Seplat seeks new capital to settle old debts
Seplat Petroleum Development Company Plc has launched a process to raise new debt capital from the international capital market to enable it debts and finance corporate growth plan.
In a regulatory filing, Seplat, which is quoted on the London Stock Exchange (LSE) and Nigerian Stock Exchange (NSE), stated that it had mandated major global investment bankers and financial institutions to launch the process.
According to the indigenous oil and gas company, Citi, J.P. Morgan, Standard Bank and Standard Chartered Bank were mandated as global coordinators while Natixis, Rand Merchant Bank and Société Générale were as mandated as bookrunning managers.
The professional parties were expected to organise a global investor call and one-on-one meeting with fixed-income investors, after which Seplat will issue new debts.
Seplat plans to issue dollar-denominated, senior unsecured guaranteed notes, subject to market conditions. The company is rated B2 by Moody’s, B by S & P and B- by Fitch.
The net proceeds of the new capital raising, according to the company, will be used “to redeem the existing Seplat 2023 notes, repay drawings under the revolving credit facility, for general corporate purposes, and to pay transaction fees and expenses”.
The Board of Seplat had earlier this month recommended payment of $58 million to shareholders as cash dividends for the 2020 business year, despite running into a major loss during the period.
Shareholders will receive a final dividend of $0.05 per share, in addition to interim dividend of $0.05, bringing to dividend for the year to $0.10 per share.
The audited report and accounts for the year ended December 31, 2020 showed Earnings before interest, taxes, depreciation, and amortization (EBITDA) at $265.8 million while operating profit stood at $121 million, before non-cash impairments and unrealised fair value losses.
The report also showed cash position of $259 million after $100 million RCF repayment, $58 million dividends paid in the year, and $150 million capital expenditure. Net debt stood at $440 million with most maturities after 2021.
FSDH Group, an investment banking group, described Seplat’s performance as “weak” in 2020 with revenues declining 10.8 per cent and a loss of N30.7 billion in 2020 compared with a profit of N85 billion in 2019.
According to the report, total revenue in 2020 was N190.9 billion as against N214.2 billion in 2019. The crude oil revenue declined 1.0 per cent to N150.4 billion while gas revenue slipped 34.9 per cent to N40.5 billion in 2020.
The report noted that the fall in oil revenue reflects lower realised oil prices of $39.95/bbl for the period as against $64.4/bbl in 2019, offset by added production primarily from the Eland assets.
Following its acquisition, Eland’s revenues and costs are included in the full year 2020 accounts but not reflected in 2019. Brent remained volatile throughout the year, following the twin shocks of the Saudi Arabia – Russia price war and the COVID-19 pandemic, trading between a high of $68.91/bbl in January and a low of $19.33/bbl in April, before ending the year at $51.80/bbl.
Gas sales revenue declined by 34.9 per cent to N40.5 billion in 2020, due to lower gas sales volumes of 37.1 Bscf compared to 47.8 Bscf in 2019.
The lower gas sales volumes reflect lower-than-expected gas production due to constrained demand due to the pandemic’s impact and delays in completing the Oben-50 gas well, following restoration in demand. There were no gas-processing revenues in 2020, compared with the one-off gas-processing revenue of N20.5 billion in 2019, the Oben gas plant tolling payment by NPDC. The average realised gas price was slightly higher, at $2.87/Mscf as against $2.84/Mscf in 2019.
According to the report, following a reassessment of the business models and assumptions to establish their reasonableness and practicality, particularly in the current and expected oil price environment, Seplat booked a non-cash provision of N52 billion across assets in 2020. Including all adjustments, the operating loss for the year was N11.4 billion as against operating profit of N95.8 billion in 2019.
“The loss reflects lower oil prices realised and an impairment provision of N52 billion booked in the period, which includes a non-financial asset charge of N41.2 billion (IAS 36) and financial asset charges of N10.8 billion (IFRS 9). The financial asset charge includes charges against a deposit made for a potential investment that the company no longer plans to pursue. Other income of N30.2 billion includes an adjustment for an N18.0 billion underlift position, shortfalls of crude lifted below Seplat’s share of production, which is priced at the date of lifting and recognised as other income. The higher net finance charge of N18 billion in 2020 includes interest on the $350 million RCF in December and the consolidation of Eland finance,” the report stated.
Further analysis showed that loss before tax was N28.9 billion in 2020, compared to a profit before tax of N89.9 billion in 2019. The group’s tax charge for 2020 was N1.8 billion, compared to N9.0 billion for 2019. The reduction in the effective tax rate was principally due to the recognition of tax losses available for utilisation against future profit. Consequently, the loss for the year was N30.7 billion as against profit after tax of N85 billion in 2019.
The resultant basic loss per share was N46.42 per share in 2020, compared to an earnings per share of N149.35 per share in 2019. The reduction was mainly due to lower oil prices and impairment charges. The board recommended a final dividend of N19 per share in line with the dividend policy, bringing the total dividend to N37.32 per share as against N30.70 per share in 2020.