Introduction

Delivering solutions in our control

Faced with a challenging set of operating circumstances throughout the past two years, our proactive responses allowed us to stabilise and protect our core business and in turn provide a solid platform upon which we have returned to profitability in 2017 and can look towards a return to growth.

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The challenge

A complex price risk environment

Our solutions

  • Growing our gas revenues
  • Implementation of our oil hedging strategy

Outcomes

Our gas business is making an increasingly material contribution and 2017 was a record year. To guard against oil price downside, we also hedged 3.69 MMbbls of our oil production at an average of US$48.38/bbl in 2017. For 2018, we have hedged 6.6 MMbbls at an average of US$44.55/bbl.

US$124m

Gas revenue in 2017

443MMscfd

Working interest Seplat operated gas processing capacity

US$2.97/Mscf

Realised gas price in 2017

The challenge

Disrupted operating conditions

Our solutions

  • Multiple crude oil export routes
  • Excellent community and stakeholder relations

Outcomes

In 2017, Seplat continued to actively implement multiple export routes for oil production to mitigate future over-reliance on any one infrastructure system. Alongside this we continued to invest in our host communities across a number of initiatives.

47,291boepd

H2 2017 working interest production back to pre force majeure levels

81%

Production uptime in H2 following lifting of force majeure

US$59m

Invested in our host communities since 2010

The challenge

Positioning Seplat for future growth and diversification

Our solutions

  • Strong financial discipline and risk management strategies
  • Prioritisation of complementary portfolio expansion opportunities that can offset the current risk profile

Outcomes

In 2017, we retained discretion over spend, continued to de-leverage and strengthen the balance sheet, diligently preserved a liquidity buffer and kept downward pressure on our cost base. Effective risk management will always underpin Seplat’s activities and we remain focused on the early identification of risks and future risks that are central to delivering our strategy.

US$422m

Debt principal repaid since January 2015 refinancing

28%

Reduction in G&A year on year helped drive return to profitability

10

Risk Champions embedded within the business

Outlook - a return to growth

Back into “build and grow” mode

Seplat has emerged from a period of unprecedented disruption to operating conditions in the Niger Delta which, coupled with macro uncertainty, presented a number of risks to the business.


Optimising our oil production

Seplat is underpinned by a high quality asset base and since inception has invested to consistently grow oil production capacity. In 2017, we prioritised the creation of multiple oil export routes to mitigate concentration risk in the future.

Looking ahead, we have a large inventory of production drilling opportunities in our current portfolio that we will high-grade and implement a work programme to exploit.

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274MMbbls

2P + 2C working interest oil reserves and resources

+18%

CAGR in oil reserves over 2010-2017
Man turning a red wheel

Scaling up our gas business

Alongside our oil business, we have also prioritised the commercialisation and development of the substantial gas reserves and resources identified at our blocks, positioning Seplat today as a leading supplier of processed natural gas to the domestic market in Nigeria.

Looking ahead, we plan to further increase our gas production and processing capacity to help meet Nigeria’s growing demand, particularly in the gas-to-power sector.

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254MMscfd

Gross average daily gas production in 2017

+18%

Year-on-year growth in gas revenues

1,000MW

Power generation that envisaged Seplat operated capacity at ANOH could underpin

1,531Bscf

2P + 2C working interest gas reserves and resources

+20%

CAGR in gas reserves over 2010-2017
Man turning a wheel surrounded by pipes

Strong financial and risk management

We have continued to carefully manage our finances, striking the balance between focused investment and preservation of a liquidity buffer to guard against unplanned interruptions to the business. Alongside this we have kept downward pressure on our cost base and taken steps to strengthen our balance sheet.

At the heart of everything we do is our risk management framework that helps us effectively identify, assess, mitigate and monitor risks with a uniform methodology.

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US$450m

Free cash flow in 2017

US$141m

Net debt at 31 December 2017
Smiling man looking over his shoulder sitting near a computer

2017 highlights

Underpinned by strong fundamentals

Positioned for long term profitability and to capitalise on growth opportunities.


Operational

36,923boepd

WI production within guidance
FY 2016: 25,877 boepd

US$ 5.96/boe

Low unit production opex
FY 2016: US$8.79/boe

477MMboe

Large-scale 2P reserves base
YE 2016: 462 MMboe

Financial

US$ 44m

[Profit before tax]
Return to FY profitability
FY 2016: US$173 million loss before tax

US$ 447m


Strong cash flow from operations
FY 2016: US$172 million

US$ 141m


Significantly reduced net debt
YE 2016: US$516 million

Gas business

US$ 124m

Gas revenues at record levels
FY 2016: US$105 million

114MMscfd

Net WI domestic market supply
FY 2016: 95 MMscfd

443MMscfd

Seplat WI gas processing capacity
YE 2016: 218 MMscfd

A spotlight on Nigeria

Nigeria is rapidly advancing and the opportunities are extensive. Key factors in this development will be the huge, young and urbanised population, large oil and gas reserves, an increasingly diversified economy and enormous transport infrastructure projects.

Things are looking bright for the future.

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Country facts

198m1

Population size (2017)

US$1,897

GDP per capita (2017)

+6.5%1

Population growth (2017)

+2.7%3

GDP growth forecast 2017-2020
(average yearly rate)

US$376bn2

GDP (2017)

3.30 4

Global competitiveness index
(global rank 2017/ 125)
  1. Source: National Population Commission (‘NPC’).
  2. Source: National Bureau of Statistics (‘NBS’).
  3. Source: World Bank.
  4. Source: The World Economic Forum (‘WEF’).

Management statements

A resilient business returned to profitability

I am pleased to report the success of our strategy in navigating through a difficult period. The resumption of full production in our operations is translating into strong financial performance and our gas business continues to go from strength to strength.

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A.B.C. Orjiako
A.B.C. Orjiako Chairman

Reset and in position to deliver growth

Our proactive and decisive management coupled with the strong underlying fundamentals of the business have seen us emerge from an exceptionally challenging period a much fitter and stronger business that is well equipped to deliver long-term value for our shareholders.

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Austin Avuru
Austin Avuru Chief Executive Officer

A strong financial platform to underpin growth

In 2017, the Group continued to moderate investments and preserve a liquidity buffer owing to the force majeure conditions over much of the first half. Following the resumption of operations, a sharp improvement in business performance over the second half translated into a return to profitability and balance sheet improvement.

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Roger Brown
Roger Brown Chief Financial Officer