to Abuja back to Lagos also led by Dr. ABC Orjiakor and finally we got the approvals and on the 29th of July, the assets were handed over to us. It usually took August 1st that is the advice to date but indeed it was actually July 29 that the assets were handed over to us by Shell and we kicked off with those assets on production.
On the funding, these negotiations were arrived at $73 million cash payment for these assets, $340 million to be paid immediately and $33 million differed. BLB Piber has been our adviser. They had a client that was also interested in these assets, and was about entering into Nigeria. They organized a meeting between ABC and myself, the chairman of BLB Piber in London and we basically did less than an hour presentation and they were interested. They came in and asked for an equity stake that will interest them not more than 20% of the asset since we are acquiring 45%.
For them to get 20% of the asset, they needed to get 45% of the company, that is how we ceded 45% to them and the remaining 55% between Sheba 31% and Platform 24% the transaction was closed and it became the three of us with the 45% stake inside Seplat, Sheba with 31% stake in Seplat and Platform with a 24% stake in Seplat. Then we went in backed heavily, we put some cash on the table, Platform and Sheba. The cash on the table worth $153 million, we got a brief loan through BLB Piber. They brought in $187 million plus $153 million that is how we closed and paid for the asset.
Seplat took over the asset and we were producing 17000 to 18000 barrels per day. We inherited the core production staff of Shell that were working in these assets, they took their last salary on the 31st from July and we had them in the 1st of August as Seplat staff. It was very seamless and we continued with that production of 17000 barrels per day and brought in more staff. We enlarged the company within a couple of months and in six months from where we took over, we have already gone from 17000 barrels to 35000 barrel a day. That is how we grow the production and three years after we were already at 70,000 barrels per day and heading forward.
QUESTION
Roger, this journey requires a lot of big commercial decisions, can you take us through some of these decisions?
ROGER
When the company was making its financial decisions, I was leading the group at that time and I met the Chairman and Austin. They were very smart individuals which was a key point. Some of the commercial decisions that we made were really successful in Seplat beyond growing production there are commercial negotiation discussions in place. We also acquire an asset from Chevron. One thing I would say about commercial decision of the company is the strength of the early acquisition that we won. The board is committed, it looks like what has been paid and value created and that is very critical for each individual. Of course, beyond oil, we have had a lot of gas. The acquisition from Chevron brought its own credit. The flagship project is the ease of developing the gas business. Seplat pride itself in its highest level of governance and the right level of scrutiny which is the success of the business but everyone in the company has to justify any position it is making.
QUESTION
Seplat is a successful company backed by its board that has supported the growth of its business. What is your view about the Seplat board?
AVURU
Two things I need to quickly say, when I discussed with my friends ordinarily, they tell me that the Seplat board is a goal standard board that you will like to discuss good business discussions and they are right. Look at the calibre and quality of people you see on the board, starting from you Mr. Omiyi, first Nigeria CEO of Shell in Nigeria, the biggest multinational oil and gas industry in Nigeria including others. It is a 12 member board, 3 Executive Directors, 9 non-Executive Directors including 6 independents, it is the strongest board I ever come in contact with and that kind of board puts you on your toes, so what has really happened is that we spent the last ten years building a very strong company, the right structures, the right governance, the right policies and I always say to Roger, now we have built a platform of which you will stand and build this business, that is really what we have done in the past ten years. We built a strong company that is the platform that Roger will stand on to build this business.
QUESTION
Roger, tell us about Seplat staff and its workforce?
ROGER
Every staff in Seplat has a voice at all levels, from senior management to middle management and junior staff, there are ideas and plans. Indeed, what made Seplat successful is its people. It has the right existing structures with good level of governance. Staff of the company talk about it favourably in good light. People are willing to work in Seplat and see its successes. This is critical and that is one of the biggest back bone of our success and am looking forward to take our achievements as a platform to the future.
QUESTION
Where is the business heading to in future as you take over as CEO?
ROGER
The key thing is that we are going to build on what we have achieved that is the most critical strategy and I am going to create things for this. Looking at our business, it is changing incredibly and rapidly at the moment. Two years ago, no one has heard about history but you can’t go to anywhere without hearing history in terms of environment, social and governance of Seplat. Energy is transitional and we need to deliver that transition to Nigeria. This will be in a big scale which is the biggest change for us as a business. We need to be adaptable, flexible and absolute every time to grow the GDP of Nigeria and Africa. Seplat is dealing with a young and fast-growing population.
QUESTION
Another stakeholders group that we need to talk about which is the communities where we operate. They are our landlords who have supported us to this time. What is Seplat relationship with its host communities?
AVURU
Our relationship with our communities has been built on a strong belief by everybody in the company from the chairman of the board, down to every staff. We built on one strong platform and the communities are key stakeholder in our business. We recongnise four stakeholders: the shareholders of the company, government that gives us the licence to operate, staff that create the value and the communities that give us the freedom to operate. So, we have implemented over these years policy of share value and preached it to the people to the point where every staff understands it. We are not doing the community a favour when we do anything in their place. Whether we are hiring staff from there, training people or equipping contractors to build on their capacity, based on any principle, Seplat sees the community as an integral part of its business. Seplat reward them for the job they do for the community as it operates in their land. We create a mini economy for them. Our relationship with our communities is the best success story in the past ten years.
QUESTION
What is Seplat plan to invest in Solar energy?
ROGER
Interestingly, couple of years, we had opportunity to look at the solar project with major oil companies in Nigeria which has been deliberated at the board level. We commenced a strategy to consider renewable energy two years ago. Seplat will focus specifically on what it will do in Nigeria. The country has hydro with some renewable energy, this technology is under review. Solar is a technology and a new perspective for Nigeria.
Solar is absolutely what we will be looking at as part of our strategy in moving forward and the key thing for us is partnership. Seplat aims at best partner and what it does is piece meal stepping into renewable energy. We will be doing something that the company considers quite meaningful as a business while considering other impactful projects going forward.
On the aspect of gas, Seplat will build gas supplies in-country, it be involved in renewable energy in scale.
QUESTION
Will Seplat be involved in midstream, downstream, refining and distribution of petroleum products as contributions to the society?
AVURU
Seplat is an energy company. Our goal is to provide the energy particularly to the domestic economy and every time I say domestic am referring to the entire West Africa sub-region which is our target, to provide the energy that will build up the economies of West Africa. Crude oil to be refined as products, gas to stimulate electricity generation and used by heavy industries. Going forward, we will look at the possibilities of renewable at a scale that is not just impactful but serves as a business. Everything we do is to provide the energy that the world needs while running it as a business and that is what we will continue to do.
For CSR, it comes with social responsibility and that is where our Environment Social and Governance (ESG) comes lies, the board of Seplat is taking the issue of ESG seriously, in fact a presentation on ESG has been done to the board at that level. This has to be integrated into the way we do business; we have to be profitable in what we do.
QUESTION
What is Seplat doing about reducing gas flaring, is there any possibility in investing in crude oil refining?
AVURU
Let me talk about building a company from the scratch, I will emphasise on some of the key challenges. The key thing we needed to do and get right is building the human resource by hiring competent brilliant Nigerians to run the business as a team. You know you are doing this in an environment where the competent people you are looking for are hard to get. The people you do not want are over the place chasing you for a job. Putting that resource base in place including the governance structure weaving them into a culture to drive the entire staff. To inculcate everybody, right from the board to the chairman, the lowest staff, these stand as a corporate culture which we have successful done in the past ten years.
On the issue of gas flaring for instance, the board and our investors hold us accountable. Almost accountable to a date where there will be zero flare from our operations. The past ten years, Seplat has reduced flaring to about 8% of all the gas it produced. The company is committed in eliminating flaring entirely in the next twenty-four months and we are putting structure in place making investments to ensure that every molecule of gas the company produces is not only utilized, it will be monitised and none is flared.
In refining, our business is guided by corporate strategy that is approved by the board and we renew this strategy at strategic sessions every year. In the beginning, refining and midstream business we not part of our core mandate. Our job was to produce crude oil and natural gas. We will be stepping further to be in midstream. Seplat will be processing natural gas and key into the domestic market. The company will be looking at possibilities of refining the condensing it produces out of its midstream business. We are taking a look at the refining business but it has to be an integrated fashion. Refining crude oil that we produce and delivering products into the market. The same way we take our midstream business and process the gas that is produced, send the derivatives to the market. It is going to be an integrated fashion in our business model.
The ANOH project we delivered from our side is about 15000 barrels of condensate rather than put this in a pipe NNPC has requested to refine it. Discussions are ongoing about how to make the process work.
QUESTION
How has Seplat navigated oil price depression amidst fluctuations of Nigerian currency?
ROGER
Astoundingly, we have never seen lower prices before for quite some time. What we have is a number of three main factors and one is that we control our cost base. Cost base is critical to an operator and Seplat has been driving down these costs, the other one is controlling the oil price by hedges between six to twelve months through control of debt. Another concern is about the naira that is devaluing particularly for us the money coming in is in dollars but money going out is in naira. We have been able to care for this critical aspect of our business.
Responding to Seplat relationship with its host communities, Omiyi posited that being in the company’s board for six years. “I discovered that the relationship has been good and Seplat has endured most of the issues in the Niger Delta which it sees around its competitors.” The company has had a special relationship with its host communities by providing support base for them without considering what it does as a favour. “They are part of our business and our job is to make sure they participate in what we do. If we make a contribution to local economy then of course we have made contribution to the Nigerian people.”
As a young company, Seplat numerous contributions to its host communities is a pride to the indigenous company.
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