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Seplat Energy Plc reported a sharp fall in second-quarter operating profit from bumper 2022 earnings as oil and gas prices weakened, while foreign exchange (FX) losses due to changes in exchange rates compounded the company’s woes.
Oil and gas prices spiked last year underpinned by the Russia and Ukraine war but prices have plummeted this year as fear of shortages eased amid global economic challenges.
Seplat average oil price for the period was equivalent to $79.54/bbl, compared to $107.35/bbl for the 6M 2022, period; and average gas price $2.87/Mscf (6M 2022: $2.76/Mscf).
The upstream oil and gas giant’s operating profit dipped by 40.98 percent to N60.21 billion in June 2023 from N102.02 billion as at June 2022.
However, net income that got a boost from tax credit jumped 18.59 percent to N42.03 billion as at June 2023.
The company attributed the drop in operating profit to the impact of depreciating currency on foreign currency obligations.
The revaluation of financial assets arising from this exchange rate resulted in a net (non-cash) loss of N17.21 billion.
“On June 14, 2023, the Central Bank of Nigeria (CBN) implemented a major operational change in the foreign exchange (FX) market to unify the multiple exchange rate windows,” said the company.
“This change involved consolidating all FX segments into the Investors and Exporters (I&E) window, which became the sole approved and recognized window for setting the FX rate, following the adoption of “willing buyer, willing seller” model.,” said the company.
The oil and gas sector is the best performer on the NGXASI index, a lead it has maintained since the start of the year.
The NGXoil and gas has a year-to-date of 100.59 percent, outperforming the NGXASI index of 27.71 percent.
Seplat shares have gained 53.96 percent so far this year. Its working interest production increased by 1.8% to 50,805 boepd.