MPI 1
Interim management statement and consolidated interim financial results
For the nine months ended 30 September 2015 (expressed in US Dollars and Naira)
26 October 2015
Seplat Petroleum Development Company Plc
Seplat Petroleum Development Company PlcInterim management statement and consolidated interim financial results for the nine months ended 30 September 2015
Lagos and London, 26 October 2015: Seplat Petroleum Development Company Plc ('Seplat' or the 'Company'), a leading Nigerian indigenous oil and gas company listed on both the Nigerian Stock Exchange and London Stock Exchange, today announces average working interest production for the first nine months of 40,012 boepd, up 38% year-on-year and ahead of full year guidance. In addition, there has been a marked improvement in uptime of the Trans Forcados System ('TFS'), with only two days of interruptions recorded in the third quarter, and gas production has been strong with gross sales into the domestic market regularly exceeding 300 MMscfd. These positive factors allowed the Company to reach record levels of daily net working interest production of up to 56,415 boepd in September 2015.
After lifting adjustments, crude revenue was US$367 million, 36% lower than in 2014 against a 55% decrease in average oil price. Gas revenue increased by 220% year-on-year to US$53 million as the step-change in gas production, arising from commissioning in June of the Oben gas plant expansion, takes effect.
Gross profit stood at US$192 million and net profit US$62 million. Capital investments incurred during the first nine months totaled US$98 million against operating cash flow before working capital of US$168 million. Cash at bank was US$445 million and net debt US$480 million at period end.
The outstanding NPDC net receivable as at 30 September was US$461 million, down from US$504 million at mid-year, the reduction coming primarily as a result of the agreement signed between Seplat and NPDC in July whereby gas revenues attributable to NPDC's interest in OMLs 4, 38 and 41 are offset against the balance of arrears. Pursuant to the agreement NPDC and Seplat are also engaged with potential counterparties to provide joint venture loan facilities of up to US$300 million to fund cash calls with effect from January and further accelerate repayment of arrears.
'Our operating performance in the third quarter has been very strong, and has restored momentum to the business after a first half that was heavily impacted by infrastructure downtime. Having gone through a period of sharp adjustment to the drop in oil prices the business is on a sound financial footing, we remain profitable and are on track to deliver our production guidance for the year,' said Austin Avuru, Seplat's Chief Executive Officer. 'But perhaps most notably, it is pleasing to witness the positive impact our gas business is having in Nigeria with the uptick in our gas output correlating directly to an increase in gas fired power generation in July onwards. This is a direct result of the substantial investments we have made at OMLs 4, 38 and 41 that have enabled the full and accelerated development of the blocks' potential,' he added.
Information contained within this release is un-audited and is subject to further review.
Average working interest production during the first nine months increased by 38% to 40,012 boepd (compared to 29,014 boepd for the same period in 2014) and comprised 27,270 bopd liquids and 76.5 MMscfd gas; guidance of 32,000 to 36,000 boepd for the full year is prudently maintained given the scope for interruptions to third party infrastructure that is beyond the Company's control
Reported production figures reflect 54 full and 29 partial days of downtime on the third party operated TFS in the first nine months (two days recorded in Q3). There were no shut-ins recorded at OML 53 and OML 55. Excluding downtime, average working interest production in the first nine months was 45,301 boepd (comprising 32,559 bopd liquids and 73.9 MMscfd gas)
Deliveries to the Warri refinery via the Seplat operated alternative export pipeline were 385,060 bbls (versus 288,661 bbls in Q3 2014)
During the first nine months, approximately 97% of liquids production from OMLs 4, 38 and 41 was transported through the TFS. This volume was subject to an average of 12.0% reconciliation losses
Average oil price realisation of US$49.3/bbl (2014: US$109.9/bbl), achieving an average US$1.2/bbl premium to Brent, and an average gas price of US$2.53/Mscf (2014: US$1.60/Mscf)
Working interest production for the first nine months of 2015(1)Gross
Working Interest
Liquids
Gas
Oil equivalent
Liquids
Gas
Oil equivalent
Seplat %
bopd
MMscfd
Boepd
bopd
MMscfd
boepd
OMLs 4, 38 & 41
45.0%
53,525
169.9
81,840
24,086
76.5
36,828
OPL 283
40.0%
2,634
-
2,634
1,054
-
1,054
OML 53
40.0%
1,550
-
1,550
620
-
620
OML 55 (2)
22.5%
6,715
-
6,715
1,511
-
1,511
Total
64,423
169.9
92,738
27,270
76.5
40,012
(1) Liquid production volumes as measured at the LACT unit for OMLs 4, 38 and 41 and OPL 283 flow station. Volumes stated are subject to reconciliation and will differ from sales volumes within the period.
(2) Volumes associated with Seplat's 56.25% in Belemaoil producing Limited, equivalent to an effective 22.5% working interest in OML 55
Drilling and capital projects updateThe Company completed six development wells in the period (four gas wells; two oil wells) and one workover oil well
Following final commissioning of the new 150 MMscfd Oben gas plant and integration with the old gas plant in the period, engineering designs and procurement for the second phase of gas plant expansion has commenced. The next phase is intended to install an additional 225 MMscfd processing capacity
Work has progressed on construction of the 2 X 50,000 bbl storage tank at the Amukpe field. One of the tanks has been completed and is now operational. The second tank has been fully tested, is undergoing calibration and expected to be available for use in Q4 on completion of associated ancillaries. The additional storage capacity will allow for gas production and sales to continue even during periods of downtime on the TFS
Installation of the three 10MMscfd compressors was completed in Q3. The plant was commissioned in September and is currently in a standard 90 days operations and maintenance phase
Work on the replacement of a 4.2 km section of the Amukpe-Rapele crude export line has progressed to over 90% completion level and the replacement section is place. The work will be completed in Q4 and will prolong pipeline life without disruption to production
Corporate updateIn July 2015 the Company entered into a signed agreement with NPDC on terms for the payment of receivables due to Seplat and also for the future structure of joint venture funding to mitigate the risk of the receivable. Pursuant to the agreement outstanding sums owed to Seplat in relation to joint venture, expenditures up to 31 December 2014 will be settled by offsetting gas revenues attributable to NPDC's 55% share of contracted gas sales. Furthermore, NPDC and Seplat have agreed to jointly source loan facilities, up to a limit of US$300 million, to fund joint venture cash calls with effect from January 2015. Under the agreed structure, once such facilities are in place, NPDC and Seplat will each contribute crude oil production commensurate with their respective obligations. Consequently, the Company has engaged with potential counterparties to implement this arrangement
Also in July 2015, the Company announced that it had reached agreement for release of the sums from escrow that it had previously been allocated as a refundable deposit against a potential investment by a consortium. The net funds returned to the Company, and reinstated as unrestricted cash at bank, were US$368 million. A sum of US$45 million remains in escrow as a deposit with the potential vendors whilst negotiations with the consortium continue, and US$29 million was placed into a new escrow account in London pending outcome of the ongoing negotiations. The Company also agreed to pay a portion of previously incurred consortium costs, amounting to US$11 million, US$3.5 million of which has been paid and US$7.5 million of which is payable on a deferred basis and is presently also held in the escrow account (total amount in escrow US$36.5 million)
In early 2015 the Nigeria Investment Promotional Council ('NIPC') notified oil and gas companies which are in receipt of the pioneer tax incentive, of its intention to test compliance with the conditions under which the incentive was granted to all companies, including Seplat, in order for the final two out of five years of the incentive be received. The Company is currently engaged with NIPC on this process and expects an outcome during the fourth quarter of 2015. The Company considers itself to have met or exceeded all conditions
Finance updateGross revenue for the first nine months was US$420 million (N83.0 billion) (2014: US$592 million (N92.0 billion)) lower than for the same period in 2014 mainly due to the significantly lower realised oil price, partially offset by increased gas sales volumes and higher gas pricing
Crude revenue (after lifting adjustments) was US$367 million (N72.6 billion), a 36% decrease from the same period in 2014 (US$576 million (N89.4 billion)) reflecting a -55% decrease in the realised oil
Gas revenue was US$53 million (N10.4 billion), a 220% increase from the same period in 2014 driven by the increased production capacity resulting from new wells and work-overs completed by the Company, a doubling of gas processing capacity at the Oben plant to 300 MMscfd and higher offtake from the gas buyers
Working interest sales volumes during the first nine months increased to 10.9 MMboe from 7.1 MMboe in 2014. The total volume of crude lifted in the first three months was 5.1 MMbbls compared to 5.3 MMbbls in 2014. Total gas volume sold was 3.5 MMboe (2014: 1.8 MMboe)
Nine month net profit was US$62 million (2014: US$228 million)
Decrease year-on-year is primarily due to the lower realised oil price and increased finance charges offsetting the higher overall sales volumes and reductions in cost of sales and G&A
Having put in place during April 2015, deferred premium puts covering a volume of 4.4 MMbbls to year-end at a strike price of US$52.0/bbl, the net amount paid out to end September was US$3.2 million. Under this arrangement the Company has a volume of 1.6 MMbbls hedged over the fourth quarter. The board and management continue to 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
Cash at bank US$445 million (N88.6 billion) at 30 September comprising US$343 million unrestricted funds and US$102 million held in debt service and escrow accounts
Debt principal repayments of US$37 million were made in the third quarter, bringing total repayments in the first nine months to US$75 million
Gross debt at 30 September US$925 million
Net debt at 30 September US$480 million
Capital investments of US$98 million incurred in the first nine months funded by net operating cash flow before working capital of US$168 million; full year capex expectation is around US$168 million
The outstanding NPDC net receivable at 30 September was US$461 million (N91.7 billion), consisting of both current year performances and outstanding payments brought forward from prior period performances; of the outstanding receivables balance US$300 million is approved as cash calls with the remainder still undergoing various discussions and approval levels within NPDC
NPDC receivable movements in 2015
US$ million
Opening balance at start year
463
Receipts in first nine months
(133)
Payments in first nine months
220
Gas revenues withheld
(40)
Headline receivable at 30 September
510
Crude handling charges withheld
(49)
Net receivable at 30 September
461
Interim dividendIn line with its dividend policy, and as a result of a stronger Q3 performance, the board of Seplat has agreed an interim core dividend of US$0.04 per share. The dividend will be paid on or shortly after 17 November 2015 to shareholders on the register at the close of business on 29 October 2015. The Nigerian shareholder register will be temporarily closed on 30 October 2015 to enable the Company's registrar, DataMax Registrars Limited ('DataMax'), to prepare for the payment of the interim dividend.
Seplat shareholders who are yet to provide their account details for the direct credit of the interim dividend payment should provide necessary information to DataMax. Holders of Depositary Interests on the London Stock Exchange should contact the Company's UK depositary, Computershare.
DataMax Registrars Limited | Computershare |
2c Gbagada Expressway | The Pavillions |
Gbagada Phase 1 | Bridgewater Road |
Lagos | Bristol |
Fax: + 234 - 2716095 | BS13 8AE |
Web: www.datamaxregistrars.com | Web: www.computershare.com |
Email address: misan.kofi-senaya@datamaxregistrars.com | |
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