Seplat Energy PLC Unaudited Results for Three Months Ended 31.03.24

RNS Number : 3140M

Seplat Energy PLC

29 April 2024

 

Please see the Full Unaudited Results in attached PDF

http://www.rns-pdf.londonstockexchange.com/rns/3140M_1-2024-4-28.pdf

Lagos and London, 29 April 2024: Seplat Energy PLC ("Seplat Energy" or "the Company"), a leading Nigerian independent energy company listed on both the Nigerian Exchange and the London Stock Exchange, announces its unaudited results for the three months ended 31 March 2024.

Operational highlights

·    Production averaged 49,258 boepd, down 4.8% on prior period (3M 2023: 51,720 boepd), but 5.7% above Q4 2023 production, and towards the upper end of 2024 guidance (44,000 boepd - 52,000 boepd).

·    ANOH gas plant pre-commissioning works ongoing. Seplat maintains its first gas target in 3Q 2024.

·    Sibiri-1 on stream a few weeks after FDP approval, work ongoing to commence production from Sibiri-2.

·    Discovery of hydrocarbons in previously untested deep reservoirs at Sapele-37 and Okporhuru-9.

·    Carbon emissions intensity: 29.4 kg CO2/boe (3M 2023: 26.4 kg CO2/boe). End of Routine Flaring ("EORF") projects are on track, with EORF expected in H2 2025, these will deliver a material reduction in emissions intensity.

·    Achieved more than 2.3 million hours without Lost Time Injury ("LTI") at Seplat-operated assets in Q1 2024.

Financial updates  

·    Revenue $179.8 million, down from $331.0 million in 3M 2023 (after adjusting for underlift and overlift oil volumes, 3M 2024 adjusted revenues of $236.3 million, against $255.6 million in 3M 2023).

·    Average realised oil price $86.17/bbl (3M 2023: $82.32/bbl); average realised gas price $3.11/Mscf (3M 2023: $2.88/Mscf).

·    Unit production opex of $9.6/boe, (3M 2023: $9.0/boe).

·    Cash generated from operations of $16.8 million, primarily due to timing of liftings, $95 million received in April for volumes lifted in March, down from $145.0m in Q1 2023. Capex invested of $47.1 million (3M 2023: $44.7 million)

·    Balance sheet cash down to $335.8 million (YE 2023: $450.1 million), $128 million MPNU cash deposit not included.

·    Net debt at end March increased to $385 million (Dec 2023: $305 million), a further $19.3 million of RBL borrowings were repaid in the quarter. Net Debt to EBITDA was 0.9x.

·    Q1 2024 dividend declared of US3.0 cents per share.

Corporate updates

·    On 1^st April 2024 Mr. Udoma Udo Udoma became Independent Non-Executive Chairman and Mr. Bello Rabiu became Senior Independent Non-Executive Director of the Seplat Energy Board.

·    On 1^st May 2024 Mrs. Eleanor Adaralegbe will join the Board of Seplat as an Executive Director and will succeed Mr. Emeka Onwuka as Chief Financial Officer on 21^st May 2024.

·    Full year guidance unchanged. Production 44,000-52,000 boepd, capex $170 million - $200 million.

·    Working with NNPC and government to conclude the acquisition of ExxonMobil's share capital in Mobil Producing Nigeria Unlimited ("MPNU"). We remain confident that President Tinubu's administration will approve the transaction.

Post-reporting period events

·    NMDPRA increased the domestic market gas price to $2.42/Mscf from $2.18/Mscf, effective 1 April 2024. New pricing will be applied to approximately 30% of gas volumes.

·    On April 14^th, 2024, after approximately 2 years of outage, Zone-6 of SPDC operated Trans Niger Pipeline ("TNP") resumed operations, four months ahead of management's expectations. 

Roger Brown, Chief Executive Officer, said:

"Seplat Energy continued its trend of strong operational performance in the first quarter. Oil production on OMLs 4, 38, 40 and 41 outperformed expectations, benefitting from low pipeline losses and deferments, which were ahead of plan. Cash flow was down in the first quarter, but this is largely due to timing difference of lifting oil from the terminals. The business remains strong, production is firmly on track this year and price realisations remain supportive of cash generation.

In our FY 2023 results we outlined several growth opportunities for 2024. The first of these to start generating revenue for Seplat is Sibiri, which came on stream just a few weeks after the FDP approval was received from NUPRC. At Abiala (a marginal field within OML 40), the drilling programme is on track to start during 2Q. We were delighted to see resumption of operations on the Trans Niger Pipeline in April, approximately four months ahead of plan. Access to the pipeline will enable us to increase production from OML53, as well as providing the primary export route for condensate from AGPC, which remains on track for first gas in 3Q 2024. 

Looking further forward, we are pleased to share that we discovered hydrocarbons in deeper reservoirs than had previously been tested at Sapele-37 and Okhorpuru-9. The initial results are promising, again highlighting the world class quality of the geology in Nigeria.

In Nigeria, we were pleased to see more progressive actions taken by President Tinubu and the industry regulators. In March, the President signed executive orders that will provide fiscal incentives in our gas and midstream businesses. In addition, an executive order was signed and gazetted into law, which has potential to materially improve our contracting process and bring the right level of efficiency that will support costs reductions. We applaud the change, which can drive much needed efficiency gains across our industry. More recently NMDPRA lifted the domestic gas price to $2.42/Mscf supporting revenue generation and re-emphasising the government's commitment to develop Nigeria's gas resources, a factor aligned with Pillar 2 in our strategy.

Our message to investors on MPNU is unchanged. Dialogue between key parties is active and constructive, and we remain confident that we can reach a conclusion on this transformational acquisition."  

 

Summary of performance

	$ million				₦ billion
	Q1 2024	Q1 2023	% Change		Q1 2024	Q1 2023
Revenue *	179.8	331.0	(45.7%)		268.6	152.0
Gross profit	42.7	198.3	(78.5%)		63.8	91.1
EBITDA **	123.3	140.2	(12.0%)		184.2	64.4
Operating profit (loss)	81.9	103.7	(21.0%)		122.4	47.6
Profit (loss) before tax	69.3	86.1	(19.5%)		103.5	39.5
Cash generated from operations	16.8	145.0	(88.4%)		25.2	66.6
Working interest production (boepd)	49,258	51,720	(4.8%)
Oil volumes produced (MMbbls)	2.77	2.73	1.5%
Oil volumes lifted (MMbbls)	1.75	3.58	(51.1%)
Average realised oil price ($/bbl.)	$86.17	$82.32	4.7%
Average realised gas price ($/Mscf)	$3.11	$2.88	8.0%
LTIF	0	0
CO2 emissions intensity from operated assets, kg/boe	29.4	26.4	11.4%

* 3M 2023 revenue includes an overlift of $75.4m

** Adjusted for non-cash items

 

Responsibility for publication

This announcement has been authorised for publication on behalf of Seplat Energy by Emeka Onwuka, Chief Financial Officer, Seplat Energy PLC.

Signed:

 

 

Emeka Onwuka

Chief Financial Officer       

Important notice The information contained within this announcement is unaudited and deemed by the Company to constitute inside information as stipulated under Market Abuse Regulations. Upon the publication of this announcement via Regulatory Information Services, this inside information is now considered to be in the public domain. Certain statements included in these results contain forward-looking information concerning Seplat Energy's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors, or markets in which Seplat Energy operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances and relate to events of which not all are within Seplat Energy's control or can be predicted by Seplat Energy. Although Seplat Energy 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 Energy or any other entity and must not be relied upon in any way in connection with any investment decision. Seplat Energy undertakes no obligation to update any forward-looking statements, whether because of new information, future events or otherwise, except to the extent legally required.

 

Enquiries:

Seplat Energy Plc
Emeka Onwuka, Chief Financial Officer	[phone]
Eleanor Adaralegbe, CFO Designate
James Thompson, Head of Investor Relations	[phone]
Ayeesha Aliyu, Investor Relations
Chioma Afe, Director, External Affairs & Social Performance
FTI Consulting
Ben Brewerton / Christopher Laing	[phone] [e-mail]
Citigroup Global Markets Limited
Luke Spells / Peter Catterall	[phone]
Investec Bank plc
Chris Sim / Charles Craven	[phone]

About Seplat Energy

Seplat Energy PLC (Seplat) is Nigeria's leading indigenous energy company. Listed on the Nigerian Exchange Limited (NGX: SEPLAT) and the Main Market of the London Stock Exchange (LSE: SEPL), we are pursuing a Nigeria-focused growth strategy in oil and gas, as well as developing a Power & New Energy business to lead Nigeria's energy transition.

Seplat's energy portfolio consists of seven oil and gas blocks in the prolific Niger Delta region of Nigeria, which we operate with partners including the Nigerian Government and other oil producers. We also have a revenue interest in OML 55. We operate a 465MMscfd gas processing plant at Oben, in OML4, and are building the 300MMscfd ANOH Gas Processing Plant in OML53 and a new 90MMscfd gas processing plant at Sapele in OML41, to augment our position as a leading supplier of gas to the domestic power generation market. https://www.seplatenergy.com/

Operating review

Group production performance

Working interest production for the three months ended 31 March 2024 

			Q1 2024				Q1 2023
			Liquids	Gas	Total		Liquids	Gas	Total
	Seplat %		bopd	MMscfd	boepd		bopd	MMscfd	boepd
OMLs 4, 38 & 41	45%	15,089		109.5	33,961		17,613	124.1	39,002
OML 40	45%	12,470		-	12,470		9,568	-	9,568
OML 53	40%	1,263		-	1,263		1,280	-	1,280
OPL 283	40%	1,564		-	1,564		1,870	-	1,870
Total		30,387		109.5	49,258		30,331	124.1	51,720

Liquid production volumes as measured at the LACT (Lease Automatic Custody Transfer) unit for OMLs 4, 38 and 41; OML 40 and OPL 283 flow station.

Gas conversion factor of 5.8 boe per scf.

Volumes stated are subject to reconciliation and may differ from sales volumes within the period.

 

During the first three months of 2024, total working interest production was within 2024 guidance. Production of 49,258 boepd represents a 5.7% increase versus Q4 2023, but a 4.8% decrease versus the prior year period (3M 2023: 51,720 boepd); the oil and gas mix was 62% and 38% respectively. Within this, average daily working interest oil production was stable, growing by 0.2% while gas working interest production fell 11.8%. Total production deferment in the period was 22% (3M 2023: 29%), a significant improvement on prior year performance, due to better asset availability during the period.

Upstream business performance

Total liquids production increased by 1.5% to 2.77 MMbbls in 3M 2024, compared to 2.73 MMbbls in 3M 2023. The modest growth in liquids production during the period was underpinned by improved liquids production on OML 40.

Western Assets

In OMLs 4, 38, & 41, working interest liquids production declined 14.3% to 15,089 bopd (3M 2022: 17,613 bopd). The reduction in production was driven by the effects of natural decline and the delays to the 2023 drilling programme. Export route availability remained stable during the period. Minor repairs on the Trans Forcados Pipeline ("TFP") route while an operational challenge at the Escravos Oil Terminal (EOT) caused a one-day downtime on Amukpe to Escravos Pipeline ("AEP") in February, were the only outages of significance in the period. As a result, total deferments on OML 4, 38, 41 for the period were 13% (3M 2023: 19%).

Elcrest

Our operations at OML 40 recorded the strongest growth in the period. Working interest production from the asset grew by 30.3% to 12,470 bopd in 3M 2024 (3M 2023: 9,568 bopd). OML 40 volumes benefitted from improved export route availability (both pipeline and terminal), and the ongoing benefit of the effective drilling campaign in 2023.

We received approval for the full field development plan at Sibiri on OML 40 in February 2024. The first phase of the development plan includes commencement of production from the previously drilled E&A wells; Sibiri-1 and Sibiri-2. We are pleased to announce that Sibiri-1 was brought online only a few weeks after receiving development approval, though contribution to group production in 1Q 2024 was limited. Work is ongoing to bring Sibiri-2 online later in the year.

Abiala is the second growth project planned to be brought online in 2024, it is a marginal field located in the OML 40 area. At the end of the first quarter the project remained on schedule. The rig move to the location for the first production well is on track for the second quarter.

Eastern Assets

In OML 53, daily working interest production fell 1.3% to 1,263 bopd in 3M 2024, with the evacuation of these volumes principally to the nearby Waltersmith Refinery from our Ohaji operations. Production levels in Q1 2024 were broadly similar to 2023, with Ohaji supplying crude to the Waltersmith refinery and following recent conclusion of commercial terms, it is also able to supply up to 1,000 bopd gross (400 bopd net) to the Edo refinery. The Jisike field is currently producing into the Antan-Ebocha line, for export at the Brass terminal. The export route has been available since August 2023.

Production on OPL 283 declined by 16.3% to 1,564 bopd in 3M 2024. The year over year fall was largely due to natural decline and lack of new well stock. No new wells are planned for the license in 2024.

Trans Niger Pipeline (TNP) Update

On the 14th of April 2024, Zone-6 of the SPDC operated Trans Niger Pipeline resumed preliminary operations after successful hydrotesting. The pipeline has been out of operation since April 2022. Seplat operated Ohaji field in OML53 is evacuated to the export market via this section of the pipeline. Work is now ongoing on a gradual reopening of wells while observing the performance of the line for stability. The well stock includes three wells drilled across 2022 and 2023, which have yet to produce. We therefore anticipate that output from Ohaji will increase over the coming quarter.

TNP is also the primary export route for condensate production for ANOH Gas Processing Company ("AGPC") which will evacuate condensate into the TNP from the ANOH gas plant.

Drilling

For 2024, the Company's drilling program is expected to deliver 13 new wells (11 oil wells and 2 gas wells) across both operated and non-operated assets. We intend to use the 2024 drilling program to address normal production decline and, along with the completion of maintenance activities, support long-term production levels from the assets.

In the first quarter of the year, our drilling program successfully delivered One well from the 2024 drilling program, Ovhor-21, and completed two wells; Okporhuru-9, Sapele-37, which were spudded towards the end of 2023.

Sapele-37 and Okporhuru-9 had multiple targets in their respective initial plans, and each recorded notable positive results. Each well had secondary exploration targets in previously untested deeper stratigraphy in OML 41. We are pleased to announce the discovery of hydrocarbons, predominantly gas, in both wells. Okporhuru -9 well discovered multiple hydrocarbon-bearing intervals in deeper formations. While the Sapele-37 well (previously Sapele-N) encountered hydrocarbons in deeper reservoirs, as well as proving up a northernly extension to the Sapele field. Early indications suggest that these deeper reservoirs may have commercial potential, and further technical analysis is now underway to assess the deep potential at Okporhuru, Sapele and the wider OML 41.

For the remainder of 2024, we plan to deliver the remaining 12 wells on the 2024 drilling plan. Three wells: Ovhor-22, Sapele-38, and OBEN KIKB-02, are expected to be completed during the second quarter. We expect these wells to support production volumes later in the year.

Midstream Gas business performance

During the period, the average working interest gas production volume fell 11.8% to 109.5 MMscfd in 3M 2024, from 124.1 MMscfd in 3M 2023. The decline was due to delays bringing two new gas wells onstream. Total gas sales for the period were 10.0 Bcf (3M 2023: 11.2 Bcf), contributing 38% of the Company's volumes and 16% of total revenue.

The business continues to pursue growth opportunities by expanding 3rd party gas sources to maximize the utilization of the Oben and Sapele gas plants processing hubs. New customers are being brought onboard to high grade the GSA customer base and improve revenue generation.

During the period, the Nigerian Midstream and Downstream Petroleum Regulatory Authority ("NMDPRA") announced upward revisions to the Domestic Base Price ("DBP"). The DBP for gas is now set at $2.42/Mscf, from $2.18/Mscf previously. Seplat has contracts to deliver approximately 30% of its gas to Domestic Gas Delivery Obligation ("DGDO") customers. Effective 1^st April 2024 gas will be sold to these customers at the new DBP.

 

ANOH Gas Processing Plant

During the quarter, we delivered continued progress of pre-commissioning work on the ANOH gas plant. Construction of the flowlines for delivery of wet gas from the upstream wells have been completed.  AGPC has further extended its safety record on the project to 12 million man-hours without Lost Time Injury.

The recent return to operations of the TNP (mentioned above) is an important development as it de-risks the primary route for export of the condensate produced by the plant.

Our government partner, NGIC, is responsible for delivering the pipelines required to transport the gas from ANOH to the demand centres, including the 23km spur line and the Obiafu-Obrikom-Oben (OB3) pipeline.

With respect to OB3 pipeline, tunnelling operations commenced during the first quarter and are currently ongoing after the tunnel walls were previously strengthened by a process of grouting. Good progress is also being made on the Spur Line, with completion currently standing at 88%.  Our government partner anticipates completion of both pipelines before the end of Q2 2024.

Based on the progress to date, we believe that we are on target to achieve our planned first gas date of Q3 2024.

New Energy Business

In line with our strategy to support the energy transition, we continue to assess various midstream gas, power, and renewable investment opportunities that are focused on increasing energy supply and reliability, lowering costs, and reducing carbon intensity of Nigeria's electricity consumption.

We continue to monitor reforms within the energy sector and their possible impact on improving the viability of investments in the sector. On that front, significant positive steps have been made in the past quarter with the Nigerian Electricity Regulatory Commission (NERC) announcing an increase in electricity tariff to N225/kwh (from an average of N68/kwh) for electricity consumers on band A feeders. Consumers on band A feeders receive 20 - 24 hours of electricity supply daily. While other bands have their existing pricing unchanged, this represents a positive step towards achieving a cost reflective tariff within the power sector.

In addition, the NERC issued a new directive to electricity distribution companies to source 10% of their power needs from renewable sources coupled with the announcement of the Federal government plans to grant subsidies to mini grid developers via the deployment of solar power mini grids to 150 underserved sites across seven states. These numerous initiatives continue to improve the viability of potential investments within this sector.

HSE Performance

In 3M 2024, The Company has achieved a total of 2.3 million manhours without any Lost Time Injury (LTI) on its operated assets, which reflects the Company's strong focus on safety and the dedication of its workforce to maintaining a secure work environment. This brings aggregate LTI free manhours to 12.8 million with over 534 days (13^th October 2022) since last LTI was recorded. In addition, TRIR was 0.0 with no major injuries were reported during this period. Lastly, no Tier 2 Process Safety Loss of Primary Containment (LOPC) incident was recorded during the period.

Ending routine flaring

The carbon intensity recorded for the period was 29.4 kg CO2/boe, higher than the 26.4 kg CO2/boe recorded in 3M 2023. The Sapele and Ohaji Flow Stations remained the biggest contributors to higher carbon intensity recorded during the period. The Company continues to progress efforts to secure evacuation options for unprocessed associated gas from the Sapele Flow Station. Alongside this, works continue on construction of the Sapele Integrated Gas Plant (SIGP), which is scheduled to complete during H2 2024. Once operational, SIGP offtake has the potential to materially reduce Group Scope 1 emissions.

Proposed acquisition of MPNU

On 24 May 2023, we announced that we have extended with Mobil Development Nigeria Inc. and Mobil Exploration Nigeria Inc. (ExxonMobil) the Share Sale and Purchase Agreement (SSPA) for the acquisition of ExxonMobil's share capital of Mobil Producing Nigeria Unlimited (MPNU) to preserve the transaction pending the resolution of certain legal proceedings and receipt of applicable regulatory approvals.

The Board remains confident that the transaction will be approved, and all associated legal issues will be resolved. We continue to work with all parties to achieve a successful outcome, including our financiers who remain supportive, and have been encouraged by the recent drive of President Tinubu's administration to promote investment in country. We will provide further updates as appropriate.

Outlook

Our production guidance for 2024 is unchanged at 44,000-52,000 boepd. Our Q1 2024 production benefitted from deferral of planned turnaround maintenance (TAM) at Oben, which will now occur in August (previously February 2024), requiring a c.2 week shut down. Given earlier than expected resumption of the Trans Niger Pipeline (TNP) we may see improved production from our Eastern Asset than in our base forecast. Once Ohaji wells have been brought on-line and stabilised, we will be able to assess the impact on our production guidance.

Our capital expenditure guidance for 2024 is unchanged at a range of $170 million - $200 million.

We expect cash balances to normalise in the second quarter given the currently planned lifting schedule, coupled with the continuation of a supportive commodity price environment and the payments received in April for the March liftings.

Financial review

Revenue

The crude oil price was steady year over year (Brent averaged $81.76/bbl a decrease of just 0.4% vs. 3M 2023's $82.06/bbl), though the picture during the quarter was one of steadily increasing oil prices, as geopolitical tensions rose in the Middle East region.

Though Brent was stable YoY, the Company achieved a 4.7% growth in average realised crude oil price to $86.17/bbl in 3M 2024, from $82.32/bbl in 3M 2023. The greater than usual premium to Brent achieved in the quarter was due to timing, as our liftings were biased to the end of the quarter when prices were higher.

Despite a steady oil price, crude oil revenue declined 49.4% to $150.8 million in 3M 2024, from $297.9 million in 3M 2023. The YoY decline in reported crude oil revenue was attributed to the timing of liftings, exacerbated by the overlift reported in 3M 2023. Total crude lifted during the period declined 51.1% to 1.8 MMbbls (3M 2023: 3.6 MMbbls). Net underlift volumes in 3M 2024 totalled 849 kbbls valued at $73.8 million, this was then adjusted down by $17.3m to reflect the impact on the value of overlift volumes brought forward from the prior reporting period. As such, net underlift volumes were revalued to $56.4 million. Our lifting activities are expected to normalise in subsequent quarters.

Gas revenue fell by 12.4% to $29.0 million in 3M 2024 (compared to $33.1 million in 3M 2023). The decline in gas revenue was attributed to lower gas volumes produced during the period, due principally to delays in new gas wells coming on stream, these are now expected onstream in Q2 2024. Production fell 10.8% to 10.0 Bscf in 3M 2024, from 11.2 Bscf in 3M 2023, offset by the average realised gas price, which rose by 8.0% to $3.11/Mscf in 3M-2024, from $2.88/Mscf in 3M 2023. The average realised gas price improvement reflects the impact of higher gas price negotiated with off-takers taking effect in the period.

Overall, Oil and Gas sales for 3M 2024 fell 45.7% to $179.8 million, from $331.0 million in 3M 2023.

Gross profit

Gross profit fell 78.5% to $42.7m, from the $198.3m recorded in 3M 2023. Non-production costs primarily included $50.8 million in royalties and $41.4 million in depreciation, depletion, and amortisation (DD&A), contrasting with $47.4 million in royalties and $36.2 million in DD&A in the previous period.

 

Direct operating costs, which encompass expenses related to crude-handling charges (CHC), barging/trucking, operations and maintenance, amounted to $42.8 million in 3M 2024, marking a 5.4% decrease from the $45.3 million incurred in 3M 2023. This fall in direct operating costs is attributed to the lower operational and maintenance expenses in the period despite higher produced liquid volumes in 3M 2024.

Considering the cost per barrel equivalent basis, production operating expenses (opex) were $9.6/boe in 3M 2024, compared to $9.0/boe in 3M 2023.

Operating profit

Operating profit decreased by 21.0% to $81.9 million, from $103.7 million achieved in 3M 2023. This decline in operating profit was mostly attributed to a combination of lower revenues and higher DD&A (arising from changes in the basis of computation of DD&A versus the prior period) and General and Administrative (G&A) expenses.

G&A expenses amounted to $24.1 million, 17.2% higher than the $20.5 million incurred in 3M 2023. The increase in G&A costs was mainly due to share-based expenses towards employee benefits relating to the Long-Term Incentive Plan (LTIP). Seplat remains committed to minimising G&A expenses and continues to implement measures to manage all costs.

During the period, we reported a non-cash foreign exchange gain of $6.0 million (from revaluation of Naira assets & liabilities).

After adjusting for non-cash items such as impairment, fair value losses, and exchange gains, the adjusted EBITDA for the period was $123.3 million (3M 2023: $140.2 million), resulting in an adjusted EBITDA margin of 68.6% (3M 2023: 42.4%).

Taxation

The income tax expense of $71.2 million includes a current tax charge of $13.9 million and a deferred tax charge of $57.3 million. The significant increase in deferred tax charge for the quarter was due to both the sizable underlift position and unrealised FX gains recorded during the period, resulting in an effective tax rate of 102.8% (3M 2023: 33.2%).  Changes to underlift position and exchange rates in future will continue to impact the foreign exchange differences position, and this will in turn reflect in the tax result as movements between current and deferred tax positions.

Effective tax rate analysis	Income tax expense			Tax rate
Profit before tax ($'million)	Current	Deferred	Total	ETR (Effective Tax Rate)	Current Tax rate
69.3	13.9	57.3	71.2	103%	33%

Net result

Profit before tax declined by 19.5%, amounting to $69.3 million, compared to $86.1 million in 3M 2023. However, primarily due to the significant deferred taxation charge in the period, a net loss of $1.9 million was recorded as opposed to a net profit of $57.5 million in 3M 2023. After adjusting for deferred taxes, profit after tax totals $55.3 million, against $58.0 million in 3M 2023.

The profit attributable to equity holders of the parent company, representing shareholders, was $1.0 million in 3M 2024, which resulted in basic earnings per share of $0.002/share for the period (3M 2023: $0.10/share).

Cash flows from operating activities

During the period, the Company generated $16.8 million in cash from its operations, a decrease from the $145.0 million generated in 3M 2023. Primarily due to working capital effects, comprised of the reduction in overlift position and revaluation of Naira payables due to devaluation of the currency in the period. 2Q 2024 operating cash flow is anticipated to benefit from the normalisation of these working capital dynamics.

Net cash flow from operating activities amounted to $14.9 million in 3M 2024, compared to $141.7 million in 3M 2023. This figure includes lower tax payments of $0.5 million and a higher hedging premium of $1.4 million during the current period, while in the previous year, tax payments were $2.1 million, and the hedging premium paid was $1.2 million.

During the quarter, we continued to receive cash call payments from our JV partners. For OMLs 4, 38, & 41, we received a net amount of $97.0 million towards settlement of cash call receivables on our NEPL/Seplat JV, bringing receivable balance to $58.0 million. On Elcrest, we received $54.0 million from NEPL towards settlement of cash call receivables, bringing the outstanding balance to $28.0 million. Receivables outstanding from our JV partner on OML 53 as of March 2024 are $18 million, after we received c.$1.0 million to settle part of outstanding receivables. In April, we reached an agreement with our joint venture (JV) partner, NUIMS, which will support a normalisation of lifting operations and provides a mechanism to reduce JV receivables.

Cash flows from investing activities

The total net cash outflow from investing activities was $32.5 million, which decreased from the $41.6 million recorded in 3M 2023. We received $2.0 million in respect to the divestment from Ubima and $10.9 million from our financial interest in OML 55.

The capital expenditure on oil & gas assets during the period was $46.4 million, including $37.4 million invested in drilling activities and $8.9 million invested in engineering projects. Total capex (including other fixed assets) was $47.1 million.

Cash flows from financing activities

Net cash outflows from financing activities were $67.4 million, which increased from the $45.3 million recorded in 3M 2023.

These outflows included $32.2 million for interest on loans and borrowings, reflecting the cost of servicing the Company's debt obligations. Additionally, a commitment fee and associated transaction cost of $2.1 million was incurred on our credit facilities. The loan repayments of $19.3 million represents further principal repayments on the Eland Senior RBL Facility, bringing our total repayment on the facility to $41.3 million.

 

Liquidity

The balance sheet continues to remain healthy with a solid liquidity position.

Net debt reconciliation 31 March 2024	$ million*	Interest Rate	Maturity
Senior notes*	642.7	7.75%	April 2026
Westport RBL*	68.9	SOFR +8%	March 2026
Off-take facility*	9.6	SOFR +10.5%	April 2027
Total borrowings	721.2
Cash and cash equivalents (exclusive of restricted cash)	335.8
Net debt	385.4

* Calculation of outstanding balances reflects financial reporting approach of fee accruals and interest treatment.  The principal outstanding from a legal perspective is Senior notes $650m, Westport RBL $68.75m and Westport offtake facility $11m

Seplat Energy ended 3M 2024 with gross debt of $721.2 million (with maturities in 2026 and 2027) and cash at bank of $335.8 million, leaving net debt at $385.4 million. The restricted cash balance of $30.0 million includes $8.0 million and $21.0 million set aside in the stamping reserve and debt service reserve accounts for the revolving credit facility.

As the Company continuously reviews its funding and maturity profile, it continues to monitor the market in ensuring that it is well positioned for any refinancing and or buy back opportunities for the current debt facilities - including potentially the $650 million 7.75% 144A/Reg S bond maturing in 2026.

Dividend

In line with the Company's quarterly dividend policy, the board has approved a Q1 2024 dividend of US3.0 cents per share (subject to appropriate WHT) to be paid to shareholders whose names appear in the Register of Members as at the close of business on 31 May 2024. 

Hedging

Seplat's hedging policy aims to guarantee appropriate levels of cash flow assurance in times of oil price weakness and volatility. Total volumes hedged till date in 2024 amount to 4.5 MMbbls. For Q1 2024, Seplat hedged 1.5 MMbbls of dated Brent deferred premium put options at $65/bbl (at a cost of $1.08/bbl); for Q2 2024, Seplat hedged 1.5 MMbbls dated Brent deferred premium put options at $55/bbl (at a cost of $0.86/bbl); and for Q3 2024, Seplat hedged 1.5 MMbbls dated Brent deferred premium put options at $60/bbl (at a cost of $0.86/bbl).

Oil put options	Q1 2024	Q2 2024	Q3 2024
Volume hedged (MMbbls)	1.5	1.5	1.5
Price hedged ($/bbl.)	65	55	60

Additional barrels are expected to be hedged for Q4 2024, in line with the approach to target hedging two quarters in advance. The Board and management team closely monitor prevailing oil market dynamics and will consider further measures to provide appropriate levels of cash flow assurance in times of oil price weakness and volatility.

Petroleum Industry Act (PIA) Implementation Status

Since submitting the conditional application to convert all our assets to the PIA regime in February 2023, our multidisciplinary team has been diligently preparing the Company for full compliance with the various aspects of the PIA and anchor regulations as they impact Seplat. Meanwhile, the regulator is finalising the guidelines for the conversion and has shared concession contracts with converting companies to enable a thorough review and understanding of the contractual terms and obligations that will be applicable under the new PIA regime. Key technical issues that need to be resolved include modalities around establishing decommissioning & abandonment fund, guidelines alignment on acreage delineation and retention areas, and process flow for Minimum Work Program (MWP) commitment on retaining prospecting license areas, environmental remediation and management - these all form part of the conditions precedent to conversion. The long-stop date for the fulfilment of the condition's precedent, which was extended to September 30, 2023, has expired; we expect a new date to be communicated.

Share dealing policy

The Company confirms that, to the best of its knowledge, there has been compliance with the Company's share dealing policy during the period.

Free float

The Company's free float on 29 March 2024 was 29%.

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