Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Seplat Energy PLC (SEPLF, Financial) reported strong first-half production of 48,000 barrels of oil equivalent, aligning with their guidance.
- Adjusted EBITDA increased by 13% to $267 million, indicating robust cost performance.
- The ANOH Gas Project is progressing well, with significant milestones achieved, including the inauguration of the gas plant by President Tinubu.
- The company maintained its quarterly dividend of $0.3 per share, reflecting a commitment to shareholder returns.
- Seplat Energy PLC (SEPLF) has made significant progress in its strategic growth ambitions, including the Mobil Producing Nigeria Unlimited (MPNU) acquisition and the operational readiness of the TNP pipeline.
Negative Points
- First-half production slightly decreased from 50,000 barrels of oil equivalent last year to 48,000 this year.
- Operating costs increased to $9.7 per barrel of oil equivalent, higher than the same period last year.
- Net debt increased due to several payments made in the first half of the year.
- The effective tax rate rose to 72%, impacting profit after tax.
- The company faced delays in the Mobil Producing Nigeria Unlimited (MPNU) acquisition due to regulatory and court challenges.
Q & A Highlights
Q: How long do you expect it to take to complete the transaction with MPNU once you receive the regulatory approvals?
A: We believe the regulatory approvals will be on a fast track basis. Post-approval, it will probably take a couple of months to be ready to take ownership. However, we need to clear the competition commission approval first.
Q: Do you intend to refinance the 2026 Eurobond and pay down the RCF soon after the acquisition completes?
A: Yes, we plan to refinance the Eurobond. We are working with our Board to put forward a plan and proposal, aiming to do this at the beginning of next year.
Q: What's going to be the evacuation exit for the condensates from AGPC? Are you going to take them to the refinery or use the TNP?
A: The TNP is our main option, and it's currently operational during daylight hours. We also have backup options like trucking and barging volumes, and potentially routing into the brass line. Longer-term, there are discussions around a concept refinery at the plant itself.
Q: What's the reason for tapping the extra $60 million on the project financing for ANOH? Have there been any cost overruns?
A: Initially, we built in a 10% contingency for the project. Despite delays, we've managed to keep costs controlled. The additional accordion is part of what we need to get to completion.
Q: What's the longer-term outlook for the Western assets, given the improved transport reliability?
A: The focus is on ensuring continuous improvement in security and availability of export routes. We are also building redundancies within the assets through buffer tanks. Looking forward, we aim to arrest decline through new wells and maximize production.
Q: What should we expect cash tax to be going forward?
A: Cash taxes will be about half of what we've shown for this period. We expect the effective tax rate to remain around the same levels for the rest of the year, with cash taxes similar to last year's levels.
Q: Are there any tax synergies expected if you complete the MPNU transaction?
A: The tax position will likely be different post-transaction due to the larger business size. We will update on this once the transaction is completed.
Q: How do you intend to fund the MPNU transaction?
A: We have sufficient liquidity, with about $722 million available. We also have support from banks for additional debt if needed. The lockbox opportunity is also in place.
Q: What can you say about the underlifts moving into the rest of the year?
A: We expect the lifting program to significantly improve in the second half compared to the first two quarters.
Q: Why is the profit attributable to non-controlling interest a lower percentage of the total profit compared to last year?
A: The non-controlling interest is for Elcrest. The performance of the Western assets and OML53 was better this period. Last year, there was a tax benefit, which is why it was higher. It is normalizing now.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
