LEADING NIGERIA'S ENERGY TRANSITION - 9M 2020 RESULTS - Seplat Petroleum
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LEADING NIGERIA’S ENERGY TRANSITION 9M 2020 RESULTS 30 OCTOBER 2020 www.seplatpetroleum.com
SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC |
2
9M 2020 RESULTS
HIGHLIGHTS
Roger Brown
Chief Executive Officer
www.seplatpetroleum.com
9M 2020 KEY MACROECONOMIC EVENTS
An unprecedented period of volatility as twin shocks hit the oil market
› Oil price more stable after twin shocks of BRENT FUTURES IN 9M 2020 ($)
COVID-19 demand drop and KSA-Russia
price war, but will depend on scale of any 65
future lockdowns in major economies 55
› OPEC+ cuts imposed on Nigeria in Q3 45
› Nigeria is relatively lightly affected by 35
COVID-19 with
9M 2020 PERFORMANCE HIGHLIGHTS
Seplat delivered production well within guidance and maintained a healthy cash balance despite low oil prices
A STRONG PERFORMANCE DESPITE CHALLENGING MARKET
KEY FIGURES
› 50,653 boepd total › $38.60/bbl realised
VOLUMES WITHIN GUIDANCE Production
› Liquids 33,327 bopd Oil price across 9M 2020
well within
› Gas 100 MMscfd recovering › Q4 hedging
guidance 1.5Mmbbl @ $30
50,653 boepd (17,326 boepd)
0.5Mmbbl @ $35
(9M 2019: 47,163 boepd)
› $8.73 opex cost per boe › $109m invested to
INTERIM DIVIDEND Focus on underpin future revenues
› Negotiating at least 30% Capex
cost reduction savings from suppliers, › Focus on gas projects
increased
and efficiency per Government request › Non-essential capex
US$0.05/share under review
(9M 2019: US$0.05)
STRONG CASH BALANCE › Repaid $100m debt › ANOH remains on schedule
Balance › NPDC receivables down for Q4 2021 first gas
Update on
sheet remains to $152m › Amukpe-Escravos Pipeline
US$213m strong
› $0.05 interim dividend
major projects
now expected in H2 2021
(FY 2019: US$333m) declared at 9M 2020 (project is not managed by Seplat)
4 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSRECENT CORPORATE DEVELOPMENTS
Focus on efficiency and sustainability
INTERNAL REORGANISATION UPDATE ON SUSTAINABILITY INITIATIVES
› Creation of New Energy unit to spearhead gas
› Streamlining to improve efficiency transition and examine renewable investments
› Asset managers will report directly to CEO, who will be › Gap Analysis conducted by ESG consultants Critical
supported by Operations Director and Technical Director Resource, with view to follow-on activities including
› Creation of New Energy unit to accelerate development scenario analysis for assets and strategic analysis of
of gas business and explore lower-carbon opportunities climate change impacts
› Merger of Strategy and Business Development functions › Planning to align reporting with major standards e.g.
› Technical Training & Development to be housed at TCFD/IPIECA by 2022 to ensure full reporting of ESG
Seplat’s Centre of Excellence in Aberdeen › More detailed update on Strategy and ESG initiatives
› Creation of Corporate Services Department to follow with the full year 2020 results and a Capital
- HR, IT, Business Services
Markets day will be scheduled for March 2021.
› New function of Research & Sustainability created in
External Affairs Department to focus on ESG
› General Counsel and Company Secretariat remerged.
› Change management process underway with target
completion date Q1 2021.
5 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSSEPLAT PETROLEUM DEVELOPMENT COMPANY PLC |
6
9M 2020 RESULTS
OPERATIONAL
PERFORMANCE
Effiong Okon
Operations Director
www.seplatpetroleum.com9M 2020 WORKING INTEREST PRODUCTION
Volumes are well within guidance for 2020 despite severe market challenges in second quarter
boepd
60,000 FY 2020 guidance
Oil production
48-52 kboepd
PERFORMANCE
Gas production
49,867
51,177 50,653 › Implemented robust strategy to
50,000 48,491
46,498 47,163 manage COVID 19 risk to operations
43,372 › Average W.I. production in 9M 2020:
15,103
17,060
17,326 50,653 boepd
40,000
36,924 24,198 › Q3 oil production affected by BRVS
14,369
22,563 23,505
accident, downtime and quotas
›
30,823
30,000 28,341
Gas production improving after Q1
6,571 25,877 19,070 turnaround maintenance gains
4,867
› Average gas price $2.88/Mscf
20,020
20,000
5,226 15,786
34,117
IMPACT OF OPEC+ CUTS
33,388 33,327
29,003
25,669
› Eastern Assets impacted most (20%)
24,252 23,935
›
23,474 23,658
10,000
17,853
Leveraged on OPEC+ exemption of
14,794 condensate for Western Assets
10,091
› Ongoing engagement with regulators
0 0 to increase quota
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 3M 2020 6M 2020 9M 2020 9M 2019
7 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSA RICH PORTFOLIO OF PRODUCTIVE OIL & GAS ASSETS
Eight blocks in the prolific Niger Delta, ideally located for export or internal demand centres
W.I. 2P reserves * W.I. production
MMboe 9M 2020 boepd
Block Share Partner Oil Gas Total Oil Gas Total
OML 38
OML 40
OML 4, 38, 41 45% NPDC 164 118 282 20,731 17,326 38,057
OML 4 NPDC
OML 40 ** 45% 29 - 29 8,285 - 8,285
Starcrest
OML 41 OML 53
OML 53 40% NAPIMS 45 127 172 2,531 - 2,531
OPL 283
Revenue
OML 55 AMT 2 - 2 - - -
interest
OPL 283 40% Pillar Oil 5 12 17 914 - 914
Ubima All Grace
Ubima *** 88% 7 - 7 866 - 866
Energy
TOTAL 252 257 509 33,327 17,326 50,653
OML 55
* Reserve volumes stated at 1/1/20 are based on independent estimates from Ryder Scott (Seplat) and NSIA (Eland)
** Reverts to 20.25% after Westport loan is fully repaid, see slide 43
*** Reverts to 40% after Carry has been reached
8 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | INVESTOR PRESENTATIONUPDATE ON OPERATIONS
Focus on gas well development and reducing overall costs
OIL BUSINESS GAS BUSINESS
› OML40 production resumed late August after BVRS › 100 MMscfd achieved across nine-month period
accident affected exports › New gas wells expected to produce 75MMscfd
› 23% downtime at TFP owing to leaks, tank tops, combined (gross), Oben-49 already drilled, work to
third-party issues etc start on second on completion of Oben-49 works
› TFP 8.6% reconciliation losses (from 13% in 2019) › Sapele Gas Plant decommissioning in advanced stage
› Six oil wells completed across Sapele, Ovhor, Ohaji but timetable affected by COVID-19
South and Gbetiokun › ANOH project still on target to produce first gas in late
› Cost savings achieved and more initiatives underway 2021, despite COVID-19 impact
include savings from suppliers, larger barges at › ANOH financing completion imminent
Gbetiokun to reduce shipping costs
› Amukpe-Escravos Pipeline now expected onstream H2
2021 after delays in accessing the terminal, pipeline
ownership issues; expected to significantly reduce
reconciliation and other losses, thereby enhancing
revenue assurance
9 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSINTEGRATION OF ELAND OIL AND GAS PLC
Year-long integration process is on track to deliver synergies and savings
NON-TECHNICAL INTEGRATION
› Consolidated and effective support
functions
Staff: 500
› Optimal use of locations Offices: Lagos,
› Organisation, e.g. HR, payroll,
London, Abuja,
Sapele
IT, finance, legal
› External affairs & community One
Share
liaison/projects best
›
practices
Actions plans being executed
Joint venture
with Starcrest
TECHNICAL INTEGRATION Staff: 112
› Operational synergies, best practices
› Subsurface and exploration expertise Staff: 27
Offices: Aberdeen Aberdeen office to become Centre of
› Understand cost base, achieve cost Excellence focused on training and
reductions technical support for subsurface,
business development and New Energy
10 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSUPDATE ON ACCIDENT AT BENIN RIVER VALVE STATION
Investigation leads to new safety procedures
SUMMARY
› Seven fatalities amongst third-party contractors; our
thoughts and prayers are with the families and
friends of all those who lost their lives
› Accident occurred as the mooring dolphin at Benin
River Valve Station was being modified to receive a
larger barge
› Three separate investigations into the immediate and
remote causes of the incident concluded: DPR led;
NPDC/Elcrest Investigation; Independent Investigator
› The investigations identified failure of the Permit to
Work system as the root cause of the incident and
recommended improvement actions
› In addition to the recommendations of the various
investigations, Elcrest has setup a team to drive
overall safety culture improvement
11 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSSEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M
12
2020 RESULTS
FINANCIAL
PERFORMANCE
Emeka Onwuka
Chief Financial Officer
www.seplatpetroleum.com9M 2020 FINANCIAL HIGHLIGHTS
Cash balance increases, NPDC receivables fall, capex increased, interim dividend of $0.05 / share
REVENUES LOSS BEFORE TAX CASH AT BANK
22% 170% 36%
US$388 million US$130 million US$213 million
Impact of COVID-19 and oil price fall Loss results from IAS36 impairment After $100m RCF loan repayment
9M 2019: $495 million 9M 2019: $185 million profit FY 2019: $333 million
UNIT OPERATING COSTS EBITDA NET DEBT
41% 16% 5%
US$8.73 / boe US$206 million US$479 million
OML40 / Ubima export cost, lower production After adjusting for non-cash items Includes $692m gross debt
9M 2019: $6.20 / boe 9M 2019: $244 million FY 2019: $456 million
GENERAL & ADMINISTRATIVE CAPITAL INVESTMENT NPDC RECEIVABLES
22% 70% 32%
US$52 million US$109 million US$152 million
Cost savings being achieved Investment for growth Strong government partnership
9M 2019: $55 million 9M 2019: $64 million FY 2019: $222 million
13 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTS9M 2020 FINANCIAL RESULTS
Non-cash impairments impact P&L but cash position remains strong
$ million 9M 2020 9M 2019 Change › Lower oil revenues reflect price falls in Q2; average price of $38.60/bbl achieved
Total revenue 387.8 494.9 (21.6%) across 9M with a low of $17.50/bbl
Cost of sales (297.2) (230.2) 29.1% › 9M 2020 gas revenue did not include tolling (9M 2019: $67m);
$2.88/Mscf achieved
Gross profit 90.6 264.7 (65.8%)
› In cost of sales, royalties, crude handling and DDA now includes consolidated
G&A (52.4) (54.6) (3.9%)
amounts from Eland
Other income 42.2 36.3 16.4%
› Operating expenses include impact of Eland consolidation, $158m IAS36
Fair value gain / (loss) 19.9 4.9 303% impairment on assets to reflect impact of oil price decline and $21.4m impairment
Non-cash impairments (179.7) (40.1) 347% of financial assets
Operating profit / (loss) (79.3) 211.2 (138%) › 9M 2020 finance cost is made up of interest repayments impacted by interest on
$350m RCF in December and consolidation of Eland finance cost compared to
Net finance costs (51.8) (27.1) 91.0%
9M 2019
(Loss)/Profit before tax (130.1) 184.8 (170%)
› Tax expense contains a deferred tax credit of $44.5m and a tax charge of $10.4m
Tax credit / (expense) 33.8 (3.4) (1,094%)
› Capex for 9M 2020 includes mainly costs for ramped up activities on Ovhor wells,
(Loss)/Profit for the period (96.3) 181.4 (152%) Sapele and Gbetiokun oil wells, Oben-48 gas well, Sapele gas plant project and
other projects
Capital investment (108.6) (63.7) 70.3%
› Good relationship with NPDC continues to drive fall in NPDC receivables
Cash flow from operations 187.4 306.3 (38.8%)
NPDC receivables (vs. 31/12/19) 151.6 222.3 31.5%
14 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSCOST-CUTTING INITIATIVES PROVING SUCCESSFUL
Seplat is focused on reducing costs to ensure greater profitability
Federal NNPC targeting Negotiating at Targeting cuts in Central
Government has $10/bbl cost of least 30% cost OML 40 barging costs including
mandated that production savings from costs through travel, legal fees,
E&P companies across Nigerian suppliers use of larger hospitality, rents,
drive cuts of at oil industry vessels, savings rates etc
least 30% from in production
suppliers personnel costs
15 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSCASH POSITION REMAINS STRONG
ENABLES $100m LOAN REPAYMENT IN Q3 2020, EVEN AFTER DIVIDEND AND INCREASED CAPEX
Hedging strategy of put options to
provide cash flow assurance
Q3 Q4 Q1
Hedge
2020 2020 2021
1.5 / 0.5 1.0 / 1.0
Amount 1.5 MMbbl
MMbbl MMbbl
Price $45 $30 / $35 $30 / $35
$m
Cash at 31/12/19 Cash from Proceeds Receipts FX gains Interest Capex Lease AGPC Interest, Loan Dividends Income tax Cash at 30/9/20
(excl. restricted operations from loans from Belema received repayment investment finance repayment paid paid (excl. restricted
cash) charges cash)
16 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSROBUST CAPITAL STRUCTURE
Seplat is in a position of financial strength to capitalise on profitable opportunities
› Capital structure amended following acquisition of Eland Oil & Gas PLC NET DEBT POSITION REFLECTS STRONG CASH BALANCE
› $100m Eland reserve-based loan now part of structure.
› $100m of $350m RCF repaid
600
400 585
437
200 285 326 333 213
KEY TERMS 160
0
$m
-200
Pricing Tenor -446
-400 -588 -570
-664 480
-692
Notes 9.25% 2023 -600 -789
-800 -900
RCF LIBOR+6% falling to LIBOR+5% after Amukpe-Escravos opens 2022/23 -1000
RBL LIBOR+8% / LIBOR+7.5% ifSEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M
18
2020 RESULTS
OUTLOOK
Roger Brown
Chief Executive Officer
www.seplatpetroleum.comTIMETABLE OF KEY DE-RISKING EVENTS
Seplat is progressively de-risking the business
EVENT EXPECTED IMPACT EXPECTED
› Successful completion of funding substantially
ANOH FINANCING de-risks ANOH project
Q4 2020
› Dividend stream from AGPC joint venture
ANOH FIRST GAS › Strengthens Seplat’s position as Nigeria’s Q4 2021
leading gas supplier
› Immediate increase in revenues by reducing downtime
AMUKPE-ESCRAVOS
from 23% to 10% and reconciliation losses from 8% to H2 2021
PIPELINE 3%
SAPELE GAS PLANT › Restores Sapele output at higher 75MMscfd capacity
› Higher revenues at higher margin due to LPG module
H2 2022
UPGRADE
› Increases the Company’s resource base, with strong
EXPLORATION potential for valuation uplift 2021-22
› Several strong prospects across portfolio.
19 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSOUTLOOK FOR 2020 AND DRIVERS OF FUTURE VALUE
Short term focus on efficiency, cash generation, longer term significant growth prospects
SHORT TERM VALUE DRIVERS (0-2 YEARS)
GUIDANCE FOR 2020
1. New gas wells expected to increase gas production in 2021 (75MMscfd gross)
2. Increase in production from Eland’s OML40/Ubima fields, with exports not dependent on
VOLUME GUIDANCE Seplat’s existing export routes
3. Greater and more reliable output expected from OMLs 4,38, and 41 as Amukpe-Escravos
48 – 52 kboepd
pipeline assures more secure flow, reduces losses through shut-ins and vandalism
4. Potential for dedicated export route to support OML 40 and OML 4,38,41, reducing handling
(Includes impact of OPEC+ quota cuts in July/August)
costs and reconciliation losses
5. Improved uptime from increased focus on operational improvements in 2020; increased field
development
HEDGING (PUT OPTIONS)
6. Prioritise prolific swamp wells to increase production
7. Sapele gas plant will reduce flaring, monetise gas
Hedge Q4 2020 Q1 2021
Amount
1.5 / 0.5
MMbbl
1.0 / 1.0
MMbbl
LONGER TERM VALUE DRIVERS (2+ YEARS)
Price $30/$35 $30/$35 1. Significant opportunity from gas displacement of diesel generators as government
prioritises gas-fired electricity
CAPEX 2. ANOH significantly boosts potential income from gas from 2022, further decoupling value
from oil price volatility; expansion potential beyond 300MMscfd to serve increasing demand
3. Opportunity to increase scale of oil and gas businesses through M&A as IOCs divest
$120m for full year Nigerian assets
$109 million spent in 9M 2020 4. $400m+ cash flows expected from Westport loan repayments
5. Significant reserve upgrade potential from Eland’s Amobe prospect at OML40, benefiting
from Eland expertise
20 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSSEPLAT PETROLEUM DEVELOPMENT COMPANY PLC |
21
9M 2020 RESULTS
APPENDIX
www.seplatpetroleum.comQUARTERLY PERFORMANCE
9M RESULTS SHOW CONTINUING RECOVERY FROM TWIN CRISES
$ million Q1 2020 Q2 2020 Q3 2020 9M 2020 9M 2019
FINANCIAL
Revenue 130.5 103.0 154.2 388.8 494.9
EBIT (77.0) (35.8) 33.5 (79.3) 211.2
PBT (95.7) (49.6) 15.3 (130.1) 184.8
Realised oil price ($/bbl) 50.09 25.69 42.65 38.60 64.20
Realised gas price ($/Mscf) 2.89 2.88 2.88 2.88 2.80
Cash at bank 336.0 342.6 213.0 213.0 333.0 (FY 2019)
OPERATIONAL
Oil (bopd) 33,368 35,372 31,764 33,327 23,658
Gas (MMscfd) 88 110 104 100 136
Total working interest (boepd) 48,491 54,369 49,617 50,653 47,163
SAFETY
Fatalities 0 0 7 7 0
LTI 0 0 0 0 0
22 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSCLEARLY FOCUSED CAPITAL ALLOCATION PRIORITIES
We are focused on low-risk strategies to generate and deploying cash to grow the business and improve stakeholder returns
GAS BUSINESS › Repaid $100m of $350m
› Invest in growing the gas business Revolving Credit Facility
to fuel Nigeria’s increasing demand LOW-RISK › Refinance Eland’s
› Develop ANOH for long-term growth Reserve-Based Loan
› CAPITAL REDUCTION
Drill gas wells to serve demand › Maintain optimal balance
OIL BUSINESS
INVESTMENT OF NET DEBT of cash and debt
› Offset expected decline by PROGRAM › $400m+ cash flows expected
developing low-risk wells / prospects from Westport loan repayments
› Sustain and optimise production
› Approved interim dividend › Seek low-risk opportunities for
of $0.05 per share at Q3 20 growth that enhance NAV and FCF
› Top up when considered › Opportunity to consolidate
appropriate COMMITTED M&A Nigerian market though OMLs,
› Commitment to dividend payments TO DIVIDENDS POTENTIAL
divested assets from IOCs and
distressed small-scale operators
evidenced by protection of FY2019
payment in May 2020 despite › Other value-enhancing M&A
COVID-19 crisis
23 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSPROVEN RESILIENCE THROUGH PRUDENT MANAGEMENT
Financial discipline and a robust business model have protected Seplat through difficult times
INCREASING GAS VOLUMES FOR GROWING MARKET NEEDS FOCUSED CASH MANAGEMENT STRATEGY
49,867 $900
50,000 46,498 $900 Gross debt ($m) $259m OML 53
Oil Gas 43,372 acquisition $451m Eland $789
$800 Cash ($m)
acquisition
40,000 36,923
$700 $664
24,198
14,369 22,563 $588 $570 $585
30,823 $600
28,341
30,000 25,877
6,571 19,070 $500
4,867
$400 $326 $333
20,000 $310 $285 $446
15,786 $437
$300
29,003 $169 $160
23,474 24,252 25,669 23,935 Higher
10,000 $200
17,853 level than
10,091 $100 2014-16
- $0
2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019
($108.6) ($99.0) ($53.0) ($45.1) ($54.7) ($71.3) ($64.0)
GAS DIVERSIFICATION REDUCES EXPOSURE TO OIL PRICE FLEXIBILITY WITH CAPITAL INVESTMENT
$1,000 2% Oil Gas $350
$120m capex
$18.1
4% 21% $300
$800 planned for 2020
29%
($86m spent in H1)
$27.4 $250
13% $155.6
$600 $202.4 $200
$77.0 28%
$400 $862.1 $150
$747.6 $124.0
41%
$590.5 $100
$493.5 $495.1
$200 $105.5
$318.2 $50
$148.8
$0 $0
2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019
24 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTS Oil price crisis (Jul 14 – Jan 16) Trans Forcados force majeure (Feb 16 – Jun 17)ANOH FINANCING STRUCTURE
Robust funding structure with adequate headroom
NGC SEPLAT
› Seplat and NGC have funded their equal share of the Amount
(US$M)
Funding
status
Amount
(US$M)
Funding
status
project, i.e. US$210 million each for a total of 2 Oct 18 100.0 Funded 100.0 Funded
14 Dec 18 50.0 Funded 50.0 Funded
US$420 million Mar 20 30.0 Funded
› This equity of US$420 million, together with the
Oct 20
Total
60.0
210.0
Funded
Funded
30.0
210.0
Funded
Funded
US$320 million from the senior secured facility, will
ensure a fully funded project with projected total
NGC SEPLAT Plc Senior Debt up to
development costs of US$700 million, including a US$ 210 million US$ 210 million US$ 320 million
contingency of US$40 million
50% 50%
› Both debt and equity are denominated in US$ to
KEY
de-risk the project by mitigating devaluation risk during
construction. AGPC Equity Senior Debt
Sources US$ million Uses US$ million
Senior debt 320 Construction Costs (base case) 642
Equity (fully funded) 420 Financing fees 14
Levies & taxes 3
Stamp Duty Reserve 4
Interest during construction 31
Additional headroom 46
Total 740 Total 740
25 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 2020 RESULTSHead Office Seplat Plc 16A, Temple Road, Ikoyi, Lagos, Nigeria. +234 (0)1 277 0400 info@seplatpetroleum.com www.seplatpetroleum.com London Office Seplat UK Ltd. 4th Floor, 50 Pall Mall, London SW1Y 5JH +44 (0)20 3725 6500 Investor Relations CFranklin@seplatpetroleum.com AAliyu@seplatpetroleum.com
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