Says £382m Eland AcquisitionTo Create Long-Term Value For Shareholders – Avuru
Seplat Petroleum Development Company Plc (SEPLAT), leading Nigerian independent oil and gas company listed on both the Nigerian Stock Exchange (NSE) and London Stock Exchange (LSE), has announced its unaudited results for the nine months ended 30 September 2019 released to the NSE and LSE.
The company declared a $29m interim dividend to shareholders and highlighted that its recent £382m cash acquisition of Eland Oil and Gas Plc would create more value opportunities for shareholders going forward.
Working interest production averaged 47,163 boepd for the period (2018: 50,303 boepd) and reflects slippage to the intended production drilling programme as a result of rig mobilisation delays and availability. Four drilling rigs are now operating across Seplat’s portfolio to drive liquids working interest production to an expected exit rate of 30,000 bopd.Production uptime stood at 91% while average reconciliation losses for the first nine months stood at 13%. This factor for the third quarter only, stands at 1% while the factor for the first six month period is still under review and expected to be consistent with prior periods when finalised
Full year average working interest production guidance has consequently been revised downwards to 45,000 boepd to 48,000 boepd (from 49,000 boepd to 55,000 boepd), comprising 23,000 to 25,000 bopd liquids and 128 to 133 MMscfd gas.
9M revenue of US$495 million (2018: US$568 million) reflects lower production and sales year-on-year together with lower price realisations of US$64.22/bbl and US$2.8/Mscf (2018: US$71.14/bbl and US$3.06/Mscf); gas tolling revenue of US$67 million also recognised in relation to the processing of NPDC’s gas at the Seplat sole risk funded Oben gas plant 375 MMscfd expansion between June 2015 and end 2018
Gross profit of US$265 million (2018: US$306 million) represents a 54% gross profit margin; operating profit of US$211 million (2018: US$264 million) with US$36 million recognised within Other Income (including a US$31 million oil underlift position and US$3 million income generated by third party useage of the Group’s Warri pipeline) and a US$5 million net fair value gain offset by a US$40 million impairment of NPDC receivables
Profit for the period of US$185 million (2018: US$91 million) positively impacted by a 37% year-on-year reduction in finance costs reflecting de-leveraging of the balance sheet early in the year when the outstanding balance on the 2022 RCF was ultimately reduced to zero
Cash generated from operations stood at US$306 million (2018: US$386 million) versus capex incurred of US$64 million (2018: US$29 million). Full year 2019 capex spend expected to be around US$120 million; gross debt of US$350 million at 30 September consists solely of the 2023 senior notes with undrawn headroom of US$225 million available through the 2022 RCF. Cash at bank at 30 September was US$455 million resulting in a net cash position of US$105 million.
Commenting on the result, the Chief executive Officer, SEPLAT, Mr. Austin Avuru, said: “2019 so far has seen us make significant progress towards furthering our ambitious growth strategy. Our core business remains highly cash generative and with four rigs now operational in the field we expect to quickly regain momentum. This is reflected in our decision to declare an interim dividend of US$29 million.”
“We have set the next major growth phase of our gas business in motion having taken FID for the large scale ANOH gas and condensate development to position us as Nigeria’s largest supplier of processed gas to the domestic market. In another major step, and inline with our overall growth strategy, we have made a strong statement of intent by becoming the first Nigerian company to undertake a public market acquisition of a London Stock Exchange listed company, and in doing so highlighted our ambitions to be a consolidator within our space.
“The recommended acquisition of Eland for £382 million is a logical continuation of our business model and represents a rare opportunity to secure a well run asset base that lies firmly within our core geographical area of focus and expertise. Following completion, the enlarged asset base will enhance our inventory of production, development, appraisal and exploration opportunities and enable us to ensure capital continues to be deployed to the most value creative opportunities for shareholders.”
Final investment decision (FID) taken for the large scale ANOH gas and condensate development in March 2019 and followed by capital markets days in London and Lagos in June and July (see separately released materials on the Company website); Project to comprise of a first phase 300 MMscfd midstream gas processing development with first gas targeted for Q1 2021; key regulatory, commercial and engineering workstreams remain on schedule
Equity investment of US$150 million from government received by ANOH Gas Processing Company (“AGPC”) with US$150 million equity funding from Seplat also made into AGPC. Final equity injection of US$120 million expected in Q4 and funding discussions have progressed with prospective bank lenders and relevant advisors, in anticipation of debt funding being in place in H1 2020 in advance of the time that such funds are needed to meet project costs
Gas sales of US$105 million and tolling fees of US$67 million take total gas derived revenue for the period to US$172 million; Gas sales reflect lower than expected gas production owing to constrained production from the Oben-47 well and delay in completing the Oben-48 gas well. The Oben-48 gas well is expected to be completed in Q4
Following NPDC’s exercise of back in rights to 55% of the Oben gas plant’s 375MMscfd expansion, transfer of NPDC’s interest is in progress and expected to be completed in Q1 2020.
With four rigs now operational in the field, three oil wells (Sapele-29, Sapele-33 and Jisike-06) have been drilled and completed to date. Two oil wells (Ovhor-18, Sapele-34) and Oben-48 (a gas well) are ongoing with two additional oil wells (Ovhor-19 and Sapele-35) to be spuded before year end and completed early 2020. Seplat’s net oil production is expected to rise by 7,000 bopd to achieve a 2019 exit rate of 30,000 bopd
Based on information provided by the owners and contractors of the Amukpe to Escravos pipeline, Seplat understands that the pipeline has seen further operational delays. The Hydrotesting and Intelligent Pigging of the 20 inch and 160,000 bopd capacity pipeline has been successfully completed with final commissioning activities commenced. The pipeline is now scheduled to be operational during Q1 2020
Following a review of Seplat’s operational, liquidity and financial position the Board has decided to declare an interim dividend of US$0.05 per share (2018: US$0.05) in line with Seplat’s normal dividend distribution timetable.
On 15 October 2019, the Boards of Seplat and Eland announced that they have reached agreement on the terms of a recommended cash acquisition (the “Acquisition”) of the entire issued and to be issued ordinary share capital of Eland by Seplat
The Acquisition values the entire issued and to be issued ordinary share capital of Eland at approximately £382 million on a fully diluted basis
The Acquisition is to be effected by means of a scheme of arrangement and is expected to complete in Q4 2019; irrevocable undertakings received from Eland’s shareholders stand at 60.92%
The cash consideration payable under the Acquisition is being wholly funded through a combination of existing cash resources of Seplat and a new loan facility available to Seplat. A US$350 million acquisition bridge facility was put in place after the reporting period in connection with the Eland offer, which would only be drawn in order to meet the acquisition cost upon completion
Seplat believes the combination will leverage Seplat’s core production and development expertise to capture potential upsides and increase growth and profitability. The combined business will have greater scale in production and reserves and should create long-term value for stakeholders.