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Seplat Energy Plc hedging policy formulated to shield itself from oil price weakness and volatility have helped strengthen cash flow need to reduce debts, pay dividend, and fund the construction of wells.
Investors put their money in the stocks of oil majors who are proactive and nimble enough to meander the vagaries of the inevitable volatility in commodity prices.
The largest upstream oil and gas firm in Africa’s most populous nation completed its 2025 hedging programme during the second quarter of (2Q) 2025. It has hedged a total of 5.25 million barrels (MMbbls), placed at a weighted average premium of $1.34/bbl and a weighted average strike price of $50.00/bbl.
During the third quarter (3Q0 2025, Seplat completed its first quarter (1Q) 2026 hedging programme. In 3 tranches the company hedged 6.0 MMbbls upfront premium puts hedged at an average strike price of $52.5/bbl, at a cost of $1.21/bbl.
“We note that due to increased production, we increased hedged volumes by 14 percent versus the prior quarter. Our simple put option hedge strategy is unchanged,” said Seplat.
Oil and gas hedging helps companies stabilize their cash flow and protect themselves from potential losses due to price fluctuations. The most common hedging instruments used in the oil and gas industry are futures contracts, options contracts, swaps, and collars.
A hedging strategy helped strengthen cash from operations that hit N2.15 trillion in the first nine months of 2025, which represents 239.25 percent increase from 2024’s N633.75 billion.
The company’s strong cash generation year to date supported the declaration of a special dividend of 2.5 US cents/share, delivering a total dividend to shareholders this quarter of 7.5 US cents/share.
A robust cash also led to a significant deleveraging to 0.27x ND/EBITDA, well below the company’s target.
Debt to equity ratio reduced to 52.41 percent in September 2025 from 74.13 percent as at September 2024, which underscores a strong balance sheet. Total debts (both long and short term borrowing) reduced by 32.53 percent to N1.41 trillion from N2.09 trillion the previous year.
The oil and gas giant has narrowed its Capex guidance to $270-290 million (previously $260-320 million) as the company seeks to intensify drilling of more wells.
For the first nine months through September 2025, Seplat’s profit after tax surged by 177.88 percent to N146.64 billion from N52.77 billion as at September 2024.
Revenue spiked by 213 percent to N3.35 trillion in September 2025 from N1.07 trillion as at September 2024.
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