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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Seplat Energy Plc | LSE:SEPL | London | Ordinary Share | NGSEPLAT0008 | ORD NGN0.50 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.50 | -0.31% | 159.50 | 159.00 | 160.00 | 163.00 | 156.00 | 156.00 | 428,844 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Oil & Gas Field Services,nec | 696.87B | 54.58B | 92.7479 | 0.02 | 935.63M |
From Apr 2019 to Apr 2024
TIDMSEPL
RNS Number : 5967F
SEPLAT Petroleum Development Co PLC
30 October 2018
Seplat Petroleum Development Company Plc
Interim management statement and consolidated interim financial results for the nine months ended 30 September 2018
Lagos and London, 30 October 2018: Seplat Petroleum Development Company Plc ("Seplat" or the "Company"), a leading Nigerian independent oil and gas company listed on both the Nigerian Stock Exchange and London Stock Exchange, today announces its results for the nine months ended 30 September 2018.
Commenting on the results Austin Avuru, Seplat's Chief Executive Officer, said:
"Seplat has continued to deliver on its production targets which, combined with an oil price tailwind, has resulted in yet another consecutive quarter of very strong financial performance and profitability. With the current business generating significant free cash flow and combined with our robust balance sheet which we are in the process of deleveraging further, we plan to build on this performance in the coming quarters as we step up organic development activities across our existing portfolio with headroom to also capitalise on inorganic growth opportunities as and when they may arise, in line with our price disciplined approach".
Highlights
Working interest production for the third quarter and first nine months of 2018(1)
Hot Features
Premium
-- 9M working interest production of 50,834 boepd remains within
guided range; full year working interest production guidance
of 48,000 to 55,000 boepd is maintained
-- Uptime on the Trans Forcados System during Q3 was 88% (year
to date 80% in line with budget), while average reconciliation
losses stood at 7%
-- Rig based work on recompletion of Ohaji South oil production
wells on OML 53 and one new gas production well at Oben
on OMLs 4,38 and 41 set to commence in Q4
9M Working Interest Q3 Working Interest
=============================== ===============================
Liquids Gas Oil equivalent Liquids Gas Oil equivalent
Production Seplat bopd MMscfd boepd bopd MMscfd boepd
%
=========== ====== ======= ====== ============== ======= ====== ==============
OMLs 4, 38
& 41 45.0% 23,764 151 48,902 24,400 143 48,209
----------- ------ ------- ------ -------------- ------- ------ --------------
OPL 283 40.0% 962 - 962 1,152 - 1,152
----------- ------ ------- ------ -------------- ------- ------ --------------
OML 53 40.0% 970 - 970 942 - 942
=========== ====== ======= ====== ============== ======= ====== ==============
Total 25,696 151 50,834 26,494 143 50,303
=========== ====== ======= ====== ============== ======= ====== ==============
((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.
Seplat continues to record strong financial performance and sustained profitability, interim dividend declared
-- 9M revenue boosted to US$568 million (9M 2017: US$279 million);
9M oil revenues of US$441 million up 97% year-on-year (9M
2017: US$224 million); 9M gas revenues of US$127 million
up 48% year-on-year (9M 2017: US$86 million);
-- Gross profit US$306 million (9M 2017: US$125 million) with
9M average oil price realisation US$71.14/bbl (9M 2017: US$46.49/bbl)
and 9M average gas price US$3.06/Mscf (9M 2017: US$3.01/Mscf)
-- 9M operating profit US$264 million (9M 2017: US$53 million)
while 9M profit before tax has extended to US$213 million
(9M 2017: US$2 million loss); after 9M taxes of US$121 million
(including non cash deferred taxes of US$87 million) 9M profit
after tax stood at US$91 million (9M 2017: US$5 million loss)
Robust free cash flow translates to balance sheet strength with de-leveraging post period end to optimise capital structure
-- 9M cash generated from operations US$386 million (9M 2017:
US$167 million) versus capex incurred of US$29 million (9M
2017: US$22 million); Net cash at 30 September 2018 US$84
million; gross debt US$550 million and cash at bank US$634
million; Post period end, issued notice to the 2022 RCF
lending banks to reduce the outstanding balance on the facility
to US$100 million thereby reducing overall gross debt to
US$450 million
-- Extended hedging programme with dated Brent puts covering
2 MMbbls at an average strike price of US$55/bbl in H1 2019.
Q4 2018 hedges comprise dated Brent puts covering 1.5 MMbbls
at an average strike price of US$50/bbl
-- Following a review of Seplat's operational, liquidity and
financial position the Board has decided to declare an interim
dividend of US$0.05 per share in line with our normal dividend
distribution timetable. This in effect makes the April 2018
dividend a special dividend payment to normalise returns
to shareholders after the board had suspended dividends
for 2016 & 2017
Project Updates
-- ANOH: Signed a Shareholder Agreement and Share Subscription
Agreement in August with the Nigerian Gas Processing and
Transportation Company ("NGPTC") for it to subscribe for
fifty per cent of the shares in ANOH Gas Processing Company
Limited ("AGPC") that will process future wet gas production
from the upstream unitised gas fields at OML 53 & OML21,
which is operated by Shell. The agreements are an important
precursor to the Final Investment Decision ("FID") for the
ANOH project which is still expected in Q4 2018
-- Amukpe to Escravos Pipeline ("AEP"): Based on information
provided by the pipeline owners and contractor undertaking
completion works and connection to the Escravos terminal
and offshore export pipeline the Company maintains its expectation
of completion by year end
Important notice
Information contained within this release is un-audited and is subject to further review. The information contained within this announcement is 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 as a result of new information, future events or otherwise, except to the extent legally required.
Enquiries:
Seplat Petroleum Development Company Plc Roger Brown, CFO +44 203 725 6500 Andrew Dymond, Head of Investor Relations Ayeesha Aliyu, Investor Relations +234 1 277 0400 Chioma Nwachuku, GM - External Affairs and Communications ---------------------------------------------------------- ---------------- FTI Consulting Ben Brewerton / Sara Powell / Molly Stewart seplat@fticonsulting.com +44 203 727 1000 ---------------------------------------------------------- ---------------- Citigroup Global Markets Limited Tom Reid / Luke Spells +44 207 986 4000 ---------------------------------------------------------- ---------------- Investec Bank plc Chris Sim / Jonathan Wolf +44 207 597 4000 ========================================================== ================
Notes to editors
Seplat Petroleum Development Company Plc is a leading indigenous Nigerian oil and gas exploration and production company with a strategic focus on Nigeria, listed on the Main Market of the London Stock Exchange ("LSE") (LSE:SEPL) and Nigerian Stock Exchange ("NSE") (NSE:SEPLAT).
Seplat is pursuing a Nigeria focused growth strategy and is well-positioned to participate in future divestment programmes by the international oil companies, farm-in opportunities and future licensing rounds. For further information please refer to the company website, http://seplatpetroleum.com/
Interim Condensed Consolidated Financial Statements (Unaudited)
for the third quarter ended 30 September 2018
Expressed in Naira ('NGN')
Condensed consolidated statement of profit or loss and other comprehensive income
for the third quarter ended 30 September 2018
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
Unaudited Unaudited Unaudited Unaudited
-------------- -------------- -------------- --------------
Note 'million 'million 'million 'million
================================================ ==== ============== ============== ============== ==============
Revenue from contracts with customers 7 173,710 85,190 68,916 44,873
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Cost of sales 8 (80,200) (47,107) (28,713) (23,193)
================================================ ==== ============== ============== ============== ==============
Gross profit 93,510 38,083 40,203 21,680
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Other income/(expenses)-net 9 6,259 - (2,224) -
------------------------------------------------ ---- -------------- -------------- -------------- --------------
General and administrative expenses 10 (16,870) (17,167) (5,101) (7,611)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Reversal of/(impairment) losses on financial
assets - net 11 521 - (8) -
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Loss on foreign exchange - net 12 (208) (277) (216) (13)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Fair value loss - net 13 (2,449) (4,361) (322) (1,544)
================================================ ==== ============== ============== ============== ==============
Operating profit 80,763 16,278 32,332 12,512
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Finance income 14 2,050 483 720 213
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Finance costs 14 (17,760) (17,521) (5,092) (4,736)
================================================ ==== ============== ============== ============== ==============
Profit/(loss) before taxation 65,053 (760) 27,960 7,330
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Taxation 15 (37,085) (860) (14,836) (518)
================================================ ==== ============== ============== ============== ==============
Profit/(loss) for the period 27,968 (1,620) 13,124 6,812
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Other comprehensive income:
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Items that may be reclassified to profit or
loss:
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Foreign currency translation difference 468 932 315 (117)
================================================ ==== ============== ============== ============== ==============
Total comprehensive income/(loss) for the period 28,436 (688) 13,439 6,695
================================================ ==== ============== ============== ============== ==============
Earnings/(loss) per share ( ) 16 47.98 (2.88) 22.52 12.09
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Diluted earnings/(loss) per share( ) 16 47.48 (2.84) 22.28 11.95
================================================ ==== ============== ============== ============== ==============
The above condensed consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Condensed consolidated statement of financial position
As at 30 September 2018
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
Unaudited Audited
------------------ -----------------
Note 'million 'million
=========================================== ==== ================== =================
Assets
------------------------------------------- ---- ------------------ -----------------
Non-current assets
------------------------------------------- ---- ------------------ -----------------
Oil and gas properties 374,518 393,377
------------------------------------------- ---- ------------------ -----------------
Other property, plant and equipment 959 1,553
------------------------------------------- ---- ------------------ -----------------
Other asset 58,497 66,368
------------------------------------------- ---- ------------------ -----------------
Deferred tax 15a 41,836 68,417
------------------------------------------- ---- ------------------ -----------------
Tax paid in advance 9,670 9,670
------------------------------------------- ---- ------------------ -----------------
Prepayments 7,744 287
------------------------------------------- ---- ------------------ -----------------
Total non-current assets 493,224 539,672
=========================================== ==== ================== =================
Current assets
------------------------------------------- ---- ------------------ -----------------
Inventories 32,007 30,683
------------------------------------------- ---- ------------------ -----------------
Trade and other receivables 18 51,245 94,904
------------------------------------------- ---- ------------------ -----------------
Contract assets 19 3,401 -
------------------------------------------- ---- ------------------ -----------------
Prepayments 829 595
------------------------------------------- ---- ------------------ -----------------
Cash and cash equivalents 20 194,067 133,699
=========================================== ==== ================== =================
Total current assets 281,549 259,881
=========================================== ==== ================== =================
Total assets 774,773 799,553
=========================================== ==== ================== =================
Equity and liabilities
------------------------------------------- ---- ------------------ -----------------
Equity
------------------------------------------- ---- ------------------ -----------------
Issued share capital 21a 296 283
------------------------------------------- ---- ------------------ -----------------
Share premium 82,080 82,080
------------------------------------------- ---- ------------------ -----------------
Treasury shares (10) -
------------------------------------------- ---- ------------------ -----------------
Share based payment reserve 21b 6,743 4,332
------------------------------------------- ---- ------------------ -----------------
Capital contribution 5,932 5,932 ------------------------------------------- ---- ------------------ ----------------- Retained earnings 183,325 166,149 ------------------------------------------- ---- ------------------ ----------------- Foreign currency translation reserve 201,338 200,870 =========================================== ==== ================== ================= Total shareholders' equity 479,704 459,646 =========================================== ==== ================== ================= Non-current liabilities ------------------------------------------- ---- ------------------ ----------------- Interest bearing loans & borrowings 17 163,006 93,170 ------------------------------------------- ---- ------------------ ----------------- Contingent consideration 6.4 5,641 4,251 ------------------------------------------- ---- ------------------ ----------------- Provision for decommissioning obligation 33,210 32,510 ------------------------------------------- ---- ------------------ ----------------- Defined benefit plan 2,058 1,994 =========================================== ==== ================== ================= Total non-current liabilities 203,915 131,925 =========================================== ==== ================== ================= Current liabilities ------------------------------------------- ---- ------------------ ----------------- Interest bearing loans and borrowings 17 1,329 81,159 ------------------------------------------- ---- ------------------ ----------------- Trade and other payables 22 78,092 125,559 ------------------------------------------- ---- ------------------ ----------------- Current taxation 11,733 1,264 ------------------------------------------- ---- ------------------ ----------------- Total current liabilities 91,154 207,982 =========================================== ==== ================== ================= Total liabilities 295,069 339,907 =========================================== ==== ================== ================= Total shareholders' equity and liabilities 774,773 799,553 =========================================== ==== ================== =================
The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.
The Group financial statements of Seplat Petroleum Development Company Plc and its subsidiaries for the nine months
ended 30 September 2018 were authorised for issue in accordance with a resolution of the Directors on 30 October 2018
and were signed on its behalf by
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 30 October 2018 30 October 2018 30 October 2018
Condensed consolidated statement of changes in equity continued
for the third quarter ended 30 September 2018
For the third quarter ended 30 September 2017
=============================================================================================================================
Share Foreign
Issued based currency
share Treasury payment Capital Retained translation Total
capital Share premium shares reserve contribution earnings reserve equity
================ =========== ============= ======== ========== =============== ========== ============ =============
'million 'million 'million 'million 'million 'million 'million 'million
================ =========== ============= ======== ========== =============== ========== ============ =============
At 1 January
2017 283 82,080 2,597 5,932 85,052 200,429 376,373
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -------------
Loss for the
period - - - - - (1,620) - (1,620)
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -------------
Other
comprehensive
income - - - - - - 932 932
================ =========== ============= ======== ========== =============== ========== ============ =============
Total
comprehensive
loss for the
period - - - - - (1,620) 932 (688)
================ =========== ============= ======== ========== =============== ========== ============ =============
Transactions
with
owners in their
capacity
as owners:
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -------------
Share based
payments - - - 1,226 - - - 1,226
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -------------
Total - - - 1,226 - - - 1,226
================ =========== ============= ======== ========== =============== ========== ============ =============
At 30 September
2017
(unaudited) 283 82,080 - 3,823 5,932 83,432 201,361 376,911
================ =========== ============= ======== ========== =============== ========== ============ =============
For the third quarter ended 30 September 2018
=============================================================================================================
Share Foreign
Issued based currency
share Treasury payment Capital Retained translation Total
capital Share premium shares reserve contribution earnings reserve equity
================ =========== ============= ======== ========== =============== ========== ============ ===========
'million 'million 'million 'million 'million 'million 'million 'million
================ =========== ============= ======== ========== =============== ========== ============ ===========
At 31 December
2017
as originally
presented 283 82,080 - 4,332 5,932 166,149 200,870 459,646
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -----------
Impact of change
in
accounting
policy:
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -----------
Adjustment on
initial
application of
IFRS
9 (Note 3.3) - - - - - (1,779) - (1,779)
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -----------
Adjustment on
initial
application of
IFRS
15 (Note 3.3) - - - - - - - -
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -----------
At 1 January
2018
- Restated 283 82,080 - 4,332 5,932 164,370 200,870 457,867
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -----------
Profit for the
period - - - 27,968 - 27,968
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -----------
Other
comprehensive
income 468 468
================ =========== ============= ======== ========== =============== ========== ============ ===========
Total
comprehensive
income for the
period - - - - - 27,968 468 28,436
================ =========== ============= ======== ========== =============== ========== ============ ===========
Transactions
with
owners in their
capacity
as owners:
---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ -----------
Dividends paid - - - - (9,013) - (9,013) ---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ ----------- Share based payments - - 2,414 - - - 2,414 ---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ ----------- Issue of shares 13 - (13) - - - - ---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ ----------- Vested shares - 3 (3) ---------------- ----------- ------------- -------- ---------- --------------- ---------- ------------ ----------- Total 13 - (10) 2,411 - (9,013) - (6,599) At 30 September 2018 (unaudited) 296 82,080 (10) 6,743 5,932 183,325 201,338 479,704 ================ =========== ============= ======== ========== =============== ========== ============ ===========
The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Condensed consolidated statement of cash flow
for the third quarter ended 30 September 2018
9 months 9 months ended 30
ended Sept 2017
30 Sept
2018
---------- --------------------
'million 'million
---------- --------------------
Note Unaudited Unaudited
================================================================================================================ ========== ====================
Cash flows from operating activities
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Cash generated from operations 23 118,126 51,098
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Net cash inflows from operating activities 118,126 51,098
================================================================================================================ ========== ====================
Cash flows from investing activities
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Investment in oil and gas properties (8,777) (6,726)
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Investment in other property, plant and equipment - (157)
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Receipts from other property, plant and equipment 1 -
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Receipts from other asset 7,936 6,913
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Interest received 2,050 483
================================================================================================================ ========== ====================
Net cash inflows/(outflows) from investing activities 1,210 513
================================================================================================================ ========== ====================
Cash flows from financing activities
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Repayments of bank financing (176,782) (16,744)
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Receipts from bank financing 59,793 -
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Dividends paid (9,013) -
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Proceeds from senior notes issued 103,935 -
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Repayments on crude oil advance (23,704) (1,346)
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Payments for other financing charges (1,190) -
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Interest paid on bank financing (12,400) (15,240)
================================================================================================================ ========== ====================
Net cash outflows from financing activities (59,361) (33,330)
================================================================================================================ ========== ====================
Net increase in cash and cash equivalents 59,975 18,281
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Cash and cash equivalents at the beginning of the period 133,699 48,684
---------------------------------------------------------------------------------------------------------------- ---------- --------------------
Effects of exchange rate changes on cash and cash equivalents 393 43
================================================================================================================ ========== ====================
Cash and cash equivalents at the end of the period 194,067 67,008
================================================================================================================ ========== ====================
The above condensed consolidated statement of cashflows should be read in conjunction with the accompanying notes.
Notes to the condensed consolidated financial statements
1. Corporate structure and business
Seplat Petroleum Development Company Plc ('Seplat' or the 'Company'), the parent of the Group, was incorporated
on 17 June 2009 as a private limited liability company and re-registered as a public company on 3 October 2014, under
the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria 2004. The Company commenced
operations on 1 August 2010. The Company is principally engaged in oil and gas exploration and production.
The Company's registered address is: 25a Lugard Avenue, Ikoyi, Lagos, Nigeria.
The Company acquired, pursuant to an agreement for assignment dated 31 January 2010 between the Company, SPDC,
TOTAL and AGIP, a 45% participating interest in the following producing assets:
OML 4, OML 38 and OML 41 located in Nigeria. The total purchase price for these assets was 104 billion paid at the completion of the acquisition on 31 July 2010 and a contingent payment of 10 billion payable 30 days after the second anniversary, 31 July 2012, if the average price per barrel of Brent Crude oil over the period from acquisition up to 31 July 2012 exceeds 24,476 per barrel. 110 billion was allocated to the producing assets including 5.7 billion as the fair value of the contingent consideration as calculated on acquisition date. The contingent consideration of 10 billion was paid on 22 October 2012.
In 2013, Newton Energy Limited ("Newton Energy"), an entity previously beneficially owned by the same shareholders
as Seplat, became a subsidiary of the Company. On 1 June 2013, Newton Energy acquired from Pillar Oil Limited ("Pillar
Oil") a 40 percent Participant interest in producing assets: the Umuseti/Igbuku marginal field area located within OPL
283 (the "Umuseti/Igbuku Fields").
On 12 December 2014, Seplat Gas Company Limited ('Seplat Gas') was incorporated as a private limited liability company to engage in oil and gas exploration and production.
In 2015, the Group purchased a 40% participating interest in OML 53, onshore north eastern Niger Delta, from Chevron Nigeria Ltd for 79 billion.
In 2017, the Group incorporated a new subsidiary, ANOH Gas Processing Company Limited. The principal activity of the Company is the processing of gas from OML 53.
The Company together with its six wholly owned subsidiaries namely, Newton Energy, Seplat Petroleum Development Company UK Limited ('Seplat UK'), Seplat East Onshore Limited ('Seplat East'), Seplat East Swamp Company Limited ('Seplat Swamp'), Seplat Gas Company Limited ('Seplat GAS') and ANOH Gas Processing Company Limited are collectively referred to as the Group.
Country of incorporation and
Subsidiary Date of incorporation place of business Principal activities
=============================== ===================== ============================== ==============================
Oil & gas exploration and
Newton Energy Limited 1 June 2013 Nigeria production
------------------------------- --------------------- ------------------------------ ------------------------------
Oil & gas exploration and
Seplat Petroleum Development UK 21 August 2014 United Kingdom production
------------------------------- --------------------- ------------------------------ ------------------------------
Oil & gas exploration and
Seplat East Onshore Limited 12 December 2014 Nigeria production
------------------------------- --------------------- ------------------------------ ------------------------------
Seplat East Swamp Company Oil & gas exploration and
Limited 12 December 2014 Nigeria production
------------------------------- --------------------- ------------------------------ ------------------------------
Oil & gas exploration and
Seplat Gas Company 12 December 2014 Nigeria production
------------------------------- --------------------- ------------------------------ ------------------------------
ANOH Gas Processing Company
Limited 18 January 2017 Nigeria Gas processing
=============================== ===================== ============================== ==============================
2. Significant changes in the current reporting period
The following significant changes occurred during the reporting period ended 30 September 2018:
-- The offering of 9.25% senior notes with an aggregate principal amount of 107 billion due in April 2023. The notes were issued by the Group in March 2018 and guaranteed by some of its subsidiaries. The proceeds of the notes are being used to refinance existing indebtedness and for general corporate purposes.
-- In March 2018, the Group obtained a 91.8 billion revolving facility to refinance of an existing 91.8 billion revolving credit facility due in December 2018. The facility has a tenor of 4 years (due in June 2022) with an initial interest rate of the 6% +Libor. Interest is payable semi-annually and principal repayable annually. 61.2 billion was drawn down in March 2018. The proceeds from the notes are being used to repay existing indebtedness.
-- 25,000,000 additional shares were issued. In furtherance of the Group's Long Term Incentive Plan, in February 2018. The additional issued shares, less 5,534,964 shares which vested in April 2018, are held by Stanbic IBTC Trustees Limited as Custodian. The Group's share capital as at the reporting date consists of 588,444,561 ordinary shares of N0.50k each, all with voting rights.
3. Summary of significant accounting policies 3.1. Introduction to summary of significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards which are set out below.
3.2. Basis of preparation i) Compliance with IFRS
The condensed consolidated financial statements of the Group for the nine months reporting period ended 30 September 2018 have been prepared in accordance with accounting standard IAS 34 Interim financial reporting.
ii) Historical cost convention
The financial information has been prepared under the going concern assumption and historical cost convention, except for contingent consideration and financial instruments measured at fair value on initial recognition. The financial statements are presented in Nigerian Naira and United States Dollars, and all values are rounded to the nearest million ( 'million) and thousand (US$'000) respectively, except when otherwise indicated.
iii) Going concern
Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for at least twelve months from the date of these condensed consolidated financial statements.
iv) New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period and the Group had to change its accounting policies and make retrospective adjustments as a result of adopting the following standards.
-- IFRS 9 Financial instruments, and -- IFRS 15 Revenue from contracts with customers -- Amendments to IFRS 15 Revenue from contracts with customers
The impact of the adoption of these standards and the new accounting policies are disclosed in note 3.3 below. The
other standards did not have any impact on the Group's accounting policies and did not require retrospective
adjustments.
v) New standards, amendments and interpretations not yet adopted
The following standards have been issued but are not yet effective and may have a significant impact on the Group's consolidated financial statements.
a. IFRS 16 Leases
Title IFRS 16 Leases
of standard
------------ -----------------------------------------------------------------------
Nature IFRS 16 was issued in January 2016. It will result in almost
of change all leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a financial
liability to pay rentals are recognised. The only exceptions
are short-term and low-value leases. The accounting for lessors
will not significantly change.
------------ -----------------------------------------------------------------------
Impact Operating leases: The standard will affect primarily the accounting
for the Group's operating leases which include leases of buildings,
boats, storage facilities, rigs, land and motor vehicles. As
at the reporting date, the Group had no non-cancellable operating
lease commitments.
Short term leases & low value leases: The Group's one-year contracts
with no planned extension commitments mostly applicable to leased
staff flats will be covered by the exception for short-term leases,
while none of the Group's other leases will be covered by the
exception for low value leases.
Service contracts: Some commitments such as contracts for the
provision of drilling, cleaning and community services were identified
as service contracts as they did not contain an identifiable
asset which the Group had a right to control. It therefore did
not qualify as leases under IFRS 16.
------------ -----------------------------------------------------------------------
Date The standard for leases is mandatory for financial years commencing
of adoption on or after 1 January 2019. The Group does not intend to adopt
the standard before its effective date.
b. Amendments to IAS 19 Employee benefits
These amendments were issued in February 2018. The amendments issued require an entity to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement. They also require an entity to recognise in profit or loss as part of past service cost or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.
These amendments are mandatory for annual periods beginning on or after 1 January 2019. The Group does not intend to adopt the amendments before its effective date and is yet to assess the full impact of the amendments on its financial statements.
c. IFRIC 23- Uncertainty over income tax treatment
These amendments were issued in June 2017. IAS 12 Income taxes specifies requirements for current and deferred tax assets and liabilities. An entity applies the requirements in IAS 12 based on applicable tax laws. It may be unclear how tax law applies to a particular transaction or circumstance. The acceptability of a particular tax treatment under tax law may not be known until the relevant taxation authority or a court takes a decision in the future. Consequently, a dispute or examination of a particular tax treatment by the taxation authority may affect an entity's accounting for a current or deferred tax asset or liability.
This Interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. In such a circumstance, an entity shall recognise and measure its current or deferred tax asset or liability applying the requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined applying this Interpretation.
These amendments are mandatory for annual periods beginning on or after 1 January 2019. The Group does not intend to adopt the amendments before its effective date and is yet to assess the full impact of the amendments on its financial statements.
d. Conceptual framework for financial reporting - Revised
These amendments were issued in March 2018. Included in the revised conceptual framework are revised definitions of an asset and a liability as well as new guidance on measurement and derecognition, presentation and disclosure. The amendments focused on areas not yet covered and areas that had shortcomings.
These amendments are mandatory for annual periods beginning on or after 1 January 2020. The Group does not intend to adopt the amendments before its effective date date and is yet to assess the full impact of the amendments on its financial statements.
e. Amendments to IAS 23 Borrowing costs
These amendments were issued in December 2017. The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.
These amendments are mandatory for annual periods beginning on or after 1 January 2019. The Group does not intend to adopt the amendments before its effective date and is yet to assess the full impact of the amendments on its financial statements.
3.3. Changes in accounting policies
This note explains the impact of the adoption of IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers (including the amendments to IFRS 15) on the Group's financial statements and also discloses the related accounting policies that have been applied from 1 January 2018, where they are different from those applied in prior periods.
3.3.1. Impact on the financial statements
As explained in note 3.3.2 below, IFRS 9: Financial instruments was adopted without restating comparative information. The adjustments arising from the new impairment rules are therefore not reflected in the statement of financial position as at 31 December 2017, but are recognised in the opening statement of changes in equity on 1 January 2018.
The Group has also adopted IFRS 15: Revenue from Contracts with Customers using the simplified method, with the effect of applying this standard recognised at the date of initial application (1 January 2018). Accordingly, the information presented for 2017 financial year has not been restated but is presented, as previously reported, under IAS 18 and related interpretations.
The following tables summarise the impact, net of tax, of transition to IFRS 9 and IFRS 15 for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided. There was no impact on the statement of cash flows as a result of adopting the new standards.
As at 1 January
At 31 December 2017 Impact of IFRS 9 Impact of IFRS 15 2018
---- ------------------- ------------------ ------------------- ---------------
Note 'million 'million 'million 'million
============================ ==== =================== ================== =================== ===============
ASSETS
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Current assets
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Trade and other receivables 18 99,121 (1,779) (4,217) 93,125
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Contract assets 19 - - 4,217 4,217
============================ ==== =================== ================== =================== ===============
Total assets 799,553 (1,779) - 797,774
============================ ==== =================== ================== =================== ===============
EQUITY AND LIABILITIES
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Equity
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Retained earnings 166,149 (1,779) - 164,370
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Total shareholders' equity 459,646 (1,779) - 457,867
============================ ==== =================== ================== =================== ===============
3.3.2. IFRS 9 Financial Instruments - Impact of adoption
The new financial instruments standard, IFRS 9 replaces the provisions of IAS 39. The new standard presents a new model for classification and measurement of assets and liabilities, a new impairment model which replaces the incurred credit loss approach with an expected credit loss approach, and new hedging requirements.
The adoption of IFRS 9: Financial Instruments from 1 January 2018 resulted in changes in accounting policies and the adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in notes below. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated but the impact of adoption has been adjusted through opening retained earnings for the current reporting period.
3.3.2.1. Classification and measurement
a) Financial assets
On 1 January 2018 (the date of initial application of IFRS 9), the Group's management assessed the classification of its financial assets which is driven by the cash flow characteristics of the instrument and the business model in which the asset is held.
The Group's financial assets includes cash and cash equivalents, trade and other receivables and contract assets. The Group's business model is to hold these financial assets to collect contractual cash flows and to earn contractual interest. For cash and cash equivalents, interest is based on prevailing market rates of the respective bank accounts in which the cash and cash equivalents are domiciled. Interest on trade and other receivables is earned on defaulted payments in accordance with the Joint operating agreement (JOA). The contractual cash flows arising from these assets represent solely payments of principal and interest (SPPI).
Cash and cash equivalents, trade and other receivables and contract assets that were previously classified as loans and receivables (L and R) are now classified as financial assets at amortised cost.
Since there was no change in the measurement basis except for nomenclature change, opening retained earnings was not impacted (no differences between the previous carrying amount and the revised carrying amount of these assets at 1 January 2018).
b) Financial liabilities
The adoption of IFRS 9 eliminates the policy choice on the treatment of gain or loss from the refinancing of a borrowing. Day one gain or loss can no longer be deferred over the remaining life of the borrowing but must now be recognised at once. No retrospective adjustments have been made in relation to this change as at 1 January 2018.
On the date of initial application, 1 January 2018, the financial instruments of the Group were classified as follows:
Classification & Measurement category Carrying amount
=================================================== =================================
Original New Original New
------------------------- ------------------------ ----------------- --------------
IAS 39 IFRS 9 million million
============================== ========================= ======================== ================= ==============
Current financial assets
============================== ========================= ======================== ================= ==============
Trade and other receivables:
--------------------------------------------------------- ------------------------ ----------------- --------------
Trade receivables L and R Amortised cost 33,236 33,236
------------------------------ ------------------------- ------------------------ ----------------- --------------
NPDC receivables L and R Amortised cost 34,453 34,453
------------------------------ ------------------------- ------------------------ ----------------- --------------
NAPIMS receivables L and R Amortised cost 3,824 3,824
------------------------------ ------------------------- ------------------------ ----------------- --------------
Other receivables* L and R Amortised cost 7 7
------------------------------ ------------------------- ------------------------ ----------------- --------------
Cash and cash equivalents L and R Amortised cost 133,699 133,699
------------------------------ ------------------------- ------------------------ ----------------- --------------
Non-current financial liabilities
========================================================= ======================== ================= ==============
Interest bearing loans and
borrowings Amortised cost Amortised cost 93,170 93,170
------------------------------ ------------------------- ------------------------ ----------------- --------------
Current financial liabilities
========================================================= ======================== ================= ==============
Interest bearing loans and
borrowings Amortised cost Amortised cost 81,159 81,159
------------------------------ ------------------------- ------------------------ ----------------- --------------
Trade and other payables** Amortised cost Amortised cost 38,876 38,876
------------------------------ ------------------------- ------------------------ ----------------- --------------
*Other receivables exclude NGMC VAT receivables, cash advance and advance payments.
** Trade and other payables exclude accruals, provisions, bonus, VAT, Withholding tax, deferred revenue and royalties.
The new carrying amounts in the table above have been determined based on the measurement criteria specified in IFRS 9. However, the impact of IFRS 9 expected credit loss impairment has not been considered here. See the subsequent pages for the impact of IFRS 9 ECL on the assets carried at amortised cost.
3.3.2.2. Impairment of financial assets
The Group has seven types of financial assets that are subject to IFRS 9's new expected credit loss model. Under IFRS 9, the Group is required to revise its previous impairment methodology under IAS 39 for each of these classes of assets. The impact of the change in impairment methodology on the Group's retained earnings is disclosed in the table below.
-- Nigerian Petroleum Development Company (NPDC) receivables
-- National Petroleum Investment Management Services (NAPIMS)
-- Receivables from Shell Petroleum Development Company (SPDC)
-- Trade receivables
-- Contract assets
-- Other receivables and;
-- Cash and cash equivalents
The total impact on the Group's retained earnings as at 1 January 2018 is as follows:
Notes 'million
================================================================================================= ====== ========
Closing retained earnings as at 31 December 2017- IAS 39 166,149
--------------------------------------------------------------------------------------------------------- --------
Increase in provision for Nigerian Petroleum Development Company (NPDC) receivables (a) (1,698)
------------------------------------------------------------------------------------------------- ------ --------
Increase in provision for National Petroleum Investment Management Services (NAPIMS) receivables (b) (81)
================================================================================================= ====== ========
Total transition adjustments (1,779)
========================================================================================================= ========
Opening retained earnings 1 January 2018 on adoption of IFRS 9 164,370
========================================================================================================= ========
a) Nigerian Petroleum Development Company (NPDC) receivables
NPDC receivables represent the outstanding cash calls due to Seplat from its JV partner, Nigerian Petroleum Development Company. The Group applies the IFRS 9 general model for measuring expected credit losses (ECL). This requires a three-stage approach in recognising the expected loss allowance for NPDC receivables.
The ECL recognised for the period is a probability-weighted estimate of credit losses discounted at the effective interest rate of the financial asset. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive).
The ECL was calculated based on actual credit loss experience from 2014, which is the date the Group initially became a party
to the contract. The following analysis provides further detail about the calculation of ECLs related to these assets. The Group
considers the model and the assumptions used in calculating these ECLs as key sources of estimation uncertainty.
1 January 2018
Stage 1 Stage 2 Stage 3 Total
------------------------------------ ------------ ------------ ------------ --------
12-month ECL Lifetime ECL Lifetime ECL
------------------------------------ ------------ ------------ ------------ --------
'million 'million 'million 'million
==================================== ============ ============ ============ ========
Gross EAD* - 11,369 23,084 34,453
------------------------------------ ------------ ------------ ------------ --------
Loss allowance as at 1 January 2018 - (32) (1,666) (1,698)
==================================== ============ ============ ============ ========
Net EAD - 11,337 21,418 32,755
==================================== ============ ============ ============ ========
* Exposure at default
30 September 2018
Stage 1 Stage 2 Stage 3 Total
--------------------------------------- ------------ ------------ ------------ --------
12-month ECL Lifetime ECL Lifetime ECL
--------------------------------------- ------------ ------------ ------------ --------
'million 'million 'million 'million
======================================= ============ ============ ============ ========
Gross EAD* - - 14,827 14,827
--------------------------------------- ------------ ------------ ------------ --------
Loss allowance as at 30 September 2018 - - (1,175) (1,175)
======================================= ============ ============ ============ ========
Net EAD - - 13,652 13,652
======================================= ============ ============ ============ ========
The Group considers both quantitative and qualitative indicators in classifying its receivables into the relevant stages for impairment calculation.
*Stage 1 includes receivables that are less than 30 days past due (Performing).
*Stage 2 includes receivables that have been assessed to have experienced a significant increase in credit risk using the days past due criteria (i.e the outstanding receivables amounts are more than 30 days past due but less than 90 days past due) and other qualitative indicators such as the increase in political risk concerns or other micro-economic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance.
*Stage 3 receivables are receivables that have been assessed as being in default (i.e receivables that are more than 90 days past due) or there is a clear indication that the imposition of financial or legal penalties and/or sanctions will make the full recovery of indebtedness highly improbable.
The reconciliation of loss allowances for Nigerian Petroleum Development Company (NPDC) receivables as at 31 December 2017
and 30 September 2018 is as follows:
'million
================================================================ ========
Loss allowance as at 31 December 2017 - calculated under IAS 39 -
---------------------------------------------------------------- --------
Amounts adjusted through opening retained earnings 1,698
================================================================ ========
Loss allowance as at 1 January 2018 - calculated under IFRS 9 1,698
---------------------------------------------------------------- --------
Reversal of impairment loss on NPDC receivables (523)
================================================================ ========
Loss allowance as at 30 September 2018 - Under IFRS 9 1,175
================================================================ ========
Probability of default (PD)
The credit rating of Federal Government bonds was used to reflect the assessment of the probability of default on these receivables. This was supplemented with external data from credit bureau scoring information from Standard & Poor's (S&P) to arrive at a 12-month PD of 3.9%. Lifetime PD (stage 2) was assumed to be the 12-month PD as the maximum contractual period over which the Group is exposed to credit risk is less than 12 months. The PD for Stage 3 receivables was 100% as these amounts were deemed to be in default using the days past due criteria. (See note 3.3.3 (d) for definition of default).
Loss given default (LGD)
The 12-month LGD was determined based on management's estimate of expected cash recoveries after considering historical recovery pattern of these receivables. The 12-month LGD assumptions are a reasonable proxy for lifetime LGD.
Exposure at default (EAD)
This is the amount that best represents the maximum exposure to credit risk at the end of the reporting period without taking account of any collateral.
Macroeconomic indicators
The real historical gross domestic product (GDP) growth rate in Nigeria and crude oil price were identified as the key economic variables impacting the credit risk on these receivables. Historical data on these variables for the last ten years were used to determine the three economic scenarios (base, optimistic and downturn) and their scenario weightings.
The probability weight attached to each of the scenarios was determined using the GDP growth rates. The historical GDP growth rates were evaluated at 75% confidence interval. Based on this confidence interval, 75% of historical GDP growth rate observation falls within the acceptable bounds, 8% of the observation relates to period of boom while 17% of the observation relate to periods of recession/downturn.
b) National Petroleum Investment Management Services (NAPIMS) receivables
NAPIMS receivables represent the outstanding cash calls due to Seplat from its JV partner, National Petroleum Investment Management Services. The Group applies the IFRS 9 general model for measuring expected credit losses (ECL) which uses a three-stage approach in recognising the expected loss allowance for NAPIMS receivables.
The ECL was calculated based on actual credit loss experience from 2016, which is the date the Group initially became a party to the contract. The following analysis provides further detail about the calculation of ECLs related to these assets. The Group considers the model and the assumptions used in calculating these ECLs as key sources of estimation uncertainty. The explanation of inputs, assumptions and estimation techniques used are consistent with those for NPDC receivables.
1 January 2018
Stage 1 Stage 2 Stage 3 Total
------------------------------------ ------------ ------------ ------------ --------
12-month ECL Lifetime ECL Lifetime ECL
------------------------------------ ------------ ------------ ------------ --------
'million 'million 'million 'million
==================================== ============ ============ ============ ========
Gross EAD* 1,306 - 2,518 3,824
------------------------------------ ------------ ------------ ------------ --------
Loss allowance as at 1 January 2018 (2) - (79) (81)
==================================== ============ ============ ============ ========
Net EAD 1,304 - 2,439 3,743
==================================== ============ ============ ============ ========
30 September 2018
Stage 1 Stage 2 Stage 3 Total
--------------------------------------- ------------ ------------ ------------ --------
12-month ECL Lifetime ECL Lifetime ECL
--------------------------------------- ------------ ------------ ------------ --------
'million 'million 'million 'million
======================================= ============ ============ ============ ========
Gross EAD* - - 90 90
--------------------------------------- ------------ ------------ ------------ --------
Loss allowance as at 30 September 2018 - - (77) (77)
======================================= ============ ============ ============ ========
Net EAD - - 13 13
======================================= ============ ============ ============ ========
The Group considers both quantitative and qualitative indicators in classifying its receivables into the relevant stages for impairment calculations.
*Stage 1 includes receivables that are less than 30 days past due (Performing).
*Stage 2 includes receivables that have been assessed to have experienced a significant increase in credit risk using the days past due criteria (i.e the outstanding receivables amounts are more than 30 days past due but less than 90 days past due) and other qualitative indicators such as the increase in political risk concerns or other micro-economic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance.
*Stage 3 receivables are receivables that have been assessed as being in default (i.e receivables that are more than 90 days past due) or there is a clear indication that the imposition of financial or legal penalties and/or sanctions will make the full recovery of indebtedness highly improbable.
The reconciliation of loss allowances for National Petroleum Investment Management Services receivables as at 31 December 2017 and 30 September 2018 is as follows:
'million
================================================================ ========
Loss allowance as at 31 December 2017 - calculated under IAS 39 -
---------------------------------------------------------------- --------
Amounts restated through opening retained earnings 81
================================================================ ========
Loss allowance as at 1 January 2018 - calculated under IFRS 9 81
---------------------------------------------------------------- --------
Reversal of impairment loss on NAPIMS receivables (4)
================================================================ ========
Loss allowance as at 30 September 2018 - Under IFRS 9 77
================================================================ ========
c) Receivables from Shell Petroleum Development Company (SPDC)
The Group applies the IFRS 9 general model for measuring expected credit losses (ECL) which uses a three-stage approach in recognising the expected loss allowance for receivables from SPDC. Receivables from SPDC represent the outstanding payments due to Seplat from an investment no longer being pursued.
30 September 2018
Stage 1 Stage 2 Stage 3 Total
--------------------------------------- ------------ ------------ ------------ --------
12-month ECL Lifetime ECL Lifetime ECL
--------------------------------------- ------------ ------------ ------------ --------
'million 'million 'million 'million
======================================= ============ ============ ============ ========
Gross EAD* - 13,627 - 13,627
--------------------------------------- ------------ ------------ ------------ --------
Loss allowance as at 30 September 2018 - (6) - (6)
======================================= ============ ============ ============ ========
Net EAD - 13,621 - 13,621
======================================= ============ ============ ============ ========
The Group considers both quantitative and qualitative indicators in classifying its receivables into the relevant stages for impairment calculations.
*Stage 1 includes receivables that are less than 30 days past due (Performing).
*Stage 2 includes receivables that have been assessed to have experienced a significant increase in credit risk using the days past due criteria (i.e the outstanding receivables amounts are more than 30 days past due but less than 90 days past due) and other qualitative indicators such as the increase in political risk concerns or other micro-economic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance.
*Stage 3 receivables are receivables that have been assessed as being in default (i.e receivables that are more than 90 days past due) or there is a clear indication that the imposition of financial or legal penalties and/or sanctions will make the full recovery of indebtedness highly improbable.
The reconciliation of loss allowances for receivables from Shell Petroleum Development Company as at 31 December 2017 and 30 September 2018 is as follows:
'million
================================================================ ========
Loss allowance as at 31 December 2017 - calculated under IAS 39 -
---------------------------------------------------------------- --------
Amounts restated through opening retained earnings -
================================================================ ========
Loss allowance as at 1 January 2018 - calculated under IFRS 9 -
---------------------------------------------------------------- --------
Increase in provision for impairment loss on SPDC receivables 6
================================================================ ========
Loss allowance as at 30 September 2018 - Under IFRS 9 6
================================================================ ========
Probability of default (PD)
External data from Standard & Poor's (S&P) for Royal Dutch Shell in an emerging market was used to arrive at a 12-month PD of 0.05%. Lifetime PD (stage 2) was assumed to be the 12-month PD as the maximum contractual period over which the Group is exposed to credit risk is less than 12 months.
Loss given default (LGD)
The 12-month LGD was determined based on management's estimate of expected cash recoveries after considering historical recovery pattern of these receivables. The 12-month LGD assumptions are a reasonable proxy for lifetime LGD.
Exposure at default (EAD)
This is the amount that best represents the maximum exposure to credit risk at the end of the reporting period without taking account of any collateral.
Macroeconomic indicators
The real historical gross domestic product (GDP) growth rate in Nigeria and crude oil price were identified as the key economic variables impacting the credit risk on these receivables. Historical data on these variables for the last ten years were used to determine the three economic scenarios (base, optimistic and downturn) and their scenario weightings.
The probability weight attached to each of the scenarios was determined using the GDP growth rates. The historical GDP growth rates were evaluated at 75% confidence interval. Based on this confidence interval, 89% of historical GDP growth rate observation falls within the acceptable bounds, 2% of the observation relates to period of boom while 9% of the observation relate to periods of recession/downturn.
d) Trade receivables and contract assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due criterion. Contract assets relate to unbilled receivables for the delivery of gas supplies in which NGMC has taken delivery of but has not been invoiced as at the end of the reporting period. These assets have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
Trade receivables and contract assets include amounts receivable from Mercuria Energy Group, Shell Western Supply, Pillar Limited and Nigerian Gas Marketing Company (NGMC).
For Mecuria Energy Group and Shell Western Supply, impairment was assessed to be insignificant as there has been no history of default (i.e. the Group receives the outstanding amount within the standard payment period of 30 days) and there has been no dispute arising on the invoiced amount from both parties.
The Group also assessed for impairment on receivable balances from Pillar Limited and Nigerian Gas Marketing Company (NGMC) using outstanding payments from 2014 to model the expected loss rates. Based on this assessment, the identified impairment loss as at 1 January 2018 and 30 September 2018 was insignificant as there has been no history of default or dispute on the receivables. The impairment allowance on these assets was nil under the incurred loss model of IAS 39.
e) Other receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all financial assets that are classified within other receivables.
Other receivables relate to staff receivables. Impairment allowance on receivable amounts were assessed to be insignificant. This was on the basis that there has been no history of default on these assets as repayments are deducted directly from the staff's monthly salary. In addition, the outstanding balance as at the 30 September 2018 and 31 December 2017 was deemed to be insignificant 718,723 (2017: 4.5 million). The impairment loss was nil under the incurred loss model of IAS 39.
f) Cash and cash equivalents
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was insignificant.
3.3.2.3. Hedge accounting
The Group entered agreements to sell put options for crude oil in Brent at a strike price of 12,236 per barrel to NedBank Limited for 600,000 barrels within a period of 6 months from 1 January 2018 to 30 June 2018.
It also entered into agreements to sell put options for crude oil in Brent at a strike price of 15,295 per barrel to Natixis for 500,000 barrels within a period of 6 months from 1 July 2018 to 31 December 2018.
The purpose of these is to hedge its cash flows against oil price risk. The contracts provide for a no loss position for Seplat, in that Seplat makes a gain if the price of oil falls below the strike price; and if the price of oil is above the strike price, there is no loss i.e. no payment is made by Seplat except for the mutually agreed monthly premium which is paid in arrears and is settled net of any gain on settlement date.
These contracts however, are not designated as hedging instruments, and as such hedge accounting is not being applied. In the event that the Group takes the option of designating its derivative as hedging instruments, the Group would need to make a formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge.
As at the reporting periods ended 31 December 2017 and 30 September 2018, the Group had no derivative assets or liabilities.
3.3.3. IFRS 9: Financial Instruments - Accounting policies
The Group's accounting policies were changed to comply with IFRS 9. IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures.
a) Classification and measurement
-- Financial assets
It is the Group's policy to initially recognise financial assets at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss which are expensed in profit or loss.
Classification and subsequent measurement is dependent on the Group's business model for managing the asset and the cashflow characteristics of the asset. On this basis, the Group may classify its financial instruments at amortised cost, fair value through profit or loss and at fair value through other comprehensive income.
All the Group's financial assets as at 30 September 2018 satisfy the conditions for classification at amortised cost under IFRS 9.
The Group's financial assets include trade receivables, NPDC receivables, NAPIMS receivables, contract assets, other receivables and cash and cash equivalents.
-- Financial liabilities
Financial liabilities of the Group are classified and subsequently measured at amortised cost net of directly attributable transaction costs, except for derivatives which are classified and subsequently recognised at fair value through profit or loss.
Fair value gains or losses for financial liabilities designated at fair value through profit or loss are accounted for in profit or loss except for the amount of change that is attributable to changes in the Group's own credit risk
which is presented in other comprehensive income. The remaining amount of change in the fair value of the liability is presented in profit or loss. The Group's financial liabilities include trade and other payables and interest bearing loans and borrowings.
b) Impairment of financial assets
Recognition of impairment provisions under IFRS 9 is based on the expected credit loss (ECL) model. The ECL model is applicable to financial assets classified at amortised cost and contract assets under IFRS 15: Revenue from Contracts with Customers. The measurement of ECL reflects an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, time value of money and reasonable and supportable information, that is available without undue cost or effort at the reporting date, about past events, current conditions and forecasts of future economic conditions.
The Group applies the simplified approach or the three-stage general approach to determine impairment of receivables depending on their respective nature. The simplified approach is applied for trade receivables and contract assets while the three-stage approach is applied to NPDC receivables, NAPIMS receivables and receivables from SPDC.
The simplified approach requires expected lifetime losses to be recognised from initial recognition of the receivables. This involves determining the expected loss rates which is then applied to the gross carrying amount of the receivable to arrive at the loss allowance for the period.
The three-stage approach assesses impairment based on changes in credit risk since initial recognition using the past due criterion and other qualitative indicators such as increase in political concerns or other microeconomic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance. Financial assets classified as stage 1 have their ECL measured as a proportion of their lifetime ECL that results from possible default events that can occur within one year, while assets in stage 2 or 3 have their ECL measured on a lifetime basis.
Under the three-stage approach, the ECL is determined by projecting the probability of default (PD), loss given default (LGD) and exposure at default (EAD) for each ageing bucket and for each individual exposure. The PD is based on default rates determined by external rating agencies for the counterparties. The LGD assesses the portion of the outstanding receivable that is deemed to be irrecoverable at the reporting period. The EAD is the total amount of outstanding receivable at the reporting period. These three components are multiplied together and adjusted for forward looking information. This effectively calculates an ECL which is then discounted back to the reporting date and summed. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the related financial assets and the amount of the loss is recognised in profit or loss.
c) Derecognition
-- Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or when it transfers the financial asset and the transfer qualifies for derecognition.
-- Financial liabilities
The Group derecognises a financial liability when it is extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised immediately in the statement of profit or loss.
d) Significant increase in credit risk and default definition
The Group assesses the credit risk of its financial assets based on the information obtained during periodic review of publicly available information on the entities, industry trends and payment records. Based on the analysis of the information provided, the Group identifies the assets that require close monitoring.
Furthermore, financial assets that have been identified to be more than 30 days past due on contractual payments are assessed to have experienced significant increase in credit risk. These assets are grouped as part of Stage 2 financial assets where the three-stage approach is applied.
In line with the Group's credit risk management practices, a financial asset is defined to be in default when contractual payments have not been received at least 90 days after the contractual payment period. Subsequent to default, the Group carries out active recovery strategies to recover all outstanding payments due on receivables. Where the Group determines that there are no realistic prospects of recovery, the financial asset and any related loss allowance is written off either partially or in full.
3.3.4. IFRS 15 Revenue from Contracts with Customers - Impact of adoption
The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in IFRS 15, the Group has adopted the new rules using the modified retrospective approach and has not restated comparatives for the 2017 financial year. There was no impact on the Group's retained earnings at the date of initial application (i.e. 1 January 2018). The reclassification adjustments resulting from the adoption of IFRS 15 is shown in note 3.3.1 and detailed below:
3.3.4.1. Impact on statement of financial position
a) Trade and other receivables
The Group introduced the presentation of contract assets in the balance sheet to reflect the guidance of IFRS 15. Contract assets recognised in relation to unbilled revenue from Nigerian Gas Marketing Company (NGMC) were previously presented as part of trade and other receivables.
3.3.4.2. Impact on statement of profit or loss and other comprehensive income
a) Reclassification of underlifts to other income
In some instances, Joint ventures (JV) partners lift the share of production of other partners. Under IAS 18, over lifts and underlifts were recognised net in revenue using entitlement accounting. They are settled at a later period through future liftings and not in cash (non-monetary settlements). This is referred to as the entitlement method. IFRS 15 excludes transactions arising from arrangements where the parties are participating in an activity together and share the risks and benefits of that activity as the counterparty is not a customer. To reflect the change in policy, the Group has reclassified underlifts to other income.
b) Reclassification of demurrage from costs of sales
Seplat pays demurrage to Mercuria for delays caused by incomplete cargoes delivered at the port. These are referred to as price adjustments and Seplat is billed subsequently by Mercuria. Under IFRS 15, these are considerations payable to customers and should be recognised net of revenue. Revenue has therefore been recognised net of demurrage costs. In the current period, there was a refund of demurrage which has been added to revenue. In prior reporting periods, demurrage costs were included as part of operations and maintenance costs.
c) Reclassification of barging costs from cost of sales
Seplat refunds to Mecuria barging costs incurred on crude oil barrels delivered. Seplat does not enjoy a separate service which it would have to pay another party for. This has been determined to be a consideration payable to a customer and should be accounted for as a direct deduction from revenue. Revenue should therefore be recognised net of barging costs. In the current period, there were no barging costs. In prior periods, barging costs were shown separately in cost of sales.
3.3.5. IFRS 15 Revenue from Contracts with Customers - Accounting policies
The Group has adopted IFRS 15 as issued in May 2014 which has resulted in changes in accounting policy of the Group. IFRS 15 replaces IAS 18 which covers revenue arising from the sale of goods and the rendering of services, IAS 11 which covers construction contracts, and related interpretations. In accordance with the transitional provisions in IFRS 15, comparative figures have not been restated as the Group has applied the modified retrospective approach in adopting this standard.
IFRS 15 introduces a five-step model for recognising revenue to depict transfer of goods or services. The model distinguishes between promises to a customer that are satisfied at a point in time and those that are satisfied over time.
a) Revenue recognition
It is the Group's policy to recognise revenue from a contract when it has been approved by both parties, rights have been clearly identified, payment terms have been defined, the contract has commercial substance, and collectability has been ascertained as probable. Collectability of customer's payments is ascertained based on the customer's historical records, guarantees provided, the customer's industry and advance payments made if any.
Revenue is recognised when control of goods sold has been transferred. Control of an asset refers to the ability to direct the use of and obtain substantially all of the remaining benefits (potential cash inflows or savings in cash outflows) associated with the asset. For crude oil, this occurs when the crude products are lifted by the customer (buyer) Free on Board at the Group's loading facility. Revenue from the sale of oil is recognised at a point in time when performance obligation is satisfied. For gas, revenue is recognised when the product passes through the custody transfer point to the customer. Revenue from the sale of gas is recognised over time using the practical expedient of the right to invoice.
The surplus or deficit of the product sold during the period over the Group's share of production is termed as an overlift or underlift. With regard to underlifts, if the over-lifter does not meet the definition of a customer or the settlement of the transaction is non-monetary, a receivable and other income is recognised. Conversely, when an overlift occurs, cost of sale is debited and a corresponding liability is accrued. Overlifts and underlifts are initially measured at the market price of oil at the date of lifting, consistent with the measurement of the sale and purchase. Subsequently, they are remeasured at the current market value. The change arising from this remeasurement is included in the profit or loss as other income/expenses-net.
-- Definition of a customer
A customer is a party that has contracted with the Group to obtain crude oil or gas products in exchange for a consideration, rather than to share in the risks and benefits that result from sale. The Group has entered into collaborative arrangements with its Joint Venture partners to share in the production of oil. Collaborative arrangements with its Joint Venture partners to share in the production of oil are accounted for differently from arrangements with customers as collaborators share in the risks and benefits of the transaction, and therefore, do not meet the definition of customers. Revenue arising from these arrangements are recognised separately in other income.
-- Identification of performance obligation
At inception, the Group assesses the goods or services promised in the contract with a customer to identify as a performance obligation, each promise to transfer to the customer either a distinct good or series of distinct goods. The number of identified performance obligations in a contract will depend on the number of promises made to the customer. The delivery of barrels of crude oil or units of gas are usually the only performance obligation included in oil and gas contract with no additional contractual promises. Additional performance obligations may arise from future contracts with the Group and its customers.
The identification of performance obligations is a crucial part in determining the amount of consideration recognised as revenue. This is due to the fact that revenue is only recognised at the point where the performance obligation is fulfilled, Management has therefore developed adequate measures to ensure that all contractual promises are appropriately considered and accounted for accordingly.
-- Contract enforceability and termination clauses
The Group may enter into contracts that do not create enforceable rights and obligation to parties in the contract. Such instances may include where the counterparty has not met all conditions necessary to kick start the contract or where a non-contractual promise exists between both parties to the agreement. In these instances, the agreement is not yet a valid contract and therefore no revenue can be recognised. The agreement between Seplat and PanOcean is not a valid contract. Therefore, it may not be appropriate to reclassify the outstanding balance from deferred revenue to contract liability. The outstanding balance has been included as part of accruals and other payables. No amount has been recognized in revenue in relation to the transaction.
It is the Group's policy to assess that the defined criteria for establishing contracts that entail enforceable rights and obligations are met. The criteria provides that the contract has been approved by both parties, rights have been clearly identified, payment terms have been defined, the contract has commercial substance, and collectability has been ascertained as probable.
The Group may enter into contracts that do not meet the revenue recognition criteria. In such cases, the consideration received will only be recognised as revenue when the contract is terminated.
The Group may also have the unilateral rights to terminate an unperformed contract without compensating the other party. This could occur where the Group has not yet transferred any promised goods or services to the customer and the Group has not yet received, and is not yet entitled to receive, any consideration in exchange for promised goods or services.
b) Transaction price
Transaction price is the amount that an entity allocates to the performance obligations identified in the contract. It represents the amount of revenue recognised as those performance obligations are satisfied. Complexities may arise where a contract includes variable consideration, significant financing component or consideration payable to a customer.
Variable consideration not within the Group's control is estimated at the point of revenue recognition and reassessed periodically. The estimated amount is included in the transaction price to the extent that it is highly probable that a significant reversal of the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. As a practical expedient, where the Group has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Group's performance completed to date, the Group may recognise revenue in the amount to which it has a right to invoice.
Significant financing component (SFC) assessment is carried out (using a discount rate that reflects the amount charged in a separate financing transaction with the customer and also considering the Group's incremental borrowing rate) on contracts that have a repayment period of more than 12 months.
As a practical expedient, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between when it transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Instances when SFC assessment may be carried out include where the Group receives advance payment for agreed volumes of crude oil or receivables take or pay deficiency payment on gas sales. Take or pay gas sales contract ideally provides that the customer must sometimes pay for gas even when not delivered to the customer. The customer, in future contract years, takes delivery of the product without further payment. The portion of advance payments that represents significant financing component will be recognised as interest revenue.
Consideration payable to a customer is accounted for as a reduction of the transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service that the customer transfers to the Group. Examples include barging costs incurred, demurrage and freight costs. These do not represent a distinct service transferred and is therefore recognised as a direct deduction from revenue.
c) Breakage
The Group enters into take or pay contracts for sale of gas where the buyer may not ultimately exercise all of their rights to the gas. The take or pay quantity not taken is paid for by buyer called take or pay deficiency payment. The Group assesses if there is a reasonable assurance that it will be entitled to a breakage amount. Where it establishes that a reasonable assurance exists, it recognises the expected breakage amount as revenue in proportion to the pattern of rights exercised by the customer. However, where the Group is not reasonably assured of a breakage amount, it would only recognise the expected breakage amount as revenue when the likelihood of the customer exercising its remaining rights becomes remote.
d) Contract modification and contract combination
Contract modifications relates to a change in the price and/or scope of an approved contract. Where there is a contract modification, the Group assess if the modification will create a new contract or change the existing enforceable rights and obligations of the parties to the original contract.
Contract modifications are treated as new contracts when the performance obligations are separately identifiable and transaction price reflects the standalone selling price of the crude oil or the gas to be sold. Revenue is adjusted prospectively when the crude oil or gas transferred is separately identifiable and the price does not reflect the standalone selling price. Conversely, if there are remaining performance obligations which are not separately identifiable, revenue will be recognised on a cumulative catch-up basis when crude oil or gas is transferred.
The Group enters into new contracts with its customers only on the expiry of the old contract. In the new contracts, prices and scope may be based on terms in the old contract. In gas contracts, prices change over the course of time. Even though gas prices change over time, the changes are based on agreed terms in the initial contract i.e. price change due to consumer price index. The change in price is therefore not a contract modifications. Any other change expected to arise from the modification of a contract is implemented in the new contracts.
The Group combines contracts entered into at near the same time (less than 12 months) as one contract if they are entered into with the same or related party customer, the performance obligations are the same for the contracts and the price of one contract depends on the other contract.
e) Portfolio expedients
As a practical expedient, the Group may apply the requirements of IFRS 15 to a portfolio of contracts (or performance obligations) with similar characteristics if it expects that the effect on the financial statements would not be materially different from applying IFRS to individual contracts within that portfolio.
f) Contract assets and liabilities
The Group recognises contract assets for unbilled revenue from crude oil and gas sales. A contract liability is consideration received for which performance obligation has not been met.
g) Disaggregation of revenue from contract with customers
The Group derives revenue from two types of products, oil and gas. The Group has determined that the disaggregation of revenue based on the criteria of type of products meets the revenue disaggregation disclosure requirement of IFRS 15 as it depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. See further details in note 6.
3.4. Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 September 2018.
This basis of consolidation is the same adopted for the last audited financial statements as at 31 December 2017.
3.5. Functional and presentation currency
Items included in the financial statements of the Company and the subsidiaries are measured using the currency of the primary economic environment in which the subsidiaries operate ('the functional currency'), which is the US dollar except for the UK subsidiary which is the Great Britain Pound. The interim condensed consolidated financial statements are presented in the Nigerian Naira and the US Dollars.
The Group has chosen to show both presentation currencies and this is allowable by the regulator.
i) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end are generally recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss or other comprehensive income depending on where fair value gain or loss is reported.
ii) Group companies
The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
-- assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date.
-- income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not - a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the respective exchange rates that existed on the dates of the transactions), and
-- all resulting exchange differences are recognised in other comprehensive income.
On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.
4. Significant accounting judgements, estimates and assumptions
4.1. Judgements
Management's judgements at the end of the third quarter are consistent with those disclosed in the recent 2017 Annual financial statements. The following are some of the judgements which have the most significant effect on the amounts recognised in this consolidated financial statements.
i) OMLs 4, 38 and 41
OMLs 4, 38, 41 are grouped together as a cash generating unit for the purpose of impairment testing. These three OMLs are grouped together because they each do not independently generate cash flows. They currently operate as a single block sharing resources for the purpose of generating cash flows. Crude oil and gas sold to third parties from these OMLs are invoiced together.
ii) New tax regime
Effective 1 January 2013, the Company was granted the inter tax status incentive by the Nigerian Investment Promotion Commission for an initial three-year period and a further two-year period on approval. For the period the incentive applies, the Company is exempted from paying petroleum profits tax on crude oil profits (which was taxed at 65.75% but increased to 85% in 2017), corporate income tax on natural gas profits (currently taxed at 30%) and education tax of 2%. The Company has completed its first three years of the pioneer tax status and now required to pay the full petroleum profits tax on crude oil profits, corporate income tax on natural gas profits and education tax of 2%.
Newton Energy and Seplat East Onshore Limited (OML 53) were also granted pioneer tax status on the same basis as the company. Tax incentives do not apply to Seplat East Swamp Company Limited (OML 55), as it had no activities at the time the incentives were granted to Seplat and Newton Energy.
Deferred tax assets have been recognised during the reporting period. Deferred tax liabilities are not recognised in the reporting period as the Group was not liable to make future income taxes payment in respect of taxable temporary differences.
iii) Unrecognised deferred tax asset
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. See further details in note 15.
iv) Defined benefit plan
Actuarial valuations were carried out at the end of the previous financial year. These valuatons included the estimated interest and service costs for the 2018 interim periods. The Group has relied on these valuations to determine its defined benefit liability as it does not expect material differences in the assumptions used for the current reporting period. All assumptions are reviewed annually.
v) Revenue recognition -- Definition of contracts
The Group has entered into a non-contractual promise with PanOcean where it allows Panocean to pass crude oil through its pipelines from a field just above Seplat's to the terminal for loading. Management has determined that the non-existence of an enforceable contract with Panocean means that it may not be viewed as a valid contract with a customer. As a result, income from this activity is recognised as other income. Also the deferred revenue was reclassified to accruals and other payables.
-- Performance obligations
The judgments applied in determining what constitutes a performance obligation will impact when control is likely to pass and therefore when revenue is recognised i.e. over time or at a point in time. The Group has determined that only one performance obligation exists in oil contracts which is the delivery of crude oil to specified ports. Revenue is therefore recognised at a point in time.
For gas contracts, the performance obligation is satisfied through the delivery of a series of distinct goods. Revenue is recognised over time in this situation as NGMC simultaneously receives and consumes the benefits provided by the Group's performance. The Group has elected to apply the 'right to invoice' practical expedient in determining revenue from its gas contracts. The right to invoice is a measure of progress that allows the Group to recognise revenue based on amounts invoiced to the customer. Judgement has been applied in evaluating that the Group's right to consideration corresponds directly with the value transferred to the customer and is therefore eligible to apply this practical expedient.
-- Significant financing component
The Group has entered into an advance payment contract with Mercuria for future crude oil to be delivered. The Group has considered whether the contract contains a financing component and whether that financing component is significant to the contract, including both of the following;
(a) The difference ,if any, between the amount of promised consideration and cash selling price and;
(b) The combined effect of both the following:
- The expected length of time between when the Group transers the crude to Mecuria and when payment for the crude is recieved and;
- The prevailing interest rate in the relevant market.
The advance period is greater than 12 months. In addition, the interest expense accrued on the advance is based on a comparable market rate. Interest expense has therefore been included as part of finance cost.
-- Transactions with Joint Venture (JV) partners
The treatment of underlift and overlift transactions is judgmental and requires a consideration of all the facts and circumstances including the purpose of the arrangement and transaction. The transaction between the Group and its JV partners involves sharing in the production of crude oil, and for which the settlement of the transaction is non-monetary. The JV partners have been assessed to be partners not customer. Therefore, shortfalls or excesses below or above the Group's share of production are recognised in other income/expenses- net.
-- Barging costs
The Group refunds to Mercuria barging costs incurred on crude oil barrels delivered. The Group does not enjoy a separate service as it would have had to pay another party for the delivery of crude oil. The barging costs is therefore determined to be a consideration payable to customer as there is no distinct goods or service being enjoyed by Group. Since no distinct good or service is transferred, barging costs is accounted for as a direct deduction from revenue i.e. revenue is recognised net of barging costs.
vi) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The Board of directors has appointed a steering committee which assesses the financial performance and position of the Group, and makes strategic decisions. The steering committee, which has been identified as being the chief operating decision maker, consists of the chief financial officer, the general manager (Finance), the general manager (Gas) and the financial reporting manager. See further details in note 6.
4.2. Estimates and assumptions
The key assumptions concerning the future and the other key source of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are disclosed in the most recent 2017 annual financial statements.
The following are some of the estimates and assumptions made.
i) Defined benefit plans
The cost of the defined benefit retirement plan and the present value of the retirement obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and changes in inflation rates.
Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. The parameter most subject to change is the discount rate. In determining the appropriate discount rate, management considers market yield on federal government bonds in currencies consistent with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation.
The rates of mortality assumed for employees are the rates published in 67/70 ultimate tables, published jointly by the Institute and Faculty of Actuaries in the UK.
ii) Contingent consideration
During the reporting period, the Group continued to recognise the contingent consideration of 5.7 billion for OML 53 at the fair value of 5.64 billion (2017: 4.2 billion). It is contingent on oil price rising above US$90 ( 27,535) per barrel over a one year period and expiring on 31st January 2020.
iii) Income taxes
The Group is subject to income taxes by the Nigerian tax authority, which does not require significant judgement in terms of provision for income taxes, but a certain level of judgement is required for recognition of deferred tax assets. Management is required to assess the ability of the Group to generate future taxable economic earnings that will be used to recover all deferred tax assets. Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. The estimates are based on the future cash flow from operations taking into consideration the oil and gas prices, volumes produced, operational and capital expenditure.
iv) Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk of default, expected loss rates and maximum contractual period. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed note 3.3.3.
5. Financial risk management
5.1. Financial risk factors
The Group's activities expose it to a variety of financial risks such as market risk (including foreign exchange risk, interest rate risk and commodity price risk), credit risk and liquidity risk. The Group's risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
Risk Exposure arising from Measurement Management
------------ ------------------------------ --------------------- --------------------------------
Market risk Future commercial transactions Cash flow forecasting Match and settle foreign
- foreign Recognised financial Sensitivity analysis denominated cash inflows
exchange assets and liabilities with foreign denominated
not denominated in cash outflows.
US dollars.
------------ ------------------------------ --------------------- --------------------------------
Market risk Long term borrowings Sensitivity analysis Review refinancing opportunities
- interest at variable rate
rate
------------ ------------------------------ --------------------- --------------------------------
Market risk Future sales transactions Sensitivity analysis Oil price hedges
- commodity
prices
------------ ------------------------------ --------------------- --------------------------------
Credit risk Cash and cash equivalents, Aging analysis Diversification of bank
trade receivables and Credit ratings deposits.
derivative financial
instruments.
------------ ------------------------------ --------------------- --------------------------------
Liquidity Borrowings and other Rolling cash flow Availability of committed
risk liabilities forecasts credit lines and borrowing
facilities
------------ ------------------------------ --------------------- --------------------------------
5.1.1. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group manages liquidity risk by ensuring that sufficient funds are available to meet its commitments as they fall due.
The Group uses both long-term and short-term cash flow projections to monitor funding requirements for activities and to ensure there are sufficient cash resources to meet operational needs. Cash flow projections take into consideration the Group's debt financing plans and covenant compliance.
Surplus cash held is transferred to the treasury department which invests in interest bearing current accounts, time deposits and money market deposits.
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed maturity periods. The table has been drawn based on the undiscounted cash flows of the financial liabilities based on the earliest date on which the Group can be required to pay.
Effective Less than 1 -2 2 - 3 3 - 5 After Total
interest rate 1 year years years years 5 years
---------------- =============== ========== ============= ============== ============== ======== ============
% 'million 'million 'million 'million 'million 'million
---------------- =============== ========== ============= ============== ============== ======== ============
30 September
2018
================ =============== ========== ============= ============== ============== ======== ============
Non -
derivatives
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Fixed interest
rate borrowings
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Senior notes 9.25% 10,130 10,075 10,048 122,220 - 152,473
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Variable
interest rate
borrowings (bank
loans):
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Stanbic IBTC
Bank Plc 6.0% +LIBOR 624 1,072 3,220 4,335 - 9,251
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
The Standard
Bank of South
Africa L 6.0% +LIBOR 416 715 2,147 2,890 - 6,168
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Nedbank Limited,
London Branch 6.0% +LIBOR 867 1,488 4,472 6,022 - 12,849
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Standard
Chartered Bank 6.0% +LIBOR 780 1,340 4,025 5,419 - 11,564
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Natixis 6.0% +LIBOR 607 1,042 3,131 4,215 - 8,995
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
FirstRand Bank
Limited Acting 6.0% +LIBOR 607 1,042 3,131 4,215 - 8,995
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Citibank N.A.
London 6.0% +LIBOR 520 893 2,683 3,613 - 7,709
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
The Mauritius
Commercial Bank
Plc 6.0% +LIBOR 520 893 2,683 3,613 - 7,709
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Nomura
International
Plc 6.0% +LIBOR 260 447 1,342 1,806 - 3,855
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Other non -
derivatives
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
Trade and other
payables** 21,340 - - - - 21,340
---------------- --------------- ---------- ------------- -------------- -------------- -------- ------------
36,671 19,007 36,882 158,348 - 250,908
================ =============== ========== ============= ============== ============== ======== ============
Effective Less than 1 - 2 2 - 3 3 - 5 After Total
interest 1 year years years years 5
rate years
---------------- =============== ========== ============= ============== ============== ======== ==========
% 'million 'million 'million 'million 'million 'million
---------------- =============== ========== ============= ============== ============== ======== ==========
31 December 2017
================ --------------- ---------- ------------- -------------- -------------- -------- ----------
Non -
derivatives
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
Variable
interest rate
borrowings
(bank loans):
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
8.5% +
Allan Gray LIBOR 1,696 1,564 1,124 538 - 4,922
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
8.5% +
Zenith Bank Plc LIBOR 23,243 21,439 15,404 7,371 - 67,457
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
First Bank of 8.5% +
Nigeria Limited LIBOR 12,830 11,835 8,503 4,069 - 37,237
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
United Bank for 8.5% +
Africa Plc LIBOR 14,527 13,400 9,628 4,607 - 42,162
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
Stanbic IBTC 8.5% +
Bank Plc LIBOR 2,177 2,008 1,443 690 - 6,318
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
The Standard
Bank of South 8.5% +
Africa Limited LIBOR 2,177 2,008 1,443 690 - 6,318
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
Standard 6.0% +
Chartered Bank LIBOR 5,747 - - - - 5,747
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
6.0% +
Natixis LIBOR 5,747 - - - - 5,747
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
Citibank Nigeria
Ltd and 6.0% +
Citibank NA LIBOR 4,470 - - - - 4,470
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
FirstRand Bank 6.0% + - - - - - -
Ltd (Rand LIBOR
Merchant Bank
Division)
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
6.0% +
Nomura Bank Plc* LIBOR 3,831 - - - - 3,831
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
NedBank Ltd, 6.0% +
London Branch LIBOR 3,831 - - - - 3,831
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
The Mauritius
Commercial 6.0% +
Bank Plc* LIBOR 3,831 - - - - 3,831
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
Stanbic IBTC 6.0% +
Bank Plc LIBOR 2,874 - - - - 2,874
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
The Standard
Bank of South 6.0% +
Africa Limited LIBOR 4,152 - - - - 4,152
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
Other non -
derivatives
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
Trade and other
payables** 38,876 - - - - 38,876
---------------- --------------- ---------- ------------- -------------- -------------- -------- ----------
130,009 52,254 37,545 17,965 - 237,773
================ =============== ========== ============= ============== ============== ======== ==========
*Nomura and The Mauritius Commercial Bank replace JP Morgan and Bank of America.
** Trade and other payables (excludes non-financial liabilities such as provisions, accruals, taxes, pension and other
non-contractual payables).
5.1.2. Credit risk
Credit risk refers to the risk of a counterparty defaulting on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, favourable derivative financial instruments, deposits with banks and financial institutions as well as credit exposures to customers and Joint venture partners, i.e. NPDC receivables and NGMC receivables.
Risk management
The Group is exposed to credit risk from its sale of crude oil to Mecuria. The off-take agreement with Mercuria runs until 31 July 2021 with a 30 day payment term. The Group is exposed to further credit risk from outstanding cash calls from Nigerian Petroleum Development Company (NPDC) and National Petroleum Investment Management Services (NAPIMS).
In addition, the Group is exposed to credit risk in relation to its sale of gas to Nigerian Gas Marketing Company (NGMC) Limited, a subsidiary of NNPC, its sole gas customer during the period.
The credit risk on cash is limited because the majority of deposits are with banks that have an acceptable credit rating assigned by an international credit agency. The Group's maximum exposure to credit risk due to default of the counterparty is equal to the carrying value of its financial assets.
5.2. Fair value measurements
Set out below is a comparison by category of carrying amounts and fair value of all financial instruments:
Carrying amount Fair value
==================== ==================
As at 31 As at 30 As at 31
As at 30 Dec Sept Dec
Sept 2018 2017 2018 2017
million million million million
====================================== ========== ======== ======== ========
Financial assets
Trade and other receivables* 35,558 91,613 35,558 91,613
-------------------------------------- ---------- -------- -------- --------
Contract assets 3,401 - 3,401 -
-------------------------------------- ---------- -------- -------- --------
Cash and cash equivalents 194,067 133,699 194,067 133,699
-------------------------------------- ---------- -------- -------- --------
233,026 225,312 233,026 225,312
====================================== ========== ======== ======== ========
Financial liabilities
Interest bearing loans and borrowings 164,335 174,329 171,478 174,329
-------------------------------------- ---------- -------- -------- --------
Trade and other payables 21,340 38,876 21,340 38,876
====================================== ========== ======== ======== ========
185,675 213,205 192,818 213,205
====================================== ========== ======== ======== ========
*Trade and other receivables excludes NGMC VAT receivables, cash advances and advance payments.
5.2.1. Fair Value Hierarchy
As at the reporting period, the Group had classified its financial instruments into the three levels prescribed under the accounting standards. These are all recurring fair value measurements. There were no transfers of financial instruments between fair value hierarchy levels during this third quarter.
The fair values of the Group's interest-bearing loans and borrowings are determined by using discounted cash flow models that use market interest rates as at the end of the period. The interest-bearing loans and borrowings are in level 2. The carrying amounts of the other financial instruments are the same as their fair values.
The Valuation process
The finance & planning team of the Group performs the valuations of financial and non financial assets required for financial reporting purposes, including level 3 fair values. This team reports directly to the Finance Manager (FM) who reports to the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussions of valuation processes and results are held between the FM and the valuation team at least once every quarter, in line with the Group's quarterly reporting periods.
6. Segment reporting
Business segments are based on Seplat's internal organisation and management reporting structure. Seplat's business segments
are the two core businesses: Oil and Gas. The Oil segment deals with the exploration, development and production of crude
oil while the Gas segment deals with the production of gas.
For the nine months ended 30 September 2018, revenue from the gas segment of the business constituted 22% of the Group's
revenue. Management believes that the gas segment of the business will continue to generate higher profits in the foreseeable
future. It also decided that more investments will be made toward building the gas arm of the business. This investment will
be used in establishing more offices, creating a separate operational management and procuring the required infrastructure
for this segment of the business. The new gas business is positioned separately within the Group and reports directly to the
('chief operating decision maker'). As this business segment's revenues and results, and also its cash flows, will be largely
independent of other business units within Seplat, it is regarded as a separate segment.
The result is two reporting segments, Oil and Gas. There were no intrasegment sales during the reporting periods under consideration. All operating and reportable segments are situated in Nigeria.
Where applicable, the comparative figures for 2017 have been reclassified to match the new structure for the nine months ended 30 September 2018.
The Group accounting policies are also applied in the segment reports.
6.1. Segment profit disclosure
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
--------------------------------------------------- -------------- -------------- -------------- --------------
Oil (3,457) (17,756) (1,795) 1,034
--------------------------------------------------- -------------- -------------- -------------- --------------
Gas 31,425 16,136 14,919 5,778
--------------------------------------------------- -------------- -------------- -------------- --------------
Total profit/(loss) after tax 27,968 (1,620) 13,124 6,812
--------------------------------------------------- -------------- -------------- -------------- --------------
Oil
--------------------------------------------------- ============== ============== ============== ==============
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
--------------------------------------------------- -------------- -------------- -------------- --------------
'million 'million 'million 'million
=================================================== ============== ============== ============== ==============
Revenue
--------------------------------------------------- -------------- -------------- -------------- --------------
Crude oil sales 134,849 58,928 56,154 35,238
--------------------------------------------------- -------------- -------------- -------------- --------------
Operating profit before depreciation, amortisation
and impairment 73,569 8,344 29,557 12,823
--------------------------------------------------- -------------- -------------- -------------- --------------
Depreciation, amortisation and impairment (24,231) (8,202) (7,338) (4,537)
=================================================== ============== ============== ============== ==============
Operating profit/(loss) 49,338 142 22,219 8,286
=================================================== ============== ============== ============== ==============
Finance income 2,050 483 720 213
--------------------------------------------------- -------------- -------------- -------------- --------------
Finance expenses (17,760) (17,521) (5,092) (6,947)
--------------------------------------------------- -------------- -------------- -------------- --------------
Profit/(loss) before taxation 33,628 (16,896) 17,847 1,552
--------------------------------------------------- -------------- -------------- -------------- --------------
Taxation (28,933) (860) (11,490) (518)
=================================================== ============== ============== ============== ==============
(Loss) for the period 4,695 (17,756) 6,357 1,034
=================================================== ============== ============== ============== ==============
Gas
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
=================================================== ============== ============== ============== ==============
Revenue
--------------------------------------------------- -------------- -------------- -------------- --------------
Gas sales 38,861 26,262 12,762 9,635
--------------------------------------------------- -------------- -------------- -------------- --------------
Operating profit before depreciation, amortisation
and impairment 35,266 25,517 11,388 9,239
--------------------------------------------------- -------------- -------------- -------------- --------------
Depreciation, amortisation and impairment (3,841) (9,381) (1,275) (3,461)
--------------------------------------------------- -------------- -------------- -------------- --------------
Operating profit 31,425 16,136 10,113 5,778
--------------------------------------------------- -------------- -------------- -------------- --------------
Finance income - - - -
--------------------------------------------------- -------------- -------------- -------------- --------------
Finance expenses - - - -
--------------------------------------------------- -------------- -------------- -------------- --------------
Profit before taxation 31,425 16,136 10,113 5,778
--------------------------------------------------- -------------- -------------- -------------- --------------
Taxation (8,152) - (3,346) -
--------------------------------------------------- -------------- -------------- -------------- --------------
Profit for the period 23,273 16,136 6,767 5,778
--------------------------------------------------- -------------- -------------- -------------- --------------
6.1.1. Disaggregation of revenue from contracts with customers
The Group derives revenue from the transfer of commodities at a point in time on the basis of product type. The Group has not disclosed disaggregated revenue and contract asset for the comparative periods, as the effect of IFRS 15 adjustments have been treated retrospectively using the simplified transition approach. The simplified approach does not require a restatement of comparatives.
9 months ended 9 months ended 9 months ended 3 months ended 3 months ended 3 months ended
30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept
2018 2018 2018 2018 2018 2018
-------------- -------------- -------------- -------------- -------------- --------------
Oil Gas Total Oil Gas Total
-------------- -------------- -------------- -------------- -------------- --------------
'million 'million 'million million million million
====================== ============== ============== ============== ============== ============== ==============
Revenue from contract
with customers 134,849 38,861 173,710 56,154 12,762 68,916
---------------------- -------------- -------------- -------------- -------------- -------------- --------------
Timing of revenue
recognition
---------------------- -------------- -------------- -------------- -------------- -------------- --------------
At a point in time 134,849 - 134,849 56,154 - 56,154
---------------------- -------------- -------------- -------------- -------------- -------------- --------------
Over time - 38,861 38,861 - 12,762 12,762
---------------------- -------------- -------------- -------------- -------------- -------------- --------------
134,849 38,861 173,710 56,154 12,762 68,916
====================== ============== ============== ============== ============== ============== ==============
6.2. Segment assets
Segment assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the reporting segment and the physical location of the asset.
Oil Gas Total
-------- ------------------- --------
Total segment assets 'million 'million 'million
===================== ======== =================== ========
30 September 2018 652,780 121,993 774,773
--------------------- -------- ------------------- --------
31 December 2017 716,657 82,896 799,553
--------------------- -------- ------------------- --------
6.3. Segment liabilities
Segment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated
based on the operations of the segment.
Oil Gas Total
-------- ------------------ -------------------
Total segment liabilities 'million 'million 'million
========================== ======== ================== ===================
30 September 2018 285,564 9,505 295,069
-------------------------- -------- ------------------ -------------------
31 December 2017 325,967 13,940 339,907
-------------------------- -------- ------------------ -------------------
6.4. Contingent consideration
Contingent consideration of 5.7 billion for OML 53 relates solely to the oil segment. This is contingent on oil price rising above N 27,535/bbl. over a one year period and expiring on 31st January 2020. The fair value loss arising during the reporting period is 5.64 billion.
7. Revenue from contracts with customers
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
===================== ============== ============== ============== ==============
Crude oil sales 134,849 68,460 56,154 34,453
--------------------- -------------- -------------- -------------- --------------
Gas sales 38,861 26,262 12,762 9,635
===================== ============== ============== ============== ==============
173,710 94,722 68,916 44,088
--------------------- -------------- -------------- -------------- --------------
(Overlift)/underlift - (9,532) - 785
===================== ============== ============== ============== ==============
Total 173,710 85,190 68,916 44,873
===================== ============== ============== ============== ==============
The major off-taker for crude oil is Mercuria. The major off-taker for gas is the Nigerian Gas Marketing Company.
8. Cost of sales
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
========================================= ============== ============== ============== ==============
Crude handling 14,450 5,240 5,511 3,709
----------------------------------------- -------------- -------------- -------------- --------------
Barging costs - 2,787 - 792
----------------------------------------- -------------- -------------- -------------- --------------
Royalties 29,352 13,107 10,293 7,371
----------------------------------------- -------------- -------------- -------------- --------------
Depletion, depreciation and amortisation 27,903 16,546 9,312 7,685
----------------------------------------- -------------- -------------- -------------- --------------
Niger Delta Development Commission 1,573 1,108 496 379
----------------------------------------- -------------- -------------- -------------- --------------
Other rig related expenses 12 1,020 - 521
----------------------------------------- -------------- -------------- -------------- --------------
Operations & maintenance expenses 6,910 7,299 3,101 2,736
========================================= ============== ============== ============== ==============
80,200 47,107 28,713 23,193
========================================= ============== ============== ============== ==============
9. Other income/(expenses)- net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
===================== ============== ============== ============== ==============
Underlift/(overlift) 6,259 - (2,224) -
===================== ============== ============== ============== ==============
Shortfalls may exist between the crude oil lifted and sold to customers during the period and the participant's ownership share of production. The shortfall is initially measured at the market price of oil at the date of lifting and recognised as other income.
At each reporting period, the shortfall is remeasured at the current market value. The resulting change, as a result of the remeasurement, is also recognised in profit or loss as other income.
10. General and administrative expenses
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
===================================== ============== ============== ============== ==============
Depreciation 689 1,035 (179) 313
------------------------------------- -------------- -------------- -------------- --------------
Employee benefits 7,076 4,908 2,400 1,612
------------------------------------- -------------- -------------- -------------- --------------
Professional and consulting fees 2,725 3,802 306 1,905
------------------------------------- -------------- -------------- -------------- --------------
Auditor's remuneration 79 288 22 194
------------------------------------- -------------- -------------- -------------- --------------
Directors emoluments (executive) 442 560 247 137
------------------------------------- -------------- -------------- -------------- --------------
Directors emoluments (non-executive) 765 718 266 242
------------------------------------- -------------- -------------- -------------- --------------
Rentals 450 350 149 126
------------------------------------- -------------- -------------- -------------- --------------
Flight and other travel costs 1,623 1,228 864 504
------------------------------------- -------------- -------------- -------------- --------------
Other general expenses 3,021 4,278 1,026 2,578
===================================== ============== ============== ============== ==============
16,870 17,167 5,101 7,611
===================================== ============== ============== ============== ==============
Directors' emoluments have been split between executive and non-executive directors. There were no non-audit services rendered by the Group's auditors during the period.
Other general expenses relate to costs such as office maintenance costs, telecommunication costs, logistics costs and others. Share based payment expenses are included in employee benefits expense.
11. Reversal of/(impairment) losses on financial assets - net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
================================================== ============== ============== ============== ==============
Reversal/(impairment) of loss on NPDC receivables 523 - (47) -
================================================== ============== ============== ============== ==============
Reversal of loss on NAPIMS receivables 4 - 45 -
================================================== ============== ============== ============== ==============
Impairment loss on SPDC receivables (6) - (6) -
================================================== ============== ============== ============== ==============
Net reversal of impairment loss allowance 521 - (8) -
================================================== ============== ============== ============== ==============
On initial application of IFRS 9, an impairment loss of 1.78 billion was recognised for NPDC and NAPIMS receivables as at 1 January 2018 (note 3.3.2.2). The loss allowance was calculated on a total exposure of 38.3 billion. During the reporting period, the outstanding receivable balance reduced to 14.9 billion. The reduction in the receivables balance led to the reversal of previously recognised loss allowance for the 9 months ended 30 September 2018.
12. Loss on foreign exchange - net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
============== ============== ============== ============== ==============
Exchange loss (208) (277) (216) (13)
============== ============== ============== ============== ==============
This is principally as a result of translation of naira denominated monetary assets and liabilities.
13. Fair value loss - net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
============================================ ============== ============== ============== ==============
Crude oil hedging payments (1,063) (4,405) (303) (1,399)
-------------------------------------------- -------------- -------------- -------------- --------------
Fair value loss on contingent consideration (1,386) (419) (19) (145)
-------------------------------------------- ============== ============== ============== ==============
Fair value gain on other assets - 463 - -
============================================ ============== ============== ============== ==============
(2,449) (4,361) (322) (1,544)
============================================ ============== ============== ============== ==============
Crude oil hedging payments represents the payments for crude oil price options charged to profit or loss. Fair value loss on contingent consideration arises in relation to remeasurement of contingent consideration on the Group's acquisition of participating interest in OML 53. The contingency criteria are the achievement of certain production milestones.
14. Finance income/ (costs)
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- --------------------- -------------- --------------------
'million 'million 'million 'million
========================================= ============== ===================== ============== ====================
Finance income
----------------------------------------- -------------- --------------------- -------------- --------------------
Interest income 2,050 483 720 213
----------------------------------------- -------------- --------------------- -------------- --------------------
Finance costs
----------------------------------------- -------------- --------------------- -------------- --------------------
Interest on bank loan (16,561) (16,153) (4,839) (4,984)
----------------------------------------- -------------- --------------------- -------------- --------------------
Interest on advance payments for crude
oil sales (530) (1,346) - (403)
----------------------------------------- -------------- --------------------- -------------- --------------------
Unwinding of discount on provision for
decommissioning (669) (22) (253) (8)
========================================= ============== ===================== ============== ====================
(17,760) (17,521) (5,092) (5,395)
========================================= ============== ===================== ============== ====================
Finance cost - net (15,710) (17,038) (4,372) (5,182)
========================================= ============== ===================== ============== ====================
15. Taxation
Income tax expense is recognised based on management's estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rates used for the period to 30 September 2018 were 85% and 65.75% for crude oil activities and 30% for gas activities. As at 31 December 2017, the applicable tax rates were 85%, 65.75% for crude oil and 30% for gas activities.
15a. Deferred tax assets
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.
As at As at As at As at 31 Dec As at 31 Dec
30 Sept 2018 30 Sept 2018 30 Sept 2018 2017 2017
------------------- ------------------- ------------- ------------ ------------
'million 'million 'million 'million 'million
------------------- ------------------- ------------- ------------ ------------
Gross amount at 85% Gross amount at 30% Tax effect Gross amount Tax effect
================================= =================== =================== ============= ============ ============
Tax losses - - - 14,578 12,392
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Other cumulative timing
differences:
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Fixed assets (97,962) (22,907) (90,140) (105,840) -89,964
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Unutilised Capital Allowance 130,780 9,904 114,134 149,999 127,499
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Provision for Abandonment 752 - 639 120 102
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Provision for Gratuity 2,058 - 1,749 1,471 1,250
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Share Equity Reserve 7,866 - 6,687 5,446 4,629
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Unrealised Forex (Gain)/Loss 4,957 - 4,213 4,952 4,209
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Overlift / (Underlift) 3,225 - 2,741 7,633 6,488
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Provision for Doubtful Debt 2,133 - 1,813 2,131 1,811
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
53,809 (13,003) 41,836 80,490 68,417
================================= =================== =================== ============= ============ ============
15b. Unrecognised deferred tax assets
The unrecognised deferred tax assets relates to the Group's subsidiaries and will be recognised once the entities return to profitability. There are no expiration dates for the unrecognized deferred tax assets.
As at 30 Sept As at 31 Dec As at 31 Dec
As at 30 Sept 2018 2018 2017 2017
------------------ ------------- ------------ ------------
'million 'million 'million 'million
------------------ ------------- ------------ ------------
Gross amount Tax effect Gross amount Tax effect
======================================= ================== ============= ============ ============
Other deductible temporary differences 18,516 12,475 14,988 7,869
--------------------------------------- ------------------ ------------- ------------ ------------
Tax losses 8,360 4,754 14,579 8,908
--------------------------------------- ------------------ ------------- ------------ ------------
26,858 17,218 29,567 16,777
======================================= ================== ============= ============ ============
15c. Unrecognised deferred tax liabilities
There were no temporary differences associated with investments in the Group's subsidiaries for which a deferred tax liability would have been recognised in the periods presented.
16. Earnings/(loss) per share (EPS/LPS)
Basic
Basic LPS/EPS is calculated on the Group's profit or loss after taxation attributable to the parent entity and on the basis of the weighted average of issued and fully paid ordinary shares at the end of the period.
Diluted
Diluted LPS/EPS is calculated by dividing the profit or loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares (arising from outstanding share awards in the share based payment scheme) into ordinary shares.
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
'million 'million 'million 'million
====================================================== ============== ============== ============== ==============
Profit/(loss) for the period 27,968 (1,620) 13,124 6,812
====================================================== ============== ============== ============== ==============
Share Share Share Share
'000 '000 '000 '000
====================================================== ============== ============== ============== ==============
Weighted average number of ordinary shares in issue 582,889 563,445 582,889 563,445
------------------------------------------------------ -------------- -------------- -------------- --------------
Share awards 6,157 6,437 6,157 6,437
------------------------------------------------------ -------------- -------------- -------------- --------------
Weighted average number of ordinary shares adjusted
for the effect of dilution 589,046 569,882 589,046 569,882
====================================================== ============== ============== ============== ==============
Basic earnings/(loss) per share 47.98 (2.88) 22.52 12.09
------------------------------------------------------ -------------- -------------- -------------- --------------
Diluted earnings/(loss) per share 47.48 (2.84) 22.28 11.95
====================================================== ============== ============== ============== ==============
'million 'million 'million 'million
====================================================== ============== ============== ============== ==============
Profit/(loss) used in determining basic/diluted
earnings/(loss) per share 27,968 (1,620) 13,124 6,812
====================================================== ============== ============== ============== ==============
17. Interest bearing loans & borrowings
Below is the net debt reconciliation on interest bearing loans and borrowings.
Borrowings due Borrowings due above
within 1 year 1 year Total
'million 'million 'million
============================= ============== ==================== =========
Balance as at 1 January
2018 81,159 93,170 174,329
Principal repayment (81,173) (95,609) (176,782)
----------------------------- -------------- -------------------- ---------
Interest repayment (7,915) (4,475) (12,390)
----------------------------- -------------- -------------------- ---------
Interest accrued 9,243 - 9,243
----------------------------- -------------- -------------------- ---------
Effect of loan restructuring - 7,320 7,320
----------------------------- -------------- -------------------- ---------
Other financing charges - (1,191) (1,191)
----------------------------- -------------- -------------------- ---------
Proceeds from loan financing - 163,643 163,643
----------------------------- -------------- -------------------- ---------
Exchange differences 15 148 163
============================= ============== ==================== =========
Balance as at 30 September
2018 1,329 163,006 164,335
============================= ============== ==================== =========
Interest bearing loans and borrowings include a revolving loan facility and senior notes. In the reporting period, the Group repaid its 214 billion seven year term loan and its 91 billion four year revolving loan facility.
In the reporting period, the Group also issued 107 billion million senior notes at a contractual interest rate of 9.25% with interest payable on 1 April and 1 October, and principal repayable at maturity. The notes are expected to mature in April 2023. The interest accrued at the reporting date is 5.58 billion using an effective interest rate of 10.4%.
An agreement for another four year revolving loan facility was entered into by the Group to refinance its old four year revolving loan facility with interest payable semi-annually and principal repayable on 31 December of each year. The new revolving loan has an initial contractual interest rate of 6% +Libor (7.7%) and a settlement date of June 2022. The interest rate of the facility is variable. The Group made a draw down of 61.2 billion in March 2018. The interest accrued at the reporting period is 2.89 billion billion using an effective interest rate of 9.4%. The interest paid was determined using 3-month LIBOR rate + 6% on the last business day of the reporting period. The amortised cost for the senior notes and the borrowings at the reporting period is 104 billion and 60 billion respectively.
The proceeds from the notes issue and new revolving loan facility were used to repay and cancel existing indebtedness, and for general corporate purposes.
18. Trade and other receivables
As at 30 Sept 2018 As at 31 Dec 2017
--------------------------------------------------------------------- -----------------
'million 'million
===================================================================== ================= -------
Trade receivables (note 18a) 33,435 33,236
---------------------------------------------------------------------- ----------------- -------
Nigerian Petroleum Development Company (NPDC) receivables (note 18b) - 34,453
---------------------------------------------------------------------- ----------------- -------
National Petroleum Investment Management Services receivables 89 3,824
---------------------------------------------------------------------- ----------------- -------
Advances on investment - 20,093
---------------------------------------------------------------------- ----------------- -------
Advances to suppliers 3,989 2,404
---------------------------------------------------------------------- ----------------- -------
Other receivables (note 18c) 13,816 894
====================================================================== ================= =======
Gross carrying amount 51,329 94,904
---------------------------------------------------------------------- ----------------- -------
Less: Specific impairment allowance (84) -
====================================================================== ================= =======
51,245 94,904
====================================================================== ================= =======
18a. Trade receivables:
Included in trade receivables is an amount due from Nigerian Gas Marketing Company (NGMC) and Central Bank of Nigeria (CBN) totaling 17.9 billion (2017: 23 billion) with respect to the sale of gas, for the Group. Also included in trade receivables is an amount of 13 billion (2017: 8.39 billion) due from Mecuria for sale of crude.
18b. NPDC receivables:
NPDC receivables represent the outstanding cash calls due to Seplat from its JV partner, Nigerian Petroleum Development Company is Nil (2017: 34 billion). The outstanding NPDC receivables at the end of the reporting period has been netted off against the gas receipts payable to NPDC as Seplat has a legally enforceable right to settle outstanding amounts on a net basis.
18c. Other receivables:
Included in other receivables is a receivable amount from SPDC on an investment that is no longer being pursued. The outstanding receivable amount as at the reporting date is 13.8 billion (2017: nil).
19. Contract assets
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
'million 'million
===================== ================== =================
Revenue on gas sales 3,401 -
===================== ================== =================
A contract asset is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer. The Group has recognised an asset in relation to a contract with NGMC for the delivery of Gas supplies which NGMC has received but which has not been invoiced as at the end of the reporting period.
The terms of payments relating to the contract is between 30- 45 days from the invoice date. However, invoices are raised after delivery between 14-21 days when the the receivable amount has been established and the right to the receivables crytallises. The right to the unbilled receivables is recognised as a contract asset.
At the point where the final billing certificate is obtained from NGMC authorising the quantities, this will be reclassified from the contract assets to trade receivables.
19.1. Reconciliation of contract assets
The movement in the Group's contract assets is as detailed below:
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
'million 'million
========================================= ================== =================
Impact on initial application of IFRS 15 4,238 -
----------------------------------------- ------------------ -----------------
Gas revenue received during the period (837) -
========================================= ================== =================
3,401 -
========================================= ================== =================
20. Cash and cash equivalents
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
'million 'million
================ ================== =================
Cash on hand 3 3
---------------- ------------------ -----------------
Restricted cash 564 19,166
---------------- ------------------ -----------------
Cash at bank 193,500 114,530
================ ================== =================
194,067 133,699
================ ================== =================
Included in cash and cash equivalents is the total amount of 46 billion arising from NPDC's share of gas proceeds. These amounts will be applied against tolling fees from the gas processing on the expanded Oben Gas Plant solely funded by Seplat and on-going cash calls.
21. Share capital
21a. Authorised and issued share capital
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
'million 'million
=============================================================================== ================== =================
Authorised ordinary share capital
------------------------------------------------------------------------------- ------------------ -----------------
1,000,000,000 ordinary shares denominated in Naira of 50 kobo per share 500 500
=============================================================================== ================== =================
Issued and fully paid
------------------------------------------------------------------------------- ------------------ -----------------
588,444,561 (2017: 563,444,561) issued shares denominated in Naira of 50 kobo
per share 296 283
=============================================================================== ================== =================
21b. Employee share based payment scheme
As at 30 September 2018, the Group had awarded 40,410,644 shares (2017: 33,697,792 shares) to certain employees and senior executives in line with its share based incentive scheme. Included in the share based incentive schemes are two additional schemes (2017 Deferred Bonus Scheme and 2018 LTIP Scheme) awarded during the reporting period. During the nine months ended 30 September 2018, 5,534,964 shares were vested (31 December 2017: No shares had vested).
21c. Movement in share capital
Treasury
Number of shares Issued share capital shares Share based payment reserve Total
---------------- -------------------- -------- --------------------------- --------
Shares 'million 'million 'million 'million
============================= ================ ==================== ======== =========================== ========
Opening balance as at 1
January 2018 563,444,561 283 - 4,332 4,615
----------------------------- ---------------- -------------------- -------- --------------------------- --------
Share based payments - - - 2,414 2,414
----------------------------- ---------------- -------------------- -------- --------------------------- --------
Share issue 19,465,036 13 (13) - -
----------------------------- ---------------- -------------------- -------- --------------------------- --------
Vested shares 5,534,964 - 3 (3) -
============================= ================ ==================== ======== =========================== ========
Closing balance as at 30
September 2018 588,444,561 296 (10) 6,743 7,029
============================= ================ ==================== ======== =========================== ========
22. Trade and other payables
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -------------------
'million 'million
============================================== ================== ===================
Trade payables 13,023 19,191
---------------------------------------------- ------------------ -----------------
Nigerian Petroleum Development Company (NPDC) 11,505 -
---------------------------------------------- ------------------ -----------------
Accruals and other payables 33,318 45,570
---------------------------------------------- ------------------ -----------------
Pension payables 95 55
---------------------------------------------- ------------------ -----------------
NDDC levy 3,189 2,564
---------------------------------------------- ------------------ -----------------
Deferred revenue - 41,970
---------------------------------------------- ------------------ -----------------
Royalties payable 16,962 16,209
============================================== ================== =================
78,092 125,559
============================================== ================== =================
Included in accruals and other payables are field-related accruals of 12 billion (2017: 17 billion) and other vendor payables of 21 billion (2017: 29 billion). Royalties include accruals in respect of gas sales for which payment is outstanding at the end of the period.
NPDC payables relate to cash calls paid in advance in line with the Group's Joint operating agreement (JOA) on OML 4, OML 38 and OML 41. The net amount of 11.5 billion has been reported after adjusting for interest as set out in the JOA and undercash call payments in other currencies. The outstanding NPDC receivables at the end of the reporting period has been netted off against the gas receipts payable to NPDC, and impairment has been calculated on the net NPDC receivables balance.
23. Computation of cash generated from operations
9 months ended 9 months ended
30 Sept 2018 30 Sept 2017
----- -------------- ---------------------------
Notes 'million 'million
================================================================== ===== ============== ===========================
Profit/(loss) before tax 65,053 (760)
================================================================== ===== ============== ===========================
Adjusted for:
------------------------------------------------------------------ ----- -------------- ---------------------------
Depletion, depreciation and amortisation 8, 10 28,592 17,581
------------------------------------------------------------------ ----- -------------- ---------------------------
Interest on bank loan 14 16,561 16,153
------------------------------------------------------------------ ----- -------------- ---------------------------
Interest on advance payment for crude oil sales 14 530 1,346
------------------------------------------------------------------ ----- -------------- ---------------------------
Unwinding of discount on provision for decommissioning 14 669 22
------------------------------------------------------------------ ----- -------------- ---------------------------
Interest income 14 (2,050) (483) ------------------------------------------------------------------ ----- -------------- --------------------------- Fair value loss on contingent consideration 13 1,386 419 ------------------------------------------------------------------ ----- -------------- --------------------------- Fair value gain on other assets 13 - (463) ------------------------------------------------------------------ ----- -------------- --------------------------- Unrealised foreign exchange loss 12 208 277 ------------------------------------------------------------------ ----- -------------- --------------------------- Share based payments expenses 2,413 1,226 ------------------------------------------------------------------ ----- -------------- --------------------------- Defined benefit expenses 63 365 ------------------------------------------------------------------ ----- -------------- --------------------------- Reversal of impairment loss on NPDC, NAPIMS and SPDC receivables 11 (521) - ------------------------------------------------------------------ ----- -------------- --------------------------- Loss on disposal of other property,plant and equipment - 25 ------------------------------------------------------------------ ----- -------------- --------------------------- Changes in working capital (excluding the effects of exchange differences): ------------------------------------------------------------------ ----- -------------- --------------------------- Trade and other receivables, including prepayments 34,847 (9,050) ------------------------------------------------------------------ ----- -------------- --------------------------- Contract assets (3,401) - ------------------------------------------------------------------ ----- -------------- --------------------------- Trade and other payables (24,900) 23,129 ------------------------------------------------------------------ ----- -------------- --------------------------- Inventories (1,324) 1,311 ================================================================== ===== ============== =========================== Net cash from operating activities 118,126 51,098 ================================================================== ===== ============== ===========================
24. Related party relationships and transactions
The Group is controlled by Seplat Petroleum Development Company Plc (the 'parent Company'). The shares in the
parent Company are widely held.
24a. Related party relationships
The services provided by the related parties:
Abbeycourt Trading Company Limited: The Chairman of Seplat is a director and shareholder. The company provides diesel supplies to Seplat in respect of Seplat's rig operations.
Cardinal Drilling Services Limited (formerly Caroil Drilling Nigeria Limited): Is owned by common shareholders with the parent Company. The company provides drilling rigs and drilling services to Seplat.
Charismond Nigeria Limited: The sister to the CEO works as a General Manager. The Company provides administrative services including stationary and other general supplies to the field locations.
Keco Nigeria Enterprises: The Chief Executive Officer's sister is shareholder and director. The company provides diesel supplies to Seplat in respect of its rig operations.
Montego Upstream Services Limited: The Chairman's nephew is shareholder and director. The company provides drilling and engineering services to Seplat.
Neimeth International Pharmaceutical Plc: The chairman of Seplat is also the chairman of this company. The company provides medical supplies and drugs to Seplat, which are used in connection with Seplat's corporate social responsibility and community healthcare programmes.
Stage leasing (Ndosumili Ventures Limited): Is a subsidiary of Platform Petroleum Limited. The company provides transportation services to Seplat.
Nerine Support Services Limited: Is owned by common shareholders with the parent Company. Seplat leases a warehouse from Nerine and the company provides agency and contract workers to Seplat.
Oriental Catering Services Limited: The Chief Executive Officer of Seplat's spouse is shareholder and director. The company provides catering services to Seplat at the staff canteen.
ResourcePro Inter Solutions Limited: The Chief Executive Officer of Seplat's in-law is its UK representative. The company supplies furniture to Seplat.
Shebah Petroleum Development Company Limited (BVI): The Chairman of Seplat is a director and shareholder of SPDCL (BVI). SPDCL (BVI) provided consulting services to Seplat.
The following transactions were carried by Seplat with related parties:
24b. Related party relationships
i) Purchases of goods and services 9 months ended 9 months ended
30 Sept 2018 30 Sept 2017
-------------- --------------
'million 'million
================================================= ============== ==============
Shareholders of the parent company
------------------------------------------------- -------------- --------------
SPDCL (BVI) 241 310
================================================= ============== ==============
Total 241 310
================================================= ============== ==============
Entities controlled by key management personnel:
------------------------------------------------- -------------- --------------
Contracts > $1million in 2018
------------------------------------------------- -------------- --------------
Nerine Support Services Limited 1,570 1,191
------------------------------------------------- -------------- --------------
Cardinal Drilling Services Limited 425 793
------------------------------------------------- -------------- --------------
Stage Leasing Limited 348 -
------------------------------------------------- -------------- --------------
2,343 1,984
================================================= ============== ==============
9 months ended 9 months ended
30 Sept 2018 30 Sept 2017
------------------------------------------------- -------------- --------------
'million 'million
================================================= ============== ==============
Contracts < $1million in 2018
------------------------------------------------- -------------- --------------
Abbey Court trading Company Limited 232 147
------------------------------------------------- -------------- --------------
Charismond Nigeria Limited 22 13
------------------------------------------------- -------------- --------------
Keco Nigeria Enterprises 14 35
------------------------------------------------- -------------- --------------
Stage Leasing Limited - 171
------------------------------------------------- -------------- --------------
Oriental Catering Services Limited 130 95
------------------------------------------------- -------------- --------------
ResourcePro Inter Solutions Limited 3 7
------------------------------------------------- -------------- --------------
Montego Upstream Services Limited 20 80
------------------------------------------------- -------------- --------------
Neimeth International Pharmaceutical Plc - 1
------------------------------------------------- -------------- --------------
421 549
================================================= ============== ==============
Total 2,764 2533
================================================= ============== ==============
* Nerine charges an average mark-up of 7.5% on agency and contract workers assigned to Seplat. The amounts shown above are gross i.e. it includes salaries and Nerine's mark-up. Total costs for agency and contracts during the nine months ended 30 September 2018 is 1.6 billion (2017: 1.1 billion).
24c. Balances
The following balances were receivable from or payable to related parties as at 30 September 2018:
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
Prepayments / receivables 'million 'million
================================================ ================== =================
Entities controlled by key management personnel
------------------------------------------------ ------------------ -----------------
Cardinal Drilling Services Limited 1,683 1,681
------------------------------------------------ ------------------ -----------------
1,683 1,681
================================================ ================== =================
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
Payables 'million 'million
================================================ ================== =================
Entities controlled by key management personnel
------------------------------------------------ ------------------ -----------------
Montego Upstream Services Limited 8 115
------------------------------------------------ ------------------ -----------------
Nerine Support Services Limited 2 2
------------------------------------------------ ------------------ -----------------
Keco Nigeria Enterprises - 8
------------------------------------------------ ------------------ -----------------
Cardinal Drilling Services Limited 61 292
------------------------------------------------ ------------------ -----------------
Oriental Catering Services Ltd 2 -
------------------------------------------------ ------------------ -----------------
Resourcepro Inter Solutions Ltd 2 -
------------------------------------------------ ------------------ -----------------
75 417
================================================ ================== =================
25. Commitments and contingencies
25a. Operating lease commitments - Group as lessee
The Group leases drilling rigs, buildings, land, boats and storage facilities. The lease terms are between 1 and 5 years. The operating lease commitments of the Group as at 30 September 2018 are:
As at 30 Sept 2018 As at 31 Dec 2017
------------------- -----------------
'million 'million
====================================================== =================== =================
Not later than one year - 728
------------------------------------------------------ ------------------- -----------------
Later than one year and not later than five years - 565
====================================================== =================== =================
- 1,293
========================================================================== =================
25b. Contingent Liabilities
The Group is involved in a number of legal suits as defendant. The estimated value of the contingent liabilities for the period ended 30 september 2018 is 734 million (2017: 4.7 billion). The contingent liability for the period ended 30 September 2018 is determined based on possible occurrences though unlikely to occur. No provision has been made for this potential liability in these financial statements. Management and the Group's solicitors are of the opinion that the Group will suffer no loss from these claims.
26. Dividend
The directors paid an interim dividend of 8.99 billion (2017: Nil) per fully paid ordinary share. The aggregate amount of the dividend was paid out of retained earnings as at 31 March 2018.
Following a review of Seplat's operational, liquidity and financial position as at 30 September 2018, the Board has proposed an interim dividend of 15.29 per share. The total amount of this proposed dividend, expected to be paid out of retained earnings but for which no liability has been recognized in the financial statements is 8.99 billion (September 2017: Nil).
27. Events after the reporting period
Except for the interim dividend proposed at the end of the third quarter (Note 26), there were no significant events that would have a material effect on the Group after the reporting period.
28. Exchange rates used in translating the accounts to Naira
The table below shows the exchange rates used in translating the accounts into Naira.
Basis 30 Sept 2018 30 Sept 2017 31 Dec 2017
/$ /$ /$
================================= ===================== ============= ============ =============
Fixed assets - opening balances Historical rate Historical Historical Historical
-------------------------------- ----------------------- ------------ ------------ -----------
Fixed assets - additions Average rate 305.85 305.82 305.80
-------------------------------- ----------------------- ------------ ------------ -----------
Fixed assets - closing balances Closing rate 306.1 305.75 305.81
-------------------------------- ----------------------- ------------ ------------ -----------
Current assets Closing rate 306.1 305.75 305.81
-------------------------------- ----------------------- ------------ ------------ -----------
Current liabilities Closing rate 306.1 305.75 305.81
-------------------------------- ----------------------- ------------ ------------ -----------
Equity Historical rate Historical Historical Historical
-------------------------------- ----------------------- ------------ ------------ -----------
Income and Expenses: Overall Average rate 305.85 305.82 305.81
-------------------------------- ----------------------- ------------ ------------ -----------
Interim Condensed Consolidated Financial Statements (Unaudited)
for the third quarter ended 30 September 2018
Expressed in US Dollars ('USD')
Condensed consolidated statement of profit or loss and other comprehensive income
for the third quarter ended 30 September 2018
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
Unaudited Unaudited Unaudited Unaudited
-------------- -------------- -------------- --------------
Note $'000 $'000 $'000 $'000
================================================ ==== ============== ============== ============== ==============
Revenue from contracts with customers 7 567,956 278,560 225,280 146,746
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Cost of sales 8 (262,218) (154,031) (93,854) (75,844)
================================================ ==== ============== ============== ============== ==============
Gross profit 305,738 124,529 131,426 70,902
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Other income/(expenses)-net 9 20,463 - (7,278) -
------------------------------------------------ ---- -------------- -------------- -------------- --------------
General and administrative expenses 10 (55,156) (56,132) (16,674) (24,891)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Reversal of/(impairment) losses on financial
assets - net 11 1,703 - (27) -
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Loss on foreign exchange - net 12 (679) (906) (702) (40)
------------------------------------------------ ---- -------------- -------------- -------------- --------------
Fair value loss - net 13 (8,004) (14,262) (1,050) (5,052)
================================================ ==== ============== ============== ============== ============== Operating profit 264,065 53,229 105,695 40,919 ------------------------------------------------ ---- -------------- -------------- -------------- -------------- Finance income 14 6,705 1,582 2,354 699 ------------------------------------------------ ---- -------------- -------------- -------------- -------------- Finance costs 14 (58,065) (57,291) (16,641) (17,644) ================================================ ==== ============== ============== ============== ============== Profit/(loss) before taxation 212,705 (2,480) 91,408 23,974 ------------------------------------------------ ---- -------------- -------------- -------------- -------------- Taxation 15 (121,251) (2,813) (48,498) (1,694) ================================================ ==== ============== ============== ============== ============== Profit/(loss) for the period 91,454 (5,293) 42,910 22,280 ------------------------------------------------ ---- -------------- -------------- -------------- -------------- Other comprehensive income: ------------------------------------------------ ---- -------------- -------------- -------------- -------------- Items that may be reclassified to profit or loss: ------------------------------------------------ ---- -------------- -------------- -------------- -------------- Foreign currency translation difference - - - - ================================================ ==== ============== ============== ============== ============== Total comprehensive income/(loss) for the period 91,454 (5,293) 42,910 22,280 ================================================ ==== ============== ============== ============== ============== Earnings/(loss) per share ($) 16 0.16 (0.01) 0.07 0.04 ------------------------------------------------ ---- -------------- -------------- -------------- -------------- Diluted earnings/(loss) per share($) 16 0.16 (0.01) 0.07 0.04 ================================================ ==== ============== ============== ============== ==============
The above condensed consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Condensed consolidated statement of financial position
As at 30 September 2018
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
Unaudited Audited
------------------ -----------------
Note $'000 $'000
=========================================== ==== ================== =================
Assets
------------------------------------------- ---- ------------------ -----------------
Non-current assets
------------------------------------------- ---- ------------------ -----------------
Oil and gas properties 1,223,517 1,286,387
------------------------------------------- ---- ------------------ -----------------
Other property, plant and equipment 3,134 5,078
------------------------------------------- ---- ------------------ -----------------
Other asset 191,104 217,031
------------------------------------------- ---- ------------------ -----------------
Deferred tax 15a 136,674 223,731
------------------------------------------- ---- ------------------ -----------------
Tax paid in advance 31,623 31,623
------------------------------------------- ---- ------------------ -----------------
Prepayments 25,269 939
------------------------------------------- ---- ------------------ -----------------
Total non-current assets 1,611,321 1,764,789
=========================================== ==== ================== =================
Current assets
------------------------------------------- ---- ------------------ -----------------
Inventories 104,568 100,336
------------------------------------------- ---- ------------------ -----------------
Trade and other receivables 18 167,419 310,345
------------------------------------------- ---- ------------------ -----------------
Contract assets 19 11,117 -
------------------------------------------- ---- ------------------ -----------------
Prepayments 2,707 1,948
------------------------------------------- ---- ------------------ -----------------
Cash and cash equivalents 20 633,997 437,212
=========================================== ==== ================== =================
Total current assets 919,808 849,841
=========================================== ==== ================== =================
Total assets 2,531,129 2,614,630
=========================================== ==== ================== =================
Equity and liabilities
------------------------------------------- ---- ------------------ -----------------
Equity
------------------------------------------- ---- ------------------ -----------------
Issued share capital 21a 1,867 1,826
------------------------------------------- ---- ------------------ -----------------
Share premium 497,457 497,457
------------------------------------------- ---- ------------------ -----------------
Treasury shares (32) -
------------------------------------------- ---- ------------------ -----------------
Share based payment reserve 21b 25,690 17,809
------------------------------------------- ---- ------------------ -----------------
Capital contribution 40,000 40,000
------------------------------------------- ---- ------------------ -----------------
Retained earnings 1,000,271 944,108
------------------------------------------- ---- ------------------ -----------------
Foreign currency translation reserve 1,897 1,897
=========================================== ==== ================== =================
Total shareholders' equity 1,567,150 1,503,097
=========================================== ==== ================== =================
Non-current liabilities
------------------------------------------- ---- ------------------ -----------------
Interest bearing loans & borrowings 17 532,530 304,677
------------------------------------------- ---- ------------------ -----------------
Contingent consideration 6.4 18,430 13,900
------------------------------------------- ---- ------------------ -----------------
Provision for decommissioning obligation 108,497 106,312
------------------------------------------- ---- ------------------ -----------------
Defined benefit plan 6,724 6,518
=========================================== ==== ================== =================
Total non-current liabilities 666,181 431,407
=========================================== ==== ================== =================
Current liabilities
------------------------------------------- ---- ------------------ -----------------
Interest bearing loans and borrowings 17 4,342 265,400
------------------------------------------- ---- ------------------ -----------------
Trade and other payables 22 255,127 410,593
------------------------------------------- ---- ------------------ -----------------
Current taxation 38,329 4,133
------------------------------------------- ---- ------------------ -----------------
Total current liabilities 297,798 680,126
=========================================== ==== ================== =================
Total liabilities 963,979 1,111,533
=========================================== ==== ================== =================
Total shareholders' equity and liabilities 2,531,129 2,614,630 =========================================== ==== ================== =================
The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.
The Group financial statements of Seplat Petroleum Development Company Plc and its subsidiaries for the nine months
ended 30 September 2018 were authorised for issue in accordance with a resolution of the Directors on 30 October 2018
and were signed on its behalf by
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 30 October 2018 30 October 2018 30 October 2018
Condensed consolidated statement of changes in equity continued
for the third quarter ended 30 September 2018
For the third quarter ended 30 September 2017
======================================================================== ========== ============ ==========
Share Foreign
Issued based currency
share Share Treasury payment Capital Retained translation Total
capital premium shares reserve contribution earnings reserve equity
================= ======== ======== ======== ======== ============= ========== ============ ==========
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
================= ======== ======== ======== ======== ============= ========== ============ ==========
At 1 January 2017 1,826 497,457 - 12,135 40,000 678,922 3,675 1,234,015
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Loss for the
period - - - - - (5,293) - (5,293)
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Other -
comprehensive
income - - - - - - -
================= ======== ======== ======== ======== ============= ========== ============ ==========
Total
comprehensive
loss for the
period - - - - - (5,293) - (5,293)
================= ======== ======== ======== ======== ============= ========== ============ ==========
Transactions with
owners in their
capacity
as owners:
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Share based
payments - - - 4,010 - - - 4,010
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Total - - - 4,010 - - - 4,010
================= ======== ======== ======== ======== ============= ========== ============ ==========
At 30 September
2017
(unaudited) 1,826 497,457 - 16,145 40,000 673,629 3,675 1,232,732
================= ======== ======== ======== ======== ============= ========== ============ ==========
For the third quarter ended 30 September 2018
==============================================================================================================
Share Foreign
Issued based currency
share Share Treasury payment Capital Retained translation Total
capital premium shares reserve contribution earnings reserve equity
================= ======== ======== ======== ======== ============= ========== ============ ==========
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
================= ======== ======== ======== ======== ============= ========== ============ ==========
At 31 December
2017
as originally
presented 1,826 497,457 - 17,809 40,000 944,108 1,897 1,503,097
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Impact of change
in accounting
policy:
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Adjustment on
initial
application of
IFRS
9 (Note 3.3) - - - - - (5,816) - (5,816)
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Adjustment on
initial
application of
IFRS
15 (Note 3.3) - - - - - - - -
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
At 1 January 2018
- Restated 1,826 497,457 - 17,809 40,000 938,292 1,897 1,497,281
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Profit for the
period - - - - 91,454 - 91,454
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Other - - - - - - -
comprehensive
income
================= ======== ======== ======== ======== ============= ========== ============ ==========
Total
comprehensive
income for the
period - - - - 91,454 - 91,454
================= ======== ======== ======== ======== ============= ========== ============ ==========
Transactions with
owners in their
capacity
as owners:
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Dividends paid - - - - - (29,475) - (29,475)
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Share based
payments - - - 7,890 - - - 7,890
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Issue of shares 41 - (41) - - - - -
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Vested shares - - 9 (9) - - - -
----------------- -------- -------- -------- -------- ------------- ---------- ------------ ----------
Total 41 - (32) 7,881 - (29,475) - (21,585)
At 30 September
2018
(unaudited) 1,867 497,457 (32) 25,690 40,000 1,000,271 1,897 1,567,150
================= ======== ======== ======== ======== ============= ========== ============ ==========
The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Condensed consolidated statement of cash flow
for the third quarter ended 30 September 2018
9 months 9 months
ended ended 30
30 Sept Sept 2017
2018
---------- ---------
$'000 $'000
---------- ---------
Note Unaudited Unaudited
================================================================================================================ ========== =========
Cash flows from operating activities
---------------------------------------------------------------------------------------------------------------- ---------- ---------
Cash generated from operations 23 386,300 167,089
---------------------------------------------------------------------------------------------------------------- ---------- ---------
Net cash inflows from operating activities 386,300 167,089
================================================================================================================ ========== ========= Cash flows from investing activities ---------------------------------------------------------------------------------------------------------------- ---------- --------- Investment in oil and gas properties (28,671) (21,993) ---------------------------------------------------------------------------------------------------------------- ---------- --------- Investment in other property, plant and equipment (515) ---------------------------------------------------------------------------------------------------------------- ---------- --------- Receipts from other property, plant and equipment 3 - ---------------------------------------------------------------------------------------------------------------- ---------- --------- Receipts from other asset 25,927 22,604 ---------------------------------------------------------------------------------------------------------------- ---------- --------- Interest received 6,705 1,582 ================================================================================================================ ========== ========= Net cash inflows from investing activities 3,964 1,678 ================================================================================================================ ========== ========= Cash flows from financing activities ---------------------------------------------------------------------------------------------------------------- ---------- --------- Repayments of bank financing (578,000) (54,750) ---------------------------------------------------------------------------------------------------------------- ---------- --------- Receipts from bank financing 195,499 - ---------------------------------------------------------------------------------------------------------------- ---------- --------- Dividends paid (29,475) - ---------------------------------------------------------------------------------------------------------------- ---------- --------- Proceeds from senior notes issued 339,546 - ---------------------------------------------------------------------------------------------------------------- ---------- --------- Repayments on crude oil advance (77,499) (4,402) ---------------------------------------------------------------------------------------------------------------- ---------- --------- Payments for other financing charges (3,894) - ---------------------------------------------------------------------------------------------------------------- ---------- --------- Interest paid on bank financing (40,507) (49,832) ================================================================================================================ ========== ========= Net cash outflows from financing activities (194,330) (108,984) ================================================================================================================ ========== ========= Net increase in cash and cash equivalents 195,934 59,783 ---------------------------------------------------------------------------------------------------------------- ---------- --------- Cash and cash equivalents at the beginning of the period 437,212 159,621 ---------------------------------------------------------------------------------------------------------------- ---------- --------- Effects of exchange rate changes on cash and cash equivalents 851 (244) ================================================================================================================ ========== ========= Cash and cash equivalents at the end of the period 633,997 219,160 ================================================================================================================ ========== =========
The above condensed consolidated statement of cashflows should be read in conjunction with the accompanying notes.
Notes to the condensed consolidated financial statements
1. Corporate structure and business
Seplat Petroleum Development Company Plc ('Seplat' or the 'Company'), the parent of the Group, was incorporated
on 17 June 2009 as a private limited liability company and re-registered as a public company on 3 October 2014, under
the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria 2004. The Company commenced
operations on 1 August 2010. The Company is principally engaged in oil and gas exploration and production.
The Company's registered address is: 25a Lugard Avenue, Ikoyi, Lagos, Nigeria.
The Company acquired, pursuant to an agreement for assignment dated 31 January 2010 between the Company, SPDC,
TOTAL and AGIP, a 45% participating interest in the following producing assets:
OML 4, OML 38 and OML 41 located in Nigeria. The total purchase price for these assets was US$340 million paid at the completion of the acquisition on 31 July 2010 and a contingent payment of US$33 million payable 30 days after the second anniversary, 31 July 2012, if the average price per barrel of Brent Crude oil over the period from acquisition up to 31 July 2012 exceeds US$80 per barrel. US$358.6 million was allocated to the producing assets including US$18.6 million as the fair value of the contingent consideration as calculated on acquisition date. The contingent consideration of US$33 million was paid on 22 October 2012.
In 2013, Newton Energy Limited ("Newton Energy"), an entity previously beneficially owned by the same shareholders
as Seplat, became a subsidiary of the Company. On 1 June 2013, Newton Energy acquired from Pillar Oil Limited ("Pillar
Oil") a 40 percent Participant interest in producing assets: the Umuseti/Igbuku marginal field area located within OPL
283 (the "Umuseti/Igbuku Fields").
On 12 December 2014, Seplat Gas Company Limited ('Seplat Gas') was incorporated as a private limited liability company to engage in oil and gas exploration and production.
In 2015, the Group purchased a 40% participating interest in OML 53, onshore north eastern Niger Delta, from Chevron Nigeria Ltd for US$ 259.4 million.
In 2017, the Group incorporated a new subsidiary, ANOH Gas Processing Company Limited. The principal activity of the Company is the processing of gas from OML 53.
The Company together with its six wholly owned subsidiaries namely, Newton Energy, Seplat Petroleum Development Company UK Limited ('Seplat UK'), Seplat East Onshore Limited ('Seplat East'), Seplat East Swamp Company Limited ('Seplat Swamp'), Seplat Gas Company Limited ('Seplat GAS') and ANOH Gas Processing Company Limited are collectively referred to as the Group.
Country of incorporation and
Subsidiary Date of incorporation place of business Principal activities
=============================== ===================== ============================== ==============================
Oil & gas exploration and
Newton Energy Limited 1 June 2013 Nigeria production
------------------------------- --------------------- ------------------------------ ------------------------------
Oil & gas exploration and
Seplat Petroleum Development UK 21 August 2014 United Kingdom production
------------------------------- --------------------- ------------------------------ ------------------------------
Oil & gas exploration and
Seplat East Onshore Limited 12 December 2014 Nigeria production
------------------------------- --------------------- ------------------------------ ------------------------------
Seplat East Swamp Company Oil & gas exploration and
Limited 12 December 2014 Nigeria production
------------------------------- --------------------- ------------------------------ ------------------------------
Oil & gas exploration and
Seplat Gas Company 12 December 2014 Nigeria production ------------------------------- --------------------- ------------------------------ ------------------------------ ANOH Gas Processing Company Limited 18 January 2017 Nigeria Gas processing =============================== ===================== ============================== ============================== 2. Significant changes in the current reporting period
The following significant changes occurred during the reporting period ended 30 September 2018:
-- The offering of 9.25% senior notes with an aggregate principal amount of US$350 million due in April 2023. The notes were issued by the Group in March 2018 and guaranteed by some of its subsidiaries. The proceeds of the notes are being used to refinance existing indebtedness and for general corporate purposes.
-- In March 2018, the Group obtained a US$300 million revolving facility to refinance of an existing US$300 million revolving credit facility due in December 2018. The facility has a tenor of 4 years (due in June 2022) with an initial interest rate of the 6% +Libor. Interest is payable semi-annually and principal repayable annually. US$200 million was drawn down in March 2018. The proceeds from the notes are being used to repay existing indebtedness.
-- 25,000,000 additional shares were issued. In furtherance of the Group's Long Term Incentive Plan, in February 2018. The additional issued shares, less 5,534,964 shares which vested in April 2018, are held by Stanbic IBTC Trustees Limited as Custodian. The Group's share capital as at the reporting date consists of 588,444,561 ordinary shares of N0.50k each, all with voting rights.
3. Summary of significant accounting policies 3.1. Introduction to summary of significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards which are set out below.
3.2. Basis of preparation i) Compliance with IFRS
The condensed consolidated financial statements of the Group for the nine months reporting period ended 30 September 2018 have been prepared in accordance with accounting standard IAS 34 Interim financial reporting.
ii) Historical cost convention
The financial information has been prepared under the going concern assumption and historical cost convention, except for contingent consideration and financial instruments measured at fair value on initial recognition. The financial statements are presented in Nigerian Naira and United States Dollars, and all values are rounded to the nearest million ( 'million) and thousand (US$'000) respectively, except when otherwise indicated.
iii) Going concern
Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for at least twelve months from the date of these condensed consolidated financial statements.
iv) New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period and the Group had to change its accounting policies and make retrospective adjustments as a result of adopting the following standards.
-- IFRS 9 Financial instruments, and -- IFRS 15 Revenue from contracts with customers -- Amendments to IFRS 15 Revenue from contracts with customers
The impact of the adoption of these standards and the new accounting policies are disclosed in note 3.3 below. The
other standards did not have any impact on the Group's accounting policies and did not require retrospective
adjustments.
v) New standards, amendments and interpretations not yet adopted
The following standards have been issued but are not yet effective and may have a significant impact on the Group's consolidated financial statements.
a. IFRS 16 Leases
Title IFRS 16 Leases
of standard
------------ -----------------------------------------------------------------------
Nature IFRS 16 was issued in January 2016. It will result in almost
of change all leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a financial
liability to pay rentals are recognised. The only exceptions
are short-term and low-value leases. The accounting for lessors
will not significantly change.
------------ -----------------------------------------------------------------------
Impact Operating leases: The standard will affect primarily the accounting
for the Group's operating leases which include leases of buildings,
boats, storage facilities, rigs, land and motor vehicles. As
at the reporting date, the Group had no non-cancellable operating
lease commitments.
Short term leases & low value leases: The Group's one-year contracts
with no planned extension commitments mostly applicable to leased
staff flats will be covered by the exception for short-term leases,
while none of the Group's other leases will be covered by the
exception for low value leases.
Service contracts: Some commitments such as contracts for the
provision of drilling, cleaning and community services were identified
as service contracts as they did not contain an identifiable
asset which the Group had a right to control. It therefore did
not qualify as leases under IFRS 16.
------------ -----------------------------------------------------------------------
Date The standard for leases is mandatory for financial years commencing
of adoption on or after 1 January 2019. The Group does not intend to adopt
the standard before its effective date.
b. Amendments to IAS 19 Employee benefits
These amendments were issued in February 2018. The amendments issued require an entity to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement. They also require an entity to recognise in profit or loss as part of past service cost or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.
These amendments are mandatory for annual periods beginning on or after 1 January 2019. The Group does not intend to adopt the amendments before its effective date and is yet to assess the full impact of the amendments on its financial statements.
c. IFRIC 23- Uncertainty over income tax treatment
These amendments were issued in June 2017. IAS 12 Income taxes specifies requirements for current and deferred tax assets and liabilities. An entity applies the requirements in IAS 12 based on applicable tax laws. It may be unclear how tax law applies to a particular transaction or circumstance. The acceptability of a particular tax treatment under tax law may not be known until the relevant taxation authority or a court takes a decision in the future. Consequently, a dispute or examination of a particular tax treatment by the taxation authority may affect an entity's accounting for a current or deferred tax asset or liability.
This Interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. In such a circumstance, an entity shall recognise and measure its current or deferred tax asset or liability applying the requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined applying this Interpretation.
These amendments are mandatory for annual periods beginning on or after 1 January 2019. . The Group does not intend to adopt the amendments before its effective date and is yet to assess the full impact of the amendments on its financial statements.
d. Conceptual framework for financial reporting - Revised
These amendments were issued in March 2018. Included in the revised conceptual framework are revised definitions of an asset and a liability as well as new guidance on measurement and derecognition, presentation and disclosure. The amendments focused on areas not yet covered and areas that had shortcomings.
These amendments are mandatory for annual periods beginning on or after 1 January 2020. The Group does not intend to adopt the amendments before its effective date and is yet to assess the full impact of the amendments on its financial statements.
e. Amendments to IAS 23 Borrowing costs
These amendments were issued in December 2017. The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.
These amendments are mandatory for annual periods beginning on or after 1 January 2019. The Group does not intend to adopt the amendment before its effective date and is yet to assess the full impact of the amendments on its financial statements.
3.3. Changes in accounting policies
This note explains the impact of the adoption of IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers (including the amendments to IFRS 15) on the Group's financial statements and also discloses the related accounting policies that have been applied from 1 January 2018, where they are different from those applied in prior periods.
3.3.1. Impact on the financial statements
As explained in note 3.3.2 below, IFRS 9: Financial instruments was adopted without restating comparative information. The adjustments arising from the new impairment rules are therefore not reflected in the statement of financial position as at 31 December 2017, but are recognised in the opening statement of changes in equity on 1 January 2018.
The Group has also adopted IFRS 15: Revenue from Contracts with Customers using the simplified method, with the effect of applying this standard recognised at the date of initial application (1 January 2018). Accordingly, the information presented for 2017 financial year has not been restated but is presented, as previously reported, under IAS 18 and related interpretations.
The following tables summarise the impact, net of tax, of transition to IFRS 9 and IFRS 15 for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided. There was no impact on the statement of cash flows as a result of adopting the new standards.
As at 1 January
At 31 December 2017 Impact of IFRS 9 Impact of IFRS 15 2018
---- ------------------- ------------------ ------------------- ---------------
Note $'000 $'000 $'000 $'000
============================ ==== =================== ================== =================== ===============
ASSETS
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Current assets
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Trade and other receivables 18 324,135 (5,816) (13,790) 304,529
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Contract assets 19 - - 13,790 13,790
============================ ==== =================== ================== =================== ===============
Total assets 2,614,630 (5,816) - 2,608,814
============================ ==== =================== ================== =================== ===============
EQUITY AND LIABILITIES
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Equity
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Retained earnings 944,108 (5,816) - 938,292
---------------------------- ---- ------------------- ------------------ ------------------- ---------------
Total shareholders' equity 1,503,097 (5,816) - 1,497,281
============================ ==== =================== ================== =================== ===============
3.3.2. IFRS 9 Financial Instruments - Impact of adoption
The new financial instruments standard, IFRS 9 replaces the provisions of IAS 39. The new standard presents a new model for classification and measurement of assets and liabilities, a new impairment model which replaces the incurred credit loss approach with an expected credit loss approach, and new hedging requirements.
The adoption of IFRS 9: Financial Instruments from 1 January 2018 resulted in changes in accounting policies and the adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in notes below. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated but the impact of adoption has been adjusted through opening retained earnings for the current reporting period.
3.3.2.1. Classification and measurement
a) Financial assets
On 1 January 2018 (the date of initial application of IFRS 9), the Group's management assessed the classification of its financial assets which is driven by the cash flow characteristics of the instrument and the business model in which the asset is held.
The Group's financial assets includes cash and cash equivalents, trade and other receivables and contract assets. The Group's business model is to hold these financial assets to collect contractual cash flows and to earn contractual interest. For cash and cash equivalents, interest is based on prevailing market rates of the respective bank accounts in which the cash and cash equivalents are domiciled. Interest on trade and other receivables is earned on defaulted payments in accordance with the Joint operating agreement (JOA). The contractual cash flows arising from these assets represent solely payments of principal and interest (SPPI).
Cash and cash equivalents, trade and other receivables and contract assets that were previously classified as loans and receivables (L and R) are now classified as financial assets at amortised cost.
Since there was no change in the measurement basis except for nomenclature change, opening retained earnings was not impacted (no differences between the previous carrying amount and the revised carrying amount of these assets at 1 January 2018).
b) Financial liabilities
The adoption of IFRS 9 eliminates the policy choice on the treatment of gain or loss from the refinancing of a borrowing. Day one gain or loss can no longer be deferred over the remaining life of the borrowing but must now be recognised at once. No retrospective adjustments have been made in relation to this change as at 1 January 2018.
On the date of initial application, 1 January 2018, the financial instruments of the Group were classified as follows:
Classification & Measurement category Carrying amount
=================================================== =================================
Original New Original New
------------------------- ------------------------ ----------------- --------------
IAS 39 IFRS 9 $ '000 $ '000
============================== ========================= ======================== ================= ==============
Current financial assets
============================== ========================= ======================== ================= ==============
Trade and other receivables:
--------------------------------------------------------- ------------------------ ----------------- --------------
Trade receivables L and R Amortised cost 108,685 108,685
------------------------------ ------------------------- ------------------------ ----------------- --------------
NPDC receivables L and R Amortised cost 112,664 112,664
------------------------------ ------------------------- ------------------------ ----------------- --------------
NAPIMS receivables L and R Amortised cost 12,506 12,506
------------------------------ ------------------------- ------------------------ ----------------- --------------
Other receivables* L and R Amortised cost 23 23
------------------------------ ------------------------- ------------------------ ----------------- --------------
Cash and cash equivalents L and R Amortised cost 437,212 437,212
------------------------------ ------------------------- ------------------------ ----------------- --------------
Non-current financial liabilities
========================================================= ======================== ================= ==============
Interest bearing loans and
borrowings Amortised cost Amortised cost 304,677 304,677
------------------------------ ------------------------- ------------------------ ----------------- --------------
Current financial liabilities
========================================================= ======================== ================= ==============
Interest bearing loans and
borrowings Amortised cost Amortised cost 265,400 265,400
------------------------------ ------------------------- ------------------------ ----------------- --------------
Trade and other payables** Amortised cost Amortised cost 127,128 127,128
------------------------------ ------------------------- ------------------------ ----------------- --------------
*Other receivables exclude NGMC VAT receivables, cash advance and advance payments.
** Trade and other payables exclude accruals, provisions, bonus, VAT, Withholding tax, deferred revenue and royalties.
The new carrying amounts in the table above have been determined based on the measurement criteria specified in IFRS 9. However, the impact of IFRS 9 expected credit loss impairment has not been considered here. See the subsequent pages for the impact of IFRS 9 ECL on the assets carried at amortised cost.
3.3.2.2. Impairment of financial assets
The Group has seven types of financial assets that are subject to IFRS 9's new expected credit loss model. Under IFRS 9, the Group is required to revise its previous impairment methodology under IAS 39 for each of these classes of assets. The impact of the change in impairment methodology on the Group's retained earnings is disclosed in the table below.
-- Nigerian Petroleum Development Company (NPDC) receivables
-- National Petroleum Investment Management Services (NAPIMS)
-- Receivables from Shell Petroleum Development Company (SPDC)
-- Trade receivables
-- Contract assets
-- Other receivables and;
-- Cash and cash equivalents
The total impact on the Group's retained earnings as at 1 January 2018 is as follows:
Notes $ '000
================================================================================================= ====== =======
Closing retained earnings as at 31 December 2017- IAS 39 944,108
--------------------------------------------------------------------------------------------------------- -------
Increase in provision for Nigerian Petroleum Development Company (NPDC) receivables (a) (5,553)
------------------------------------------------------------------------------------------------- ------ -------
Increase in provision for National Petroleum Investment Management Services (NAPIMS) receivables (b) (263)
================================================================================================= ====== =======
Total transition adjustments (5,816)
========================================================================================================= =======
Opening retained earnings 1 January 2018 on adoption of IFRS 9 938,292
========================================================================================================= =======
a) Nigerian Petroleum Development Company (NPDC) receivables
NPDC receivables represent the outstanding cash calls due to Seplat from its JV partner, Nigerian Petroleum Development Company. The Group applies the IFRS 9 general model for measuring expected credit losses (ECL). This requires a three-stage approach in recognising the expected loss allowance for NPDC receivables.
The ECL recognised for the period is a probability-weighted estimate of credit losses discounted at the effective interest rate of the financial asset. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive).
The ECL was calculated based on actual credit loss experience from 2014, which is the date the Group initially became a party
to the contract. The following analysis provides further detail about the calculation of ECLs related to these assets. The Group
considers the model and the assumptions used in calculating these ECLs as key sources of estimation uncertainty.
1 January 2018
Stage 1 Stage 2 Stage 3 Total
------------------------------------ ------------ ------------ ------------ -------
12-month ECL Lifetime ECL Lifetime ECL
------------------------------------ ------------ ------------ ------------ -------
$'000 $'000 $'000 $'000
==================================== ============ ============ ============ =======
Gross EAD* - 37,179 75,485 112,664
------------------------------------ ------------ ------------ ------------ -------
Loss allowance as at 1 January 2018 - (105) (5,448) (5,553)
==================================== ============ ============ ============ =======
Net EAD - 37,074 70,037 107,111
==================================== ============ ============ ============ =======
* Exposure at default
30 September 2018
Stage 1 Stage 2 Stage 3 Total
--------------------------------------- ------------ ------------ ------------ -------
12-month ECL Lifetime ECL Lifetime ECL
--------------------------------------- ------------ ------------ ------------ -------
$'000 $'000 $'000 $'000
======================================= ============ ============ ============ =======
Gross EAD* - - 48,439 48,439
--------------------------------------- ------------ ------------ ------------ -------
Loss allowance as at 30 September 2018 - - (3,840) (3,840)
======================================= ============ ============ ============ =======
Net EAD - - 44,599 44,599
======================================= ============ ============ ============ =======
The Group considers both quantitative and qualitative indicators in classifying its receivables into the relevant stages for impairment calculation.
*Stage 1 includes receivables that are less than 30 days past due (Performing).
*Stage 2 includes receivables that have been assessed to have experienced a significant increase in credit risk using the days past due criteria (i.e the outstanding receivables amounts are more than 30 days past due but less than 90 days past due) and other qualitative indicators such as the increase in political risk concerns or other micro-economic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance.
*Stage 3 receivables are receivables that have been assessed as being in default (i.e receivables that are more than 90 days past due) or there is a clear indication that the imposition of financial or legal penalties and/or sanctions will make the full recovery of indebtedness highly improbable
The reconciliation of loss allowances for Nigerian Petroleum Development Company (NPDC) receivables as at 31 December 2017
and 30 September 2018 is as follows:
$'000
================================================================ =======
Loss allowance as at 31 December 2017 - calculated under IAS 39 -
---------------------------------------------------------------- -------
Amounts adjusted through opening retained earnings 5,553
================================================================ =======
Loss allowance as at 1 January 2018 - calculated under IFRS 9 5,553
---------------------------------------------------------------- -------
Reversal of impairment loss on NPDC receivables (1,713)
================================================================ =======
Loss allowance as at 30 September 2018 - Under IFRS 9 3,840
================================================================ =======
Probability of default (PD)
The credit rating of Federal Government bonds was used to reflect the assessment of the probability of default on these receivables. This was supplemented with external data from credit bureau scoring information from Standard & Poor's (S&P) to arrive at a 12-month PD of 3.9%. Lifetime PD (stage 2) was assumed to be the 12-month PD as the maximum contractual period over which the Group is exposed to credit risk is less than 12 months. The PD for Stage 3 receivables was 100% as these amounts were deemed to be in default using the days past due criteria. (See note 3.3.3 (d) for definition of default).
Loss given default (LGD)
The 12-month LGD was determined based on management's estimate of expected cash recoveries after considering historical recovery pattern of these receivables. The 12-month LGD assumptions are a reasonable proxy for lifetime LGD.
Exposure at default (EAD)
This is the amount that best represents the maximum exposure to credit risk at the end of the reporting period without taking account of any collateral.
Macroeconomic indicators
The real historical gross domestic product (GDP) growth rate in Nigeria and crude oil price were identified as the key economic variables impacting the credit risk on these receivables. Historical data on these variables for the last ten years were used to determine the three economic scenarios (base, optimistic and downturn) and their scenario weightings.
The probability weight attached to each of the scenarios was determined using the GDP growth rates. The historical GDP growth rates were evaluated at 75% confidence interval. Based on this confidence interval, 75% of historical GDP growth rate observation falls within the acceptable bounds, 8% of the observation relates to period of boom while 17% of the observation relate to periods of recession/downturn.
b) National Petroleum Investment Management Services (NAPIMS) receivables
NAPIMS receivables represent the outstanding cash calls due to Seplat from its JV partner, National Petroleum Investment Management Services. The Group applies the IFRS 9 general model for measuring expected credit losses (ECL) which uses a three-stage approach in recognising the expected loss allowance for NAPIMS receivables.
The ECL was calculated based on actual credit loss experience from 2016, which is the date the Group initially became a party to the contract. The following analysis provides further detail about the calculation of ECLs related to these assets. The Group considers the model and the assumptions used in calculating these ECLs as key sources of estimation uncertainty. The explanation of inputs, assumptions and estimation techniques used are consistent with those for NPDC receivables.
1 January 2018
Stage 1 Stage 2 Stage 3 Total
------------------------------------ ------------ ------------ ------------ ------
12-month ECL Lifetime ECL Lifetime ECL
------------------------------------ ------------ ------------ ------------ ------
$'000 $'000 $'000 $'000
==================================== ============ ============ ============ ======
Gross EAD* 4,274 - 8,232 12,506
------------------------------------ ------------ ------------ ------------ ------
Loss allowance as at 1 January 2018 (5) - (258) (263)
==================================== ============ ============ ============ ======
Net EAD 4,269 - 7,974 12,243
==================================== ============ ============ ============ ======
30 September 2018
Stage 1 Stage 2 Stage 3 Total
--------------------------------------- ------------ ------------ ------------ -----
12-month ECL Lifetime ECL Lifetime ECL
--------------------------------------- ------------ ------------ ------------ -----
$'000 $'000 $'000 $'000
======================================= ============ ============ ============ =====
Gross EAD* - - 293 293
--------------------------------------- ------------ ------------ ------------ -----
Loss allowance as at 30 September 2018 - - (251) (251)
======================================= ============ ============ ============ =====
Net EAD - - 42 42
======================================= ============ ============ ============ =====
The Group considers both quantitative and qualitative indicators in classifying its receivables into the relevant stages for impairment calculations.
*Stage 1 includes receivables that are less than 30 days past due (Performing).
*Stage 2 includes receivables that have been assessed to have experienced a significant increase in credit risk using the days past due criteria (i.e the outstanding receivables amounts are more than 30 days past due but less than 90 days past due) and other qualitative indicators such as the increase in political risk concerns or other micro-economic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance.
*Stage 3 receivables are receivables that have been assessed as being in default (i.e receivables that are more than 90 days past due) or there is a clear indication that the imposition of financial or legal penalties and/or sanctions will make the full recovery of indebtedness highly improbable.
The reconciliation of loss allowances for National Petroleum Investment Management Services receivables as at 31 December 2017 and 30 September 2018 is as follows:
$'000
================================================================ =====
Loss allowance as at 31 December 2017 - calculated under IAS 39 -
---------------------------------------------------------------- -----
Amounts restated through opening retained earnings 263
================================================================ =====
Loss allowance as at 1 January 2018 - calculated under IFRS 9 263
---------------------------------------------------------------- -----
Reversal of impairment loss on NAPIMS receivables (12)
================================================================ =====
Loss allowance as at 30 September 2018 - Under IFRS 9 251
================================================================ =====
c) Receivables from Shell Petroleum Development Company (SPDC)
The Group applies the IFRS 9 general model for measuring expected credit losses (ECL) which uses a three-stage approach in recognising the expected loss allowance for receivables from SPDC. Receivables from SPDC represent the outstanding payments due to Seplat from an investment no longer being pursued.
30 September 2018
Stage 1 Stage 2 Stage 3 Total
--------------------------------------- ------------ ------------ ------------ ------
12-month ECL Lifetime ECL Lifetime ECL
--------------------------------------- ------------ ------------ ------------ ------
$'000 $'000 $'000 $'000
======================================= ============ ============ ============ ======
Gross EAD* - 44,519 - 44,519
--------------------------------------- ------------ ------------ ------------ ------
Loss allowance as at 30 September 2018 - (22) - (22)
======================================= ============ ============ ============ ======
Net EAD - 44,497 - 44,497
======================================= ============ ============ ============ ======
The Group considers both quantitative and qualitative indicators in classifying its receivables into the relevant stages for impairment calculations.
*Stage 1 includes receivables that are less than 30 days past due (Performing).
*Stage 2 includes receivables that have been assessed to have experienced a significant increase in credit risk using the days past due criteria (i.e the outstanding receivables amounts are more than 30 days past due but less than 90 days past due) and other qualitative indicators such as the increase in political risk concerns or other micro-economic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance.
*Stage 3 receivables are receivables that have been assessed as being in default (i.e receivables that are more than 90 days past due) or there is a clear indication that the imposition of financial or legal penalties and/or sanctions will make the full recovery of indebtedness highly improbable.
The reconciliation of loss allowances for receivables from Shell Petroleum Development Company as at 31 December 2017 and 30 September 2018 is as follows:
$'000
================================================================ =====
Loss allowance as at 31 December 2017 - calculated under IAS 39 -
---------------------------------------------------------------- -----
Amounts restated through opening retained earnings -
================================================================ =====
Loss allowance as at 1 January 2018 - calculated under IFRS 9 -
---------------------------------------------------------------- -----
Increase in provision for impairment loss on SPDC receivables 22
================================================================ =====
Loss allowance as at 30 September 2018 - Under IFRS 9 22
================================================================ =====
Probability of default (PD)
External data from Standard & Poor's (S&P) for Royal Dutch Shell in an emerging market was used to arrive at a 12-month PD of 0.05%. Lifetime PD (stage 2) was assumed to be the 12-month PD as the maximum contractual period over which the Group is exposed to credit risk is less than 12 months.
Loss given default (LGD)
The 12-month LGD was determined based on management's estimate of expected cash recoveries after considering historical recovery pattern of these receivables. The 12-month LGD assumptions are a reasonable proxy for lifetime LGD.
Exposure at default (EAD)
This is the amount that best represents the maximum exposure to credit risk at the end of the reporting period without taking account of any collateral.
Macroeconomic indicators
The real historical gross domestic product (GDP) growth rate in Nigeria and crude oil price were identified as the key economic variables impacting the credit risk on these receivables. Historical data on these variables for the last ten years were used to determine the three economic scenarios (base, optimistic and downturn) and their scenario weightings.
The probability weight attached to each of the scenarios was determined using the GDP growth rates. The historical GDP growth rates were evaluated at 75% confidence interval. Based on this confidence interval, 89% of historical GDP growth rate observation falls within the acceptable bounds, 2% of the observation relates to period of boom while 9% of the observation relate to periods of recession/downturn.
d) Trade receivables and contract assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due criterion. Contract assets relate to unbilled receivables for the delivery of gas supplies in which NGMC has taken delivery of but has not been invoiced as at the end of the reporting period. These assets have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
Trade receivables and contract assets include amounts receivable from Mercuria Energy Group, Shell Western Supply, Pillar Limited and Nigerian Gas Marketing Company (NGMC).
For Mecuria Energy Group and Shell Western Supply, impairment was assessed to be insignificant as there has been no history of default (i.e. the Group receives the outstanding amount within the standard payment period of 30 days) and there has been no dispute arising on the invoiced amount from both parties.
The Group also assessed for impairment on receivable balances from Pillar Limited and Nigerian Gas Marketing Company (NGMC) using outstanding payments from 2014 to model the expected loss rates. Based on this assessment, the identified impairment loss as at 1 January 2018 and 30 September 2018 was insignificant as there has been no history of default or dispute on the receivables. The impairment allowance on these assets was nil under the incurred loss model of IAS 39.
e) Other receivables
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all financial assets that are classified within other receivables.
Other receivables relate to staff receivables. Impairment allowance on receivable amounts were assessed to be insignificant. This was on the basis that there has been no history of default on these assets as repayments are deducted directly from the staff's monthly salary. In addition, the outstanding balance as at the 30 September 2018 and 31 December 2017 was deemed to be insignificant $ 2,348 (2017: $14,598). The impairment loss was nil under the incurred loss model of IAS 39.
f) Cash and cash equivalents
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was insignificant.
3.3.2.3. Hedge accounting
The Group entered agreements to sell put options for crude oil in Brent at a strike price of $40 per barrel to NedBank Limited for 600,000 barrels within a period of 6 months from 1 January 2018 to 30 June 2018.
It also entered into agreements to sell put options for crude oil in Brent at a strike price of $50 per barrel to Natixis for 500,000 barrels within a period of 6 months from 1 July 2018 to 31 December 2018.
The purpose of these is to hedge its cash flows against oil price risk. The contracts provide for a no loss position for Seplat, in that Seplat makes a gain if the price of oil falls below the strike price; and if the price of oil is above the strike price, there is no loss i.e. no payment is made by Seplat except for the mutually agreed monthly premium which is paid in arrears and is settled net of any gain on settlement date.
These contracts however, are not designated as hedging instruments, and as such hedge accounting is not being applied. In the event that the Group takes the option of designating its derivative as hedging instruments, the Group would need to make a formal designation and documentation of the hedging relationship and the Group's risk management objective and strategy for undertaking the hedge.
As at the reporting periods ended 31 December 2017 and 30 September 2018, the Group had no derivative assets or liabilities.
3.3.3. IFRS 9: Financial Instruments - Accounting policies
The Group's accounting policies were changed to comply with IFRS 9. IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures.
a) Classification and measurement
-- Financial assets
It is the Group's policy to initially recognise financial assets at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss which are expensed in profit or loss.
Classification and subsequent measurement is dependent on the Group's business model for managing the asset and the cashflow characteristics of the asset. On this basis, the Group may classify its financial instruments at amortised cost, fair value through profit or loss and at fair value through other comprehensive income.
All the Group's financial assets as at 30 September 2018 satisfy the conditions for classification at amortised cost under IFRS 9.
The Group's financial assets include trade receivables, NPDC receivables, NAPIMS receivables, contract assets, other receivables and cash and cash equivalents.
-- Financial liabilities
Financial liabilities of the Group are classified and subsequently measured at amortised cost net of directly attributable transaction costs, except for derivatives which are classified and subsequently recognised at fair value through profit or loss.
Fair value gains or losses for financial liabilities designated at fair value through profit or loss are accounted for in profit or loss except for the amount of change that is attributable to changes in the Group's own credit risk
which is presented in other comprehensive income. The remaining amount of change in the fair value of the liability is presented in profit or loss. The Group's financial liabilities include trade and other payables and interest bearing loans and borrowings.
b) Impairment of financial assets
Recognition of impairment provisions under IFRS 9 is based on the expected credit loss (ECL) model. The ECL model is applicable to financial assets classified at amortised cost and contract assets under IFRS 15: Revenue from Contracts with Customers. The measurement of ECL reflects an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, time value of money and reasonable and supportable information, that is available without undue cost or effort at the reporting date, about past events, current conditions and forecasts of future economic conditions.
The Group applies the simplified approach or the three-stage general approach to determine impairment of receivables depending on their respective nature. The simplified approach is applied for trade receivables and contract assets while the three-stage approach is applied to NPDC receivables, NAPIMS receivables and receivables from SPDC.
The simplified approach requires expected lifetime losses to be recognised from initial recognition of the receivables. This involves determining the expected loss rates which is then applied to the gross carrying amount of the receivable to arrive at the loss allowance for the period.
The three-stage approach assesses impairment based on changes in credit risk since initial recognition using the past due criterion and other qualitative indicators such as increase in political concerns or other microeconomic factors and the risk of legal action, sanction or other regulatory penalties that may impair future financial performance. Financial assets classified as stage 1 have their ECL measured as a proportion of their lifetime ECL that results from possible default events that can occur within one year, while assets in stage 2 or 3 have their ECL measured on a lifetime basis.
Under the three-stage approach, the ECL is determined by projecting the probability of default (PD), loss given default (LGD) and exposure at default (EAD) for each ageing bucket and for each individual exposure. The PD is based on default rates determined by external rating agencies for the counterparties. The LGD assesses the portion of the outstanding receivable that is deemed to be irrecoverable at the reporting period. The EAD is the total amount of outstanding receivable at the reporting period. These three components are multiplied together and adjusted for forward looking information. This effectively calculates an ECL which is then discounted back to the reporting date and summed. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the related financial assets and the amount of the loss is recognised in profit or loss.
c) Derecognition
-- Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or when it transfers the financial asset and the transfer qualifies for derecognition.
-- Financial liabilities
The Group derecognises a financial liability when it is extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised immediately in the statement of profit or loss.
d) Significant increase in credit risk and default definition
The Group assesses the credit risk of its financial assets based on the information obtained during periodic review of publicly available information on the entities, industry trends and payment records. Based on the analysis of the information provided, the Group identifies the assets that require close monitoring.
Furthermore, financial assets that have been identified to be more than 30 days past due on contractual payments are assessed to have experienced significant increase in credit risk. These assets are grouped as part of Stage 2 financial assets where the three-stage approach is applied.
In line with the Group's credit risk management practices, a financial asset is defined to be in default when contractual payments have not been received at least 90 days after the contractual payment period. Subsequent to default, the Group carries out active recovery strategies to recover all outstanding payments due on receivables. Where the Group determines that there are no realistic prospects of recovery, the financial asset and any related loss allowance is written off either partially or in full.
3.3.4. IFRS 15 Revenue from Contracts with Customers - Impact of adoption
The Group has adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in IFRS 15, the Group has adopted the new rules using the modified retrospective approach and has not restated comparatives for the 2017 financial year. There was no impact on the Group's retained earnings at the date of initial application (i.e. 1 January 2018). The reclassification adjustments resulting from the adoption of IFRS 15 is shown in note 3.3.1 and detailed below:
3.3.4.1. Impact on statement of financial position
a) Trade and other receivables
The Group introduced the presentation of contract assets in the balance sheet to reflect the guidance of IFRS 15. Contract assets recognised in relation to unbilled revenue from Nigerian Gas Marketing Company (NGMC) were previously presented as part of trade and other receivables.
3.3.4.2. Impact on statement of profit or loss and other comprehensive income a) Reclassification of underlifts to other income
In some instances, Joint ventures (JV) partners lift the share of production of other partners. Under IAS 18, over lifts and underlifts were recognised net in revenue using entitlement accounting. They are settled at a later period through future liftings and not in cash (non-monetary settlements). This is referred to as the entitlement method. IFRS 15 excludes transactions arising from arrangements where the parties are participating in an activity together and share the risks and benefits of that activity as the counterparty is not a customer. To reflect the change in policy, the Group has reclassified underlifts to other income.
b) Reclassification of demurrage from costs of sales
Seplat pays demurrage to Mercuria for delays caused by incomplete cargoes delivered at the port. These are referred to as price adjustments and Seplat is billed subsequently by Mercuria. Under IFRS 15, these are considerations payable to customers and should be recognised net of revenue. Revenue has therefore been recognised net of demurrage costs. In the current period, there was a refund of demurrage which has been added to revenue. In prior reporting periods, demurrage costs were included as part of operations and maintenance costs.
c) Reclassification of barging costs from cost of sales
Seplat refunds to Mecuria barging costs incurred on crude oil barrels delivered. Seplat does not enjoy a separate service which it would have to pay another party for. This has been determined to be a consideration payable to a customer and should be accounted for as a direct deduction from revenue. Revenue should therefore be recognised net of barging costs. In the current period, there were no barging costs. In prior periods, barging costs were shown separately in cost of sales.
3.3.5. IFRS 15 Revenue from Contracts with Customers - Accounting policies
The Group has adopted IFRS 15 as issued in May 2014 which has resulted in changes in accounting policy of the Group. IFRS 15 replaces IAS 18 which covers revenue arising from the sale of goods and the rendering of services, IAS 11 which covers construction contracts, and related interpretations. In accordance with the transitional provisions in IFRS 15, comparative figures have not been restated as the Group has applied the modified retrospective approach in adopting this standard.
IFRS 15 introduces a five-step model for recognising revenue to depict transfer of goods or services. The model distinguishes between promises to a customer that are satisfied at a point in time and those that are satisfied over time.
a) Revenue recognition
It is the Group's policy to recognise revenue from a contract when it has been approved by both parties, rights have been clearly identified, payment terms have been defined, the contract has commercial substance, and collectability has been ascertained as probable. Collectability of customer's payments is ascertained based on the customer's historical records, guarantees provided, the customer's industry and advance payments made if any.
Revenue is recognised when control of goods sold has been transferred. Control of an asset refers to the ability to direct the use of and obtain substantially all of the remaining benefits (potential cash inflows or savings in cash outflows) associated with the asset. For crude oil, this occurs when the crude products are lifted by the customer (buyer) Free on Board at the Group's loading facility. Revenue from the sale of oil is recognised at a point in time when performance obligation is satisfied. For gas, revenue is recognised when the product passes through the custody transfer point to the customer. Revenue from the sale of gas is recognised over time using the practical expedient of the right to invoice.
The surplus or deficit of the product sold during the period over the Group's share of production is termed as an overlift or underlift. With regard to underlifts, if the over-lifter does not meet the definition of a customer or the settlement of the transaction is non-monetary, a receivable and other income is recognised. Conversely, when an overlift occurs, cost of sale is debited and a corresponding liability is accrued. Overlifts and underlifts are initially measured at the market price of oil at the date of lifting, consistent with the measurement of the sale and purchase. Subsequently, they are remeasured at the current market value. The change arising from this remeasurement is included in the profit or loss as other income/expenses-net.
-- Definition of a customer
A customer is a party that has contracted with the Group to obtain crude oil or gas products in exchange for a consideration, rather than to share in the risks and benefits that result from sale. The Group has entered into collaborative arrangements with its Joint Venture partners to share in the production of oil. Collaborative arrangements with its Joint Venture partners to share in the production of oil are accounted for differently from arrangements with customers as collaborators share in the risks and benefits of the transaction, and therefore, do not meet the definition of customers. Revenue arising from these arrangements are recognised separately in other income.
-- Identification of performance obligation
At inception, the Group assesses the goods or services promised in the contract with a customer to identify as a performance obligation, each promise to transfer to the customer either a distinct good or series of distinct goods. The number of identified performance obligations in a contract will depend on the number of promises made to the customer. The delivery of barrels of crude oil or units of gas are usually the only performance obligation included in oil and gas contract with no additional contractual promises. Additional performance obligations may arise from future contracts with the Group and its customers.
The identification of performance obligations is a crucial part in determining the amount of consideration recognised as revenue. This is due to the fact that revenue is only recognised at the point where the performance obligation is fulfilled, Management has therefore developed adequate measures to ensure that all contractual promises are appropriately considered and accounted for accordingly.
-- Contract enforceability and termination clauses
The Group may enter into contracts that do not create enforceable rights and obligation to parties in the contract. Such instances may include where the counterparty has not met all conditions necessary to kick start the contract or where a non-contractual promise exists between both parties to the agreement. In these instances, the agreement is not yet a valid contract and therefore no revenue can be recognised. The agreement between Seplat and PanOcean is not a valid contract. Therefore, it may not be appropriate to reclassify the outstanding balance from deferred revenue to contract liability. The outstanding balance has been included as part of accruals and other payables. No amount has been recognized in revenue in relation to the transaction.
It is the Group's policy to assess that the defined criteria for establishing contracts that entail enforceable rights and obligations are met. The criteria provides that the contract has been approved by both parties, rights have been clearly identified, payment terms have been defined, the contract has commercial substance, and collectability has been ascertained as probable.
The Group may enter into contracts that do not meet the revenue recognition criteria. In such cases, the consideration received will only be recognised as revenue when the contract is terminated.
The Group may also have the unilateral rights to terminate an unperformed contract without compensating the other party. This could occur where the Group has not yet transferred any promised goods or services to the customer and the Group has not yet received, and is not yet entitled to receive, any consideration in exchange for promised goods or services.
b) Transaction price
Transaction price is the amount that an entity allocates to the performance obligations identified in the contract. It represents the amount of revenue recognised as those performance obligations are satisfied. Complexities may arise where a contract includes variable consideration, significant financing component or consideration payable to a customer.
Variable consideration not within the Group's control is estimated at the point of revenue recognition and reassessed periodically. The estimated amount is included in the transaction price to the extent that it is highly probable that a significant reversal of the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. As a practical expedient, where the Group has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Group's performance completed to date, the Group may recognise revenue in the amount to which it has a right to invoice.
Significant financing component (SFC) assessment is carried out (using a discount rate that reflects the amount charged in a separate financing transaction with the customer and also considering the Group's incremental borrowing rate) on contracts that have a repayment period of more than 12 months.
As a practical expedient, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between when it transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Instances when SFC assessment may be carried out include where the Group receives advance payment for agreed volumes of crude oil or receivables take or pay deficiency payment on gas sales. Take or pay gas sales contract ideally provides that the customer must sometimes pay for gas even when not delivered to the customer. The customer, in future contract years, takes delivery of the product without further payment. The portion of advance payments that represents significant financing component will be recognised as interest revenue.
Consideration payable to a customer is accounted for as a reduction of the transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service that the customer transfers to the Group. Examples include barging costs incurred, demurrage and freight costs. These do not represent a distinct service transferred and is therefore recognised as a direct deduction from revenue.
c) Breakage
The Group enters into take or pay contracts for sale of gas where the buyer may not ultimately exercise all of their rights to the gas. The take or pay quantity not taken is paid for by buyer called take or pay deficiency payment. The Group assesses if there is a reasonable assurance that it will be entitled to a breakage amount. Where it establishes that a reasonable assurance exists, it recognises the expected breakage amount as revenue in proportion to the pattern of rights exercised by the customer. However, where the Group is not reasonably assured of a breakage amount, it would only recognise the expected breakage amount as revenue when the likelihood of the customer exercising its remaining rights becomes remote.
d) Contract modification and contract combination
Contract modifications relates to a change in the price and/or scope of an approved contract. Where there is a contract modification, the Group assess if the modification will create a new contract or change the existing enforceable rights and obligations of the parties to the original contract.
Contract modifications are treated as new contracts when the performance obligations are separately identifiable and transaction price reflects the standalone selling price of the crude oil or the gas to be sold. Revenue is adjusted prospectively when the crude oil or gas transferred is separately identifiable and the price does not reflect the standalone selling price. Conversely, if there are remaining performance obligations which are not separately identifiable, revenue will be recognised on a cumulative catch-up basis when crude oil or gas is transferred.
The Group enters into new contracts with its customers only on the expiry of the old contract. In the new contracts, prices and scope may be based on terms in the old contract. In gas contracts, prices change over the course of time. Even though gas prices change over time, the changes are based on agreed terms in the initial contract i.e. price change due to consumer price index. The change in price is therefore not a contract modifications. Any other change expected to arise from the modification of a contract is implemented in the new contracts.
The Group combines contracts entered into at near the same time (less than 12 months) as one contract if they are entered into with the same or related party customer, the performance obligations are the same for the contracts and the price of one contract depends on the other contract.
e) Portfolio expedients
As a practical expedient, the Group may apply the requirements of IFRS 15 to a portfolio of contracts (or performance obligations) with similar characteristics if it expects that the effect on the financial statements would not be materially different from applying IFRS to individual contracts within that portfolio.
f) Contract assets and liabilities
The Group recognises contract assets for unbilled revenue from crude oil and gas sales. A contract liability is consideration received for which performance obligation has not been met.
g) Disaggregation of revenue from contract with customers
The Group derives revenue from two types of products, oil and gas. The Group has determined that the disaggregation of revenue based on the criteria of type of products meets the revenue disaggregation disclosure requirement of IFRS 15 as it depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. See further details in note 6.
3.4. Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 September 2018.
This basis of consolidation is the same adopted for the last audited financial statements as at 31 December 2017.
3.5. Functional and presentation currency
Items included in the financial statements of the Company and the subsidiaries are measured using the currency of the primary economic environment in which the subsidiaries operate ('the functional currency'), which is the US dollar except for the UK subsidiary which is the Great Britain Pound. The interim condensed consolidated financial statements are presented in the Nigerian Naira and the US Dollars.
The Group has chosen to show both presentation currencies and this is allowable by the regulator.
i) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end are generally recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss or other comprehensive income depending on where fair value gain or loss is reported.
ii) Group companies
The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
-- assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date.
-- income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not - a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the respective exchange rates that existed on the dates of the transactions), and
-- all resulting exchange differences are recognised in other comprehensive income.
On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.
4. Significant accounting judgements, estimates and assumptions
4.1. Judgements
Management's judgements at the end of the third quarter are consistent with those disclosed in the recent 2017 Annual financial statements. The following are some of the judgements which have the most significant effect on the amounts recognised in this consolidated financial statements.
i) OMLs 4, 38 and 41
OMLs 4, 38, 41 are grouped together as a cash generating unit for the purpose of impairment testing. These three OMLs are grouped together because they each do not independently generate cash flows. They currently operate as a single block sharing resources for the purpose of generating cash flows. Crude oil and gas sold to third parties from these OMLs are invoiced together.
ii) New tax regime
Effective 1 January 2013, the Company was granted the inter tax status incentive by the Nigerian Investment Promotion Commission for an initial three-year period and a further two-year period on approval. For the period the incentive applies, the Company is exempted from paying petroleum profits tax on crude oil profits (which was taxed at 65.75% but increased to 85% in 2017), corporate income tax on natural gas profits (currently taxed at 30%) and education tax of 2%. The Company has completed its first three years of the pioneer tax status and now required to pay the full petroleum profits tax on crude oil profits, corporate income tax on natural gas profits and education tax of 2%.
Newton Energy and Seplat East Onshore Limited (OML 53) were also granted pioneer tax status on the same basis as the company. Tax incentives do not apply to Seplat East Swamp Company Limited (OML 55), as it had no activities at the time the incentives were granted to Seplat and Newton Energy.
Deferred tax assets have been recognised during the reporting period. Deferred tax liabilities are not recognised in the reporting period as the Group was not liable to make future income taxes payment in respect of taxable temporary differences.
iii) Unrecognised deferred tax asset
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. See further details in note 15.
iv) Defined benefit plan
Actuarial valuations were carried out at the end of the previous financial year. These valuatons included the estimated interest and service costs for the 2018 interim periods. The Group has relied on these valuations to determine its defined benefit liability as it does not expect material differences in the assumptions used for the current reporting period. All assumptions are reviewed annually.
v) Revenue recognition
-- Definition of contracts
The Group has entered into a non-contractual promise with PanOcean where it allows Panocean to pass crude oil through its pipelines from a field just above Seplat's to the terminal for loading. Management has determined that the non-existence of an enforceable contract with Panocean means that it may not be viewed as a valid contract with a customer. As a result, income from this activity is recognised as other income. Also the deferred revenue was reclassified to accruals and other payables.
-- Performance obligations
The judgments applied in determining what constitutes a performance obligation will impact when control is likely to pass and therefore when revenue is recognised i.e. over time or at a point in time. The Group has determined that only one performance obligation exists in oil contracts which is the delivery of crude oil to specified ports. Revenue is therefore recognised at a point in time.
For gas contracts, the performance obligation is satisfied through the delivery of a series of distinct goods. Revenue is recognised over time in this situation as NGMC simultaneously receives and consumes the benefits provided by the Group's performance. The Group has elected to apply the 'right to invoice' practical expedient in determining revenue from its gas contracts. The right to invoice is a measure of progress that allows the Group to recognise revenue based on amounts invoiced to the customer. Judgement has been applied in evaluating that the Group's right to consideration corresponds directly with the value transferred to the customer and is therefore eligible to apply this practical expedient.
-- Signficant financing component
The Group has entered into an advance payment contract with Mercuria for future crude oil to be delivered. The Group has considered whether the contract contains a financing component and whether that financing component is significant to the contract, including both of the following;
(a) The difference ,if any, between the amount of promised consideration and cash selling price and;
(b) The combined effect of both the following:
- The expected length of time between when the Group transers the crude to Mecuria and when payment for the crude is recieved and;
- The prevailing interest rate in the relevant market.
The advance period is greater than 12 months. In addition, the interest expense accrued on the advance is based on a comparable market rate. Interest expense has therefore been included as part of finance cost.
-- Transactions with Joint Venture (JV) partners
The treatment of underlift and overlift transactions is judgmental and requires a consideration of all the facts and circumstances including the purpose of the arrangement and transaction. The transaction between the Group and its JV partners involves sharing in the production of crude oil, and for which the settlement of the transaction is non-monetary. The JV partners have been assessed to be partners not customer. Therefore, shortfalls or excesses below or above the Group's share of production are recognised in other income/expenses - net.
-- Barging cost
The Group refunds to Mercuria barging costs incurred on crude oil barrels delivered. The Group does not enjoy a separate service as it would have had to pay another party for the delivery of crude oil. The barging costs is therefore determined to be a consideration payable to customer as there is no distinct goods or service being enjoyed by Group. Since no distinct good or service is transferred, barging costs is accounted for as a direct deduction from revenue i.e. revenue is recognised net of barging costs.
vi) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The Board of directors has appointed a steering committee which assesses the financial performance and position of the Group, and makes strategic decisions. The steering committee, which has been identified as being the chief operating decision maker, consists of the chief financial officer, the general manager (Finance), the general manager (Gas) and the financial reporting manager. See further details in note 6.
4.2. Estimates and assumptions
The key assumptions concerning the future and the other key source of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are disclosed in the most recent 2017 annual financial statements.
The following are some of the estimates and assumptions made.
i) Defined benefit plans
The cost of the defined benefit retirement plan and the present value of the retirement obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and changes in inflation rates.
Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. The parameter most subject to change is the discount rate. In determining the appropriate discount rate, management considers market yield on federal government bonds in currencies consistent
with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation.
The rates of mortality assumed for employees are the rates published in 67/70 ultimate tables, published jointly by the Institute and Faculty of Actuaries in the UK.
ii) Contingent consideration
During the reporting period, the Group continued to recognise the contingent consideration of $18.5 million for OML 53 at the fair value of $18.4 million (2017: $13.9 million). It is contingent on oil price rising above US$90 per barrel over a one year period and expiring on 31st January 2020.
iii) Income taxes
The Group is subject to income taxes by the Nigerian tax authority, which does not require significant judgement in terms of provision for income taxes, but a certain level of judgement is required for recognition of deferred tax assets. Management is required to assess the ability of the Group to generate future taxable economic earnings that will be used to recover all deferred tax assets. Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. The estimates are based on the future cash flow from operations taking into consideration the oil and gas prices, volumes produced, operational and capital expenditure.
iv) Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk of default, expected loss rates and maximum contractual period. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed note 3.3.3.
5. Financial risk management
5.1. Financial risk factors
The Group's activities expose it to a variety of financial risks such as market risk (including foreign exchange risk, interest rate risk and commodity price risk), credit risk and liquidity risk. The Group's risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
Risk Exposure arising from Measurement Management
------------ ------------------------------ --------------------- --------------------------------
Market risk Future commercial transactions Cash flow forecasting Match and settle foreign
- foreign Recognised financial Sensitivity analysis denominated cash inflows
exchange assets and liabilities with foreign denominated
not denominated in cash outflows.
US dollars.
------------ ------------------------------ --------------------- --------------------------------
Market risk Long term borrowings Sensitivity analysis Review refinancing opportunities
- interest at variable rate
rate
------------ ------------------------------ --------------------- --------------------------------
Market risk Future sales transactions Sensitivity analysis Oil price hedges
- commodity
prices
------------ ------------------------------ --------------------- --------------------------------
Credit risk Cash and cash equivalents, Aging analysis Diversification of bank
trade receivables and Credit ratings deposits.
derivative financial
instruments.
------------ ------------------------------ --------------------- --------------------------------
Liquidity Borrowings and other Rolling cash flow Availability of committed
risk liabilities forecasts credit lines and borrowing
facilities
------------ ------------------------------ --------------------- --------------------------------
5.1.1. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group manages liquidity risk by ensuring that sufficient funds are available to meet its commitments as they fall due.
The Group uses both long-term and short-term cash flow projections to monitor funding requirements for activities and to ensure there are sufficient cash resources to meet operational needs. Cash flow projections take into consideration the Group's debt financing plans and covenant compliance.
Surplus cash held is transferred to the treasury department which invests in interest bearing current accounts, time deposits and money market deposits.
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed maturity periods. The table has been drawn based on the undiscounted cash flows of the financial liabilities based on the earliest date on which the Group can be required to pay.
Effective Less than 1 -2 2 - 3 3 - 5 After Total
interest rate 1 year years years years 5 years
------------------ ================= ========== ============= ============== ============== ======== ==========
% $ '000 $ '000 $ '000 $ '000 $ '000 $ '000
------------------ ================= ========== ============= ============== ============== ======== ==========
30 September 2018
================== ================= ========== ============= ============== ============== ======== ==========
Non - derivatives
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Fixed interest
rate borrowings
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Senior notes 9.25% 33,094 32,915 32,825 399,282 - 498,116
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Variable interest
rate borrowings
(bank loans):
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Stanbic IBTC Bank
Plc 6.0% +LIBOR 2,039 3,502 10,520 14,164 - 30,225
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
The Standard Bank
of South Africa L 6.0% +LIBOR 1,359 2,334 7,013 9,442 - 20,148
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Nedbank Limited,
London Branch 6.0% +LIBOR 2,832 4,863 14,611 19,672 - 41,978
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Standard Chartered
Bank 6.0% +LIBOR 2,549 4,377 13,150 17,705 - 37,781
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Natixis 6.0% +LIBOR 1,983 3,404 10,228 13,770 - 29,385
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
FirstRand Bank
Limited Acting 6.0% +LIBOR 1,983 3,404 10,228 13,770 - 29,385
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Citibank N.A.
London 6.0% +LIBOR 1,699 2,918 8,767 11,803 - 25,187
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
The Mauritius
Commercial Bank
Plc 6.0% +LIBOR 1,699 2,918 8,767 11,803 - 25,187
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Nomura
International Plc 6.0% +LIBOR 850 1,459 4,383 5,902 - 12,594
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Other non -
derivatives
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
Trade and other
payables** 69,716 - - - - -
------------------ ----------------- ---------- ------------- -------------- -------------- -------- ----------
119,803 62,094 120,492 517,313 - 749,986
================== ================= ========== ============= ============== ============== ======== ==========
Effective interest rate Less than 1 - 2 2 - 3 3 - 5 After Total
1 year years years years 5 years
-------------------------------- ======================== ========= ======== ======== ======= ========
% $ '000 $ '000 $ '000 $ '000 $ '000 $ '000
31 December 2017
Non - derivatives
Variable interest rate
borrowings (bank loans):
Allan Gray 8.5% + LIBOR 5,546 5,116 3,676 1,759 - 16,097
Zenith Bank Plc 8.5% + LIBOR 76,006 70,109 50,373 24,104 - 220,592
First Bank of Nigeria Limited 8.5% + LIBOR 41,957 38,702 27,807 13,306 - 121,772
United Bank for Africa Plc 8.5% + LIBOR 47,504 43,818 31,483 15,065 - 137,870
Stanbic IBTC Bank Plc 8.5% + LIBOR 7,119 6,567 4,718 2,258 - 20,662
The Standard Bank of South
Africa Limited 8.5% + LIBOR 7,119 6,567 4,718 2,258 - 20,662
Standard Chartered Bank 6.0% + LIBOR 18,794 - - - - 18,794
Natixis 6.0% + LIBOR 18,794 - - - - 18,794
Citibank Nigeria Ltd and
Citibank NA 6.0% + LIBOR 14,617 - - - - 14,617
FirstRand Bank Ltd (Rand
Merchant Bank Division) 6.0% + LIBOR 12,529 - - - - 12,529
Nomura Bank Plc* 6.0% + LIBOR 12,529 - - - - 12,529
NedBank Ltd, London Branch 6.0% + LIBOR 12,529 - - - - 12,529
The Mauritius Commercial Bank
Plc* 6.0% + LIBOR 12,529 - - - - 12,529
Stanbic IBTC Bank Plc 6.0% + LIBOR 9,399 - - - - 9,399
The Standard Bank of South
Africa Limited 6.0% + LIBOR 13,576 - - - - 13,576
Other non - derivatives
Trade and other payables** 127,128 - - - - 127,128
437,675 170,879 122,775 58,750 - 790,079
*Nomura and The Mauritius Commercial Bank replace JP Morgan and Bank of America.
** Trade and other payables (excludes non-financial liabilities such as provisions, accruals, taxes, pension and other non-contractual payables).
5.1.2. Credit risk
Credit risk refers to the risk of a counterparty defaulting on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, favourable derivative financial instruments, deposits with banks and financial institutions as well as credit exposures to customers and Joint venture partners, i.e. NPDC receivables and NGMC receivables.
Risk management
The Group is exposed to credit risk from its sale of crude oil to Mecuria. The off-take agreement with Mercuria runs until 31 July 2021 with a 30 day payment term. The Group is exposed to further credit risk from outstanding cash calls from Nigerian Petroleum Development Company (NPDC) and National Petroleum Investment Management Services (NAPIMS).
In addition, the Group is exposed to credit risk in relation to its sale of gas to Nigerian Gas Marketing Company (NGMC) Limited, a subsidiary of NNPC, its sole gas customer during the period.
The credit risk on cash is limited because the majority of deposits are with banks that have an acceptable credit rating assigned by an international credit agency. The Group's maximum exposure to credit risk due to default of the counterparty is equal to the carrying value of its financial assets.
5.2. Fair value measurements
Set out below is a comparison by category of carrying amounts and fair value of all financial instruments:
Carrying amount Fair value
==================== ==================
As at 31 As at 30 As at 31
As at 30 Dec Sept Dec
Sept 2018 2017 2018 2017
$ '000 $ '000 $ '000 $ '000
====================================== ========== ======== ========
Financial assets
Trade and other receivables* 116,165 310,345 116,165 310,345
-------------------------------------- ---------- -------- -------- --------
Contract assets 11,117 - 11,117 -
-------------------------------------- ---------- -------- -------- --------
Cash and cash equivalents 633,997 437,212 633,997 437,212
-------------------------------------- ---------- -------- -------- --------
761,279 747,557 761,279 747,557
====================================== ========== ======== ======== ========
Financial liabilities
Interest bearing loans and borrowings 536,872 570,077 560,204 570,077
-------------------------------------- ---------- -------- -------- --------
Trade and other payables 69,716 127,128 69,716 127,128
====================================== ========== ======== ======== ========
606,588 697,205 629,920 697,205
====================================== ========== ======== ======== ========
*Trade and other receivables excludes NGMC VAT receivables, cash advance and advance payments.
5.2.1. Fair Value Hierarchy
As at the reporting period, the Group had classified its financial instruments into the three levels prescribed under the accounting standards. These are all recurring fair value measurements. There were no transfers of financial instruments between fair value hierarchy levels during this third quarter.
The fair values of the Group's interest-bearing loans and borrowings are determined by using discounted cash flow models that use market interest rates as at the end of the period. The interest-bearing loans and borrowings are in level 2. The carrying amounts of the other financial instruments are the same as their fair values.
The Valuation process
The finance & planning team of the Group performs the valuations of financial and non financial assets required for financial reporting purposes, including level 3 fair values. This team reports directly to the Finance Manager (FM) who reports to the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussions of valuation processes and results are held between the FM and the valuation team at least once every quarter, in line with the Group's quarterly reporting periods.
6. Segment reporting
Business segments are based on Seplat's internal organisation and management reporting structure. Seplat's business segments
are the two core businesses: Oil and Gas. The Oil segment deals with the exploration, development and production of crude
oil while the Gas segment deals with the production of gas.
For the nine months ended 30 September 2018, revenue from the gas segment of the business constituted 22% of the Group's
revenue. Management believes that the gas segment of the business will continue to generate higher profits in the foreseeable
future. It also decided that more investments will be made toward building the gas arm of the business. This investment will
be used in establishing more offices, creating a separate operational management and procuring the required infrastructure
for this segment of the business. The new gas business is positioned separately within the Group and reports directly to the
('chief operating decision maker'). As this business segment's revenues and results, and also its cash flows, will be largely
independent of other business units within Seplat, it is regarded as a separate segment.
The result is two reporting segments, Oil and Gas. There were no intrasegment sales during the reporting periods under consideration. All operating and reportable segments are situated in Nigeria.
Where applicable, the comparative figures for 2017 have been reclassified to match the new structure for the nine months ended 30 September 2018.
The Group accounting policies are also applied in the segment reports.
6.1. Segment profit disclosure
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
$ '000 $ '000 $ '000 $ '000
--------------------------------------------------- -------------- -------------- --------------
Oil 15,344 (58,055) 20,769 3,387
--------------------------------------------------- -------------- -------------- -------------- --------------
Gas 76,110 52,762 22,141 18,893
--------------------------------------------------- -------------- -------------- -------------- --------------
Total profit/(loss) after tax 91,454 (5,293) 42,910 22,280
--------------------------------------------------- -------------- -------------- -------------- --------------
Oil
--------------------------------------------------- ============== ============== ============== ==============
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
--------------------------------------------------- -------------- -------------- -------------- --------------
$ '000 $ '000 $ '000 $ '000
=================================================== ============== ============== ==============
Revenue
--------------------------------------------------- -------------- -------------- -------------- --------------
Crude oil sales 440,896 192,687 183,564 115,236
--------------------------------------------------- -------------- -------------- -------------- --------------
Operating profit before depreciation, amortisation
and impairment 240,529 27,283 96,602 41,934 --------------------------------------------------- -------------- -------------- -------------- -------------- Depreciation, amortisation and impairment (79,227) (26,816) (23,987) (14,834) =================================================== ============== ============== ============== ============== Operating profit/(loss) 161,302 467 72,615 27,100 =================================================== ============== ============== ============== ============== Finance income 6,705 1,582 2,354 (14,888) --------------------------------------------------- -------------- -------------- -------------- -------------- Finance expenses (58,065) (57,291) (16,641) (7,131) --------------------------------------------------- -------------- -------------- -------------- -------------- Profit/(loss) before taxation 109,942 (55,242) 58,328 5,081 --------------------------------------------------- -------------- -------------- -------------- -------------- Taxation (94,598) (2,813) (37,559) (1,694) =================================================== ============== ============== ============== ============== (Loss) for the period 15,344 (58,055) 20,769 3,387 =================================================== ============== ============== ============== ==============
Gas
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
$ '000 $ '000 $ '000 $ '000
=================================================== ============== ============== ==============
Revenue
--------------------------------------------------- -------------- -------------- -------------- --------------
Gas sales 127,060 85,873 41,716 31,510
--------------------------------------------------- -------------- -------------- -------------- --------------
Operating profit before depreciation, amortisation
and impairment 115,318 83,435 37,243 30,212
--------------------------------------------------- -------------- -------------- -------------- --------------
Depreciation, amortisation and impairment (12,555) (30,673) (4,163) (11,319)
--------------------------------------------------- -------------- -------------- -------------- --------------
Operating profit 102,763 52,762 33,080 18,893
--------------------------------------------------- -------------- -------------- -------------- --------------
Finance income - - - -
--------------------------------------------------- -------------- -------------- -------------- --------------
Finance expenses - - - -
--------------------------------------------------- -------------- -------------- -------------- --------------
Profit before taxation 102,763 52,762 33,080 18,893
--------------------------------------------------- -------------- -------------- -------------- --------------
Taxation (26,653) - (10,939) -
--------------------------------------------------- -------------- -------------- -------------- --------------
Profit for the period 76,110 52,762 22,141 18,893
--------------------------------------------------- -------------- -------------- -------------- --------------
6.1.1. Disaggregation of revenue from contracts with customers
The Group derives revenue from the transfer of commodities at a point in time on the basis of product type. The Group has not disclosed disaggregated revenue and contract asset for the comparative periods, as the effect of IFRS 15 adjustments have been treated retrospectively using the simplified transition approach. The simplified approach does not require a restatement of comparatives.
9 months ended 9 months ended 9 months ended 3 months ended 3 months ended 3 months ended
30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept
2018 2018 2018 2018 2018 2018
Oil Gas Total Oil Gas Total
$ '000 $ '000 $ '000 $ '000 $ '000 $ '000
Revenue from contract
with customers 440,896 127,060 567,956 183,564 41,716 225,280
Timing of revenue
recognition
At a point in time 440,896 - 440,896 183,564 - 183,564
Over time - 127,060 127,060 - 41,716 41,716
440,896 127,060 567,956 183,564 41,716 225,280
6.2. Segment assets
Segment assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the reporting segment and the physical location of the asset.
Oil Gas Total
Total segment assets $ '000 $ '000 $ '000
30 September 2018 2,132,591 398,538 2,531,129
31 December 2017 2,343,553 271,077 2,614,630
6.3. Segment liabilities
Segment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated
based on the operations of the segment.
Oil Gas Total
--------- ------------------ -------------------
Total segment liabilities $ '000 $ '000 $ '000
========================== ========= ===================
30 September 2018 932,925 31,054 963,979
-------------------------- --------- ------------------ -------------------
31 December 2017 1,065,950 45,583 1,111,533
-------------------------- --------- ------------------ -------------------
6.4. Contingent consideration
Contingent consideration of $18.4 million for OML 53 relates solely to the oil segment. This is contingent on oil price rising
above US$ 90/bbl. over a one year period and expiring on 31st January 2020. The fair value loss arising during the reporting
period is $18.4 billion.
7. Revenue from contracts with customers
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
$'000 $'000 $'000 $'000
Crude oil sales 440,896 223,855 183,564 112,672
Gas sales 127,060 85,873 41,716 31,510
567,956 309,728 225,280 144,182
(Overlift)/underlift - (31,168) - 2,564
Total 567,956 278,560 225,280 146,746
The major off-taker for crude oil is Mercuria. The major off-taker for gas is the Nigerian Gas Marketing Company.
8. Cost of sales
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
--------------
$'000 $'000 $'000 $'000
Crude handling 47,246 17,134 18,015 12,128
--------------
Barging costs - 9,113 - 2,589
--------------
Royalties 95,966 42,857 33,644 24,104
--------------
Depletion, depreciation and amortisation 91,231 54,105 30,437 25,131
--------------
Niger Delta Development Commission 5,143 3,620 1,622 1,239
--------------
Other rig related expenses 38 3,334 - 1,704
--------------
Operations & maintenance expenses 22,594 23,868 10,136 8,949
==============
262,218 154,031 93,854 75,844
==============
9. Other income/(expenses) -net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
===================== ============== ==============
Underlift/(overlift) 20,463 - (7,278) -
===================== ============== ============== ============== ==============
Shortfalls may exist between the crude oil lifted and sold to customers during the period and the participant's ownership share of production.The shortfall is initially measured at the market price of oil at the date of lifting and recognised as other income.
At each reporting period, the shortfall is remeasured at the current market value. The resulting fair value change, as a result of the remeasurement, is also recognised in profit or loss as other income.
10. General and administrative expenses
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
$'000 $'000 $'000 $'000
Depreciation 2,254 3,384 (584) 1,022
Employee benefits 23,134 16,046 7,844 5,270
Professional and consulting fees 8,912 12,432 1,002 6,230
Auditor's remuneration 256 940 70 634
Directors emoluments (executive) 1,445 1,832 806 450
Directors emoluments (non-executive) 2,501 2,348 869 793
Rentals 1,470 1,146 486 414
Flight and other travel costs 5,309 4,015 2,824 1,647
Other general expenses 9,875 13,989 3,357 8,431
55,156 56,132 16,674 24,891
Directors' emoluments have been split between executive and non-executive directors. There were no non-audit services rendered by the Group's auditors during the period.
Other general expenses relate to costs such as office maintenance costs, telecommunication costs, logistics costs and others. Share based payment expenses are included in employee benefits expense.
11. Reversal/(impairment) losses on financial assets - net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
================================================== ============== ============== ============== ==============
Reversal/(impairment) of loss on NPDC receivables 1,713 - (152) -
-------------------------------------------------- -------------- --------------
Reversal of loss on NAPIMS receivables 12 - 147 -
--------------
Impairment loss on SPDC receivables (22) - (22) -
================================================== ============== ============== ==============
Net reversal of impairment loss allowance 1,703 - (27) -
================================================== ============== ============== ==============
On initial application of IFRS 9, an impairment loss of $5.8 million was recognised for NPDC and NAPIMS receivables as at 1 January 2018 (note 3.3.2.2). The loss allowance was calculated on a total exposure of $125.2 million. During the reporting period, the outstanding receivable balance reduced to $48.7 million. The reduction in the receivables balance led to the reversal of previously recognised loss allowance for the 9 months ended 30 September 2018.
12. Loss on foreign exchange - net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
============== ============== ============== ==============
Exchange loss (679) (906) (702) (40)
============== ============== ============== ============== ==============
This is principally as a result of translation of Naira denominated monetary assets and liabilities.
13. Fair value loss - net
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- --------------
$'000 $'000 $'000 $'000
============== ============== ==============
Crude oil hedging payments (3,474) (14,406) (990) (4,579)
-------------- -------------- --------------
Fair value loss on contingent consideration (4,530) (1,370) (60) (473)
============== ============== ==============
Fair value gain on other assets - 1,514 - -
============== ============== ==============
(8,004) (14,262) (1,050) (5,052)
============== ============== ==============
Crude oil hedging payments represents the payments for crude oil price options charged to profit or loss. Fair value loss on contingent consideration arises in relation to remeasurement of contingent consideration on the Group's acquisition of participating interest in OML 53. The contingency criteria are the achievement of certain production milestones.
14. Finance income/ (costs)
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
====================================================== ============== ============== ============== ==============
Finance income
------------------------------------------------------ -------------- -------------- -------------- --------------
Interest income 6,705 1,582 2,354 699
------------------------------------------------------ -------------- -------------- -------------- --------------
Finance costs
------------------------------------------------------ -------------- -------------- -------------- --------------
Interest on bank loan (54,150) (52,818) (15,816) (16,302)
------------------------------------------------------ -------------- -------------- -------------- --------------
Interest on advance payments for crude oil sales (1,730) (4,402) - (1,318)
------------------------------------------------------ -------------- -------------- -------------- --------------
Unwinding of discount on provision for decommissioning (2,185) (71) (825) (24)
====================================================== ============== ============== ============== ==============
(58,065) (57,291) (16,641) (17,644)
====================================================== ============== ============== ============== ============== Finance cost - net (51,360) (55,709) (14,287) (16,945) ====================================================== ============== ============== ============== ==============
15. Taxation
Income tax expense is recognised based on management's estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rates used for the period to 30 September 2018 were 85% and 65.75% for crude oil activities and 30% for gas activities. As at 31 December 2017, the applicable tax rates were 85%, 65.75% for crude oil and 30% for gas activities.
15a. Deferred tax assets
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.
As at As at As at As at 31 Dec As at 31 Dec
30 Sept 2018 30 Sept 2018 30 Sept 2018 2017 2017
------------------- ------------------- ------------- ------------ ------------
$'000 $'000 $'000 $'000 $'000
------------------- ------------- ------------ ------------
Gross amount at 85% Gross amount at 30% Tax effect Gross amount Tax effect
================================= =================== =================== ============= ============ ============
Tax losses - - 47,674 40,523
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Other cumulative timing
differences:
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Fixed assets (320,034) (74,835) (294,479) (346,109) (294,193)
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Unutilised Capital Allowance 427,245 32,354 372,864 490,512 416,935
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Provision for Abandonment 2,457 - 2,088 393 334
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Provision for Gratuity 6,723 - 5,714 4,809 4,088
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Share Equity Reserve 25,699 - 21,844 17,809 15,138
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Unrealised Forex (Gain)/Loss 16,194 - 13,765 16,194 13,765
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Overlift / (Underlift) 10,535 - 8,955 24,963 21,218
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
Provision for Doubtful Debt 6,968 - 5,923 6,968 5,923
--------------------------------- ------------------- ------------------- ------------- ------------ ------------
175,787 (42,481) 136,674 263,213 223,731
================================= =================== =================== ============= ============ ============
15b. Unrecognised deferred tax assets
The unrecognised deferred tax assets relates to the Group's subsidiaries and will be recognised once the entities return to profitability. There are no expiration dates for the unrecognized deferred tax assets.
As at 30 Sept As at 31 Dec As at 31 Dec
As at 30 Sept 2018 2018 2017 2017
------------------ ------------- ------------ ------------
$'000 $'000 $'000 $'000
------------------ ------------- ------------ ------------
Gross amount Tax effect Gross amount Tax effect
======================================= ================== ============= ============ ============
Other deductible temporary differences 60,491 40,752 48,995 25,730
--------------------------------------- ------------------ ------------- ------------ ------------
Tax losses 27,313 15,534 47,673 29,132
--------------------------------------- ------------------ ------------- ------------ ------------
87,804 56,286 96,668 54,862
======================================= ================== ============= ============ ============
15c. Unrecognised deferred tax liabilities
There were no temporary differences associated with investments in the Group's subsidiaries for which a deferred tax liability would have been recognised in the periods presented.
16. Earnings/(loss) per share (LPS/EPS)
Basic
Basic LPS/EPS is calculated on the Group's profit or loss after taxation attributable to the parent entity and on the basis of the weighted average of issued and fully paid ordinary shares at the end of the period.
Diluted
Diluted LPS/EPS is calculated by dividing the profit or loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares (arising from outstanding share awards in the share based payment scheme) into ordinary shares.
9 months ended 9 months ended 3 months ended 3 months ended
30 Sept 2018 30 Sept 2017 30 Sept 2018 30 Sept 2017
-------------- -------------- -------------- --------------
$'000 $'000 $'000 $'000
====================================================== ============== ============== ============== ==============
Profit/(loss) for the period 91,454 (5,293) 42,910 22,280
====================================================== ============== ============== ============== ==============
Share Share Share Share
'000 '000 '000 '000
====================================================== ============== ============== ============== ==============
Weighted average number of ordinary shares in issue 582,889 563,455 582,889 563,445
------------------------------------------------------ -------------- -------------- -------------- --------------
Share awards 6,157 6,437 6,157 6,437
------------------------------------------------------ -------------- -------------- -------------- --------------
Weighted average number of ordinary shares adjusted
for the effect of dilution 589,046 569,882 589,046 569,882
====================================================== ============== ============== ============== ==============
$ $ $ $
------------------------------------------------------ -------------- -------------- -------------- --------------
Basic earnings/(loss) per share 0.16 (0.01) 0.07 (0.04)
------------------------------------------------------ -------------- -------------- -------------- --------------
Diluted earnings/(loss) per share 0.16 (0.01) 0.07 (0.04)
====================================================== ============== ============== ============== ==============
$'000 $'000 $'000 $'000
====================================================== ============== ============== ============== ==============
Profit/(loss) used in determining basic/diluted
earnings/(loss) per share 91,454 (5,293) 42,910 22,280
====================================================== ============== ============== ============== ==============
17. Interest bearing loans & borrowings
Below is the net debt reconciliation on interest bearing loans and borrowings.
Borrowings due Borrowings due above
within 1 year 1 year Total
$'000 $'000 $'000
=============================
Balance as at 1 January
2018 265,400 304,677 570,077
Principal repayment (265,400) (312,600) (578,000)
Interest repayment (25,877) (14,629) (40,506)
----------------------------- -------------- -------------------- ---------
Interest accrued 30,219 - 30,219
----------------------------- -------------- -------------------- ---------
Effect of loan restructuring - 23,931 23,931
----------------------------- -------------- -------------------- ---------
Other financing charges - (3,894) (3,894)
----------------------------- -------------- -------------------- ---------
Proceeds from loan financing - 535,045 535,045
----------------------------- -------------- -------------------- ---------
Carrying amount as at 30
June 2018 4,342 532,530 536,872
============================= ============== ==================== =========
Interest bearing loans and borrowings include a revolving loan facility and senior notes. In the reporting period, the Group repaid its US$700 million seven year term loan and its US$300 million four year revolving loan facility.
In the reporting period, the Group also issued US$350million senior notes at a contractual interest rate of 9.25% with interest payable on 1 April and 1 October, and principal repayable at maturity. The notes are expected to mature in April 2023. The interest accrued at the reporting date is US$18.2 million using an effective interest rate of 10.4%.
An agreement for another four year revolving loan facility was entered into by the Group to refinance its old four year revolving loan facility with interest payable semi-annually and principal repayable on 31 December of each year. The new revolving loan has an initial contractual interest rate of 6% +Libor (7.7%) and a settlement date of June 2022.
The interest rate of the facility is variable. The Group made a draw down of US$200 million in March 2018. The interest accrued at the reporting period is US$9.45 million using an effective interest rate of 9.4%. The interest paid was determined using 3-month LIBOR rate + 6 % on the last business day of the reporting period. The amortised cost for the senior notes and the borrowings at the reporting period is US$341 million and US$196 million respectively.
The proceeds from the notes issue and new revolving loan facility were used to repay and cancel existing indebtedness, and for general corporate purposes.
18. Trade and other receivables
As at 30 Sept 2018 As at 31 Dec 2017
$'000 $'000
--------
Trade receivables (note 18a) 109,231 108,685
---------------------------------------------------------------------- ----------------- --------
Nigerian Petroleum Development Company (NPDC) receivables (note 18b) - 112,664
---------------------------------------------------------------------- ----------------- --------
National Petroleum Investment Management Services receivables 293 12,506
---------------------------------------------------------------------- ----------------- --------
Advances on investment - 65,705
---------------------------------------------------------------------- ----------------- --------
Advances to suppliers 13,031 7,861
---------------------------------------------------------------------- ----------------- --------
Other receivables (note 18c) 45,137 2,924
=================
Gross carrying amount 167,692 310,345
---------------------------------------------------------------------- ----------------- --------
Less: Specific impairment allowance (273) -
====================================================================== =================
167,419 310,345
18a. Trade receivables:
Included in trade receivables is an amount due from Nigerian Gas Marketing Company (NGMC) and Central Bank of Nigeria (CBN) totaling $58.5 million (2017: $77 million) with respect to the sale of gas, for the Group. Also included in trade receivables is an amount of $42.8 million (2017: $27 million) due from Mecuria for sale of crude.
18b. NPDC receivables:
NPDC receivables represent the outstanding cash calls due to Seplat from its JV partner, Nigerian Petroleum Development Company is Nil (2017: $113 million). The outstanding NPDC receivables at the end of the reporting period has been netted off against the gas receipts payable to NPDC as Seplat has a legally enforceable right to settle outstanding amounts on a net basis.
18c. Other receivables:
Included in other receivables is a receivable amount from SPDC on an investment that is no longer being pursued. The outstanding receivable amount as at the reporting date is $45.1 million (2017: nil).
19. Contract assets
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
$'000 $'000
===================== ================== =================
Revenue on gas sales 11,117 -
===================== ================== =================
A contract asset is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer. The Group has recognised an asset in relation to a contract with NGMC for the delivery of Gas supplies which NGMC has received but which has not been invoiced as at the end of the reporting period.
The terms of payments relating to the contract is between 30- 45 days from the invoice date. However, invoices are raised after delivery between 14-21 days when the the receivable amount has been established and the right to the receivables crytallises. The right to the unbilled receivables is recognised as a contract asset.
At the point where the final billing certificate is obtained from NGMC authorising the quantities, this will be reclassified from the contract assets to trade receivables.
19.1. Reconciliation of contract assets
The movement in the Group's contract assets is as detailed below:
As at 30 Sept 2018 As at 31 Dec 2017
$'000 $'000
Impact on initial application of IFRS 15 13,790 -
Gas revenue received during the period (2,673) -
11,117 -
20. Cash and cash equivalents
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
$'000 $'000
================ ================== =================
Cash on hand 7 11
---------------- ------------------ -----------------
Restricted cash 1,844 62,674
---------------- ------------------ -----------------
Cash at bank 632,146 374,527
================ ================== =================
633,997 437,212
================ ================== =================
Included in cash and cash equivalents is the total amount of $150 million arising from NPDC's share of gas proceeds. These amounts will be applied against tolling fees from the gas processing on the expanded Oben Gas Plant solely funded by Seplat and on-going cash calls.
21. Share capital
21a. Authorised and issued share capital
As at 30 Sept 2018 As at 31 Dec 2017
$'000 $'000
Authorised ordinary share capital
1,000,000,000 ordinary shares denominated in Naira of 50 kobo per share 3,335 3,335
Issued and fully paid
588,444,561 (2017: 563,444,561) issued shares denominated in Naira of 50 kobo
per share 1,867 1,826
21b. Employee share based payment scheme
As at 30 September 2018, the Group had awarded 40,410,644 shares (2017: 33,697,792 shares) to certain employees and senior executives in line with its share based incentive scheme. Included in the share based incentive schemes are two additional schemes (2017 Deferred Bonus Scheme and 2018 LTIP Scheme) awarded during the reporting period. During the nine months ended 30 September 2018, 5,534,964 shares were vested (31 December 2017: No shares had vested).
21c. Movement in share capital
Number of Treasury
shares Issued share capital shares Share based payment reserve Total
Shares $'000 $'000 $'000 $'000
Opening balance as at 1 January 2018 563,444,561 1,826 - 17,809 19,635
Share based payments - - - 7,890 7,890
Share issue 19,465,036 41 (41) - -
Vested shares 5,534,964 - 9 (9) -
Closing balance as at 30 September
2018 588,444,561 1,867 (32) 25,690 27,525
22. Trade and other payables
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -------------------
$'000 $'000
============================================== ================== ===================
Trade payables 42,548 62,758
---------------------------------------------- ------------------ -----------------
Nigerian Petroleum Development Company (NPDC) 37,588 -
---------------------------------------------- ------------------ -----------------
Accruals and other payables 108,849 149,020
---------------------------------------------- ------------------ -----------------
Pension payables 311 180
---------------------------------------------- ------------------ -----------------
NDDC levy 10,417 8,383
---------------------------------------------- ------------------ -----------------
Deferred revenue - 137,248
---------------------------------------------- ------------------ -----------------
Royalties payable 55,414 53,004
============================================== ================== =================
255,127 410,593
============================================== ================== =================
Included in accruals and other payables are field-related accruals of $40.4 million (2017: $56 million) and other vendor payables of $68.4 million (2017: $94 million). Royalties include accruals in respect of gas sales for which payment is outstanding at the end of the period.
NPDC payables relate to cash calls paid in advance in line with the Group's Joint operating agreement (JOA) on OML 4, OML 38 and OML 41. The net amount of $37.6 million has been reported after adjusting for interest (as set out in the JOA) and undercash call payments in other currencies. The outstanding NPDC receivables at the end of the reporting period has been netted off against the gas receipts payable to NPDC, and impairment has been calculated on the net NPDC receivables balance.
23. Computation of cash generated from operations
9 months ended 9 months ended
30 Sept 2018 30 Sept 2017
----- -------------- --------------
Notes $'000 $'000
============================================================================ ===== ============== ==============
Profit/(loss) before tax 212,705 (2,480)
============================================================================ ===== ============== ==============
Adjusted for:
---------------------------------------------------------------------------- ----- -------------- --------------
Depletion, depreciation and amortisation 8, 10 93,485 57,489
---------------------------------------------------------------------------- ----- -------------- --------------
Interest on bank loan 14 54,150 52,818
---------------------------------------------------------------------------- ----- -------------- --------------
Interest on advance payment for crude oil sales 14 1,730 4,402
---------------------------------------------------------------------------- ----- -------------- --------------
Unwinding of discount on provision for decommissioning 14 2,185 71
---------------------------------------------------------------------------- ----- -------------- --------------
Interest income 14 (6,705) (1,582)
---------------------------------------------------------------------------- ----- -------------- --------------
Fair value loss on contingent consideration 13 4,530 1,370
---------------------------------------------------------------------------- ----- -------------- --------------
Fair value gain on other assets 13 - (1,514)
---------------------------------------------------------------------------- ----- -------------- --------------
Unrealised foreign exchange loss 12 679 906
---------------------------------------------------------------------------- ----- -------------- --------------
Share based payments expenses 7,890 4,010
---------------------------------------------------------------------------- ----- -------------- --------------
Defined benefit expenses 206 1,192
---------------------------------------------------------------------------- ----- -------------- --------------
Reversal of impairment loss on NPDC, NAPIMS and SPDC receivables 11 (1,703) -
---------------------------------------------------------------------------- ----- -------------- --------------
Loss on disposal of other property,plant and equipment - 82
---------------------------------------------------------------------------- ----- -------------- --------------
Changes in working capital (excluding the effects of exchange differences):
---------------------------------------------------------------------------- ----- -------------- --------------
Trade and other receivables, including prepayments 113,843 (29,593)
---------------------------------------------------------------------------- ----- -------------- --------------
Contract assets (11,117) -
---------------------------------------------------------------------------- ----- -------------- --------------
Trade and other payables (81,346) 75,630
---------------------------------------------------------------------------- ----- -------------- --------------
Inventories (4,232) 4,288
============================================================================ ===== ============== ==============
Net cash from operating activities 386,300 167,089
============================================================================ ===== ============== ==============
24. Related party relationships and transactions
The Group is controlled by Seplat Petroleum Development Company Plc (the 'parent Company'). The shares in the
parent Company are widely held.
24a. Related party relationships
The services provided by the related parties:
Abbeycourt Trading Company Limited: The Chairman of Seplat is a director and shareholder. The company provides diesel supplies to Seplat in respect of Seplat's rig operations.
Cardinal Drilling Services Limited (formerly Caroil Drilling Nigeria Limited): Is owned by common shareholders with the parent Company. The company provides drilling rigs and drilling services to Seplat.
Charismond Nigeria Limited: The sister to the CEO works as a General Manager. The Company provides administrative services including stationary and other general supplies to the field locations.
Keco Nigeria Enterprises: The Chief Executive Officer's sister is shareholder and director. The company provides diesel supplies to Seplat in respect of its rig operations.
Montego Upstream Services Limited: The Chairman's nephew is shareholder and director. The company provides drilling and engineering services to Seplat.
Neimeth International Pharmaceutical Plc: The chairman of Seplat is also the chairman of this company. The company provides medical supplies and drugs to Seplat, which are used in connection with Seplat's corporate social responsibility and community healthcare programmes.
Nerine Support Services Limited: Is owned by common shareholders with the parent Company. Seplat leases a warehouse from Nerine and the company provides agency and contract workers to Seplat.
Oriental Catering Services Limited: The Chief Executive Officer of Seplat's spouse is shareholder and director. The company provides catering services to Seplat at the staff canteen.
ResourcePro Inter Solutions Limited: The Chief Executive Officer of Seplat's in-law is its UK representative. The company supplies furniture to Seplat.
Shebah Petroleum Development Company Limited (BVI): The Chairman of Seplat is a director and shareholder of SPDCL (BVI). SPDCL (BVI) provided consulting services to Seplat.
Stage leasing (Ndosumili Ventures Limited): Is a subsidiary of Platform Petroleum Limited. The company provides transportation services to Seplat.
The following transactions were carried by Seplat with related parties:
24b. Related party relationships
ii) Purchases of goods and services 9 months ended 9 months ended
30 Sept 2018 30 Sept 2017
$'000 $'000
Shareholders of the parent company
SPDCL (BVI) 788 1,013
Total 788 1,013
Entities controlled by key management personnel:
Contracts > $1million in 2018
Nerine Support Services Limited 5,133 3,894
Cardinal Drilling Services Limited 1,389 2,592
Stage Leasing Limited 1,138 -
7,660 6,486
9 months ended 9 months ended
30 Sept 2018 30 Sept 2017
$'000 $'000
Contracts < $1million in 2018
Abbey Court trading Company Limited 758 482
Charismond Nigeria Limited 71 43
Keco Nigeria Enterprises 47 115
Stage Leasing Limited - 560
Oriental Catering Services Limited 424 311
ResourcePro Inter Solutions Limited 9 24
Montego Upstream Services Limited 67 262
Neimeth International Pharmaceutical Plc - 2
1,376 1,799
Total 9,036 8,285
* Nerine charges an average mark-up of 7.5% on agency and contract workers assigned to Seplat. The amounts shown above are gross i.e. it includes salaries and Nerine's mark-up. Total costs for agency and contracts during the nine months ended 30 September 2018 is $5.1 million (2017: $3.9 million).
24c. Balances
The following balances were receivable from or payable to related parties as at 30 September 2018:
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
Prepayments / receivables $'000 $'000
================== =================
Entities controlled by key management personnel
Cardinal Drilling Services Limited 5,498 5,498
5,498 5,498
As at 30 Sept 2018 As at 31 Dec 2017
------------------ -----------------
Payables $'000 $'000
================================================ ================== =================
Entities controlled by key management personnel
Montego Upstream Services Limited 26 375
Nerine Support Services Limited 8 8
Keco Nigeria Enterprises - 25
Cardinal Drilling Services Limited 198 954
Oriental Catering Services Ltd 5 -
Resourcepro Inte Solutions Ltd 6 -
243 1,362
25. Commitments and contingencies
25a. Operating lease commitments - Group as lessee
The Group leases drilling rigs, buildings, land, boats and storage facilities. The lease terms are between 1 and 5 years. The operating lease commitments of the Group as at 30 September 2018 are:
As at 30 Sept 2018 As at 31 Dec 2017
$'000 $'000
Not later than one year - 2,382
Later than one year and not later than five years - 1,846
- 4,228
25b. Contingent Liabilities
The Group is involved in a number of legal suits as defendant. The estimated value of the contingent liabilities for the period ended 30 september 2018 is $2.4 million (2017: $15.5 million). The contingent liability for the period ended 30 September 2018 is determined based on possible occurrences though unlikely to occur. No provision has been made for this potential liability in these financial statements. Management and the Group's solicitors are of the opinion that the Group will suffer no loss from these claims.
26. Dividend
The directors paid an interim dividend of $29.4 million (2017: Nil) per fully paid ordinary share. The aggregate amount of the dividend was paid out of retained earnings as at 31 March 2018.
Following a review of Seplat's operational, liquidity and financial position as at 30 September 2018, the Board has proposed an interim dividend of US$0.05 per share. The total amount of this proposed dividend expected to be paid out of retained earnings but for which no liability has been recognized in the financial statements is $29.4 million (September 2017: Nil).
27. Events after the reporting period
Except for the interim dividend proposed at the end of the third quarter (Note 26), there were no significant events that would have a material effect on the Group after the reporting period.
General information
Board of Directors
Ambrosie Bryant Chukwueloka Chairman
Orjiako
Ojunekwu Augustine Avuru Managing Director and Chief Executive
Officer
Roger Thompson Brown Chief Financial Officer (Executive British
Director)
Effiong Okon Executive Operations Director
*Michel Hochard Non-Executive Director French
Macaulay Agbada Ofurhie Non-Executive Director
Michael Richard Alexander Senior Independent Non-Executive British
Director
Ifueko M. Omoigui Okauru Independent Non-executive Director
Basil Omiyi Independent Non-executive Director
Charles Okeahalam Independent Non-executive Director
Lord Mark Malloch-Brown Independent Non-executive Director British
Damian Dinshiya Dodo Independent Non-executive Director
*Madame Nathalie Delapalme acts
as alternate Director to Michel
Hochard
Company secretary Mirian Kachikwu
Registered office and business 25a Lugard Avenue
address of directors Ikoyi
Lagos
Nigeria
Registered number RC No. 824838
FRC number FRC/2015/NBA/00000010739
Auditor Ernst & Young
(10(th) & 13th Floor), UBA House
57 Marina Lagos, Nigeria.
Registrar DataMax Registrars Limited
2c Gbagada Expressway
Gbagada Phase 1
Lagos
Nigeria
Solicitors Olaniwun Ajayi LP
Adepetun Caxton-Martins Agbor &
Segun ("ACAS-Law")
White & Case LLP
Herbert Smith Freehills LLP
Whitehall Solicitors
Chief J.A. Ororho & Co.
Ogaga Ovrawah & Co.
Consolex LP
Banwo-Ighodalo
Latham & Watkins LLP
V.E. Akpoguma & Co.
Thompson Okpoko & Partners
G.C. Arubayi & Co.
Chukwuma Chambers
Abraham Uhunmwagho & Co
Walles & Tarres Solicitors
Streamsowers & Kohn
Bankers First Bank of Nigeria Limited
Stanbic IBTC Bank Plc
United Bank for Africa Plc
Zenith Bank Plc
Citibank Nigeria Limited
Standard Chartered Bank
HSBC Bank
FirstRand Bank Limited Acting
Natixis
Nedbank Limited
Nomura International Plc
The Standard Bank of South Africa
The Muaritius Commercial Bank
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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