Seplat to Pay Shareholders $0.10 per Share, Plans to Invest $150mn
Seplat Petroleum Development Company Plc has declared a total dividend of 10 cent or $0.10 per share for its shareholders for the financial year ended Dec. 31, 2020.
The company disclosed this in its audited result released on the Nigerian Stock Exchange on Monday, while it revealed plan to spend $150 million on capital expenditure in 2021.
The oil company explained that In line with the dividend policy, the Board has recommended a final dividend of $0.05 per share. This will bring the total dividend to $0.10 per share, same as $0.10 per share paid in 2019.
2020 Operation
The Brent oil price averaged $43.21 per barrel over 2020 from $64.04 in the comparable period in 2019.
It noted that Brent remained volatile throughout the year, following the twin shocks of the Saudi Arabia – Russia price war and the COVID-19 pandemic, trading between a high of $68.91/bbl in January and a low of $19.33/bbl in April, before exiting the year at $51.80/bbl.
According to its audited report, liquids production was up 40.9% year-on-year, reflecting the first-time contribution of the acquired Eland assets.
However, gas production sloped down 22.9% year-on-year, because of Q1 maintenance and the impact of the COVID-19 pandemic on the economy.
The company said production decline rates are at levels typical of the region at 10-15% per annum.
“This represents an overall production increase of 10.1% compared with 2019 despite constrained production levels in Nigeria following cuts in OPEC+ production quotas and tank-top issues experienced at the terminal arising from the pandemic and the general impact of COVID-19 on operations”, it added.
Seplat also indicated that there was 83% uptime for the Trans Forcados Pipeline during the period and the produced liquid volumes from OMLs 4, 38 and 41 were subject to 9.4% reconciliation losses.
Financial Performance
The company during the period posted a revenue of 530.5 million dollars (N190.9 billion) as against 697.8 million dollars (N214.2 billion) achieved in the preceding period of 2019, a decrease of 24 per cent.
Its gross profit stood at 124.6 million dollars (N44.8billion) from 395.7 million dollars (N121.5billion) in 2019, down 68.5 percent.
The company’s cash flow from operations was 329.4 million dollars (N118.6 billion) in 2020, down 3.6 percent from 341.6 million dollars (N104.7 billion) in 2019.
Seplat revalued downwards its oil and gas assets by 114.4 million to reflect the lower crude oil prices of 2020 and this reversed the operating profit of 82.7 million to a loss for the year of 85.3 million dollars.
It explained that when crude oil prices improve, these same oil and gas assets would be revalued upwards.
The Management
Commenting on the performance, Seplat Chief Executive Officer, Roger Brown, described 2020 as a challenging year.
“2020 was a challenging year for the company, but Seplat has once again shown its resilience and ability to overcome challenges and deliver production in line with guidance, operating with minimal incidences of COVID-19 cases.
“From the 330 million dollars of cash generated from operations, we have increased our capital investment, invested in ANOH and voluntarily paid down 100 million dollars of debt, further deleveraging the balance sheet.
“Despite seeing the lowest oil prices in our 10-year history, we have continued to honour our commitment to shareholders of a regular income stream on their investment, by maintaining a total dividend of 10 dollars per share for the year,” Brown said.
He noted that the company would continue to provide value for its shareholders and stakeholders.
“We remain committed to providing shared value for all of our stakeholders. During the year, with our government partners, we provided medical beds and other palliatives to our communities and have started construction on a 200-bed infectious diseases hospital.
“Seplat continues to focus on employment opportunities for communities, education, healthcare and knowledge transfer and local capacity development,” he said.
Outlook for 2021
Seplat said for 2021, the company plans to produce an average of 48,000 – 55,000 boepd, taking into account the impact of OPEC+ quotas.
“We continue to hedge against oil price volatility and expect a higher proportion of revenues to come from long-term gas contracts at stable prices”, it added.
Also, the indigenous oil firm said it has significant cash resources and will continue to manage its finances prudently in 2021, expecting to invest $150 million of capital expenditure across the full year.
“We remain confident that our ongoing cost-cutting initiatives and prudent management of cash will enable further reductions in debt, whilst supporting dividend payments and investment for growth”, it added.
Seplat explained that following its successful funding, the completion of the ANOH project remains a major priority.
The company however expects to see some COVID-19 related delays to push completion into early 2022.
“Following a cost optimisation programme we now expect the project to cost no more than $650 million, substantially below the $700 million budget previously stated at Final Investment Decision (FID)”, it said.
Seplat is pursuing a Nigeria-focused growth strategy and is well positioned to participate in future asset divestments by international oil companies, farm-in opportunities, and future licensing rounds.
Oil Business Performance
The Group’s oil operations continued despite the COVID-19 crisis and produced an average 33,714 bopd on a working interest basis during 2020, up 40.9% on 2019.
The management said this increase reflects a maiden contribution of 8,855 bopd (26.3% of Group liquid volumes) from the OML 40 and Ubima assets.
This was in addition to higher production from OML 53 compared to 2019.
Exports from the Group’s operations were constrained by approximately 410,000 bbls on a gross basis as a result of the OPEC+ production cuts implemented in the third quarter of 2020.
Production output increased as a result of wells drilled earlier in the year, which has necessitated discussions with the DPR and NNPC for increased quotas to reflect this uptick.
During the period, six oil wells were drilled/completed (Sapele-35, Ovhor-6ST, Ovhor-20, Ohaji South-5, Ohaji South-6 and Gbetiokun-5), while the Extended Well Test for Ubima continued with production up to 1,200 bopd.
The company hinted that the wells flowed at a combined initial rate of approximately 18,700 bopd.
Production improvement through Well, Reservoir and Facilities Management (WRFM) interventions included rigless restoration and optimisation activities that resulted in optimised well head production and LTF performance.
The average price realised per barrel in 2020 was $39.95, significantly lower when compare with $64.40 recorded in 2019.
Seplat to pay shareholders in line with the company dividend policy as the Board recommended a final dividend of $0.05 per share.
Subject to approval of shareholders, the dividend will be paid shortly after the Annual General Meeting, which will be held in Lagos, Nigeria, on 20 May 2020.
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Seplat to Pay Shareholders $0.10 per Share, Plans to Invest $150mn
