LEADING NIGERIA'S ENERGY TRANSITION - 9M 2020 RESULTS - Seplat Petroleum
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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 RESULTS
RECENT 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 RESULTS
SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 6 9M 2020 RESULTS OPERATIONAL PERFORMANCE Effiong Okon Operations Director www.seplatpetroleum.com
9M 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 RESULTS
A 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 PRESENTATION
UPDATE 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 RESULTS
INTEGRATION 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 RESULTS
UPDATE 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 RESULTS
SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 12 2020 RESULTS FINANCIAL PERFORMANCE Emeka Onwuka Chief Financial Officer www.seplatpetroleum.com
9M 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 RESULTS
9M 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 RESULTS
COST-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 RESULTS
CASH 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 RESULTS
ROBUST 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% if
SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 9M 18 2020 RESULTS OUTLOOK Roger Brown Chief Executive Officer www.seplatpetroleum.com
TIMETABLE 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 RESULTS
OUTLOOK 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 RESULTS
SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | 21 9M 2020 RESULTS APPENDIX www.seplatpetroleum.com
QUARTERLY 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 RESULTS
CLEARLY 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 RESULTS
PROVEN 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 RESULTS
Head 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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