Mr. Austin Avuru, Seplat CEO
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.
This position is contained in the company’s unaudited results for the three months ended 31 March 2020 released to the NSE and LSE.
Mr. Austin Avuru, Chief Executive Officer, SEPLAT, was quoted in a statement 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.”
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.”
He explained, “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.”
The Seplat CEO made it known that to assist with the COVID-19 pandemic, the company has provided medical and food donations as part of its ongoing commitment to its local and state communities and it will continue to do whatever it can to support those upon whom it depends for its business activities.
According to Avuru, “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.”
Highlights
Operations
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
Non-current asset impairment provision of US$146 million in line with IAS 36 COVID-19 impact assessment.
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 current oil price.
2020 capex revised upwards to US$120 million from US$100 million, with two additional gas wells and related infrastructure.
Outlook for 2020
Avuru stated further that 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.
Seplat has been tested in previous adverse conditions and the company is confident that it will be stronger and more diverse in its business as it operates.
The Seplat boss was optimistic that the indigenous oil company will be more resilient against unprecedented market events.
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