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Seplat remains profitable on lower production costs, gas investments

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UGO AMADI

Seplat Petroleum Development Company Plc has reiterated it will remain very profitable even at lower oil prices given its low production costs and strong investments in gas.

The Chief Executive Officer of the company, Mr. Austin Avuru, said this to the investment community and analysts upon the release of Seplat’s audited results for the financial year ended 31 December 2019

Avuru said: “As we enter a challenging phase for the global economy, Seplat will benefit from being a resilient company built on the solid foundations of prudent financial management and the careful mitigation of risk.   We have previously been tested by crisis. We successfully navigated the twin challenges of the 2014/2015 oil price shock, which was immediately followed by the 16-month Trans Forcados shut-in, which drastically reduced our liquids production.

“Thanks to our flexibility in managing cash flows we emerged a stronger and better-funded company, ready to take advantage of new opportunities.  Compared to those difficult periods, today’s Seplat has more cash on its balance sheet and is even more robust and diversified thanks to our continuing investments in gas, with its long-term contracts and independence from oil price volatility. We are a low-cost producer and will continue to manage our finances prudently.

“With the recent addition of Eland and the availability of new pipelines, our oil business is broadening and derisking its production fields and routes to market to assure even greater security of revenues in the future. In the coming year we will focus our investment only on the highest-returning projects, whilst carefully balancing our future needs with prevailing market realities. The challenges before us may be significant, but we are confident that the resilience and discipline of our business will help us consolidate our position as Nigeria’s leading independent oil and gas producer.”

Seplat recorded revenue of US$698 million with total capital expenditure of US$125 million, US$114 million on oil and gas assets.

Cash flow from operations stood at US$338 million; cash at bank US$333 million and Final dividend maintained at US$0.05 per share.

On outlook for 2020, the CEO said that the emergence of the COVID-19 pandemic in the first quarter of 2020 as well as pressure on oil prices in March have placed a premium on solid financial management that focuses upon low-cost production, robust cash management, a strong balance sheet and focused investment in high-return projects for sustainable future growth.

‘’The business is hedged against low oil prices and a significant proportion of our revenues now come from gas, which offers further protection from oil price volatility. The Company has low production costs and can remain profitable even at lower oil prices. We have significant cash resources available and will manage our finances prudently in 2020, expecting now to invest just US$100 million of capital expenditure (US$50 million spent in Q1 2020), with a target of three new wells across our portfolio. ‘’ he stated.

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