Seplat Petroleum Development Company Plc has reported half year (H1) operating loss of $112 million on the back of a 301 percent jump in impairment of assets cost.
The impairment charges include $10.46.0 million IAS36 impairment on revaluation of assets and $14.8 million impairment of financial asset.
The Company said it identified the need to revalue its assets due to the significant economic uncertainty of the COVID-19 crisis, following a reassessment of the business models and assumptions to establish their reasonableness and practicality, particularly in the current and expected oil price environment.
Revenue for the period (January – June 2020) fell by 34.2 percent largely as a result of lower oil prices.
The average realized oil price for the period was $35.94 per barrel, compared to $65.16 per barrel a year ago, while realized gas prices rose 4.7 percent to $2.88 Mscf from $2.75 Mscf for the period.
Seplat produced 51,177 barrels a day in the period, up slightly from 48,004 bpd.
The company maintained its previous guidance of 47,000 to 57,000 barrels of oil equivalents per day (boepd).
Seplat says its business is hedged against low oil prices using put options and a significant proportion of revenues now come from gas, which offers additional protection from oil price volatility.
The company’s production costs averaged $7.60/boe, with cost-cutting initiatives ongoing, particularly at OML40/Ubima.
Austin Avuru, Chief Executive Officer, said: “ Our oil hedging strategy and gas revenues continue to protect the business from price volatility, we are achieving substantial cost reductions from our suppliers and are managing our own costs even more carefully in this challenging period. Thanks to the excellent relationships we have with our Government partners and supply chain, our NPDC receivables have fallen and we are managing our payments equitably. The cash position is also robust because our careful management of debt has ensured that the majority of obligations mature in 2022 and 2023. We are operating within our covenants on all our lines of debt.
This is my final set of results as Chief Executive of the Company I helped to found ten years ago. I thank all my staff, past and present, for working to make Seplat a major force in Nigerian energy production. I hand a robust and successful company over to Roger Brown in the confidence that he and everyone at Seplat will make its second decade even more successful than its first.”