Seplat Petroleum Development Company Plc, an indigenous oil and gas company, has returned to profitability after making a loss before tax of $173m in 2016 on the back of production disruption and fall in global oil prices.
The firm, which announced its full-year 2017 financial results on Wednesday, said higher oil production, following the lifting of force majeure on the Forcados terminal from June 6, 2016 onwards, together with higher oil price realisation, positively impacted on its oil revenue, which increased by 121 per cent year-on-year to $328m.
It said its gas revenue reached a new record of $124m, up 18 per cent year-on-year, adding that total revenue for 2017 was up 78 per cent from 2016 at $452m.
Seplat said its profit before tax for the year stood at $44m and reflected the return to profitability in the third and fourth quarters where net quarterly profit before tax of $24m and $46m, respectively offset the $26m loss before tax recorded at mid-year.
But the company’s board did not propose paying dividend for the 2017 financial year.
It said, “During a period in which Seplat is focusing on preservation of liquidity and selective capital allocation and in order to ensure the group maintains a necessary level of financial flexibility, the board believes that the group and its shareholders are better served at this point in time by selectively deploying available capital (on a discretionary basis) into the portfolio of production opportunities and preserving a liquidity buffer.”
The Seplat’s Chief Executive Officer, Mr. Austin Avuru, said the company registered strong cash flow performance and significantly strengthened its balance sheet last year.
He said, “We will retain the flexibility and financial discipline that have seen us emerge from a difficult chapter in our history a fitter and stronger business. With line of sight on the availability of multiple export routes, we aim to significantly de-risk distribution of oil production to market.
“Notably, our gas business made another record contribution in 2017 and continues to demonstrate the robustness of its revenues, providing a key source of growth and diversification, as well as delivering a much-needed reliable supply of gas to the Nigerian power sector. Seplat is now better positioned to return to sustainable growth.”
The company said its policy of creating multiple export routes for all of its assets had resulted in it actively pursuing alternative crude oil evacuation options for production at Oil Mining Leases 4, 38 and 41 and potential strategies to further grow and diversify production in order to reduce any over-reliance on one particular third party-operated export system.
It said successfully completed repairs and upgrades in 2017 on two jetties at the Warri refinery that will enable sustained exports of 30,000 barrels of oil per day (gross) if required in the future.
According to an operational update, the Amukpe to Escravos 160,000 bopd capacity pipeline is set to provide a third export option for liquid production at OMLs 4, 38 and 41.
Seplat said it signed a funding agreement in December 2017 with the pipeline owners, the National Petroleum Investment Management Services, Pan Ocean Corporation Limited and the pipeline contractor, FENOG, to ensure timely completion of the pipeline.
It said, “Post year-end, FENOG has engaged with the operator of the Escravos terminal, Chevron, to initiate completion work. Negotiations between the pipeline operator, Pan Ocean, and Chevron in relation to crude handling agreements are also advancing. The Heads of Terms for the Crude Transport Agreement between the NPDC/Seplat JV and NAPIMS/Pan Ocean JV is also nearly completed and Seplat anticipates the pipeline to be inaugurated and operational in Q3 2018.”
The company noted that it had prioritised the commercialisation and development of the substantial gas reserves and resources identified at its blocks.
It said, “The lifting of force majeure on June 6, 2017 and resumption of full exports via the TFS removed the condensate-handling constraints and translated into an immediate uplift in gross gas production. As a result, gross production in the second half averaged 283 MMscfd, up 26 per cent from a previously constrained level of 225 MMscfd in the first half of the year.
“Furthermore, having successfully completed and inaugurated the Phase II expansion of the Oben gas processing plant early in 2017, taking overall operated gas processing capacity to the 525 MMscfd level, the company is actively engaged with counterparties to increase contracted gas sales with the intention of taking gross production towards the 400 MMscfd level.”
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