Seplat Grows Nigerian Gas Processing Business

Nigerian gas-focused producer Seplat improved the prospects for its substantial gas reserves and resources identified at its blocks, it said in its H1 2019 statement July 30. But its work programme suffered from "unforeseen delays from rig contractors as well as the need to undertake higher levels of maintenance and asset integrity work."

Following expansion work adding 375mn ft³/day capacity that it undertook at its own expense, the Oben processing hub capacity stands at 465mn ft³/d and Seplat is in talks with counterparties to buy more gas and take gross production towards 400mn ft³/d on a consistent basis, with additional earnings from third party business.

Seplat is to pay Nigerian Petroleum Development Company $168mn for its 55% stake, of which $67mn was booked in H1 2019 as gas tolling revenues. The balance will be paid and reflected in the Q3 results. Work is on-going at the Sapele Gas Plant upgrade and which is expected to be completed in H2 2020.

The Anoh gas development at OML 53 (and adjacent OML 21 with which the upstream project is unitised) is expected to underpin the next phase of growth for the gas business and Seplat's involvement positions it at the heart of one of the largest green field gas and condensate developments onshore the Niger Delta to date, it said.

Experience gained at the Oben gas processing hub will help it incorporate operational and cost efficiencies at Anoh, where first gas is expected in Q1 2021, following final investment decision in March. Phase 1 will comprise a 300mn ft³/d midstream gas processing plant with accommodation space for significant future expansion. It is going into the project on a parity basis with Nigerian Gas Company and each has paid $150mn of the budgeted $700mn total. They are seeking debt funding for $280mn and Seplat said interest so far exceeds the target.

In addition to the four Sapele shallow wells, there will be two new oil production wells at the Ovhor field, one new gas well at Oben and one rig based re-entry of an existing oil well. Drilling at the upstream gas field at Anoh will start in 2020 when the first wells will be spudded by the upstream unit operator Shell.

Average working interest production  was 48,004 barrels of oil equivalent (boe)/day, down from 51,099 boe/d in H1 2018 and comprised 22,974 b/d liquids and 145mn ft³/d gas. 

Gross revenue for H1 2019 was $355.1mn, a 4% increase on H1 2o18. Crude oil revenue was $216mn for the first six months, down by a seventh owing to lower oil prices and production. Gas revenue for the period, which includes gas tolling income of $67mn, was $139.1mn, up from $85.3mn in H1 2018 but down about $13mn excluding tolling fees.

It received an average gas price of $2.75/'000 ft³, down from $3.04/'000 ft³ in H1 2018. Gas prices in 2019 are lower than planned, as the recently negotiated gas contracts with NGC have been structured to enable NGC take more volumes on the lower priced interruptible contract, to allow Seplat to sell to other customers at higher gas prices. Over time, the average gas price will correct as gas volumes are sold to other third parties at above $3/'000 ft³. Total gas volumes sold were 26.2bn ft³, down from 28.0bn ft³ in H1 2018.

Gross profit for the first six months was $207mn, up 19% compared with H1 2018, driven by the higher gas processing revenues. But the operating cost per barrel of oil equivalent was up a dollar, to $5.41/boe.

Pre-tax profit was $120.4mn, flat with $121.3mn in H1 2018 and net profit was up at $122mn, compared with $48.5mn in H1 2018. Cash flows from operating activities for the first six months was $255.2mn, up 4% on H1 2018.

CEO  Austin Avuru said the results "emphasise the strong cash generation potential of our low-cost production base and the good progress we are making at the large scale Anoh gas and condensate development project." It expects annualised production to reach 49,000 to 55,000 boe/d by year-end and it is targeting organic and inorganic opportunities to grow shareholder returns.