2020 Half-Yearly Financial Results

RNS Number : 4013U

Seplat Petroleum Development Co PLC

29 July 2020

 

Seplat Petroleum   Development   Company  Plc

2020 HALF-YEARLY FINANCIAL RESULTS  

29 July 2020

Please see the full Financial Results in attached PDF

http://www.rns-pdf.londonstockexchange.com/rns/4013U_1-2020-7-28.pdf

Seplat Petroleum Development Company Plc

Unaudited results for the six months ended 30 June 2020

Lagos and London, 29 July 2020: Seplat Petroleum Development Company Plc ("Seplat" or the "Company"), a leading Nigerian independent energy company listed on both the Nigerian Stock Exchange and the London Stock Exchange, announces its unaudited results for the six months ended 30 June 2020. 

Highlights

Operational 

· Working interest production comfortably within guidance at 51,177 boepd despite market volatility 

· Eland OML40/Ubima assets produced 10,861 bopd, 32% of Group oil volumes, integration progressing well

· Low unit cost of production at US$7.60/boe, with cost-cutting initiatives ongoing, particularly at OML40/Ubima

· Liquids production of 34,117 bopd, gas production of 99 MMscfd

· ANOH project remains on track for Q4 2021 first gas, financing RFP launched

· Amukpe-Escravos Pipeline delayed due to access to the Escravos terminal, expected operational in H2 2020

Financial 

· Cash increased to US$343 million despite lower revenues, US$29 million 2019 dividend, and US$86 million capex

· Net debt steady at US$457 million with most maturities after 2021

· Revenue US$234 million, down 34.2% due to lower oil prices and demand

· IAS 36 impairment provision of US$146 million (non-cash) in line with IAS 36 COVID-19 impact assessment

· Provision reverses operating profit of US$33 million to operating loss of US$113 million

Business continuity

· Business continuity and re-opening plan successfully mitigating the impact of COVID-19 lockdowns

· Oil field operations largely unaffected, 28-day rotations in force 

Outlook

· Full-year production guidance reiterated at 47-57 kboepd, subject to market conditions. We expect to narrow
the guidance range in Q3

· Oil hedging: 1.5MMbbl at US$45/bbl Q3 2020, 1.5MMbbl at US$30/bbl Q4 2020, 1.0MMbbl at US$30/bbl Q1 2021

· Full-year capex of US$120 million (US$86m already invested) to include two gas wells and related infrastructure

Austin Avuru, Chief Executive Officer, said:

"Seplat has delivered a robust performance despite the unprecedented crises we have experienced since March. Our continued resilience is possible as a result of our financial strength, our careful management of risk and our prudent approach to capital allocation. Unlike many in our industry, we were able to protect our 2019 dividend and increase our capital investment to ensure continued growth.

Our oil hedging strategy and gas revenues continue to protect the business from price volatility, we are achieving substantial cost reductions from our suppliers and are managing our own costs even more carefully in this challenging period. Thanks to the excellent relationships we have with our Government partners and supply chain, our NPDC receivables have fallen and we are managing our payments equitably. The cash position is also robust because our careful management of debt has ensured that the majority of obligations mature in 2022 and 2023. We are operating within our covenants on all our lines of debt.

As part of our commitment to our host communities, we have provided medical and food assistance where needed and will continue to do whatever we can to support those upon whom we depend for our business.

I was heartbroken to learn of the deaths of seven contractors in July at the operations on OML40. Health and safety is a top priority for the Seplat Group; we will learn whatever we can from the ongoing investigation into the matter and will take whatever steps are necessary to ensure such a tragedy is never repeated. 

This is my final set of results as Chief Executive of the Company I helped to found ten years ago. I thank all my staff, past and present, for working to make Seplat a major force in Nigerian energy production. I hand a robust and successful company over to Roger Brown in the confidence that he and everyone at Seplat will make its second decade even more successful than its first."

Summary of performance

	US$ million			₦ billion
	6M 2020	6M 2019	% change	6M 2020	6M 2019
Revenue	233.5	355.1	(34.2%)	80.1	108.9
Gross profit	37.7	207.0	(81.8%)	12.9	63.5
Impairment of assets *	(160.9)	(40.1)	301%	(55.2)	(12.3)
Operating profit (loss)	(112.9)	139.1	(181%)	(38.7)	42.7
Profit (loss) before deferred tax	(145.3)	120.4	(221%)	(49.8)	37.0
Operating cash flow	176.2	255.2	(31%)	63.5	78.3
Working interest production (boepd)	51,177	48,004	6.6%
Average realised oil price (US$/bbl)	35.94	65.16	(44.8%)
Average realised gas price (US$/Mscf)	2.88	2.75	4.7%

*Includes US$146.0 million IAS36 impairment on revaluation of assets and US$14.8 million impairment of financial asset

Outlook for 2020

We maintain our previous guidance of 47,000 to 57,000 boepd and remain confident of market recovery in the coming months. The business is hedged against low oil prices using put options and a significant proportion of our revenues now come from gas, which offers additional protection from oil price volatility. The Company has low production costs and continues to focus on cost savings in line with Government partner directives to reduce costs, to maintain profitability even at the lower prices we have seen this year.   

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 full year (of which US$86 million has already been invested), including two new gas wells to be drilled in H2. The timely completion of the ANOH project remains a major priority, despite the COVID-19 crisis and we recently launched a financing RFP that has already generated significant expressions of interest.

Seplat's hedging policy continues to focus upon assuring appropriate levels of cash flow in times of oil price weakness and volatility. The H2 2020 hedging programme consists of put options at a strike price of US$45.0/bbl protecting a volume of 1.5 MMbbl for the third quarter of 2020, with an additional 1.5 MMbbl being hedged more recently for the final quarter at US$30/bbl.  

Seplat has been tested in previous adverse conditions, including a lengthy shut-in, and we are confident that the stronger and more diverse business we operate today will be even more resilient against the unprecedented market events of 2020.  

Enquiries:

Seplat Petroleum Development Company Plc Roger Brown, Chief Financial Officer Carl Franklin, Head of Investor Relations Ayeesha Aliyu, Investor Relations Chioma Nwachuku, General Manager, External Affairs & Communications	[phone] [phone] [phone]
FTI Consulting Ben Brewerton / Sara Powell	[phone] [e-mail]
Citigroup Global Markets Limited Tom Reid / Luke Spells	[phone]
Investec Bank plc Chris Sim / Tejas Padalkar	[phone]

 

Results call

At 09:00am (London/Lagos) on Wednesday 29 July 2020, the Executive Management team will host a conference call and webcast to present the Company's results. 

The presentation can be accessed remotely via a live webcast link and pre-registering details are below. After the meeting, the webcast recording will be made available and access details of this recording are also set out below.

A copy of the presentation will be made available on the day of results on the Company's website at  https://seplatpetroleum.com/.

Conference call pre-register link:    

https://secure.emincote.com/client/seplat/seplat005/vip_connect

Webcast live event link:    

https://secure.emincote.com/client/seplat/seplat005

Archive link: 

https://secure.emincote.com/client/seplat/seplat005

Notes to editors

Seplat Petroleum Development Company Plc is Nigeria's leading indigenous energy company. It is listed on the Nigerian Stock Exchange (NSE: SEPLAT) and the Main Market of the London Stock Exchange (LSE: SEPL).

Seplat is pursuing a Nigeria-focused growth strategy and is well positioned to participate in future asset divestments by international oil companies, farm-in opportunities, and future licensing rounds. The Company is a leading supplier of gas to the domestic power generation market. For further information please refer to the Company website, http://seplatpetroleum.com/

Operating review

Working interest production for the six months ended 30 June 2020

				6M 2020				6M 2019
				Liquids(1)	Gas	Oil equivalent		Liquids	Gas	Oil equivalent
		Seplat %		bopd	MMscfd	boepd		bopd	MMscfd	boepd
OMLs 4, 38 & 41		45.0%		19,592	99	36,652		20,626	145	45,656
OML 40		45.0%		9,814	-	9,814		-	-	-
Ubima		88.0%		1,047	-	1,047		-	-	-
OPL 283		40.0%		863	-	863		1,175	-	1,175
OML 53		40.0%		2,801	-	2,801		1,173	-	1,173
Total				34,117	99	51,177		22,974	145	48,004

1.  Liquid production volumes as measured at the LACT unit for OMLs 4, 38 and 41; OML 40 and OPL 283 flow station.
Volumes stated are subject to reconciliation and may differ from sales volumes within the period. 

Average working-interest production for the first half of 2020 was well within guidance at 51,177 boepd, up 6.6% on H1 2019 and reflecting the first-time contribution of the acquired Eland assets.

Within this, liquids production was up 48.5% to 34,117 bopd, while gas production increased from 88 MMscfd in the first three months of 2020 to 99 MMscfd for the six-month period (H1 2019: 145 MMscfd).

During the period, there was a 76% uptime for the Trans Forcados Pipeline and the produced liquid volumes from OMLs 4, 38 and 41 were subject to 8.6% reconciliation losses.

Oil business performance

Seplat's oil operations produced an average 34,117 bopd on a working-interest basis in H1 2020. This 48.5% increase reflects a maiden contribution of 10,861 bopd (31.8% of Group volumes) from the recently acquired OML 40 and Ubima assets, as well as higher production from OML 53 compared to H1 2019.

The average price realised was US$34.94/bbl (H1 2019: US$65.16/bbl). The Company has hedged 1.5 MMbbl / quarter at US$45/bbl for the first three quarters of 2020 and 1.5 MMbbl at US$30/bbl for the final quarter of the year, using put options.

We continue to address costs across the oil business and are renegotiating supplier contracts in line with directives from our Government partners to achieve cost savings of at least 30%. At OML40 we have successfully reduced barging costs from US$14/bbl to US$9/bbl and believe further cuts will be achievable with the use of larger barges to evacuate liquids from Gbetiokun.  

During the period, Seplat completed five oil wells (Sapele-35, Ovhor-6ST, Ovhor-20, Ohaji South-5, Ohaji South-6). Eland completed the Gbetiokun-5 well, which is producing c.5,000 bopd from two strings and the Extended Well Test for Ubima is in progress with a production of c.1,200 bopd, which is expected to continue until the end of 2020.

OPEC+ quota

Following disruption to the oil market caused by the pandemic and market competition between Saudi Arabia and Russia, the Organization of Petroleum Exporting Countries and its allies (OPEC+) agreed in April 2020 to cut supply by 9.7 million barrels per day from May to June 2020, to stimulate oil prices that had collapsed as a result of the  disruption. However, Nigeria did not fully comply with the OPEC+ cut and so it exceeded its production quotas in May and June.

On 6 June, at the same time as OPEC+ agreed to extend the record output cuts by another month to further support oil price recovery, it was also decided that Nigeria and other countries that had not complied with the May and June cuts would be penalised with extra cuts from July to September 2020.

Nigeria had previously reaffirmed its commitment under the existing global agreement of 9.7 MMbbl cuts and had already committed to making additional cuts from July to September to compensate for exceeding its quotas in May and June. As a result, Seplat has been advised of production quota cuts of between 20%-30% across its assets in July and August. Seplat is compliant with the required quota for July and the quota for August is similar to Seplat's average output for the first half of the year. In the context of our full-year expectations, the impact of these quota cuts is not expected to be significant and therefore Group guidance of 47 kboepd - 57 kboepd is maintained.  

Integration of Eland

The integration of Eland is progressing well. The OML40 and Ubima fields contributed around 32% of Group oil volumes in H1 and we continue to address cost cutting at OML40 including successfully reducing barging costs from US$14/bbl to US$9/bbl and believe further cuts will be achievable with the use of larger barges to evacuate liquids from Gbetiokun.

As previously indicated, the integration process is expected to take a year to complete. We have been conducting detailed reviews to assess how best to combine the operations of Eland and Seplat in the most optimal manner. Technical reviews have focused upon the operational and exploration aspects of both businesses with a focus on how to implement best practices from each across the wider Group, as well as how to reduce operating and exploration costs where possible. Non-technical reviews are designed to identify how to merge the organisations and their supporting infrastructure for aspects such as IT, HR, payroll, and offices.

In addition, we are looking at ways to help Eland's joint venture Elcrest implement whatever best practices may be beneficial from the wider experience of Seplat, for example in health and safety, operations management, community relations and external affairs etc.

Update on Amukpe-Escravos export route

The Amukpe-Escravos pipeline is set to provide a third and more secure underground transportation option for liquids production from OMLs 4, 38 and 41. Final completion works on the 160kbopd pipeline have been much slower than anticipated as the contractor has been unable to access Escravos due to some cases of COVID-19 at the terminal.

Minimal outstanding works include fire water installation, piping completion, software and instrumentation deployment and the installation of a gantry crane. We expect the pipeline to be completed in the second half of 2020 and become fully operational to the initial permitted volume for the Seplat / NPDC joint venture of 40 kbopd. Once completed, we believe it will significantly improve the assets' production uptime and reduce losses from crude theft and reconciliation.

Gas business performance 

Seplat's working-interest production for the first half of 2020 was 99 MMscfd at an average selling price of US$2.88/Mscf (H1 2019: 145 MMscfd, US$2.75/Mscf).

Oben Gas Plant 

The Company successfully completed a 15-day turnaround maintenance for the Oben Gas Plant in March. Gas production was affected during the maintenance period and this impact was exacerbated by third-party infrastructure downtime of 24% due to associated condensate handling challenges.

The Oben-48 gas well, drilled in late 2019, came onstream in the first quarter of 2020. Two gas wells planned for the year will be drilled and completed in the second half. The initial well potential for both wells combined is expected to be 75 MMscfd.  

Sapele Gas Plant

Decommissioning of the existing gas plant reached 85% completion in the period, with only the last producing module and associated equipment outstanding. Complete decommissioning, due to be completed in the second quarter of 2020, has been delayed to the second half.

For the new plant, production of main process packages and fabrication have commenced with contracting ongoing for the balance of plant equipment. The project is expected to be completed in the second half of 2022, with Sapele's processing capacity increasing from 60 MMscfd to 75 MMscfd. The upgraded facility will achieve West African Gas Pipeline (WAGP) specifications.

ANOH Gas Processing Plant 

The ANOH Gas Processing Plant development at OML 53 will comprise a 300 MMscfd midstream gas processing plant in its first phase.

The contractors for the civil foundation works, plant roads and drainages have mobilised to site with work progressing as planned. However, the fabrication of the gas process modules has slipped slightly due to effects of COVID-19 and a recovery schedule has been put in place to close the gap to completion in line with the original work plan.

Having reviewed the construction schedule and progress on the OB3 gas pipeline, the project completion date has been revised from Q1 2021 to Q4 2021, as previously reported. The Company has assessed the effect of COVID-19 on equipment delivery and at present we do not believe it will delay the revised first-gas date of Q4 2021.

Looking ahead, we will collaborate with the upstream operator Shell Petroleum Development Company (SPDC) to spud the first ANOH well in November as planned, to ensure the upstream first-gas target is in alignment with the midstream project delivery schedule.

The total ANOH project cost is budgeted at US$700 million and NGC and Seplat have already made equity investments of US$150 million and US$180 million respectively. The final equity injection of a further US$90 million (including US$30 million due from Seplat) is expected in the second half of 2020. The accompanying debt funding of US$320 million was launched in April to a range of potential lenders and the response has been strong. We expect all the lenders to complete their credit committee approvals in August, with documentation to be fully signed and conditions precedent to be satisfied in Q4 2020.

COVID-19 response

The direct impact of COVID-19 has been far less severe in Nigeria than in many other countries. As of 24 July 2020, the Nigeria Centre for Disease Control had reported less than 39,000 cases and 833 fatalities. We are keeping the situation under daily review and will respond accordingly to any significant developments. 

As we continue to monitor developments, the health and safety of our employees, communities, partners and other stakeholders remain our top priority. We have implemented preventative measures across all Seplat sites, designed to protect our stakeholders whilst ensuring we can continue to provide the energy and fuels that Nigeria needs.

Although we have implemented a partial and carefully managed re-opening of our head office in Lagos, many employees continue to work from home and are supported by our robust technology platforms, enabling all staff to interact with our internal and external stakeholders. Our IT platforms, including Company-issued laptops for home use, comply with world-class data protection and confidentiality protocols. 

Our field operations continue to work with essential-only staffing based upon 28-day rotations instead of the usual 14-day rotations. All field staff are given regular health checks and undergo a period of quarantine before arriving at the field.

Seplat continues to provide support for its local host communities. At a national level, Seplat was one of 33 organisations that donated a combined total of US$30 million to support the Federal Government's efforts at curbing the spread of the pandemic. In addition, Seplat has provided food assistance, medical and protective equipment worth ₦50 million to help local State authorities.  

We will continue to monitor the rapidly changing dynamics and the impact of COVID-19 to comply with all State and Federal Government directives to help protect the health and safety of our stakeholders.

Accident at OML 40

On 7 July 2020, a tragic accident involving seven fatalities occurred because of an explosion during planned maintenance work by contractors at the Benin River Valve Station on OML 40 in Delta State. Our thoughts and prayers remain with the families and friends of all those who lost their lives. The NPDC/Elcrest joint venture is providing support where possible.

There were no other casualties and the flash fire was quickly extinguished. Field operations at Gbetiokun, 30km away, were unaffected. 

A detailed investigation by a combined team of NPDC / Elcrest, and led by NPDC as the operator, has begun and no further comment will be possible until the results of this investigation have been published.

Management transition and appointment of CFO

As previously announced, our founder Austin Avuru will step down as Chief Executive Officer on 31 July 2020. He will remain a member of the Board. His position as CEO will be taken by Roger Brown, who has been Seplat's Chief Financial Officer since 2013.

Emeka Onwuka will join as CFO and Board member on 1 August 2020. Mr. Onwuka has more than 30 years' experience in financial services within Sub-Saharan Africa. He has acted as Group Managing Director / CEO of Diamond Bank Plc and is a former Chairman of Enterprise Bank Limited. Mr. Onwuka is a Partner at Andersen Tax Nigeria and holds various Board positions at companies including FMDQ Securities Exchange Limited, FMDQ Holdings Limited, Ecobank Nigeria Limited and Bharti Airtel Nigeria.

Financial review

Revenue, production, and commodity prices

The price of oil recovered strongly in Q2 2020, with Brent averaging around US$41/bbl in June. The increase was driven by the recovery in global oil demand following the easing of COVID-19 lockdown measures around the world, along with OPEC+ imposing further production cuts that contributed to a gradual rebalancing of the global oil market.

Total revenue for the period was US$233.5 million, down 34.2% from the US$355.1 million achieved in 2019. Crude oil revenue was US$180.1 million (H1 2019: US$216.0 million) a 16.6% reduction compared to 2019, reflecting lower realised oil prices of US$34.94/bbl for the period (H1 2019: US$65.16/bbl). A US$49.3million oil underlift was recorded under other income in the period, compared to US$5.7 million in H1 2019.

Total working-interest sales volume for the period was 9.3 MMboe (H1 2019: 8.7 MMboe) with the total volume of crude lifted in the period being 5.0 MMbbl, compared to 3.3 MMbbl in 2019. The higher volume was due to a maiden contribution from OML40 and Ubima, and higher production from OML 53. The Company experienced reconciliation losses of 8.6% for the six-month period, and we expect these to fall when the Amukpe-Escravos underground pipeline comes onstream.

Gas sales revenue decreased by 25.9% to US$53.5 million (H1 2019: US$72.2 million), due to lower gas sales volumes of 18 Bscf compared to 26 Bscf in H1 2019. The lower volumes reflect higher downtime at third-party infrastructure and a planned 15-day shutdown of the Oben Gas Plant for turnaround maintenance in March. There were no gas processing revenues in H1 2020, compared with the one-off gas processing revenue of $66.9 million in H1 2019, which was the Oben gas plant tolling payment by the NPDC. Gas sales contributed 22.9% of total Group revenue in the period
(H1 2019: 20.3%) and the average realised gas price was US$2.88/Mscf (H1 2019: US$2.75/Mscf).

Cost-cutting initiatives

To adapt to current market conditions and as directed by its Nigerian Government partners, the Company seeks to significantly reduce costs by at least 30% across the business. Towards opex and G&A reduction, IT, administrative and travel costs have been reduced to the essentials and all third-party and service contracts are currently being renegotiated in line with Government directives to reduce costs. Drilling of oil wells has been suspended, with all non-essential capex under review, to consider only activities that can be supported in the new oil price environment.

Gross profit

Gross profit decreased to US$37.7 million (H1 2019: US$207.0 million) due to lower revenues and higher non-production costs primarily consisting of royalties and DD&A, which were US$119.7 million compared to US$96.6 million in the prior year. Eland revenues and costs are included in H1 2020 but not reflected in H1 2019. Production evacuation from the Gbetiokun and Ubima fields resulted in barging and trucking costs of US$10.7 million. These increased costs reflect the additional production volumes from the Eland assets and resultant increase in royalties and crude handling fees. On a cost-per-barrel equivalent basis, production opex was higher at US$7.60/boe (H1 2019: US$5.41/boe). Cost cutting was implemented on OML40 and Ubima during Q2 and the benefits will be reflected from Q3 onwards.

Higher general and administrative expenses of US$47.6 million (H1 2019: US$42.1 million) relate to one-off termination payments of US$2.3 million made to the Directors of Eland following its acquisition, as well as the inclusion of Eland staff and office costs. These were partially offset by lower professional fees and travel costs during the period.

IAS 36 impairments

As previously reported, under IAS 36 the Company identified the need to revalue its assets due to the significant economic uncertainty of the COVID-19 crisis. Following a reassessment of the business models and assumptions to establish their reasonableness and practicality, particularly in the current and expected oil price environment, the Company decided to book a provision of US$146.0 million in Q1 2020 across its non-financial assets.

Operating loss

The operating loss of US$112.9 million (H1 2019: US$139.1 million profit) resulted mainly from the US$146.0 million IAS 36 impairment charge detailed above and a US$14.9 million net charge against a deposit receivable made for a potential investment that the Company will no longer pursue. This was offset by adjustment for a US$49.4 million underlift position (shortfalls of crude lifted below the share of production, which is priced at date of lifting and recognised as other income) and the US$6.6 million fair value gain in relation to the Company's oil price hedges.

Tax

The Company's tax position for the first half of 2020 was a credit of US$35.1 million, compared to a tax expense of US$1.4 million for the same period in 2019. The tax credit is made up of a deferred tax credit of US$39.0 million and a current tax charge of US$3.9 million. The deferred tax credit is mainly driven by the underlift position and tax loss for the period.

Net result

The net finance charge was US$34.8 million, compared to US$18.9 million in 2019. The loss before tax adjustments was US$145.3 million (H1 2019: US$120.4 million profit before tax). The net loss for the period was US$110.2 million
(H1 2019: US$122.2 million net profit). The resultant basic loss per share was US$0.19 (H1 2019 EPS: US$0.21).

Cash flows from operating activities

Net cash flows from operating activities, after movements in working capital, were US$165.8 million (H1 2019: US$255.2 million). An income tax payment of US$10.4 million was made in the period. Seplat received a total of US$111 million towards the settlement of outstanding dollar-denominated cash calls and US$66 million (Naira equivalent) to offset Naira cash calls.

The NPDC receivable balance now stands at US$174.4 million, down from US$222.4 million at the end of 2019. Seplat maintains a good dialogue with the NPDC to ensure that receivables are settled promptly. The Group continues to receive the proceeds of gas sales from NPDC in lieu of Naira cash calls for ongoing operations.

Cash flows from investing activities

Capital expenditures in the period were US$85.9 million and included US$64.6 million drilling costs in relation to the completion of development wells, pre-drill and ongoing drilling operations costs for two development wells and associated facilities development, and engineering costs of US$18.9 million. Gas project costs included the Sapele Gas Plant upgrade project.

The Group received total proceeds of US$4.7 million in the period under the revised OML55 commercial arrangement with BelemaOil for the monetisation of 68 kbbls. The joint venture payment of US$30.0 million reflects an additional equity contribution towards the ANOH Gas Processing Plant project.

After adjusting for interest receipts of US$1.8 million, the net cash outflow from investing activities for the period was US$109.5 million, compared to a net cash outflow in 2019 of US$262.7 million, when AGPC's cash balance deconsolidated from the Group in April 2019.  

Cash flows from financing activities

Net cash outflows from financing activities were US$54.8 million (H1 2019: US$147.0 million). This reflects a further US$10.0 million drawn from the Westport RBL facility, interest and other financing charges totalling US$34.9 million and the payment of US$26.5 million for the 2019 final dividend, net of withholding taxes.

Net debt reconciliation at 30 June 2020	US$ million	Coupon	Maturity
Senior Notes *	352.4	9.25%	June 2023
Revolving Credit Facility *	347.2	Libor+6.00%	June 2022 / December 2023
Westport RBL *	99.8	Libor+8%	November 2023
Total borrowings	799.2
Cash and cash equivalents	342.6
Net debt	456.8

*including amortised interest

Overall, Seplat's aggregate indebtedness was US$799.2 million as at 30 June 2020, with cash at bank of US$342.6 million, leaving net debt at US$456.8 million.

Hedging strategy

Seplat's hedging policy aims to assure appropriate levels of cash flow in times of oil price weakness and volatility. The 2020 hedging programme consists of put options at a strike price of US$45.0/bbl protecting a volume of 4.5 MMbbl (in aggregate) for the first three quarters of 2020. An additional 1.5 MMbbl has been hedged for the final quarter at US$30/bbl. Following the oil price crash at the end of Q1 2020 and in line with IFRS, these hedges were fair-valued, leading to a mark-to-market gain of US$6.6 million. Similarly, in July we hedged 1.0 MMbbl for Q1 2021 at US$30/bbl.

The Board and management team continue to closely monitor prevailing oil market dynamics and will consider further measures to provide to provide appropriate levels of cash flow assurance in times of oil price weakness and volatility.

Principal risks and uncertainties

The Board of Directors is responsible for setting the overall risk management strategy of the Company and the determination of what level of risk is acceptable for Seplat to bear. The principal risks and uncertainties facing Seplat at the year-end are detailed in the risk management section of the 2019 Annual Report and Accounts. The board has identified the principal risks for the remainder of 2020 to be:

· Third party infrastructure downtime and the corresponding impact on oil and gas production levels

· Niger Delta stability and geo-political risk

· Oil price volatility

· JV receivable and future cash call funding

· Liquidity risk

Important notice

The information contained within this announcement is unaudited and deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

Certain statements included in these results contain forward-looking information concerning Seplat's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors, or markets in which Seplat operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances and relate to events, not all of which are within Seplat's control or can be predicted by Seplat. Although Seplat believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct. Actual results and market conditions could differ materially from those set out in the forward-looking statements. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Seplat or any other entity and must not be relied upon in any way in connection with any investment decision. Seplat undertakes no obligation to update any forward-looking statements, whether because of new information, future events or otherwise, except to the extent legally required.

Responsibility Statement

The Directors confirm that to the best of their knowledge: 

a)  The condensed set of financial statements have been prepared in accordance with lAS 34 'Interim Financial Report';

b)  The interim management report includes a fair review of the information required by UK DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and 

c)  The interim management report includes a fair review of the information required by UK DTR 4.2.8R disclosure of related parties' transactions and changes therein.

The Directors of Seplat Plc are as listed in the Group's 2019 Annual Report and Accounts.  A list of current Directors is included on the company website: www.seplatpetroleum.com. 

By order of the Board,

A. B. C. Orjiako	A. O. Avuru	R.T. Brown
FRC/2013/IODN/00000003161	FRC/2013/IODN/00000003100	FRC/2014/ANAN/00000017939
Chairman	Chief Executive Officer	Chief Financial Officer
29 July 2020	29 July 2020	29 July 2020

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO THE MEMBERS OF SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC

Introduction

We have reviewed the accompanying interim condensed consolidated statement of financial position of Seplat Petroleum Development Company Plc, ("the Company") and its subsidiaries (together "the Group") as at 30 June 2020 and the related interim condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the period then ended, and a summary of significant accounting policies and other explanatory notes.

The directors are responsible for the preparation and fair presentation of these interim condensed consolidated financial information in accordance with the International Accounting Standard 34 "Interim financial reporting". Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements do not give a true and fair view of the financial position of the Group as at 30 June 2020, and of its financial performance and its cash flows for the period then ended in accordance with the International Accounting Standard 34 "Interim financial reporting".

For: PricewaterhouseCoopers    29 July 2020

Chartered Accountants

Lagos, Nigeria

Engagement Partner: Pedro Omontuemhen

FRC/2013/ICAN/00000000739

 

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