…hedging costs up 147% to $11.97m
Seplat Energy, one of Nigeria’s largest indigenous energy producers has more than doubled its oil hedges to insure its 2025 oil exports against a price downturn as Brent crude prices hit a 6-months low.
The program which covers the first 3 quarters (January – September) of 2025 would protect revenues if oil falls below $55 a barrel. Seplat significantly increased the volume of oil hedged to 15.75 million barrels of oil, up 162.5% from 6 million barrels hedged for all of 2024.
“The 2025 hedging program has commenced using an equivalent strategy as previously employed, at a larger scale. Year to date 15.75 MMbbls have been hedged for 1Q-3Q 2025 at a weighted average premium of $0.76/bbl and a weighted average strike price of $55.0/bbl. Additional barrels are expected to be hedged for 4Q 2025 later in the year,” Seplat said in notes accompanying its Full Year 2024 financials seen by MoneyCentral.
The hedging process involves Seplat buying put options that allow it to sell crude at a pre-determined price of $55 per barrel (bbl) in 2025 even if oil prices fall below those levels. The average strike price for hedges was lower than in 2024 which were hedged at $60.0/bbl.
Seplat spent $11.97 million in buying put options to lock in prices of oil exports for 2025, about 147 percent higher than what it paid to hedge crude a year ago, according to MoneyCentral analysis of the data.
Oil plunged on Wednesday to the lowest in about six months as US President Donald Trump’s trade wars hammer the outlook for demand just as OPEC+ signals it’s ready to start opening the taps on supply.
Brent crude plummeted 2.4% to settle just above $69, while West Texas Intermediate dropped 2.9% to settle near $66. Both closing prices were the lowest since early September. Global benchmark Brent at one point grazed the lowest level since December 2021 during the session, before paring losses.
Seplat Energy’s hedging policy aims to guarantee appropriate levels of cash flow assurance in times of oil price weakness and volatility.
It is important to note that in 2024, Seplat’s total liquids production was 11.0 MMbbls of oil, meaning the company is expecting to ramp up oil production this year, largely due to the acquisition of Mobil Producing Nigeria Unlimited, MPNU, assets.
“The Board and management team closely monitor prevailing oil market dynamics and given the relatively softer oil price outlook for 2025 have hedged three quarters in advance, providing longer dated cash flow assurance than our typical, two quarter in advance, strategy,” Seplat Energy said.
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