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Seplat Petroleum Absorbing The Heat

Posted: Oct 1, 2015 at 12:09 am   /   by   /   comments (0)

By Andy Nssien


In April 2014, Seplat Petroleum Development Company Plc completed the ?rst  ever dual listing on both the London Stock Exchange and The Nigerian Stock Exchange. Seplat raised US$535 million in an initial public offering (IPO) that valued the company at US$1.9 billion. The IPO ranked as the largest for a sub-Saharan company since 2008 and the second largest ever for a Nigerian company, demonstrating the international investor appetite for leading Nigerian indigenous players in the oil and gas sector. The capital raised would allow the company to further implement its business strategy, which includes acquiring new assets.

Last year, Seplat, a leading independent indigenous Nigerian upstream exploration and production company with a focus on Nigeria, had to leverage on experience and expertise to wade through the harsh operating terrain  attributable to both exogenous and endogenous headwinds.

Full Year 2014 Results

Group revenue declined  by 12 percent from N136.6 billion recorded in 2013 to N124.4 billion in 2014. All earnings components also dropped, with gross profit falling by 16 percent from N85.3 billion to N73.7 billion; operating profit, down by 39 percent from N74.3 billion to N46.5 billion; while profit after tax fell by 54 percent from N85.4 billion to N40.5 billion  in  2014.

However, total assets rose  from N198.4 billion to N422.4 billion, while total liabilities climbed from N87 billion to N182.8 billion last year.

Cost Of Sales

Cost of sales has been a thorn in the flesh of the Group, chopping off 38 percent and  40 percent of revenue generated in 2013 and 2014 respectively. The Group spent N50.6 billion as cost of sales in  2014, as against N51.4 billion entered in the previous year. The amount was spent in royalties which claimed N24 billion compared to N29.7 billion in 2013; depletion, depreciation and amortisation which the Group paid N6.6 billion as against N4.3 billion; crude handling fee, N3.5 billion compared to N4.9 billion; rig related costs, N4.8 billion (2013: N4.2 billion);  and other field expenses, N9.8 billion (2013: N5.9 billion); amongst others.


The harsh operating environment notwithstanding, the Group should clip the wings of its administrative and other general expenses which jumped by 117 per cent to N24.3 billion from N11.2 billion incurred in 2013. Of concern in this expenditure profile, is auditor’s remuneration which was jacked up by 40 percent to N132 million from N94 million, just as professional and consulting fees leapt by 71 per cent to N6.5 billion from N3.8 billion.  Other general expenses  which relate to office maintenance costs, rental, telecommunications, and logistics costs, also shot up by 200 percent to N7.2 billion from N2.4 billion spent in the previous year.  Although, the cost of business development whittled down from N8 million to N3 million, its impact on the expenditure profile was neutralized by the increase in donation to N29 million   from N2 million in the previous year. However, an item: aborted acquisition costs, which swelled the total expenses by N4.2 billion in 2014 was nil in the previous year.                


The company is neck deep in a labyrinth of syndicated borrowings and other short term facilities.

There is the long-term bank loan which represents a five-year senior, secured credit facility obtained from a syndicate of lenders led by Afrexim. Seplat has a facility to draw down up to N85.360 billion ($550 million) until 2016. As at 31 December 2013, Seplat had drawn down N51.992 billion ($335 million)  of this facility and made principal repayments in 2011, 2012 and 2013.

The outstanding amount as of 31 December 2014  was N53.5 billion ($291 million) and the loan is due to be fully repaid by August 2016.

The short-term bank borrowings include N12.715 billion ($69 million) drawn down from N18.427 billion ($100 million) revolving facility obtained from First Bank of Nigeria. Interest accrues monthly at LIBOR plus 8 percent.

Also, the company secured a long-term bank loan which represents a five-year senior, secured credit facility  from Zenith Bank in February 2014. As at 31 December 2014 Seplat had drawn down the full amount of the N36.854 billion ($200 million) facility.


At a time moderation should be the watch word,  eyebrows are  being raised in respect of the emoluments of the Chairman and the Directors which rose by 26 percent to N1.2 billion from N977 million. Fueling the cost in this category is the fees item which jumped to N415 million from N143 million, just as the Chief Executive Officer was paid N290 million last year, up from N194 million in 2013.

Albeit, the Chairman received N201 million last year, instead of N222 million paid in 2013, the spike in the emoluments of the Executive Directors to N566 million from N234 million, as well as those of their non-Executive counterparts which shot up to N37 million from N18 million, is uncomplimentary  to that gesture.

Half Year 2015 Results

Seplat  reported a decline in half-year  revenue for the period ended June 30, 2015,  according to the results released recently at The Nigerian Stock Exchange

Its group revenue dropped to $247.586 million as against $388.185 million in the corresponding half-year 2014.

The group’s finance charges rose to $40.239 million as against $21.643 million in the same period last year.

The group’s general and administration expenses declined to $50.738 million from $83.426 million; Gain on foreign exchange stood at $13.363 million from $9.706 million in same period in 2014

The group’s profit before taxation declined to $41.261million from $155.968 million, while profit after taxation  stood at $41.476 million from $155.968 million last year


Seplat which was listed at N576 last year, apart from being the highest priced equity in the oil and gas  segment is the second highest priced stock on The Nigerian Stock Exchange after Nestle Nigeria. However, as at September 28, this year, the company’s share price has plummeted by 58 percent to N242.25 per share.  What’s more? The Net Profit Margin has declined from 62.5 percent in 2013 to 32.5 percent in December last year, and now to 16.7 percent at the end of the first half of this year. Certainly, an urgent call for drastic action  from the management to reverse the trend.


In July 2010, the Seplat acquired a  45% working interest in, and was appointed operator of, a portfolio of three onshore producing oil and gas leases: OMLs 4, 38  and 41. Located in the prolific western delta basin of Edo and Delta states, the three  OMLs contain the producing Oben, Ovhor,

Sapele, Okporhuru and Amukpe fields.  Initially, Seplat formed a JV partnership with NNPC, until NNPC transferred its 55% interest to NPDC. Today, Seplat operates the blocks  on behalf of the Seplat/NPDC joint venture. In June 2013, Newton Energy, a wholly owned subsidiary of Seplat, reached an agreement with Pillar Oil to acquire a 40% participating interest (non-operated) in the Umuseti/Igbuku

fields (OPL 283).