Revaluation of assets as a result of the economic impact of coronavirus has dragged Seplat Petroleum Development Company plc, Nigeria’s largest listed oil and gas firm by market value, into a loss of $106.6 million loss in its unaudited first quarter 2020 result.
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With Brent oil price averaging $50.90 in the first quarter of 2020 compared to $63.59 in the corresponding quarter last year, Seplat recorded after-tax loss of $106.6 million in its unaudited Q1’20 result, mostly driven by a $145.5 million impairment loss (compared to a gain of $14 million in Q1 2019) charged on its oil and gas assets.
“Following a reassessment of the business models and assumptions to establish its reasonableness and practicality particularly in the oil price environment principally driven by the pandemic, the Group decided to raise a provision at this stage and the result is an aggregate impact of US$145.5 million across all assets,” Seplat said in its report.
Seplat’s total revenue was down by 18.2 percent to $130.5 million while crude oil revenue was reduced by 8.8 percent to $107.4 million, reflecting lower realised oil prices.
“Against the twin crises of significantly reduced oil demand and the price war, Seplat continues to demonstrate its resilience because of its ongoing philosophy of prudent financial management, the careful mitigation of risk and a keen focus on managing factors of the business that are within our control,” Austin Avuru, Seplat’s CEO, said. In Q1 2020, gas sales contributed about 17.7 percent of total Group revenue compared to 26.2 percent in Q1 2019, thanks to decrease in gas revenue by 44.6 percent to $23.1 million due to lower realised prices and lower gas sales volumes.
“The lower gas sales volumes reflect higher downtime at the third-party infrastructure and a planned 15-day week shutdown of the gas plant for the turnaround maintenance executed in March,” Seplat said. The company successfully completed a 15-day turnaround maintenance for Oben Gas Plant in March.
“We have the benefit of longterm contracted gas revenues that are insulated from oil market volatility.
We are achieving substantial cost reductions from our suppliers and managing our own costs even more carefully in this unprecedented and challenging period,” Avuru said. Gross profit decreased to $33.1 million compared to $81.4 million in Q1 2019 as a result of $29 million lower revenues, higher crude handling fees and non-production costs primarily consisting of royalties and DD&A, which were $59.8 million compared to $49.7 million in the prior year. These increased costs reflect the additional production volumes from OML 40 and resultant increase in royalties and crude handling fees. On a cost-perbarrel basis, production operating cost was higher at $7.7/boe compared to $$6.2/boe in Q1 2019.
Earnings were further weighed by the 55.1 percent year-on-year rise in finance costs to N20.3 billion, which was mostly driven by the $350.0 million revolving credit facility drawn down in December 2019 to finance the Eland Oil acquisition.
