Seplat Petroleum Development Company Plc, has put in place strategies that would improve its financial performance and deliver better value going forward.
Speaking to shareholders during the company’s Annual General Meeting in Lagos, the Chairman, Seplat Petroleum Development Company, Dr. Ambrose Orjiako, said that several economic headwinds, the global oil price decline and the shut-in of the Forcados terminal resulting in lower production, lower oil price realisations and higher costs, made Seplat’s revenue to fall from N113 billion in 2015 to N63.7 billion in 2016, while a loss of N45.4 billion was recorded compared with a profit of N13 billion in 2015.
However, Orjiako said with the diversity of export solutions in place and “our increasing gas processing capacity, Seplat has the potential to deliver material production upside with less risk of significant constraints from any infrastructure disruption”.
According to him, The company is 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 over-reliance on one particular third party operated export system in the future.
“In line with this objective, Seplat successfully implemented, in 2016, an alternative export solution during the second quarter whereby crude oil production from OMLs 4, 38 and 41 is sent via the company’s own 100,000 barrel of oil per day (bopd) capacity pipeline to available storage tanks at the Warri refinery,” he said.
He further said that its gas revenues increased by 37 per cent last year, even as its oil production was curtailed by the shutdown of the Forcados terminal, attributing the increase in its gas volume to the new Oben gas processing facility installed mid-year 2015, with a processing capacity of 150 million standard cubic feet per day.
Orjiako said that the shut-in of the Trans Forcados Pipeline, the main route for the company’s exports, impacted the volume of oil production amid low prices, so during this period, we quickly adapted and started exporting some of our production through the Warri refinery. Another thing we did was to quickly expedite action on our gas development and commercialisation strategy, and that meant that quite a lot of revenue now came from gas,” he said.
He added that the company was able to increase its gas processing capacity to over 500 million scfpd and gas production to 300 million scfpd.
The company’s gas revenues increased to $105.5m last year, compared to $76.9m in 2015, driven by a 19 per cent increase in the average realised gas price to $3.03 per 1000 scf from $2.55/mscf in 2015, and an 11 per cent increase in working interest production to 95 million scfpd from 86 mmscfd in 2015.
Seplat said the shut-in and declaration of force majeure at the Forcados terminal by the operator, Shell, saw its average daily production fall from 52,000 barrels of oil equivalent per day by mid-February 2016 to 25,877 boepd by year end.
It said oil revenue fell by 55 per cent from $570m in 2015 to $254m in 2016, while the total volume of crude lifted in the year was 3.422 million barrels compared to 8.129 million barrels in 2015.
The firm explained that the decline in its gross profit to $72m from $249m in 2015 reflected the shut-in of the Forcados terminal, resulting in lower production, lower oil price realisation and higher costs associated with the alternative export route to the Warri refinery.
The Chief Executive Officer of Seplat Austin Avuru , while further explaining the challenges faced by the company in 2016, said: “In addition to a difficult global oil market backdrop, our business had to contend with unprecedented operational challenges due to interruptions and these are reflected in our full year results.”
He disclosed that the company has now established a longer-term alternative export route via the Warri refinery jetty and is nearing completion of upgrade works to the infrastructure enabling a doubling of barging volumes to a steady 30,000 bopd gross during Q2 2017.
According to him, alongside this, the company is collaborating and supporting government on the completion of the Amukpe to Escravos pipeline that will offer a third export route through the Escravos terminal.