Seplat held its eighth annual general meeting for 2020. How would you rate the performance of the company in the year?
The year 2020 was a good year for Seplat. During that period, our Turn Around Maintenance (TAM) was successful and we had a very well controlled cost and despite the impact of COVID-19, we remained very resilient in supplying gas to the domestic market as 30 percent of Nigeria’s gas comes from us and we are very happy being the dominant company in that space. With respect to our growth, the performance stems from our prudential policy to comply with the International Financial Reporting Standards (IFRS). Globally, all businesses were heavily impacted by the COVID-19 pandemic and we saw an unprecedented low in oil prices in the second quarter of 2020, which has never been seen before.
Last year, we showed the resilience of our business and also showed the counterbalance of our gas business, which is linked to oil prices. Our operational and financial performance reflects the very challenging conditions described above. Our average Working Interest Production was 51,183boepd, including 33,714bopd of liquids and 101MMscfd gas (17,469boepd). Of this, our Eland assets contributed 8,855bopd, or 26 percent of total liquid volumes.
As part of the deliberations at the AGM, shareholders voted for a change of name of the company. What inspired that decision?
When we started Seplat, environmental stewardship resonated very strongly in our core values. Today, our core values are Value creation, Integrity and Partnership (VIP). when we started business, obviously, what was happening at that time was that oil was making revenue but over time, things started to change. Globally today, the world is transiting from combustion-driven economies to electricity-driven economies. That comes with a real strong impact on demand for oil and gas and as this happens, you then come back to what happens in the environment. From the beginning, we knew that we would have carbon footprints, therefore, we committed to making sure that environmental stewardship remains constant in our core values.
Why is energy transitioning so important at this point in time?
The world as a whole is in a transition and that transition started from combustion such as airlines, cars and ships, which all constitute almost 60 per cent of the demand for oil in the world. That transition is now moving from that combustion to electricity, and to an extent, gas. And so, we are now beginning to see a lot of countries by legislation going the cleaner energy way for electricity.
So being that we are an energy company, there is the need for us to align ourselves with this. Being also that we are a carbon footprint company, this is very important to us. Therefore, we have seen a world moving into cleaner energy and in providing cleaner energy solutions in the transition world, it means that apart from producing liquid hydrocarbon and commercialising our gas in which we have seen growth, the contribution of gas revenue in our topline or bottomline is continuously increasing.
How did the outbreak of COVID-19 affect the ANOH Gas project?
It is indeed one of the biggest investments in Nigeria and we are happy to be part of it, as a major force in our gas strategy. It is the processing plant that we are developing in a joint venture with the Nigerian Gas Company (NGC). We have completed equity funding of the project at the end of 2020 and in February 2021, we announced that our AGPC joint venture has successfully raised $260 million in debt, to complete the project funding. The fact that a consortium of Nigerian and international banks were prepared to commit up to $450 million was a strong sign of confidence in ANOH, which is one of the most important strategic infrastructure projects in the country.
Although its completion has experienced some inevitable delays because of Covid-19 restrictions on imports, the ANOH project will significantly enhance Seplat’s position as Nigeria’s leading supplier of processed gas for the domestic energy market. Although driving Nigeria’s transition to gas remains our priority, it is essential that we ourselves transition for a long-term future in which renewables are an important part of Nigeria’s energy mix.
Seplat raised $650 million bond recently. How has this decision impacted the business?
We are sitting on good cash flows, as we just raised the $650 million which is one of the largest bonds raised in the Nigerian capital market, particularly for an oil company. It is safe to say that leverage wise and cash flow wise; we are fine and it is also safe to say that we have headroom on our debt facilities today and we do not see any need to raise equity or go to shareholders to raise money for our business. We are organic, we are growing and widening our business as we are in the gas space and going into potential renewables in the future, which is part of our organic business. Furthermore, the inorganic is also part of it as well and in the next 12 to 24 months, we would witness an unprecedented shift from the onshore, to focus on a new skill set which is the deeper water. We are sensible and have some high criteria at the board to make sure that any M&A done is profitable.
The company is embarking on a share buy-back, tell us about it
This addresses the overall value creation for our shareholders and anything we do in our strategy, we have our investors and shareholders in mind. We are not going to do share buy-back if it does not bring value. If we are going to do share buy-back that will bring value and re-rate our securities, then it is something for shareholders and other stakeholders. If it is in tender offer, it means that via the process, we are putting cash in the pockets of our shareholders and so it is a value creating tool for us. We are not just going to do that for doing sake, as we want to do it for value creation.
What is your outlook for 2021?
Having proved our resilience again, and in the most challenging and unprecedented environment we have ever experienced, I am confident that Seplat will build on its strong foundations to become a larger, more diverse and more sustainable energy company in the years to come. Given Nigeria’s need to improve access to energy and the potential for significant market growth, we are very well positioned to consolidate and strengthen our position as Nigeria’s energy champion.
Disclaimer: The Post Driving Nigeria’s Transition To Gas Remains Our Priority – Seplat Chairman was first Published by Olushola Belloon leadership.ng.