RESILIENCE AND STRENGTH - 2020 H1 RESULTS - Seplat Petroleum
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RESILIENCE AND STRENGTH 2020 H1 RESULTS 29 JULY 2020 www.seplatpetroleum.com
2 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC INTRODUCTION Austin Avuru Chief Executive Officer www.seplatpetroleum.com
H1 2020 KEY MACROECONOMIC EVENTS
An unprecedented period of volatility as twin shocks hit the oil market
› Oil price recovering after twin shocks of COVID-19 BRENT FUTURES IN H1 2020 ($)
demand drop and KSA-Russia price war 80
› OPEC+ cuts will reduce Seplat’s W.I. quotas in 70
July/August but little impact expected on full-year result 60
50
› Nigeria is relatively lightly affected by COVID-19 with 40H1 2020 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
› 51,177 boepd total › $34.94/bbl realised
VOLUMES WITHIN GUIDANCE Production across H1 2020
› Liquids 34,117 bopd Oil price
well within
› Gas 99 MMscfd recovering › Hedged put options at
guidance
51,177 boepd (17,060 boepd) $45/bbl for Q2/Q3 and
$30/bbl in Q4
(Q1 2020: 48,491 boepd)
› Negotiating at least 30% › $86m invested H1 to
LOW COST PRODUCER Focus on savings from suppliers, underpin future revenues
Capex
cost reduction per Government request › H2 focus on gas projects
increased
and efficiency › Reducing barging costs
US$7.60/boe at OML40, plus Group
› Non-essential capex
under review
central costs
STRONG CASH BALANCE › Balance sheet strong › ANOH remains on schedule
even after capex and for Q4 2021 first gas
Balance Update on
dividend payments › Amukpe-Escravos Pipeline
US$343m sheet
› All debt lines well
major projects
expected in H2, subject to
within headroom COVID-19 delayed works
being completed
4 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTS5 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC OPERATIONS UPDATE Effiong Okon Operations Director www.seplatpetroleum.com
H1 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 unchanged at PERFORMANCE
47-57kboepd
Gas production
49,867
51,177 › Average W.I. production in H1 2020:
50,000 48,491 51,177 boepd (Q1 2020: 48,491)
46,498
43,372
› Eland achieved 10,861 bopd, c32% of
17,060
Group oil volumes
40,000
36,924
15,103
› Pipeline issues affected exports from
14,369
24,198
OML 4, 38, 41
22,563
30,823
› Gas production recovering after Q1
30,000 28,341 maintenance and 3rd party downtime
6,571 25,877 19,070
4,867
20,020
20,000 IMPACT OF OPEC+ CUTS
5,226 15,786
34,117
29,003
33,388
› No impact in H1 2020
23,474 24,252
25,669
23,935 › Seplat July production within revised
10,000
17,853 quota, August quota similar to H1
14,794
average
10,091
› No change to previous FY guidance
0
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Q1 2020 H1 2020
6 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTSUPDATE ON OPERATIONS IN H1 2020
Focus on well development and reducing costs
OIL BUSINESS GAS BUSINESS
› OML40 and Ubima production now included, contributing › 99 Mscfd achieved across six-month period was
nearly a third of oil production significant increase on 88Mscfd achieved Jan-March
› 76% uptime as infrastructure outages affected OML 4,38, 41 › Oben scheduled maintenance and 3rd party
exports; 8.6% reconciliation losses infrastructure problems restricted Q1 gas sales
› Six oil wells completed across Sapele, Ovhor, Ohaji South › Oben-48 gas well completed and onstream
and Gbetiokun › ANOH project still on target to produce first gas in
› Cost saving initiatives underway include negotiating savings late 2021, despite COVID-19 impact
from suppliers per Government request, larger barges › ANOH equity and debt financing expected to
at Gbetiokun to reduce shipping costs, savings already complete in H2 2020
driving costs down from $14 to $9 per bbl
› Sapele Gas Plant decommissioning in advanced
› Amukpe-Escravos Pipeline expected H2 2020 due to delays stage but timetable affected by COVID-19
in accessing the terminal; expected to significantly reduce
reconciliation and other losses, thereby enhancing revenue › Two gas wells on track to be drilled in H2
assurance
7 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTSACCIDENT AT BENIN RIVER VALVE STATION ON OML40
Investigation has commenced into explosion on maintenance barge
SUMMARY
› Seven fatalities amongst third-party contractors; our thoughts
and prayers are with the families and friends of all those who
lost their lives
› No other casualties reported, no environmental damage
› Investigation is underway, combined NPDC / Elcrest team, led
by NPDC as the operator
› Accident occurred on mooring dolphin at Benin River Valve
Station, which is Gbetiokun crude injection point into TEP
for export to Forcados Terminal
› The mooring dolphin was being modified to receive a larger
self-propelled barge
› The BRVS is 30km away from the Gbetiokun upstream
operations
8 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTS9 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC FINANCIAL PERFORMANCE Roger Brown Chief Financial Officer & CEO Designate www.seplatpetroleum.com
H1 2020 FINANCIAL HIGHLIGHTS
Cash balance increases, NPDC receivables fall, capex increased and 2019 final dividend paid.
REVENUES LOSS BEFORE DEFERRED TAX CASH AT BANK
34% 221% 3%
US$234 million US$145 million US$343 million
Impact of COVID-19 and oil price fall Loss results from IAS36 impairment Cash balance strong and increasing
H1 2019: $355 million H1 2019: $120 million profit FY 2019: $333 million
OPERATING COSTS EBITDA NET DEBT
US$7.60 / boe
40%
US$115 million
48%
=
US$457 million
Includes OML40/Ubima export cost After adjusting for impairment Includes $799m gross debt
H1 2019: $5.41 / boe H1 2019: $223 million FY 2019: $456 million
GAS SALES REVENUE CAPITAL INVESTMENT NPDC RECEIVABLES
26% 206% 22%
US$54 million US$86 million US$174 million
23% of Group revenues Increased despite market uncertainty Good management of receivables
H1 2019: $72 million H1 2019: $28 million FY 2019: $222 million
10 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTSH1 2020 FINANCIAL RESULTS
A profitable business with strong cash flow generation and a robust balance sheet
$ million H1 2020 H1 2019 Change
Total revenue 233.6 355.1 (34.2%)
› H1 2020 results reflect contribution of Eland, acquired at the end of Q4 2019
Cost of sales (195.9) (148.0) 32.9%
› Lower oil revenues reflect price falls in Q2; average price of $34.94 achieved
across H1 with a low of $17.50
Gross profit 37.7 207.0 (81.8%)
› H1 2020 gas sales did not include tolling (H1 2019: $67m); $2.88/Mscf achieved
G&A (47.6) (42.1) 13.2%
Other income 51.4 8.6 496%
› In cost of sales, royalties, crude handling and DDA now includes consolidated amounts
from Eland, including US$10.7m barging costs, but reduction in barging costs will be felt in H2
Impairments (160.9) (40.1) 301%
› Operating expenses include impact of Eland consolidation, IAS36 impairment on assets to reflect
Operating profit / (loss) (112.9) 139.1 (181.2%) the impact of oil price decline $146m in Q1 2020, and $14.8m impairment of financial assets
Net finance costs (34.8) (18.9) 84.2% › H1 2020 finance cost is made up of interest repayments impacted by interest on additional
$350m RCF in December and consolidation of Eland finance cost compared to H1 2019
(Loss)/Profit before tax (145.3) 120.4 (220.7%)
› Hedging: FV gain on hedge due to significantly low oil prices
Tax credit / (expense) 35.1 (1.4) (2565%)
› Tax expense: H1 2020 contains a deferred tax credit of $39m and a tax charge of $3.9m
(Loss)/Profit after tax (110.2) 119.0 (193%)
› Capex for H1 2020 includes mainly costs for ramped up activities on Ovhor wells, Sapele and
Gbetiokun oil wells, Oben-48 gas well, Sapele gas plant project and other projects
Capital investment 86.0 28.1 206%
› Good relationship with NPDC drives fall in receivables
Cash flow from operations 176.2 255.2 (31%)
NPDC receivables (vs. 31/12/19) 174.4 222.3 21.6%
11 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTSCASH GENERATION STRENGTHENS BALANCE SHEET
Strong cash generation and diligent management of Group liquidity
Hedging strategy of put options to
600 provide cash flow assurance
Q3 Q4 Q1
Hedge
2020 2020 2021
10.0 4.7 2.0 1.8
176.2
500 Amount 1.5 MMbbl 1.5 MMbbl 1.0 MMbbl
Price $45 $30 $30
-86.0
400 -30.0
-38.3
326.3 329.8
-26.5
-10.4
300
200
100
0
Cash at 31/12/19 Cash from AGPC Interest,
Proceeds OML55 FX gains Interest Capex Dividend Income tax Cash at 30/6/20
(excl. restricted operations investment finance
from loans receipts received paid (excl. restricted
cash) charges
cash)
12 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 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.
› $300m Seplat revolving credit facility upsized to $350m
600
and extended to 2022/23 585
400
437
200 285 326 333 343
160
KEY TERMS 0
$m
-200
Pricing Tenor -446
-400 -588 -570 -457
-664
Notes 9.25% 2023 -600 -789 -799
-800 -900
RCF LIBOR+6% falling to LIBOR+5% after Amukpe-Escravos opens 2022/23 -1000
2014 2015 2016 2017 2018 2019 H1 2020
RBL LIBOR+8% / LIBOR+7.5% ifCLEARLY 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 › Pay down $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 REDUCTION Reserve-Based Loan
› CAPITAL
Drill gas wells to serve demand
OF NET DEBT › Maintain optimal balance
OIL BUSINESS
INVESTMENT of cash and debt
› Offset expected decline by PROGRAM › $400m+ cash flows expected from
developing low-risk wells / prospects Westport loan repayments
› Sustain and optimise production
› Maintain core dividend › Seek low-risk opportunities for
of $0.05 per share growth that enhance NAV and FCF
› Top up when considered › Opportunity to consolidate
appropriate DIVIDEND M&A Nigerian market though OMLs,
› Commitment to dividend payments PAYMENTS POTENTIAL
divested assets from IOCs and
evidenced by protection of FY2019 distressed small-scale operators
payment in May 2020 despite › Other value-enhancing M&A
COVID-19 crisis
14 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTS15 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC OUTLOOK Austin Avuru Chief Executive Officer www.seplatpetroleum.com
APPOINTMENT OF EMEKA ONWUKA AS NEW CFO
Brings substantial financial and board-level experience
CAREER HIGHLIGHTS
› Joins Seplat’s Board as CFO and Executive Director on
3 August 2020
› More than 30 years’ experience in financial services in Africa
› Most recently Partner & Head, Private Clients & Family
Wealth, Andersen Tax, Nigeria
› Serves on Boards of Ecobank Nigeria, Bharti Airtel Nigeria
› Previously on Boards of First Atlantic Bank Ghana, FMDQ
OTC Plc
› Former Group Managing Director of Diamond Bank Plc,
Chairman of Enterprise Bank
› Officer of the Order of the Niger (OON)
16 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 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. Increase in production from Eland’s OML40/Ubima fields, with exports not dependent on
Seplat’s existing export routes
VOLUME GUIDANCE UNCHANGED 2. Greater and more reliable output expected from OMLs 4,38, and 41 as Amukpe-Escravos
pipeline assures more secure flow, reduces losses through shut-ins and vandalism
3. Potential for dedicated export route to support OML 40 and OML 4,38,41, reducing handling
47 – 57 kboepd costs and reconciliation losses
(Includes impact of OPEC+ quota cuts in July/August) 4. Improved uptime from increased focus on operational improvements in 2020; increased field
development
HEDGING (PUT OPTIONS) 5. Prioritise prolific swamp wells to increase production
Q3 Q4 Q1 6. Significant reserve upgrade potential from Eland’s Amobe prospect at OML40, benefiting from
Hedge
2020 2020 2021 Eland expertise
Amount 1.5 MMbbl 1.5 MMbbl 1.0 MMbbl
Price $45 $30 $30 LONGER TERM VALUE DRIVERS (2+ YEARS)
CAPEX 1. Significant opportunity from gas displacement of diesel generators as government
prioritises gas-fired electricity
2. ANOH significantly boosts potential income from gas from 2022, further decoupling value
$120m for full year from oil price volatility; expansion potential beyond 300MMscfd to serve increasing demand
$86 million spent in H1 2020 3. Opportunity to increase scale of oil and gas businesses through M&A as IOCs divest
Nigerian assets
4. $400m+ cash flows expected from Westport loan repayments
17 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTS18 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC APPENDIX www.seplatpetroleum.com
A RICH PORTFOLIO OF OIL & GAS ASSETS
Eight oil and gas blocks in the prolific Niger Delta, ideally located for export or internal demand centres
W.I. 2P reserves * W.I. production
MMboe H1 2020 boepd
OML 38 Block Share Partner Oil Gas Total Oil Gas Total
OML 40
OML 4, 38, 41 45% NPDC 164 118 282 19,592 17,060 36,652
OML 4
NPDC
OML 40 ** 45% 29 - 29 9,814 - 9,814
OML 41 OML 53
Starcrest
OML 53 40% NNPC 45 127 172 2,801 - 2,801
OPL 283
Revenue
OML 55 AMT 2 - 2 - - -
interest
OPL 283 40% Pillar Oil 5 12 17 863 - 863
Ubima
All Grace
Ubima *** 88% 7 - 7 1,047 - 1,047
Energy
OML 55 TOTAL 252 257 509 34,117 17,060 51,177
* 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
19 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 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
24,252 25,669 23,935 Higher
10,000 23,474 $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
4% 21% $300
$800 $18.1 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
20 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 2020 RESULTS Oil price crisis (Jul 14 – Jan 16) Trans Forcados force majeure (Feb 16 – Jun 17)WESTPORT LOAN REPAYMENTS UNDERPIN FUTURE CASH FLOW
Seplat has acquired the right to be repaid more than $414m between 2021-24
When Seplat paid EV $450m for Eland it acquired:
› Eland’s 20.25% share of OML40
› The right to be repaid $410m by Westport
Westport repays $414M
to Seplat via Eland
Owns 100% › The right to consolidate 100% of Elcrest’s share until loan is repaid
of Eland
› The loan will be repaid between 2022-24
$90m reserve- Owns 100%
Amount outstanding Maximum permissible amounts outstanding as per
based loan Westport of Westport
as at 30/11/2019 ($m) revised loan agreement of 23/12/19 ($m)
$500m limit
$500 $475.0
Owns 45% $416.8
Westport repays Westport loan to Elcrest
($504m) of Elcrest $400
$90m RBL
$325.0
$300
Elcrest repays $504m
loan to Westport
$200 $175.0
$100
Starcrest Owns 55% of Elcrest
Moratorium
Owns 45% of $0.0
$0
OML40 30/11/2019 31/12/2020 31/12/2021 31/12/2022 31/12/2023 31/12/2024
Loan agreement guarantees cash flows from Elcrest to Westport
NPDC Owns 55% of OML 40
OML40 of up to $150m in 2022 and 2023 and up to $175m in 2024
21 SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC | H1 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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