Nigeria’s Seplat Petroleum Development posted net profits of US$265 million in 2017, versus a loss of US$166 million in 2016. Setting out its full-year earnings on February 28, the company reported production of 36,923 boepd.
The same day, Seplat announced plans for a five- or seven-year US dollar-denominated bond, to reduce indebtedness.
The company reported after-tax profits for the third and fourth quarters at US$24 million and US$46 million respectively, following a mid-year loss of US$26 million. Full-year revenue was US$452 million, with US$112 million of operating profit.
Production was 17,853 bpd of oil and 3.23 mcm per day of gas. After the lifting of force majeure in June, the company reported 47,552 boepd of production, made up of 26,257 bpd of liquids and 3.57 mcm per day.
Seplat “registered strong cash flow performance and significantly strengthened the balance sheet [in 2017]. In a year of contrast we were plagued throughout most of the first half by force majeure at the Forcados terminal. However, following the lifting of force majeure on June 6 we rapidly restored full production operations and our subsequent operational and financial performance is a clear indicator of our strong fundamentals and what we can achieve when we have unhindered access to market,” said Seplat’s CEO, Austin Avuru.
In line with plans set out by Eroton Exploration and Production, Seplat talked up the importance of multiple export routes.
During 2017, Seplat completed repairs and upgrades to two jetties at the Warri refinery, allowing 30,000 bpd gross – effectively doubling capacity – to be exported via this route. While barging costs on this route are high, at around US$11 per barrel, there are no reconciliation losses or terminal charges.
The Amukpe-Escravos link should be commissioned and operational in the third quarter of this year. This link has 160,000 bpd of capacity and will provide a third route for Oil Mining Licence (OML) 4, 38 and 41.
Alternative export routes, beyond Forcados, are increasingly important to Seplat as the company’s gas business grows. Shutting in oil production requires the company also to shut in gas production, as condensate could no longer be included in flows.
Avuru noted the “record contribution” of gas in 2017, which “continues to demonstrate the robustness of its revenues providing a key source of growth and diversification”, in addition to providing much-needed supplies to the Nigerian power sector. “Seplat is now better positioned to return to sustainable growth.” Gas provided US$124 million of revenues during the year, around 27% of the total.
A note from Vetiva Research pointed out that gas sales were increasing “on the back of supply of commissioning gas to the Azura power plant, started [in December 2017] in advance of commencement of full operations due in [the first half of 2018].”
A planned development on Oil Mining Licence (OML) 53, and the adjacent OML 21, should extend the company’s gas business. Seplat described the Assa North-Ohaji South (ANOH) plan as being one “of the largest greenfield gas and condensate developments onshore [in] the Niger Delta to date”. A final investment decision (FID) should be taken in the first half of this year.
The Assa North field lies on Shell Petroleum Development Co.’s (SPDC) OML 21, while Ohaji South is on Seplat’s OML 53. Gas from this project would go to the domestic market, with Seplat raising the possibility that oil may also be developed from the Ohaji South field. Seplat, with the government, will oversee the midstream aspect of this ANOH work, while SPDC will handle the upstream side, including the drilling of development wells.
Seplat managed to pay down net debt significantly over 2017, reaching US$141 million at the end of the year, versus US$516 million at the end of 2016. Aggregate debt was reduced to US$578 million at the end of 2017, from US$1 billion in the first quarter of 2015.
Nigerian Petroleum Development Co. (NPDC), the subsidiary of Nigerian National Petroleum Corp. (NNPC), reduced its debt to Seplat to US$113 million, down from US$229 million at the end of 2016. Seplat also received US$219 million to settle some outstanding cash calls.
Capital expenditures in 2017 were US$33 million. Around US$14 million of this went on ANOH work, while US$4 million went on the Anagba well, on Oil Prospecting Licence (OPL) 283.