Seplat intensifies debt reduction, drilling activities for profitability
In its interim management statement and consolidated interim financial results for the three months ended 31 March 2019, made available to The Guardian, the firm explained that it recorded positive impact in 2018 debt refinancing and subsequent deleveraging, which resulted in a 38 per cent year-on-year reduction in finance costs to US$16 million (2018: US$26 million). Net profit stood at US$33 million after adjusting for a tax credit of US$13 million.
Commenting on the results, Seplat’s Chief Executive Officer, Austin Avuru, said: “Our operations have continued to perform in line with expectation, with the phasing of our 2019 work programme such that the production uplift will be felt throughout the second half of the year as we step up drilling activities to focus on capturing the numerous high margin and short-cycle cash return opportunities within our current portfolio.
“The next phase of growth for our gas business is now gathering pace following FID for the ANOH project, with governments’ first tranche of equity investment received. We have continued to deleverage the balance sheet and self-fund investments into the existing portfolio from operational cash flow, while retaining the financial flexibility and available resources that will enable Seplat to capitalise on what we expect to be an increasingly busy pipeline of inorganic growth opportunities that fit our acquisition criteria.”
The firm explained that Final Investment Decision (FID) for the large scale ANOH gas and condensate project announced in March, with an initial equity investment of US$100 million from government received, will comprise a Phase One 300 MMscfd midstream gas processing development with first gas targeted for Q1 2021.
Similarly, gas revenue from the existing business was up 5% year-on-year at US$42 million (2018: US$40 million), while its Amukpe to Escravos pipeline project is anticipated to be operational in Q2 2019 with ramp up to initial permitted capacity of 40,000 bopd expected during Q3 2019.
According to the report, production uptime in Q1 stood at 85%; as reconciliation losses are yet to be finalised but are expected to remain at levels consistent with prior periods.
“Full year 2019 production guidance maintained at 49,000 to 55,000 boepd on a working interest basis, comprising 24,000 to 27,000 bopd liquids and 146 to 164 MMscfd (25,000 to 28,000 boepd) gas production.
“Sequencing of the 2019 work programme means the corresponding production uplift will be realised progressively throughout H2; 2019 capex guidance maintained at US$200 million (excluding investment in the ANOH joint venture).
“Revenue of US$160 million and gross profit of US$81 million represents a 51% gross profit margin (unchanged year-on-year); Revenue reflects the lower oil production and oil price realisation of US$61.7/bbl (2018: US$65.78/bbl)”, the report added.
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