Seplat Petroleum Development Company Plc or “Seplat” plans to tap the international debt market in order to refinance existing debt as the company returned to profitability, thanks to the lifting of force majeure on Forcados Terminals and higher oil prices.
A fixed income analyst who doesn’t want his name mentioned because of the sensitivity of matter said that the size of the bond could be $400 million.
“They have two loans both on floating and LIBOR plus 8.50 percent so as interest rates are going up, the floating rates are also rising,” said the analyst.
“They want to tap the Eurobond market to reduce some of the existing loans especially those maturing this year,” said the analyst.
The 2017 audited financial statement of the company shows total debt (both short term and long term) stood at N176.14 billion ($578.16 million) as against N206.55 billion ($676.12 million) the previous year.
On 31 December 2014, Seplat signed a ₦518.15 billion ($1.7.23 billion) debt refinancing package, made up of the following facilities:
₦214.23 billion ($700.15 million) seven year term loan with an ability to stretch it to ₦427 billion ($1.43 billion) contingent on a qualifying acquisition with a consortium of five local banks. This facility has a seven year maturity period at interest Libor of 8.50 percent.
₦91.12 billion ($300.45 million) three year corporate revolving loan primarily to manage working capital requirements with a consortium of eight international banks. This facility has a three year maturity period
Seplat’s finance costs grew by 21.27 percent to N22.24 billion ($72.52 million) in December 2017 from N18.27 billion ($73.90 million) as at December 2016.
“They secured a lot of banks loans during the turmoil in the oil industry; majority of the rates of the loans are not as competitive as they were before. So they are trying to move from bank loans to Eurobond,” said Jubril Kareem energy analyst at Ecobank research.
“The bonds are going to be attractive to investors although they are sensitive towards vandalism on critical infrastructure such as theTrans forcardo pipeline. However since the repairs their financial performance has improved a lot so moving beyond 2017 to 2018 and beyond its very attractive,” said Kareem.
For the year ended December 2017, Seplat posted a profit after tax of N81.1 billion from a loss of N45.34 billion the previous year.
The growth at the bottom line (profit) was also driven by a N68.35 billion ($224.12) net deferred taxes as the company recognises deferred tax assets on unused tax losses and capital allowances where it is probable that future taxable profits will be available for utilisation.
Sales spiked by 118.15 percent in the period under review to N138.25 billion ($452.17 million) while income from gas revenue, which accounted for 27.15 percent of Group revenue, increased by 18 .15 percent to hit a new record of N37.58 billion ($124.15 million).
The company saw revenue and cash-flow suffer in the first half of last year as incessant attacks on oil facilities by Niger Delta Militants on Forcados terminal subsea crude export pipeline forced Shell Nigeria, terminal operator, to shut down Forcados terminal and declare force majeure between 21 February 2016 and June 6 2017.
At the height of insurgency in 2016, the company began implementing a policy of creating multiple export routes for all of its assets which resulted in actively pursuing alternative crude oil evacuation options for production at OMLs 4, 38 and 41 and potential strategies to further grow and diversify production in order to reduce any over-reliance on one particular third party operated export system.
In line with this objective, in 2017 Seplat successfully completed repairs and upgrades on two jetties at the Warri refinery that will enable sustained exports of 30,000 bopd (gross) if required in the future. Prior to the repair and upgrade work on the two jetties gross exports through the Warri refinery were around the 15,000 bopd level.
Exports via the Warri refinery jetty to date have typically incurred barging costs of around US$11/bbl but partially offsetting this, exports via this route are not subject to the reconciliation losses or terminal crude handling and transport charges when exporting via the TFS. At 31 December 2017 a gross volume of 1.9 million barrels had been evacuated via this route in the year.
Prior to establishing the alternative oil export route via the Warri refinery, gas production was limited by storage constraints for associated condensate volumes that would ordinarily be spiked into crude oil production and exported via the Forcados terminal. Crucially, availability of the alternative export route enabled Seplat to step-up deliveries to the domestic market and greatly improve security of supply. All of Seplat’s gas production is supplied to the domestic market.
“I am pleased to report that Seplat made a return to full year profitability in 2017, registered strong cash flow performance and significantly strengthened the balance sheet. In a year of contrast we were plagued throughout most of the first half by force majeure at the Forcados terminal.” Austin Avuru, CEO of Seplat said.
“We will retain the flexibility and financial discipline that has seen us emerge from a difficult chapter in our history a fitter and stronger business,” said Avuru.
BALA AUGIE, ISAAC ANYAOGU & DIPO OLADEHINDE
