Seplat targets more acquisitions

By Taofik Salako

Seplat Petroleum Development Company Plc remains a resilient business with strong balance sheet to acquire more oil and gas assets and ensure sustainable growths and returns to shareholders.

At the annual general meeting in Lagos, the company assured that significant free cash flow from a low cost production base and a balanced portfolio split evenly between oil and gas, which is de-linked to oil price have positioned the company for sustainable growth in spite of the moderating impact of the Coronavirus pandemic and global crude oil decline.

Chairman, Seplat Petroleum Development Company Plc, Dr Ambrose Orjiako, said the company remains focused on delivering shareholder returns through regular dividend distributions and capital growth.

He spoke just as shareholders approved the distribution of $59 million as cash dividends for the 2019 business year, representing a dividend per share of 10 cents.

He said the company is in a competitive position for further price-sensitive acquisitions noting that Seplathas been well-positioned for emerging opportunities in the event of further consolidation of the oil and gas industry.

According to him, amidst the current headwinds occasioned by the prevailing global Coronavirus pandemic and low oil prices, Seplat will continue to maintain strict financial discipline over investment decisions, while also embedding high standards of corporate governance and transparency; strong commitment sustainable business; and effective management of risks with a strong health, safety and environment culture.

“I believe that Seplat has an important role to play throughout the energy transition that is set to occur in the years and decades ahead, not least through the impact we can have by scaling up our domestic gas supply business and displacing imported diesel fuels that are being burned for power generation and helping Nigeria benefit from the social and economic multiplier effects that reliable and affordable power availability can bring,” Orjiako said.

He said Seplat plans to position itself for an ambitious next phase of growth which would see the expansion of its footprint in terms of energy business activities, a plan to pursue offshore assets acquisition, as well as opportunity driven entry into different geographies.

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“Looking forward, one of the main challenges facing the independent exploration and production sector is to remain relevant as the world makes the transition to a lower carbon future. The oil and gas industry face considerable challenges given that oil in particular plays such a significant part in today’s energy supply mix, with demand for the commodity still growing. A key part of my role as chairman of the board is to steer the company through these transitions,” Orjiako said.

He pointed out that the directors of the company believe that such a corporate transition would require a different kind of organisational structure, people skills set and mentality to compete well in the expanded space, adding that in view of this, over the course of 2020 there will be a review of the current organisational and systems structure.

He assured that the fundamentals of the company’s core business remain strong and through the effective integration of the Eland acquisition, the combined business will have greater scale and value creation opportunities to capture.

“I believe the investment case for Seplat remains compelling. As we look ahead to 2020 and beyond, I would like to take this opportunity to thank all Seplat employees and wider stakeholders for their efforts and continuing support and I look forward to updating all of our stakeholders on our progress throughout the year ahead,” Orjiako said.

Also addressing shareholders, Chief Executive Officer, Seplat Petroleum Development Company Plc Mr. Austin Avuru, described 2019 as a solid year in which the robust fundamentals of the business once again kept the company on an extremely solid footing.

He noted that the strong cash generation we realised from low-cost production base meant that capital expenditures, debt service obligation and dividend distributions to shareholders were more than covered by cash generated from operations by a comfortable margin.

He said 2019 could prove to be an inflection point in the company’s history, as it took a final investment decision (FID) for the 300 MMscfd ANOH midstream gas processing project in March.

“Once completed, the plant will process gas produced at the upstream unitised gas fields in OML 53, where Seplat has a 40 per cent working interest, and Shell’s OML 21. Now that we have gone live, so to speak, with the project in partnership with government, we have set a clear trajectory that will see us become the largest supplier of processed gas to the domestic market once it becomes operational,” Avuru said.

On the outlook or 2020, Avuru said Seplat faces the same challenges as the rest of industry in terms of managing oil price volatility and other macro risks, adding that the emergence of the COVID-19 pandemic has thrown in another variable that has impacted the global economy.

Chief Financial Officer, Seplat Petroleum Development Company Plc , Mr. Roger Brown, said its position of financial strength has enabled Seplat to capitalise on significant growth opportunities during the 2019 financial year.

“Our growth strategy is underpinned by a clear financial strategy that aims to maintain a strong well-funded balance sheet with sustainable operational cash flow. Investments made during the year have significantly progressed our ambitious growth strategy for both oil and gas production; of which our core business remains highly cash generative,” Brown said.