TIDMSEPL
RNS Number : 2232M
SEPLAT Petroleum Development Co PLC
27 July 2017
Seplat Petroleum Development Company Plc
Consolidated financial results for the period ended 30 June
2017
Lagos and London, 27 July 2017: Seplat Petroleum Development
Company Plc ("Seplat" or the "Company"), a leading Nigerian
indigenous oil and gas company listed on both the Nigerian Stock
Exchange and London Stock Exchange, today announces its
consolidated half-yearly financial results for the period ended 30
June 2017 and provides an operational update. Information contained
within this release is un-audited and is subject to further review.
Details of the Webcast and conference call are set out on page 8 of
this release.
Commenting on the results Austin Avuru, Seplat's Chief Executive
Officer, said:
"Since the resumption of exports via the Forcados terminal our
production has recovered strongly providing us with sufficient
confidence to reinstate guidance, which we expect to be in the
region of 43,000 to 50,000 boepd net to Seplat in the second half
of the year. After 18 difficult months, the Company is now
well-placed to secure a long-term return to profitability and
growth. We have continued to cut costs, strengthen the balance
sheet and establish alternative export routes to insure us against
future disruption at Forcados. I believe that we are now a fitter,
stronger Company than at any time in our history and look to the
future with renewed optimism. If the current operating environment
continues, we expect to see a significant improvement in our
performance."
Half-yearly results highlights
Return to Strong Production
-- Force majeure on exports from the Forcados terminal was subsequently lifted on 6 June.
-- After downtime, overall working interest production in H1
across all blocks stood at 9,507 bopd and 101.3 MMscfd, or 26,383
boepd.
-- Guidance reinstated with working interest production in H2
after forecasted downtime expected to average 25,000 to 29,000 bopd
and 110 to 130 MMscfd (43,000 to 50,000 boepd)
Multiple Export Routes
-- Upgrades and repairs now completed as planned on two jetties
at the Warri refinery. The upgraded jetties will enable sustained
exports of 30,000 bopd gross if required in the future
-- Completion of the 160,000 bopd Amukpe to Escravos pipeline
prioritised by the Nigerian government and anticipated to be fully
operational in Q1 2018.
Robust & Growing Gas Business
-- Gas revenues of US$54 million in H1 (41% of total H1 revenues and up 15% year-on-year)
-- Actively engaged with counterparties to finalise new GSA's -
plan to take gross production towards 400 MMscfd
-- Proceeding towards FID at the large scale ANOH gas and condensate development at OML 53
Strengthen Balance Sheet
-- One year extension of revolving credit facility ("RCF"), 30%
oversubscribed and successfully concluded in June
-- US$42 million debt principal repayments made in H1; gross
debt at 30 June US$635 million and net debt US$433 million. Cash at
bank at 30 June US$202 million and discretion maintained over spend
(H1 capex US$11 million)
-- NPDC headline receivable at 30 June US$225 million (31 Dec
2016: US$239 million); net receivable US$215 million (31 Dec 2016:
US$229 million) after adjusting for impairment.
Return to Operating Profit
-- 27% year-on-year reduction in G&A helped drive return to operating profitability
-- Low cost production base (H1 production opex US$5.85/boe),
diversification of oil export routes and growing contribution of
the gas business positions Seplat on trajectory towards increased
long term profitability
Financial overview
US$ million billion
------------------------ ---------------- ----------- ----------------
H1 2017 H1 2016 % change(1) H1 2017 H1 2016
======================== ======= ======= =========== ======= =======
Revenue 132 153(4) -14% 40 31
------------------------ ------- ------- ----------- ------- -------
Gross Profit 54 69 -22% 16 15
------------------------ ------- ------- ----------- ------- -------
Operating Profit/(Loss) 7 (42) -116% 2 (10)
------------------------ ------- ------- ----------- ------- -------
Profit / (loss) for
the Period (28) (61) -54% (8) (13)
------------------------ ------- ------- ----------- ------- -------
Operating cash flow(2) 106 40 165% 32 8
======================== ======= ======= =========== ======= =======
Working interest
production (boepd) 26,383 25,695 3%
------------------------ ------- ------- ----------- ------- -------
Average realised
oil price (US$/bbl)(3) 45.0 45.8 -2%
------------------------ ------- ------- ----------- ------- -------
Average realised
gas price (US$/Mscf) 2.97 3.05 -3%
------------------------ ------- ------- ----------- ------- -------
(1) % change year-on-year calculated on US$ amounts; (2)
Operating cash flow after movements in working capital; (3)
Including sales in the period, stock in tank and hedging
proceeds/costs (4) Net hedging fees reclassified to fair value
movement
OPERATIONS REVIEW
Production for the first six months ended 30 June 2017
Gross Working Interest
----------------- ---------------------------------- ----------------------------------
Liquids(1) Gas Oil equivalent Liquids(1) Gas Oil equivalent
--------- ------ ---------- ------ -------------- ---------- ------ --------------
Seplat bopd MMscfd boepd bopd MMscfd boepd
%
--------- ------ ---------- ------ -------------- ---------- ------ --------------
OMLs 4,
38 & 41 45.0% 16,748 225.0 54,250 7,536 101.3 24,413
--------- ------ ---------- ------ -------------- ---------- ------ --------------
OPL 283 40.0% 2,656 - 2,656 1,062 - 1,062
--------- ------ ---------- ------ -------------- ---------- ------ --------------
OML 53 40.0% 2,271 - 2,271 908 - 908
--------- ------ ---------- ------ -------------- ---------- ------ --------------
Total 21,675 225.0 59,177 9,507 101.3 26,383
--------- ------ ---------- ------ -------------- ---------- ------ --------------
(1) Liquid production volumes as measured at the LACT unit for
OMLs 4, 38 and 41 and OPL 283 flow station. Volumes stated are
subject to reconciliation and will differ from sales volumes within
the period.
Average working interest production during the first six months
was 26,383 boepd (compared to 25,695 boepd in 2016) and comprised
9,507 bopd liquids and 101.3 MMscfd gas. These reported production
figures reflect the longer than expected suspension of oil
production after the terminal operator, Shell Nigeria, declared
force majeure at the terminal from 21 February 2016 to 6 June 2017
following disruption in production and exports caused by a spill on
the Forcados Terminal subsea crude export pipeline. Despite this,
the Company achieved continuity of gas production to supply the
domestic market, albeit at managed levels during the force majeure
period owing to condensate handling constraints. The recommencement
of oil and condensate injection into the Forcados system enabled
Seplat to successfully reinstate gross production at OMLs 4, 38 and
41 to pre-Force Majeure working interest levels of around 56,000
boepd, being liquids of around 34,000 bopd and gas volumes of
around 130 MMscfd.
In H1 2017, Seplat lifted and a monetised an equivalent of 0.5
MMbbls of oil from OML55, which resulted in a receipt of US$22.6
million. The carrying value of the investment in the balance sheet
was reduced from US$250.1 million to US$229 million and a profit of
US$1.5 million was taken to the profit and loss in the period.
Looking ahead, the Company is reinstating working interest
production guidance (before reconciliation losses) for H2 2017 of
25,000 to 29,000 bopd and 110 to 130 MMscfd, which equates to
43,000 to 50,000 boepd. On a full year 2017 basis, also taking into
account H1 actual production, this translates to approximately
17,000 to 19,000 bopd and 105 to 115 MMscfd, or 35,000 to 38,000
boepd. This guidance range is predicated on there being no further
prolonged force majeure event and an overall assumed production
uptime range of 75% to 85% during H2.
Proactive steps to secure alternative oil export routes
The Company's policy of creating multiple export routes for all
of its assets, has resulted in actively pursuing alternative crude
oil evacuation options for production at OMLs 4, 38 and 41 and
potential strategies to further grow and diversify production in
order to reduce any over-reliance on one particular third party
operated export system. In line with this objective, the Company
has successfully completed repairs and upgrades on two jetties at
the Warri refinery that will enable sustained exports of 30,000
bopd (gross) if required in the future. Prior to the repair and
upgrade work on the two jetties gross exports via the Warri
refinery were around the 15,000 bopd level. Exports via the Warri
refinery jetty have incurred barging costs of around US$11/bbl but
partially offsetting this, exports via this route are not subject
to the reconciliation losses (typically in the order of 10% to 12%)
or terminal crude handling and transport charges when exporting via
the TFS.
Longer term, the Amukpe to Escravos 160,000 bopd capacity
pipeline is set to provide a third export option for liquids
production at OMLs 4, 38 and 41. Seplat has agreed with the
pipeline owners, NAPIMS (a 100% subsidiary of NNPC) and Pan Ocean
Corporation Limited, to a joint operating model. An MOU was signed
on 12 July 2017 with the pipeline operator Pan Ocean (and approved
by NAPIMS) to work in partnership on completion of the pipeline,
negotiation with the Escravos Terminal Operator - Chevron on crude
handling and operation & maintenance of the pipeline going
forward.
With line of sight on the availability of three independent
export routes it is Seplat's ultimate intention to utilise all
three to ensure there is adequate redundancy in evacuation routes,
reducing downtime which has adversely affected the business over a
number of years, significantly de-risking the distribution of
production to market.
Continued strong performance of the gas business with production
and revenue upside in H2
Alongside its oil business, the Company has also prioritised the
commercialisation and development of the substantial gas reserves
and resources identified at its blocks and is today a leading
supplier of gas to the domestic market in Nigeria. The lifting of
force majeure and resumption of full exports via the TFS has
removed the condensate handling constraints and translated into an
immediate uplift in gross gas production to around the 290 MMscfd
level from a previously constrained level of 225 MMscfd.
Furthermore, having successfully completed and commissioned the
Phase II expansion of the Oben gas processing plant earlier in the
year, taking overall operated gas processing capacity to the 525
MMscfd level, the Company is actively engaged with counterparties
to increase contracted gas sales with the intention of taking gross
production towards the 400 MMscfd level. Of the 525 MMscfd total
processing capacity, 465 MMscfd is located at Oben with the
remaining 60 MMscfd located at Sapele. The 375 MMscfd expansion at
Oben (Phases I and II) was completed by Seplat as a 100% sole risk
project. The expansion of gas processing capacity is also designed
to allow the Company to receive and tariff third party gas volumes
in the future.
The ANOH gas development at OML 53 (and adjacent OML 21 with
which the upstream project is unitised) is expected to underpin the
next phase of growth for the gas business and Seplat's involvement
positions it at the heart of one of the largest greenfield gas and
condensate developments onshore the Niger Delta to date. The
Company is working with its partners to finalise a framework within
which to progress the upstream and midstream elements of the
project to FID in H2 2017.
Rig activity and other capital projects
Rig based activity year to date has been limited with just one
rig deployed for a workover well in the Orogho field. The workover
and re-completion of the Orogho-7 production well commenced in July
and is expected to be completed in early August. Upgrades to the
liquid treatment infrastructure at OMLs 4,38 and 41 have also been
made that will enable Seplat to inject export grade dry crude via
alternative routes and at the same time eliminate crude handling
charges that have historically been incurred on water in the wet
crude injected into the TFS. The Company continues to exercise
discretion over spend and, having pulled back on expenditure during
the extended period of force majeure, is selectively considering
production drilling opportunities in the existing portfolio with a
view to reinstating a work programme designed to capture the
highest cash return production opportunities whilst diligently
preserving a liquidity buffer.
FINANCE REVIEW
Revenue
Gross revenue for H1 2017 was US$132 m illion ( 40 billion), a
decrease of 14% compared to the same period in 2016 (H1 2016:
US$153 million / 40 billion). The suspension of exports at the
Forcados terminal and consequently lower oil sales together with
lower oil prices in the period have offset the year-on-year
increase in gas production rates and step-up in gas revenues.
Crude revenue (after stock movements) was US$77 million (N24
billion) for the first six months, a 27% decrease from the same
period in 2016 (H1 2016: US$106 million / 22 billion). Gas revenue
for the period was US$54 million ( 17 billion), a 15% increase from
the same period in 2016 (H1 2016: US$47 million / N10 billion).
During the first six months the Group realised an average oil
price of US$45.0/bbl(1) (H1 2016: US$45.8/bbl), against an average
price for Brent in the period of US$45.1/bbl (H1 2016:
US$45.83/bbl), and an average gas price of US$2.97/Mscf (H1 2016:
US$3.05/Mscf). Working interest sales volume for the period
increased slightly to 4.78 MMboe from 4.67 MMboe during the same
period in 2016. Total gas volumes sold were 18.3 Bscf (H1 2016:
15.5 Bscf), while total liquid (crude and condensate) volumes
lifted during the first six months were 1.72 MMbbls (H1 2016: 1.5
MMbbls).
Gross profit
Gross profit for the first six months was US$54 million ( 16
billion), a decrease of 22% compared to the same period in 2016 (H1
2016: US$69 million / 15 billion). The movement is primarily driven
by the reduction in oil revenues recorded in the period, partially
offset by the higher gas revenues and lower cost of sales.
Direct operating costs decreased to US$28 million ( 9 billion)
in the period (H1 2016: US$39 million / N8 billion), principally as
a result of force majeure limiting production activities. Rig
related and other field expenses, which form part of direct
operating costs decreased by 34% compared to the same period in
2016 at US$28 million (N6 billion) as a result of lower operation
& maintenance costs.
Operating profit
Operating profit for the first six months was US$7 million (N2
billion), compared to an operating loss in the same period in 2016
(H1 2016: US$42 million / N10 billion).
Partially offsetting the impact of lower gross revenues was a
27% year-on-year decrease in G&A expenses to US$36 million (N11
billion) during the first six months (H1 2016: US$50 million / N10
billion).
Tax
The Group did not recognise deferred income tax assets of US$235
million (2016: US$192 million) in respect of temporary differences
amounting to US$357 million (2016: US$292 million). Out of this,
deferred tax asset of US$71 million (2016: US$47 million) relates
tax losses of US$109 million (2016: US$71 million). Taxation for
the period was US$1.1 million ( 342 million).
Loss for the period
The Group loss after tax for the first six months was US$28
million ( 8 billion), compared to a loss in the same period in 2016
(H1 2016: US$61 million, 13 billion). Net finance charges stood at
US$34 million (( 10 billion) compared to US$16 million ( 3 billion)
for the same period in 2016 principally as a result of interest
accruable on NPDC and NGC receivables recognised as finance income
in the prior period.
Cash flows from operating activities
Operating cash flow for the first six months was US$106 million
( 32 billion), up 165% compared to the same period in 2016 (H1
2016: US$40 million, 8 billion).
The outstanding net NPDC receivable at period end, after
offsetting NPDC's share of gas revenue, crude handling charges and
adjusting for impairment stood at US$215 million (2016: US$229
million). In accordance with the agreement signed in July 2015 with
NPDC on terms for the payment of receivables due to Seplat, the
Company has continued to withhold and offset gas revenues
attributable to NPDC's 55% share of contracted gas sales. NPDC has
agreed to pay current year US Dollar cash calls as they fall due
and also make further payments for past receivables as well as
continuing the arrangement whereby NPDC gas receipts are used to
fund current year Naira cash calls as well as offsetting historical
balances.
Cash flows from investing activities
Net cash flows from investing activities were US$12 million
(N3.6 billion), slightly up from US$9 million (N2.4 billion) during
the same period in 2016.
Capital investments for the first six months amounted to US$11
million (N3 billion) and reflects the limited levels of operational
activity owing to the extended shut-in of the Forcados terminal.
The vast majority of the Group's capital expenditures are
discretionary and it has the flexibility to align spend with cash
flow on a rolling basis. Committed capital expenditures for the
rest of the year amount to US$20 million and relate to completion
of the Oben booster compression project, construction activities at
the Oben field logistics base and installation of a 20" Oben to NGC
gas sales pipeline. Also included is the drilling of the Anagba-1
appraisal well at OPL 283 and costs to progress the upstream and
midstream elements of the ANOH project to FID.
Cash flows from financing activities
During the first six months loan repayments on the Company's
seven year secured Term Loan amounted to US$16.5 million ( 5
billion) and repayments on its revolving credit facility ("RCF")
amounted to US$25 million ( 8 billion). Gross debt at period end
was US$635 million (N194 billion). Cash at bank at period end stood
at US$202 million ( 62 billion) and net debt US$433 million (N132
billion).
Having re-profiled the seven-year Term Loan in Q3 2016 the
Company announced on 3 July that it had successfully concluded an
oversubscribed one year extension of the RCF. The RCF, originally
due to expire at the end of 2017, now expires on 31 December 2018
and has been successfully amended to amortise the remaining
outstanding principal balance of US$150 million in equal
instalments over five quarters commencing Q4 2017. Overall,
Seplat's aggregate indebtedness under its Term Loan and RCF has
reduced by US$365 million from its peak in Q1 2015 of US$1 billion,
which is a significant deleveraging of the balance sheet
particularly in exceptionally difficult trading conditions over the
past 18 months.
Hedging
The Company had in place dated Brent puts covering a volume of
1.99 MMbbls over H1 2017 at a strike price of US$47.0/bbl resulting
in a realised hedging loss of US$10 million in the period. Over H2
2017 the Company has in place dated Brent puts covering a volume of
1.70 MMbbls at a strike price of US$50.0/bbl. The board and
management continue to closely monitor prevailing oil market
dynamics, and will consider further measures to provide appropriate
levels of cash flow assurance in times of oil price weakness and
volatility.
Principal risks and uncertainties
The Board of Directors is responsible for setting the overall
risk management strategy of the Company and the determination of
what level of risk is acceptable for Seplat to bear. The principal
risks and uncertainties facing Seplat at the year-end are detailed
in the risk management section of the 2016 Annual Report and
Accounts. The board has identified the principal risks for the
remainder of 2017 to be:
-- Third party infrastructure downtime and the corresponding
impact on oil and gas production levels
-- Niger Delta stability and geo-political risk
-- Oil price volatility
-- Successful delivery of the planned work programme
Responsibility Statement
The Directors confirm that to the best of their knowledge:
a) The condensed set of financial statements have been prepared
in accordance with lAS 34 'Interim Financial Report';
b) The interim management report includes a fair review of the
information required by UK DTR 4.2.7R indication of important
events during the first six months and description of principal
risks and uncertainties for the remaining six months of the year
and
c) The interim management report includes a fair review of the
information required by UK DTR 4.2.8R disclosure of related
parties' transactions and changes therein.
The Directors of Seplat Plc are as listed in the Group's 2016
Annual Report and Accounts. A list of current Directors is included
on the company website: www.seplatpetroleum.com.
By order of the Board,
A. B. C. Orjiako A. O. Avuru R.T. Brown
FRC/2013/IODN/00000003161 FRC/2013/IODN/00000003100 FRC/2014/IODN/00000007983
Chairman Chief Executive Officer Chief Financial
Officer
27 July 2017 27 July 2017 27 July 2017
Important notice
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the market Abuse Regulation. Upon the publication of this
announcement via Regulatory Information Service, this inside
information is now considered to be in the public domain.
Certain statements included in these results contain
forward-looking information concerning Seplat's strategy,
operations, financial performance or condition, outlook, growth
opportunities or circumstances in the countries, sectors or markets
in which Seplat operates. By their nature, forward-looking
statements involve uncertainty because they depend on future
circumstances, and relate to events, not all of which are within
Seplat's control or can be predicted by Seplat. Although Seplat
believes that the expectations and opinions reflected in such
forward-looking statements are reasonable, no assurance can be
given that such expectations and opinions will prove to have been
correct. Actual results and market conditions could differ
materially from those set out in the forward-looking statements. No
part of these results constitutes, or shall be taken to constitute,
an invitation or inducement to invest in Seplat or any other
entity, and must not be relied upon in any way in connection with
any investment decision. Seplat undertakes no obligation to update
any forward-looking statements, whether as a result of new
information, future events or otherwise, except to the extent
legally required.
Ernst & Young
10th Floor, UBA House
57, Marina
Lagos, Nigeria
Tel: +234 (01) 844 996 2/3
Fax: +234 (01) 463 0481
Email: services@ng.ey.com
www.ey.com
Report on review of interim condensed consolidated financial
statements to the shareholders of Seplat Petroleum Development
Company Plc
Introduction
We have reviewed the accompanying interim condensed consolidated
financial statements of Seplat Petroleum Development Company Plc
and its subsidiaries (the Group), which comprise the interim
condensed consolidated statements of financial position at 30 June
2017 and profit or loss and other comprehensive income, changes in
equity and cash flows for the half year then ended, and explanatory
notes. The Company's directors are responsible for the preparation
and fair presentation of these interim condensed consolidated
financial statements in accordance with IAS 34 Interim Financial
Reporting and in the manner required by the Companies and Allied
Matters Act, CAP C20, Laws of the Federation of Nigeria 2004 and
the Financial Reporting Council of Nigeria (FRCN) Act, No. 6, 2011.
Our responsibility is to express a conclusion on these interim
condensed consolidated financial statements based on our
review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity. A
review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying interim condensed
consolidated financial statements are not prepared, in all material
respects, in accordance with IAS 34.
Bernard Carrena, FCA
FRC/2013/ICAN/00000000670
For Ernst & Young
Lagos, Nigeria
27 July 2017
Webcast and conference call
At 10:00 am BST (London) / 10:00 am WAT (Lagos), Austin Avuru
(CEO) and Roger Brown (CFO) will host a webcast and conference call
to discuss the Company's results.
The webcast can be accessed via the Company's website
http://seplatpetroleum.com/ or at the following address:
https://webconnect.webex.com/webconnect/onstage/g.php?MTID=e1dc4d6ca735b539340fecc960acf3f9b
To listen to the audio commentary only, participants can use the
following telephone number:
Telephone Number (UK toll free): 0844 871 9434 or 0800 073
1340
Telephone number (international access): +44 (0) +44 (0) 1452
569393
Conference title: SEPLAT PETROLEUM DEVELOPMENT COMPANY - INTERIM
RESULTS
Conference ID: 52989164
If you are listening to the audio commentary and viewing the
webcast, you may notice a slight delay to the rate the slides
change on the webcast. If this is affecting you, please download
the pdf slide pack from the Company's website
http://seplatpetroleum.com/
Enquiries:
Seplat Petroleum Development Company
Plc
Roger Brown, CFO +44 203 725 6500
Andrew Dymond, Head of Investor Relations
Ayeesha Aliyu, Investor Relations +234 1 277 0400
Chioma Nwachuku, GM - External Affairs
and Communications
------------------------------------------ ----------------
FTI Consulting
Ben Brewerton / Sara Powell
seplat@fticonsulting.com +44 203 727 1000
------------------------------------------ ----------------
Citigroup Global Markets Limited
Tom Reid / Luke Spells +44 207 986 4000
------------------------------------------ ----------------
Investec Bank plc
Chris Sim / George Price +44 207 597 4000
Notes to editors
Seplat Petroleum Development Company Plc is a leading indigenous
Nigerian oil and gas exploration and production company with a
strategic focus on Nigeria, listed on the Main Market of the London
Stock Exchange ("LSE") (LSE:SEPL) and Nigerian Stock Exchange
("NSE") (NSE:SEPLAT).
Seplat is pursuing a Nigeria focused growth strategy and is
well-positioned to participate in future divestment programmes by
the international oil companies, farm-in opportunities and future
licensing rounds. For further information please refer to the
Company website, http://seplatpetroleum.com/
Interim condensed consolidated statement of profit or loss and
other comprehensive income
for the half year ended 30 June 2017
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
---------------- --------------- -------------------- --------------
Unaudited Unaudited Unaudited Unaudited
---------------- --------------- -------------------- --------------
Note 'm 'm 'm 'm
======================================= ==== ================ =============== ==================== ==============
Revenue 7 40,317 31,576 25,843 14,991
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Cost of sales 8 (23,914) (16,854) (15,290) (6,162)
======================================= ==== ================ =============== ==================== ==============
Gross profit 16,403 14,722 10,553 8,829
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
General and administrative expenses 9 (11,108) (10,333) (5,979) (6,069)
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Loss on foreign exchange - net 10 (264) (6,382) (793) (5,897)
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Fair value loss 11 (2,817) (7,573) (1,155) (7,414)
======================================= ==== ================ =============== ==================== ==============
Operating profit/(loss) 2,214 (9,566) 2,626 (10,551)
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Finance income 12 270 5,694 206 5,270
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Finance costs 12 (10,574) (8,321) (5,317) (3,933)
======================================= ==== ================ =============== ==================== ==============
Loss before taxation (8,090) (12,193) (2,485) (9,214)
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Taxation 13 (342) (615) (92) 886
======================================= ==== ================ =============== ==================== ==============
Loss for the period (8,432) (12,808) (2,577) (8,328)
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Loss attributable to equity holders of
parent (8,432) (13,081) (2,577) (9,340)
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Profit attributable to non-controlling
interest - 273 - 1,012
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Other comprehensive income/(loss):
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Items that may be reclassified to
profit or loss:
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Foreign currency translation difference 1,049 113,254 (1,403) 113,784
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Total comprehensive (loss)/income for
the period (7,383) 100,446 (3,980) 105,456
======================================= ==== ================ =============== ==================== ==============
(Loss)/profit attributable to equity
holders of parent (7,383) 98,436 (3,980) 102,707
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Profit attributable to non-controlling
interest - 2,010 - 2,749
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Loss per share ( ) 14 (14.97) (23.33) (4.57) (16.66)
--------------------------------------- ---- ---------------- --------------- -------------------- --------------
Diluted loss per share( ) 14 (14.83) (23.24) (4.53) (16.60)
======================================= ==== ================ =============== ==================== ==============
Interim condensed consolidated statement of financial
position
As at 30 June 2017
As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
Unaudited Audited
------------------ -----------------
Note 'm 'm
=========================================== ==== ================== =================
Assets
------------------------------------------- ---- ------------------ -----------------
Non-current assets
------------------------------------------- ---- ------------------ -----------------
Oil and gas properties 369,046 373,442
------------------------------------------- ---- ------------------ -----------------
Other property, plant and equipment 1,809 2,430
------------------------------------------- ---- ------------------ -----------------
Other asset 17 70,040 76,277
------------------------------------------- ---- ------------------ -----------------
Prepayments 9,672 10,253
------------------------------------------- ---- ------------------ -----------------
Total non-current assets 450,567 462,402
=========================================== ==== ================== =================
Current assets
------------------------------------------- ---- ------------------ -----------------
Inventories 31,229 32,395
------------------------------------------- ---- ------------------ -----------------
Trade and other receivables 18 132,520 119,160
------------------------------------------- ---- ------------------ -----------------
Prepayments 983 2,035
------------------------------------------- ---- ------------------ -----------------
Cash & cash equivalents 61,631 48,684
=========================================== ==== ================== =================
Total current assets 226,363 202,274
=========================================== ==== ================== =================
Total assets 676,930 664,676
=========================================== ==== ================== =================
Equity and liabilities
------------------------------------------- ---- ------------------ -----------------
Equity
------------------------------------------- ---- ------------------ -----------------
Issued share capital 19 283 283
------------------------------------------- ---- ------------------ -----------------
Share premium 82,080 82,080
------------------------------------------- ---- ------------------ -----------------
Share based payment reserve 19 3,415 2,597
------------------------------------------- ---- ------------------ -----------------
Capital contribution 5,932 5,932
------------------------------------------- ---- ------------------ -----------------
Retained earnings 76,620 85,052
------------------------------------------- ---- ------------------ -----------------
Foreign currency translation reserve 201,478 200,429
=========================================== ==== ================== =================
Total equity 369,808 376,373
=========================================== ==== ================== =================
Non-current liabilities
------------------------------------------- ---- ------------------ -----------------
Interest bearing loans & borrowings 16 133,163 136,060
------------------------------------------- ---- ------------------ -----------------
Deferred tax liabilities 23 -
------------------------------------------- ---- ------------------ -----------------
Contingent consideration 23 3,957 3,672
------------------------------------------- ---- ------------------ -----------------
Provision for decommissioning obligation 197 182
------------------------------------------- ---- ------------------ -----------------
Defined benefit plan 1,905 1,559
=========================================== ==== ================== =================
Total non-current liabilities 139,245 141,473
=========================================== ==== ================== =================
Current liabilities
------------------------------------------- ---- ------------------ -----------------
Interest bearing loans and borrowings 16 57,867 66,489
------------------------------------------- ---- ------------------ -----------------
Trade and other payables 20 109,114 79,766
------------------------------------------- ---- ------------------ -----------------
Current taxation 896 575
------------------------------------------- ---- ------------------ -----------------
Total current liabilities 167,877 146,830
=========================================== ==== ================== =================
Total liabilities 307,122 288,303
=========================================== ==== ================== =================
Total shareholders' equity and liabilities 676,930 664,676
=========================================== ==== ================== =================
Interim condensed consolidated statement of financial position
continued
As at 30 June 2017
The financial statements on pages 10 to 32 were approved and
authorised for issue by the board of directors on 20 July 2017 and
were signed on its behalf by
A. B. C. Orjiako A. O. Avuru R.T. Brown
FRC/2013/IODN/00000003161 FRC/2013/IODN/00000003100 FRC/2014/IODN/00000007983
Chairman Chief Executive Officer Chief Financial
Officer
27 July 2017 27 July 2017 27 July 2017
Interim condensed consolidated statement of changes in equity
continued
for the half year ended 30 June 2017
for the half year ended 30
June 2016
============================================================ ========== ============ ========== =========== =============== ===========
Share Foreign
Issued based currency
share Share Capital payment translation Retained Non-controlling Total
capital premium contribution reserve reserve earnings Total interest equity
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
'm 'm 'm 'm 'm 'm 'm 'm 'm
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
At 1 January
2016 282 82,080 5,932 1,729 56,182 134,919 281,124 (148) 280,976
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
(Loss)/Profit
for the period - - - - - (13,081) (13,081) 273 (12,808)
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
Other
comprehensive
income - - - 111,517 - 111,517 1,737 113,254
============== ============ ============= =============== ========== ============ ========== =========== =============== ===========
Total
comprehensive
loss for the
period - - - - 111,517 (13,081) 98,436 2,010 100,446
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
Transactions
with owners
in their
capacity
as owners:
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
Share based
payments - - - 375 - - 375 - 375
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
Dividends - - - - - (5,118) (5,118) (5,118)
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
Total - - - 375 - (5,118) (4,743) - (4,743)
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
At 30 June 2016
(unaudited) 282 82,080 5,932 2,104 167,699 116,720 374,817 1,862 376,679
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
for the half year ended 30 June 2017
=============================================================================================================================================
Share Foreign
Issued based currency
share Share Capital payment translation Retained Non-controlling Total
capital premium contribution reserve reserve earnings Total interest equity
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
'm 'm 'm 'm 'm 'm 'm 'm 'm
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
At 1 January
2017 283 82,080 5,932 2,597 200,429 85,052 376,373 - 376,373
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
Loss for the
period - - - - - (8,432) (8,432) - (8,432)
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
Other
comprehensive
income - - - - 1,049 - 1,049 - 1,049
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
Total
comprehensive
loss for the
period - - - - 1,049 (8,432) (7,383) - (7,383)
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
Transactions
with owners
in their
capacity
as owners: - - - - - - - - -
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
Share based
payments - - - 818 - - 818 - 818
--------------- ----------- ------------- --------------- ---------- ------------ ---------- ----------- --------------- -----------
Dividends - - - - - - - - -
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
Total - - - 818 - - 818 - 818
At 30 June 2017
(unaudited) 283 82,080 5,932 3,415 201,478 76,620 369,808 - 369,808
=============== =========== ============= =============== ========== ============ ========== =========== =============== ===========
Interim condensed consolidated statement of cash flow
for the half year ended 30 June 2017
Half year ended Half year ended
30 June 2017 30 June 2016
------------------- ------------------
'm 'm
------------------- ------------------
Note Unaudited Unaudited
================================================================================================================ =================== ==================
Cash flows from operating activities
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Cash generated from operations 21 32,492 8,287
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Net cash inflows from operating activities 32,492 8,287
================================================================================================================ =================== ==================
Cash flows from investing activities
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Acquisition of oil and gas properties (3,424) (3,091)
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Acquisition of other property, plant and equipment (118) (246)
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Receipts from other asset 17 6,914 -
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Interest received 270 5,694
================================================================================================================ =================== ==================
Net cash inflows from investing activities 3,642 2,357
================================================================================================================ =================== ==================
Cash flows from financing activities -
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Repayments of bank financing (12,693) (24,201)
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Dividends paid - (5,118)
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Interest paid (10,560) (8,298)
================================================================================================================ =================== ==================
Net cash outflows from financing activities (23,253) (37,617)
================================================================================================================ =================== ==================
Net decrease in cash and cash equivalents 12,881 (26,973)
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Cash and cash equivalents at beginning of period 48,684 64,828
---------------------------------------------------------------------------------------------------------------- ------------------- ------------------
Effects of exchange rate changes on cash and cash equivalents 66 (13,028)
================================================================================================================ =================== ==================
Cash and cash equivalents at end of period 61,631 24,827
================================================================================================================ =================== ==================
Notes to the interim condensed consolidated financial
statements
1. Corporate structure and business
Seplat Petroleum Development Company Plc ('Seplat' or the
'Company'), the parent of the Group, was incorporated on 17 June
2009 as a private limited liability company and re-registered as a
public company on 3 October 2014, under the Companies and Allied
Matters Act, CAP C20, Laws of the Federation of Nigeria 2004. The
Company commenced operations on 1 August 2010. The Company is
principally engaged in oil and gas exploration and production.
The Company's registered address is: 25a Lugard Avenue, Ikoyi,
Lagos, Nigeria.
The Company acquired, pursuant to an agreement for assignment
dated 31 January 2010 between the Company, SPDC,
TOTAL and AGIP, a 45% participating interest in the following
producing assets:
OML 4, OML 38 and OML 41 located in Nigeria. The total purchase
price for these assets was US$340 million paid at the completion of
the acquisition on 31 July 2010 and a contingent payment of US$33
million payable 30 days after the second anniversary, 31 July 2012,
if the average price per barrel of Brent Crude oil over the period
from acquisition up to 31 July 2012 exceeds US$80 per barrel.
US$358.6 million was allocated to the producing assets including
US$18.6 million as the fair value of the contingent consideration
as calculated on acquisition date. The contingent consideration of
US$33 million was paid on 22 October 2012.
In 2013, Newton Energy Limited ("Newton Energy"), an entity
previously beneficially owned by the same shareholders as Seplat,
became a subsidiary of the Company. On 1 June 2013, Newton Energy
acquired from Pillar Oil Limited ("Pillar Oil") a 40 percent
Participant interest in producing assets: the Umuseti/Igbuku
marginal field area located within OPL 283 (the "Umuseti/Igbuku
Fields").
On 27 March 2013, Seplat Energy Limited ("Seplat Energy") was
incorporated. The principal activities of the Company is the
exploration, development and transportation of petroleum products
and Seplat Gas Company Limited ("Seplat Gas") was incorporated on 9
December 2013 as a private limited liability company to engage in
oil and gas exploration and production.
In 2015, the Group purchased a 40% participating interest in OML
53, onshore north eastern Niger Delta, from Chevron Nigeria Ltd for
US$259.4 million.
In 2017, the Group incorporated a new subsidiary, ANOH Gas
Processing Company Limited. The principal activities of the Company
is the processing of gas from OML 53.
The Company together with its subsidiary, Newton Energy, and six
wholly owned subsidiaries, namely, Seplat
Petroleum Development Company UK Limited ('Seplat UK'), which
was incorporated on 21 August 2014, Seplat East
Onshore Limited ('Seplat East'), which was incorporated on 12
December 2014, Seplat East Swamp Company Limited
('Seplat Swamp'), which was incorporated on 12 December 2014,
Seplat Gas Company Limited ('Seplat GAS'), which was incorporated
on 12 December 2014, Seplat Energy Limited ('Seplat Energy'), which
was incorporated on 27 March 2013 and ANOH Gas Processing Company
Limited which was incorporated on 18 January 2017 are collectively
referred to as the Group.
Subsidiary Country of incorporation and
place of business Shareholding % Principal activities
================================= ================================ ============== =================================
Newton Energy Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat Petroleum Development UK Oil & gas exploration and
United Kingdom 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat East Onshore Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat East Swamp Company Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat Gas Company Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat Energy Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
ANOH Gas Processing Company Nigeria 100% Gas processing
Limited
================================= ================================ ============== =================================
Notes to the interim condensed consolidated financial statements
continued
2. Significant changes in the current reporting period
During the reporting period ended 30 June 2017, the Group
renegotiated its lending arrangements resulting in a twelve month
extension of its revolving credit facility till 31 December 2018.
The Group also significantly increased its production volumes as a
result of the lift in the force majeure which had in the previous
financial year restricted exports from the Forcados terminal. The
Group plans to open up other export lines to ensure sustained
growth in production volumes.
Resumption of exports via the Forcados terminal, has
strengthened the Group's financial performance and position during
the period ended 30 June 2017.
3. Summary of significant accounting policies
3.1 Introduction to summary of significant accounting policies
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards which are set
out below.
3.2 Basis of preparation
i) Compliance with IFRS
The interim condensed consolidated financial statements of the
Group for the half year reporting period ended 30 June 2017 have
been prepared in accordance with accounting standard IAS 34 Interim
financial reporting.
ii) Historical cost convention
The financial information has been prepared under the going
concern assumption and historical cost convention, except for
contingent consideration, other asset and financial instruments on
initial recognition measured at fair value. The historical
financial information is presented in Nigerian Naira and all values
are rounded to the nearest million ( 'm) except when otherwise
indicated. The accounting policies are applicable to both the
Company and Group.
iii) Going concern
Nothing has come to the attention of the directors to indicate
that the Company will not remain a going concern for at least
twelve months from the date of these financial statements.
iv) New and amended standards adopted by the Group
There were a number of new standards and amendments to standards
that are effective for annual periods beginning after 1 January
2017; the Group has adopted these new or amended standards in
preparing the interim condensed consolidated financial statements.
The nature and impact of the new standards and amendments to the
standards are described below.
Other than the changes described below, the accounting policies
adopted are consistent with those of the previous financial
year.
a) Disclosure initiative - Amendments to IAS 7
The Group is now required to explain changes in their
liabilities arising from financing activities. This includes
changes arising from cash flows (e.g. drawdowns and repayments of
borrowings) and non-cash changes such as acquisitions, disposals,
accretion of interest and unrealised exchange differences.
Changes in financial assets are included in this disclosure if
the cash flows were, or are, included in cash flows from financing
activities. This is the case, for example, for assets that hedge
liabilities arising from financing liabilities.
The Group may include changes in other items as part of this
disclosure, for example by providing a 'net debt' reconciliation.
However, in this case the changes in the other items are disclosed
separately from the changes in liabilities arising from financing
activities.
Notes to the interim condensed consolidated financial statements
continued
The Group discloses this information in tabular format as a
reconciliation from opening and closing balances, but may adopt a
different format as the standard does not mandate a specific
format.
The Group discloses this information in Note 16.
v) New standards, amendments and interpretations not yet adopted
The Group has the following updates to information provided in
the last annual financial statements about the standards issued but
not yet effective that may have a significant impact on the Group's
consolidated financial statements.
a. Amendments to IFRS 2 Share-based payments
In June 2016, the IASB made amendments to IFRS 2 Share-based
payments which clarified the effect of vesting conditions on the
measurement of cash-settled share-based payment transactions, the
classification of share-based payment transactions with net
settlement features and the accounting for a modification of the
terms and conditions that changes the classification of the
transaction from cash-settled to equity-settled.
The amendments are effective for reporting periods beginning on
or after 1 January 2018. The Group will adopt the amendments from 1
January 2018.
b. IFRS 9 Financial Instruments
IFRS 9 Financial instruments addresses the classification,
measurement and de-recognition of financial assets and financial
liabilities, the standard introduces new rules for hedge accounting
and a new impairment model for financial assets. The Group has
decided not to adopt IFRS 9 until it becomes mandatory on 1 January
2018.
The Group is undergoing a detailed assessment of the impact of
the new standard on the classification and measurement of its
financial assets. From the preliminary results, the Group does not
expect the new guidance to have a significant impact on the
classification and measurement of its financial assets for the
following reason:
-- All of the Group's financial assets are currently classified
as loans and receivables and are measured at amortised cost and
will satisfy the conditions for classification at amortised cost
under IFRS 9.
There will be no impact on the Group's accounting for financial
liabilities, as the new requirements only affect accounting for
financial liabilities that are designated at fair value through
profit or loss and the Group does not have such liabilities. The
de-recognition rules have been transferred from IAS 39 Financial
Instruments: Recognition and Measurement and have not been changed.
The new hedge accounting rules will align the accounting for
hedging instruments more closely with the Group's risk management
practices. As a general rule, more hedge relationships might be
eligible for hedge accounting, as the standard introduces a more
principles-based approach. The Group does not expect a significant
impact on the accounting for its hedging relationships as a result
of the adoption of IFRS 9, as they have not formally elected to
apply hedge accounting.
The new impairment model requires the recognition of impairment
provisions based on expected credit losses (ECL) rather than only
incurred credit losses as is the case under IAS 39. It applies to
financial assets classified at amortised cost, debt instruments
measured at fair value through OCI (FVOCI), contract assets under
IFRS 15: Revenue from Contracts with Customers and lease
receivables. Based on assessments undertaken on the Group's
portfolio of NPDC receivables, it estimates that should the new
rules had been adopted as at 1 January 2017, there would have been
an increase to its loss allowance for NPDC receivables of
approximately N1.2 billion (US$4 million) at that date and retained
earnings would decrease by the same amount.
The new standard also introduces expanded disclosure
requirements and changes in presentation. These are expected to
change the nature and extent of the Group's disclosures about its
financial instruments particularly in the year of the adoption of
the new standard.
c. IFRS 15 Revenue from contracts with customers
The IASB has issued a new standard for the recognition of
revenue. This will replace IAS 18 which covers revenue arising from
the sale of goods and the rendering of services and IAS 11 which
covers construction contracts.
The new standard is based on the principle that revenue is
recognised when control of a good or service transfers to a
customer.
Notes to the interim condensed consolidated financial statements
continued
The standard permits either a full retrospective or a modified
retrospective approach for the adoption. The new standard is
effective for first interim periods within annual reporting periods
beginning on or after 1 January 2018. The Group will adopt the new
standard from 1 January 2018.
Management identified the following areas that are likely to be
affected:
-- Accounting for under lifts and over lifts: IFRS 15 is
applicable only if the counterparty to the contract is a customer.
The standard defines a customer as a party that has contracted with
an entity to obtain goods or services that are an output of the
entity's ordinary activities. IFRS 15 makes a distinction between
customers and partners or collaborators who share in the risks and
benefits that result from the activity or process. If the
over-lifter does not meet the definition of a customer or the
transaction is a non-monetary exchange, then over lifts and under
lifts will not be recognised as revenue from contracts with
customers. If the Group were to adopt the new rules as at 1 January
2017, it estimates that revenue would have reduced by N5 billion
(US$16 million) and other operating income would have increased by
the same amount.
-- Accounting for consideration payable to the customer: The
standard requires that an entity accounts for consideration payable
to a customer as a reduction of the transaction price and,
therefore, net of revenue unless the payment to the customer is in
exchange for a distinct good or service that the customer transfers
to the entity. The Group incurs barging costs in the course of the
satisfaction of its performance obligations i.e. delivery of crude
oil and gas. These costs do not transfer any distinct good or
service to Seplat and as such represent consideration payable to
customer and will be accounted for as a direct deduction from
revenue. If the Group had adopted the new rules as at 1 January
2017, revenue would have reduced by an additional N5.5 billion
(US$18 million) as a result of barging costs.
-- Presentation of contract assets and contract liabilities in
the balance sheet - IFRS 15 requires separate presentation of
contract assets and contract liabilities in the balance sheet. This
will result in some reclassifications as of 1 January 2018 in
relation to advances for future oil sales which are currently
included in deferred revenue.
-- Other likely areas of impact are in relation to advances for
future oil sales that may have a significant financing component
and variable consideration arising from gas pricing based on an
index as well as optional pricing on crude oil sold to
customers.
d. IFRS 16 Leases
IFRS 16 was issued in January 2016. It will result in almost all
leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a
financial liability to pay rentals are recognised. The only
exceptions are short-term and low-value leases. The accounting for
lessors will not significantly change.
The standard will affect primarily the accounting for the
Group's operating leases. As at the reporting date, the Group has
non-cancellable operating lease commitments of N119 million (US$
0.39 million). However, the Group has not yet determined to what
extent these commitments will result in the recognition of an asset
and a liability for future payments and how this will affect the
Group's profit and classification of cash flows.
Some of the commitments may be covered by the exception for
short-term leases, while none of the leases will be covered by the
exception for low value leases. Some commitments may relate to
arrangements that will not qualify as leases under IFRS 16,
principally because they are service contracts.
The standard is mandatory for first interim periods within
annual reporting periods beginning on or after 1 January 2019. At
this stage, the Group does not intend to adopt the standard before
its effective date.
3.3 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 30 June
2017.
This basis is the same adopted for the last audited financial
statements as at 31 December 2016.
3.4 Functional and presentation currency
The Group's financial statements are presented in United States
Dollars, which is also the Company's functional currency. For each
entity the Group determines the functional currency and items
included in the financial statements of each entity are measured
using that functional currency.
Notes to the interim condensed consolidated financial statements
continued
i) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies
at year end exchange rates are generally recognised in profit or
loss. Foreign exchange gains and losses that relate to borrowings
are presented in the statement of profit or loss, within finance
costs. All other foreign exchange gains and losses are presented in
the statement of profit or loss on a net basis within other income
or other expenses.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the
fair value gain or loss.
ii) Group companies
The results and financial position of foreign operations that
have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of the balance sheet
-- income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the
dates of the transactions), and
-- all resulting exchange differences are recognised in other comprehensive income.
On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation
is recognised in profit or loss.
4. Segment reporting
Segment reporting has not been prepared as the Group operates
one segment, being the exploration, development and production of
oil and gas related products located in Nigeria. Operations in the
different OMLs are integrated due to geographic proximity, the use
of shared infrastructure and common operational management.
5. Significant accounting judgements, estimates and assumptions
5.1 Judgements
Management's judgements at the end of the half year are
consistent with those disclosed in the recent 2016 Annual financial
statements. The following are some of the judgements which have the
most significant effect on the amounts recognised in this
consolidated financial statements.
i) OMLs 4, 38 and 41
OMLs 4, 38, 41 are grouped together as a cash generating unit
for the purpose of impairment testing. These three
OMLs are grouped together because they each do not independently
generate cash flows. They currently operate as a single block
sharing resources for the purpose of generating cash flows. Crude
oil and gas sold to third parties from these OMLs are invoiced
together.
ii) Advances on investment (note 18)
The Group considers that the advances on investment of 20
million (2016: 20 million) in relation to the acquisition of
additional assets is fully recoverable in accordance with the terms
of the deposit.
Notes to the interim condensed consolidated financial statements
continued
5.2 Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amount of assets and
liabilities are disclosed in the most recent 2016 annual financial
statements.
The following are some of the estimates and assumptions
made.
i) Impairment of financial assets
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred loss event)
and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include
indications that the debtor or a group of debtors is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and observable
data indicating that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Management has made certain assumptions about the recoverability
of financial assets exposed to credit risk from NPDC. These are
based on management's past experiences with NPDC, current
discussions with NPDC and financial capacity of NPDC. However,
wherever these assumptions do not hold, it might have a significant
impact on the Group's profit or loss in future.
ii) Defined benefit plans
The cost of the defined benefit retirement plan and the present
value of the retirement obligation are determined at the end of the
financial year using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual
developments in the future. These include the determination of the
discount rate, future salary increases, mortality rates and changes
in inflation rates. Service and interest costs are recognised at
each reporting period based on an estimate of the periodic benefit
expense for the financial year.
The defined benefit obligation recognised in this period has
been based on the same assumptions as in the previous financial
year The subsequent financial year end balance was estimated as at
31 December 2016 and has been recognised in this half year period
on a pro rata basis. Therefore, no actuarial gains or losses have
been recognised given that last year's assumptions have been
adopted.
iii) Contingent consideration
The fair value of the contingent consideration arrangement of N4
billion (US$12.9 million) was estimated calculating the present
value of the future expected cash flows. The estimates are based on
a discount rate of 15.45%. Refer to note 23 for further
details.
6. Financial risk management
6.1 Financial risk factors
The Group's activities expose it to a variety of financial risks
such as market risk (including foreign exchange risk, interest rate
risk and commodity price risk), credit risk and liquidity risk. The
Group's risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the Group's financial performance.
Risk management is carried out by the treasury department under
policies approved by the Board of Directors. The Board provides
written principles for overall risk management, as well as written
policies covering specific areas, such as foreign exchange risk,
interest rate risk, credit risk and investment of excess
liquidity.
Notes to the interim condensed consolidated financial statements
continued
Risk Exposure arising Measurement Management
from
------------ ------------------------- --------------------- --------------------
Market risk Future commercial Cash flow forecasting Match and settle
- foreign transactions Sensitivity foreign denominated
exchange Recognised financial analysis cash inflows
assets and liabilities with foreign
not denominated denominated cash
in US dollars. outflows.
------------ ------------------------- --------------------- --------------------
Market risk Long term borrowings Sensitivity None
- interest at variable rate analysis
rate
------------ ------------------------- --------------------- --------------------
Market risk Future sales transactions Sensitivity Oil price hedges
- commodity analysis
prices
------------ ------------------------- --------------------- --------------------
Credit risk Cash and cash Aging analysis Diversification
equivalents, trade Credit ratings of bank deposits.
receivables and
derivative financial
instruments.
------------ ------------------------- --------------------- --------------------
Liquidity Borrowings and Rolling cash Availability
risk other liabilities flow forecasts of committed
credit lines
and borrowing
facilities
------------ ------------------------- --------------------- --------------------
6.1.1 Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
The Group manages liquidity risk by ensuring that sufficient
funds are available to meet its commitments as they fall due.
The Group uses both long-term and short-term cash flow
projections to monitor funding requirements for activities and to
ensure there are sufficient cash resources to meet operational
needs. Cash flow projections take into consideration the Group's
debt financing plans and covenant compliance. Surplus cash held is
transferred to the treasury department which invests in interest
bearing current accounts, time deposits and money market
deposits.
The following table details the Group's remaining contractual
maturity for its non-derivative financial liabilities with agreed
maturity periods. The table has been drawn based on the
undiscounted cash flows of the financial liabilities based on the
earliest date on which the Group can be required to pay.
Notes to the interim condensed consolidated financial statements
continued
Variable rate Less than 1 year 1 -2 2 - 3 3 - 5 After Total
years years years 5 years
===================================== ============== ================= ======= ======= ======= ======== =======
% 'm 'm 'm 'm 'm 'm
------------------------------------- ============== ================= ======= ======= ======= ======== =======
30 June 2017
===================================== ============== ================= ======= ======= ======= ======== =======
Non - derivatives
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Variable interest rate borrowings
(bank loans):
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Allan Gray 8.5%+LIBOR 1,324 1,631 1,500 929 - 5,384
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Zenith Bank Plc 8.5%+LIBOR 18,141 22,352 20,554 12,734 - 73,781
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
First Bank of Nigeria 8.5%+LIBOR 10,015 12,339 11,346 7,030 - 40,730
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
United Bank of Africa Plc 8.5%+LIBOR 11,338 13,970 12,846 7,959 - 46,113
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Stanbic IBTC Bank Plc 8.5%+LIBOR 1,699 2,094 1,925 1,193 - 6,911
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
The Standard Bank of South Africa
Limited 8.5%+LIBOR 1,699 2,094 1,925 1,193 - 6,911
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Standard Chartered Bank 6.0%+LIBOR 4,545 2,826 - - - 7,371
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Natixis 6.0%+LIBOR 4,545 2,826 - - - 7,371
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Citibank Nigeria Limited and Citibank
N.A. 6.0%+LIBOR 3,535 2,198 - - - 5,733
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
First Rand Bank (Merchant Bank
Division) 6.0%+LIBOR 3,030 1,884 - - - 4,914
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Nomura International Plc. 6.0%+LIBOR 3,030 1,884 - - - 4,914
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Ned Bank Ltd London Branch 6.0%+LIBOR 3,030 1,884 - - - 4,914
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
The Mauritius Commercial Bank Plc 6.0%+LIBOR 3,030 1,884 - - - 4,914
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Stanbic IBTC Bank Plc 6.0%+LIBOR 2,272 1,413 - - - 3,685
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
The Standard Bank of South Africa
Limited 6.0%+LIBOR 3,283 2,041 - - - 5,324
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Other non-derivatives
------------------------------------- -------------- ----------------- ------- ------- ------- -------- -------
Trade and other payables 47,677 - - - - 47,677
----------------------------------------------------- ----------------- ------- ------- ------- -------- -------
Contingent consideration - - 5,643 - - 5,643
===================================================== ================= ======= ======= ======= ======== =======
122,193 73,320 55,739 31,038 - 282,290
==================================================== ================= ======= ======= ======= ======== =======
Notes to the interim condensed consolidated financial statements
continued
Variable Less 1 - 2 - 3 - After Total
rate than 2 3 5 5 years
1 year year years years
------------------------- ========= ======== ======= ======= ======= ======== ========
% 'm 'm 'm 'm 'm 'm
------------------------- ========= ======== ======= ======= ======= ======== ========
31 December 2016
========================= --------- -------- ------- ------- ------- -------- --------
Non - derivatives
------------------------- --------- -------- ------- ------- ------- -------- --------
Variable interest
rate borrowings
(bank loans):
------------------------- --------- -------- ------- ------- ------- -------- --------
8.5%
Zenith Bank Plc + LIBOR 11,409 23,182 21,383 22,715 - 78,689
------------------------- --------- -------- ------- ------- ------- -------- --------
First Bank of Nigeria 8.5%
Limited + LIBOR 7,131 14,489 13,364 14,197 - 49,181
------------------------- --------- -------- ------- ------- ------- -------- --------
United Bank for 8.5%
Africa Plc + LIBOR 7,131 14,489 13,364 14,197 - 49,181
------------------------- --------- -------- ------- ------- ------- -------- --------
Stanbic IBTC Bank 8.5%
Plc + LIBOR 1,069 2,171 2,003 2,128 - 7,371
------------------------- --------- -------- ------- ------- ------- -------- --------
The Standard Bank
of South Africa 8.5%
Limited + LIBOR 1,069 2,171 2,003 2,128 - 7,371
------------------------- --------- -------- ------- ------- ------- -------- --------
Standard Chartered 8.5%
Bank + LIBOR 8,452 - - - - 8,452
------------------------- --------- -------- ------- ------- ------- -------- --------
6.00%
Natixis + LIBOR 8,452 - - - - 8,452
------------------------- --------- -------- ------- ------- ------- -------- --------
Citibank Nigeria
Ltd and Citibank 6.00%
NA + LIBOR 8,452 - - - - 8,452
------------------------- --------- -------- ------- ------- ------- -------- --------
Bank of America
Merrill Lynch Int'l 6.00%
Ltd + LIBOR 5,635 - - - - 5,635
------------------------- --------- -------- ------- ------- ------- -------- --------
FirstRand Bank Ltd
(Rand Merchant Bank 6.00%
Division) + LIBOR 5,635 - - - - 5,635
------------------------- --------- -------- ------- ------- ------- -------- --------
JP Morgan Chase
Bank NA, London 6.00%
Branch + LIBOR 5,635 - - - - 5,635
------------------------- --------- -------- ------- ------- ------- -------- --------
NedBank Ltd, London 6.00%
Branch + LIBOR 5,635 - - - - 5,635
------------------------- --------- -------- ------- ------- ------- -------- --------
Stanbic IBTC Bank 6.00%
Plc + LIBOR 4,225 - - - - 4,225
------------------------- --------- -------- ------- ------- ------- -------- --------
The Standard Bank
of South Africa 6.00%
Ltd + LIBOR 4,225 - - - - 4,225
------------------------- --------- -------- ------- ------- ------- -------- --------
Other non - derivatives
------------------------- --------- -------- ------- ------- ------- -------- --------
Trade and other
payables 49,341 - - - - 49,341
------------------------------------ -------- ------- ------- ------- -------- --------
Contingent consideration - - - 5,643 - 5,643
------------------------------------ -------- ------- ------- ------- -------- --------
133,496 56,502 52,117 61,008 - 303,123
=================================== ======== ======= ======= ======= ======== ========
6.2 Fair value measurements
Financial instruments measured at fair value were based on the
same assumptions as determined in the 31 December 2016 financial
statements. The judgements and estimates made by the Group in
determining the fair values of the financial instruments have
remained the same since the last annual financial report. There
were no transfers of financial instruments between fair value
hierarchy levels during this half year.
7. Revenue
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
'm 'm 'm 'm
======================= =============== =============== ============== ==============
Crude oil sales 34,007 14,503 24,793 7,247
----------------------- --------------- --------------- -------------- --------------
(Over lift)/under lift (10,317) 7,481 (7,909) 3,585
======================= =============== =============== ============== ==============
23,690 21,984 16,884 10,832
----------------------- --------------- --------------- -------------- --------------
Gas sales 16,627 9,592 8,959 4,159
======================= =============== =============== ============== ==============
Revenue 40,317 31,576 25,843 14,991
======================= =============== =============== ============== ==============
The major off-taker for crude oil is Mercuria. The major
off-taker for gas is the Nigerian Gas Company.
In the prior period to 30 June 2016, realised fair value losses
on crude oil hedges of N2,271 million were included in Revenue.
This is now classified under Fair Value Loss (note 11).
Notes to the interim condensed consolidated financial statements
continued
8. Cost of sales
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
------------------- --------------- ---------------- --------------
'm 'm 'm 'm
========================================= =================== =============== ================ ==============
Crude handling fees 1,531 2,134 1,363 209
----------------------------------------- ------------------- --------------- ---------------- --------------
Barging cost 1,995 - 1,340 -
----------------------------------------- ------------------- --------------- ---------------- --------------
Royalties 5,736 2,693 4,223 942
----------------------------------------- ------------------- --------------- ---------------- --------------
Depletion, depreciation and amortisation 8,861 5,768 5,387 2,003
----------------------------------------- ------------------- --------------- ---------------- --------------
Niger Delta Development Commission levy 729 591 379 213
----------------------------------------- ------------------- --------------- ---------------- --------------
Rig related expenses 499 370 193 162
----------------------------------------- ------------------- --------------- ---------------- --------------
Operations & maintenance expenses 4,563 5,298 2,405 2,633
========================================= =================== =============== ================ ==============
Cost of sales 23,914 16,854 15,290 6,162
========================================= =================== =============== ================ ==============
9. General and administrative expenses
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
-------------------- --------------- ----------------- --------------
'm 'm 'm 'm
===================================== ==================== =============== ================= ==============
Depreciation 722 560 380 299
------------------------------------- -------------------- --------------- ----------------- --------------
Employee benefits 3,296 2,154 1,509 919
------------------------------------- -------------------- --------------- ----------------- --------------
Professional and consulting fees 3,449 2,279 2,088 1,156
------------------------------------- -------------------- --------------- ----------------- --------------
Auditor's remuneration 94 13 48 -
------------------------------------- -------------------- --------------- ----------------- --------------
Directors emoluments (executive) 423 328 245 88
------------------------------------- -------------------- --------------- ----------------- --------------
Directors emoluments (non-executive) 476 491 246 309
------------------------------------- -------------------- --------------- ----------------- --------------
Rentals 224 206 151 89
------------------------------------- -------------------- --------------- ----------------- --------------
Other general expenses 2,424 4,302 1,312 3,209
===================================== ==================== =============== ================= ==============
General and administrative expenses 11,108 10,333 5,979 6,069
===================================== ==================== =============== ================= ==============
Directors' emoluments have been split between executive and
non-executive directors. There were no non-audit services rendered
by the Group's auditors during the period. Other general expenses
relate to costs such as office maintenance costs, telecommunication
costs, logistics costs and others. Share based payment expenses are
included in the employee benefits expense.
10. Loss on foreign exchange - net
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
'm 'm 'm 'm
============== =============== =============== ============== ==============
Exchange loss (264) (6,382) (793) (5,897)
============== =============== =============== ============== ==============
This is principally as a result of translation of naira
denominated monetary assets and liabilities.
Notes to the interim condensed consolidated financial statements
continued
11. Fair value loss
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
-------------------- --------------- -------------- --------------
'm 'm 'm 'm
=============================================== ==================== =============== ============== ==============
Realised fair value losses on crude oil hedges (3,006) (2,271) (1,478) (2,271)
----------------------------------------------- -------------------- --------------- -------------- --------------
Unrealised fair value losses on crude oil
hedges - (4,792) - (4,792)
----------------------------------------------- -------------------- --------------- -------------- --------------
Fair value loss on contingent consideration (274) (510) (140) (351)
----------------------------------------------- ==================== =============== ============== ==============
Fair value gain on other assets 463 - 463 -
=============================================== ==================== =============== ============== ==============
Fair value loss (2,817) (7,573) (1,155) (7,414)
=============================================== ==================== =============== ============== ==============
Realised fair value losses on crude oil hedges represent the
payments for crude oil price options, while unrealised fair value
losses represent losses on crude oil price hedges charged to profit
or loss. Fair value loss on contingent consideration arises in
relation to remeasurement of contingent consideration on the
Group's acquisition of participating interest in its OML 53. The
contingency criteria are the achievement of certain production
milestones. Fair value gain on other assets arises from the fair
value remeasurement of the Group's rights to receive the discharge
sum of N94 billion (US$308 million).
In the prior period to 30 June 2016, realised fair value loss on
crude oil hedges of N2,271 million were included Revenue (note 7).
This is now classified under Fair Value Loss.
12. Finance income/ (costs)
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
-------------------- --------------- ----------------- ---------------------
'm 'm 'm 'm
===================================== ==================== =============== ================= =====================
Finance income
------------------------------------- -------------------- --------------- ----------------- ---------------------
Interest income 270 5,694 206 5,270
------------------------------------- -------------------- --------------- ----------------- ---------------------
Finance costs
------------------------------------- -------------------- --------------- ----------------- ---------------------
Interest on bank loan and other bank
charges 10,560 8,298 5,310 3,933
------------------------------------- -------------------- --------------- ----------------- ---------------------
Unwinding of discount on provision
for decommissioning 14 23 7
===================================== ==================== =============== ================= =====================
10,574 8,321 5,317 3,933
===================================== ==================== =============== ================= =====================
Finance (cost)/ income - net (10,304) (2,627) (5,111) 1,337
===================================== ==================== =============== ================= =====================
13. Taxation
Income tax expense is recognised based on management's estimate
of the weighted average effective annual income tax rate expected
for the full financial year. The estimated average annual tax rate
used for the period to 30 June 2017 is 65.75% for crude oil
activities and 30% for gas activities. As at 31st December 2016,
the tax rates were 65.75% and 30% for crude oil and gas activities
respectively.
Deferred income tax assets are recognised for tax losses carried
forward to the extent that the realisation of the related tax
benefit through future taxable profits is probable. The Group did
not recognise deferred income tax assets of N72 billion (2016: N58
billion) in respect of temporary differences amounting to N109
billion (2016: N89 billion). Out of this, deferred tax asset of N22
billion (2016: N14 billion) relates to tax losses of N33 billion
(2016: N22 billion). There are no expiration dates for the tax
losses.
Notes to the interim condensed consolidated financial statements
continued
14. Loss per share (LPS)
Basic
Basic LPS is calculated on the Group's loss after taxation
attributable to the parent entity and on the basis of the weighted
average of issued and fully paid ordinary shares at the end of the
period.
Diluted
Diluted LPS is calculated by dividing the loss attributable to
ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on
conversion of all the dilutive potential ordinary shares (arising
from outstanding share awards in the share based payment scheme)
into ordinary shares.
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
'm 'm 'm 'm
==================================================== =============== =============== ============== ==============
Loss for the period attributable to equity holders
of the parent (8,432) (13,081) (2,577) (9,340)
==================================================== =============== =============== ============== ==============
Share Share Share Share
'000 '000 '000 '000
==================================================== =============== =============== ============== ==============
Weighted average number of ordinary shares in issue 563,445 560,576 563,445 560,576
---------------------------------------------------- --------------- --------------- -------------- --------------
Share awards 4,943 2,223 4,943 2,223
---------------------------------------------------- --------------- --------------- -------------- --------------
Weighted average number of ordinary shares adjusted
for the effect of dilution 568,388 562,799 568,388 562,799
==================================================== =============== =============== ============== ==============
N N N N
---------------------------------------------------- --------------- --------------- -------------- --------------
Basic loss per share (14.97) (23.33) (4.57) (16.66)
---------------------------------------------------- --------------- --------------- -------------- --------------
Diluted loss per share (14.83) (23.24) (4.53) (16.60)
==================================================== =============== =============== ============== ==============
'm 'm 'm 'm
==================================================== =============== =============== ============== ==============
Loss attributable to equity holders of the parent (8,432) (13,081) (2,577) (9,340)
==================================================== =============== =============== ============== ==============
Loss used in determining diluted loss per share (8,432) (13,081) (2,577) (9,340)
==================================================== =============== =============== ============== ==============
15. Dividend
Half year ended Half year ended
30 June 2017 30 June 2016
--------------- ---------------
'm 'm
================================ =============== ===============
Dividend paid during the period - 5,118
================================ =============== ===============
Dividend per share ($) - 9.13
================================ =============== ===============
16. Interest bearing loans & borrowings
Below is the net debt reconciliation on interest bearing loans
and borrowings.
Borrowings
due within Borrowings due
1 year above 1 year Total
'm 'm 'm
============================= ====================== =================== ================
Balance as at 1 January
2017 66,489 136,060 202,549
Effective interest - 11,169 11,169
----------------------------- ---------------------- ------------------- ----------------
Effect of loan restructuring (8,808) 8,808 -
----------------------------- ---------------------- ------------------- ----------------
Repayment - (23,253) (23,253)
----------------------------- ---------------------- ------------------- ----------------
Exchange differences 186 379 565
============================= ====================== =================== ================
Balance as at 30
June 2017 57,867 133,163 191,030
============================= ====================== =================== ================
Notes to the interim condensed consolidated financial statements
continued
17. Other asset
As at 30 June 2017
------------------
'm
=========================================== ==================
Initial fair value of investment in OML 55 76,277
------------------------------------------- ------------------
Receipts from crude oil lifted (6,914)
------------------------------------------- ------------------
Fair value adjustment as at 30 June 2017 463
------------------------------------------- ------------------
Exchange differences 214
=========================================== ==================
Fair value as at 30 June 2017 70,040
=========================================== ==================
Other asset represents the Group's rights to receive the
discharge sum of N94 billion (2016: N100 billion) from the crude
oil reserves of OML 55.The asset has been measured at fair value
through profit or loss (FVTPL) and receipts from crude oil lifted
reduce the value of the asset. At each reporting date, the fair
value of the discharge sum is determined using the income approach
in line with IFRS 13: Fair Value Measurement. As at 30 June 2017,
the fair value of the discharge sum is N70 billion (2016: N76
billion)
18. Trade and other receivables
As at 30 June 2017 As at 31 Dec 2016
---------------------------------------------------------- ----------------------------
'm 'm
========================================================== ============================
Trade receivables 41,100 22,395
----------------------------------------------------------- ------------------ --------
Nigerian Petroleum Development Company (NPDC) receivables 68,790 72,049
----------------------------------------------------------- ------------------ --------
National Petroleum Investment Management Services 1,835 2,511
----------------------------------------------------------- ------------------ --------
Advances on investment 20,096 20,040
----------------------------------------------------------- ------------------ --------
Under lift 748 1,372
----------------------------------------------------------- ------------------ --------
Advances to suppliers 2,298 2,720
----------------------------------------------------------- ------------------ --------
Other receivables 791 346
----------------------------------------------------------- ------------------ --------
- -
=========================================================== ================== ========
Impairment loss on NPDC receivables (3,138) (2,273)
=========================================================== ================== ========
132,520 119,160
=========================================================== ================== ========
18a. Trade receivables:
Included in trade receivables is an amount due from NGC of N27
billion (2016: N20 billion) with respect to the sale of gas.
18b. NPDC receivables:
NPDC receivables represent the outstanding cash calls due to
Seplat from its JV partner, Nigerian Petroleum Development Company.
The receivables have been discounted to reflect the impact of time
value of money, and an impairment loss has been recognized in the
financial statements. As at 30 June 2017, the undiscounted value of
this receivable is N69 billion (2016: N72 billion).
18c. Advances on investment:
This comprises an advance of N13.8 billion (2016: N13.8 billion)
on a potential investment in OML 25 and N6 billion (2016: N6
billion) currently held in an escrow account. Proceedings commenced
against Newton Energy Limited, a wholly owned subsidiary of Seplat
Plc by Crestar Natural Resources relating to the N6 billion (2016:
N6 billion) currently held in an escrow account. The escrow monies
relate to the potential acquisition of OML 25 by Crestar which
Newton Energy has an option to invest into. These monies were
placed in escrow in July 2015 pursuant to an agreement reached with
Crestar and the vendor on final terms of the transaction.
Notes to the interim condensed consolidated financial statements
continued
19. Share capital
19a. Authorised and issued share capital
As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
'm 'm
=============================================================================== ================== =================
Authorised ordinary share capital
------------------------------------------------------------------------------- ------------------ -----------------
1,000,000,000 ordinary shares denominated in Naira of 50 kobo per share 500 500
=============================================================================== ================== =================
Issued and fully paid
------------------------------------------------------------------------------- ------------------ -----------------
563,444,561 (2016: 563,444,561) issued shares denominated in Naira of 50 kobo
per share 283 283
=============================================================================== ================== =================
19b. Employee share based payment scheme
As at 30 June 2017, the Group had awarded shares of 25,726,262
(2016: 25,448,071 shares) to certain employees and senior
executives in line with its share based incentive scheme. During
the half year ended 30 June 2017 no shares were vested (31 December
2016: 2,868,460 shares had vested, resulting in an increase in
number of issued and fully paid ordinary shares of 50k each from
561 million to 563 million).
20. Trade and other payables
As at 30 June 2017 As at 31 Dec 2016
------------------ -------------------
'm 'm
============================ ================== ===================
Trade payables 32,073 32,983
---------------------------- ------------------ -----------------
Accruals and other payables 27,136 25,574
---------------------------- ------------------ -----------------
NDDC levy 1,574 6
---------------------------- ------------------ -----------------
Deferred revenue 37,213 10,727
---------------------------- ------------------ -----------------
Royalties 11,118 10,476
============================ ================== =================
109,114 79,766
============================ ================== =================
Included in accruals and other payables are field-related
accruals N11 billion (2016: N10.7 billion) and other vendor
payables of N16.2 billion (2016: N14.6 billion). Deferred revenue
includes advance payments for crude oil sales of N37 billion (2016:
N10 billion) and royalties include accruals in respect of gas sales
for which payment is outstanding at the end of the period.
Notes to the interim condensed consolidated financial statements
continued
21. Computation of cash generated from operations
Half year ended Half year ended
30 June 2017 30 June 2016
--------------------------- ------------------------
'm 'm
=============================================================== =========================== ========================
Loss before tax (8,090) (12,193)
=============================================================== =========================== ========================
Adjusted for:
--------------------------------------------------------------- --------------------------- ------------------------
Depletion, depreciation and amortisation 9,583 6,328
--------------------------------------------------------------- --------------------------- ------------------------
Interest on bank loan and other bank charges 10,560 8,298
--------------------------------------------------------------- --------------------------- ------------------------
Unwinding of discount on provision for decommissioning 14 23
--------------------------------------------------------------- --------------------------- ------------------------
Interest income (270) (5,694)
--------------------------------------------------------------- --------------------------- ------------------------
Fair value loss on contingent consideration 274 510
--------------------------------------------------------------- --------------------------- ------------------------
Unrealised fair value loss on crude oil hedges - 4,792
--------------------------------------------------------------- --------------------------- ------------------------
Fair value gain on other asset (463) -
--------------------------------------------------------------- --------------------------- ------------------------
Unrealised foreign exchange loss 264 6,382
--------------------------------------------------------------- --------------------------- ------------------------
Share based payments expenses 818 375
--------------------------------------------------------------- --------------------------- ------------------------
Defined benefit expenses 341 (185)
--------------------------------------------------------------- --------------------------- ------------------------
Loss on disposal of other property, plant and equipment 25 -
--------------------------------------------------------------- --------------------------- ------------------------
Changes in working capital (excluding the effects of exchange
differences):
--------------------------------------------------------------- --------------------------- ------------------------
Trade and other receivables, including prepayments (8,133) 14,820
--------------------------------------------------------------- --------------------------- ------------------------
Trade and other payables 26,313 (10,423)
--------------------------------------------------------------- --------------------------- ------------------------
Inventories 1,256 (4,746)
=============================================================== =========================== ========================
Net cash from operating activities 32,492 8,287
=============================================================== =========================== ========================
22. Related party relationships and transactions
The Group is controlled by Seplat Petroleum Development Company
Plc (the 'parent Company'). As at 30 June 2017, the parent Company
is owned 8.39% either directly or by entities controlled by A.B.C.
Orjiako ('SPDCL BVI') and members of his family and 13.15% either
directly or by entities controlled by Austin Avuru ('Professional
Support Limited' and 'Platform Petroleum Limited'). The remaining
shares in the parent company are widely held.
22a. Related party relationships
The services provided by the related parties:
Abbeycourt Trading Company Limited: The Chairman of Seplat is a
director and shareholder. The company provides diesel supplies to
Seplat in respect of Seplat's rig operations.
Berwick Nigeria Limited: The Chairman of Seplat is a shareholder
and director. The company provides construction services to Seplat
in relation to a field base station in Sapele.
Cardinal Drilling Services Limited (formerly Caroil Drilling
Nigeria Limited): Is owned by common shareholders with the parent
Company. The company provides drilling rigs and drilling services
to Seplat.
Charismond Nigeria Limited: The sister to the CEO works as a
General Manager. The company provides administrative services
including stationary and other general supplies to the field
locations.
Helko Nigeria Limited: The Chairman of Seplat is shareholder and
director. The company owns the lease to Seplat's main office at 25A
Lugard Avenue, Lagos, Nigeria.
Keco Nigeria Enterprises: The Chief Executive Officer's sister
is shareholder and director. The company provides diesel supplies
to Seplat in respect of its rig operations.
Montego Upstream Services Limited: The Chairman's nephew is
shareholder and director. The company provides drilling and
engineering services to Seplat.
Nabila Resources & Investment Ltd: The Chairman's in-law is
a shareholder and director. The company provides lubricant to
Seplat.
Ndosumili Ventures Limited: Is a subsidiary of Platform
Petroleum Limited. The company provides transportation services to
Seplat.
Nerine Support Services Limited: Is owned by common shareholders
with the parent Company. Seplat leases a warehouse from Nerine and
the company provides agency and contract workers to Seplat.
Oriental Catering Services Limited: The Chief Executive Officer
of Seplat's spouse is shareholder and director. The company
provides catering services to Seplat at the staff canteen.
ResourcePro Inter Solutions Limited: The Chief Executive Officer
of Seplat's in-law is its UK representative. The company supplies
furniture to Seplat.
Shebah Petroleum Development Company Limited (BVI): The Chairman
of Seplat is a director and shareholder of SPDCL (BVI). SPDCL (BVI)
provided consulting services to Seplat.
The following transactions were carried by Seplat with related
parties:
22b. Related party relationships
i) Purchases of goods and services Half year ended Half year ended
30 June 2017 30 June 2016
--------------- ---------------
'm 'm
================================================= =============== ===============
Shareholders of the parent company
------------------------------------------------- --------------- ---------------
M&P (MPI SA) - 8
------------------------------------------------- --------------- ---------------
SPDCL (BVI) 172 115
================================================= =============== ===============
172 123
================================================= =============== ===============
Entities controlled by key management personnel:
------------------------------------------------- --------------- ---------------
Contracts > $1million in 2017
------------------------------------------------- --------------- ---------------
Nerine Support Services Limited 826 1,238
================================================= =============== ===============
826 1,238
================================================= =============== ===============
Contracts < $1million in 2017
------------------------------------------------- --------------- ---------------
Abbey Court trading Company Limited 107 36
------------------------------------------------- --------------- ---------------
Charismond Nigeria Limited 10 4
------------------------------------------------- --------------- ---------------
Cardinal Drilling Services Limited 190 1,122
------------------------------------------------- --------------- ---------------
Keco Nigeria Enterprises 22 5
------------------------------------------------- --------------- ---------------
Ndosumili Ventures Limited 170 206
------------------------------------------------- --------------- ---------------
Oriental Catering Services Limited 65 57
------------------------------------------------- --------------- ---------------
ResourcePro Inter Solutions Limited - 15
------------------------------------------------- --------------- ---------------
Berwick Nigeria Limited - 6
------------------------------------------------- --------------- ---------------
Montego Upstream Services Limited - 2,331
------------------------------------------------- --------------- ---------------
Nabila Resources & Investment Limited - 1
------------------------------------------------- --------------- ---------------
Helko Nigeria Limited 82
================================================= =============== ===============
564 3,865
================================================= =============== ===============
Total 1,390 5,103
================================================= =============== ===============
* Nerine charges an average mark-up of 7.5% on agency and
contract workers assigned to Seplat. The amounts shown above are
gross i.e. it includes salaries and Nerine's mark-up. Total costs
for agency and contracts during the half year ended 30 June 2017 is
N795 million.
Notes to the interim condensed consolidated financial statements
continued
22c. Balances
The following balances were receivable from or payable to
related parties as at 30 June 2017:
i) Prepayments / receivables As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
'm 'm
================================================ ================== =================
Entities controlled by key management personnel
------------------------------------------------ ------------------ -----------------
Cardinal Drilling Services Limited 1,896 1,894
================================================ ================== =================
1,896 1,894
================================================ ================== =================
ii) Payables As at 30 June 2017 As at 31 Dec 2016
--------------------- -----------------
'm 'm
================================================ ===================== =================
Entities controlled by key management personnel
------------------------------------------------ --------------------- -----------------
Cardinal Drilling Services Limited 190 308
------------------------------------------------ --------------------- -----------------
Abbey Court Petroleum Company Limited 89 -
------------------------------------------------ --------------------- -----------------
Charismond Nigeria Limited 6 -
------------------------------------------------ --------------------- -----------------
Ndosumili Ventures Limited 140 -
------------------------------------------------ --------------------- -----------------
ResourcePro Inter Solutions Limited - -
------------------------------------------------ --------------------- -----------------
Nerine Support Services Limited 800 3,480
------------------------------------------------ --------------------- -----------------
Montego Upstream Services Limited - 3,520
------------------------------------------------ --------------------- -----------------
1,225 7,308
================================================ ===================== =================
23. Commitments and contingencies
23a. Operating lease commitments - Group as lessee
The Group leases drilling rigs, buildings, land, boats and
storage facilities. The lease terms are between 1 and 5 years. The
operating lease commitments of the Group as at 30 June 2017
are:
Operating lease commitments As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
'm 'm
====================================================== ================== =================
Not later than one year 36 36
------------------------------------------------------ ------------------ -----------------
Later than one year and not later than five years 83 83
====================================================== ================== =================
119 119
====================================================== ================== =================
23b. Contingent consideration
As part of the purchase agreement of OML 53, a portion of the
consideration is contingent on the performance of the producing
asset. There will be additional cash payments to the previous
owners should the oil price rise above US$90/bbl in the three year
period following the acquisition date.
Significant unobservable valuation inputs are shown below:
Discount rate 15.45%
A significant increase or decrease in the discount rate would
result in a lower/ (higher) fair value of the liability.
The fair value of the contingent consideration determined at 31
December 2016 reflects the current and projected crude oil prices,
amongst other factors and a fair value adjustment has been
recognised in profit or loss.
A reconciliation of the fair value of the contingent
consideration liability is provided below:
As at 30 June 2017
------------------
'm
============================================================================================== ==================
Initial fair value of the contingent consideration at acquisition date 2,073
---------------------------------------------------------------------------------------------- ------------------
Unrealised fair value changes recognised in profit or loss during year ended 31 December 2016 411
---------------------------------------------------------------------------------------------- ------------------
Exchange difference 1,188
============================================================================================== ==================
Financial liability for the contingent consideration as at 31 December 2016 3,672
============================================================================================== ==================
Fair value adjustment as at 30 June 2017 274
---------------------------------------------------------------------------------------------- ------------------
Exchange difference 11
============================================================================================== ==================
Contingent consideration as at 30 June 2017 3,957
============================================================================================== ==================
23c. Contingent liabilities
The Group is involved in a number of legal suits as defendant.
The estimated value of the contingent liabilities for the period
ended 30 June 2017 is N53 billion (2016: N4.7 billion). No
provision has been made for this potential liability in these
financial statements. Management and the Group's solicitors are of
the opinion that the Group will suffer no loss from these
claims.
24. Events after the reporting period
There was no significant event after the reporting date which
could have a material effect on the state of affairs of the Group
as at 30 June 2017 and on the profit or loss for the half year
ended on that date, which have not been adequately provided for or
disclosed in these financial statements.
25. Compliance with FRC Rule 1
In compliance with the regulatory requirement in Nigeria that
the CFO, who signs the Annual Report and Accounts, must be a member
of a professional accountancy body recognised by an Act of the
National Assembly in Nigeria, the CFO of Seplat, Roger Brown, has
been granted a waiver by the Financial Reporting Council of Nigeria
to sign the accounts of the Group.
26. Reclassification
Certain comparative figures have been reclassified in line with
the current year's presentation.
27. Exchange rates used in translating the accounts to Naira
The table below shows the exchange rates used in translating the
accounts into Naira.
Basis 30 June 2017 /$ 30 June 2016 /$ 31 December 2016 /$
============================= ===================== ================ =============== =====================
Fixed assets - opening Historical rate Historical Historical Historical
balances
---------------------------- ----------------------- --------------- --------------- -------------------
Fixed assets - additions Average rate 305.86 199 308
---------------------------- ----------------------- --------------- --------------- -------------------
Fixed assets - closing
balances Closing rate 305.85 283 305
---------------------------- ----------------------- --------------- --------------- -------------------
Current assets Closing rate 305.85 283 305
---------------------------- ----------------------- --------------- --------------- -------------------
Current liabilities Closing rate 305.85 283 305
---------------------------- ----------------------- --------------- --------------- -------------------
Equity Historical rate Historical Historical Historical
---------------------------- ----------------------- --------------- --------------- -------------------
Income and Expenses: Overall Average rate 305.86 213 255
---------------------------- ----------------------- --------------- --------------- -------------------
Interim condensed consolidated statement of profit or loss and
other comprehensive income
for the half year ended 30 June 2017
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- ------------------ -------------- --------------
Unaudited Unaudited Unaudited Unaudited
--------------- ------------------ -------------- --------------
Note $'000 $'000 $'000 $'000
=========================================== ==== =============== ================== ============== ==============
Revenue 7 131,814 153,022 84,515 69,606
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Cost of sales 8 (78,187) (83,742) (50,003) (29,962)
=========================================== ==== =============== ================== ============== ==============
Gross profit 53,627 69,280 34,512 39,644
------------------------------------------- ---- --------------- ------------------ -------------- --------------
General and administrative expenses 9 (36,315) (49,592) (19,556) (28,143)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Loss on foreign exchange - net 10 (866) (28,330) (2,596) (25,889)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Fair value loss 11 (9,210) (33,345) (3,777) (32,544)
=========================================== ==== =============== ================== ============== ==============
Operating profit/(loss) 7,236 (41,987) 8,583 (46,932)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Finance income 12 883 25,886 673 23,655
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Finance costs 12 (34,573) (41,432) (17,392) (19,262)
=========================================== ==== =============== ================== ============== ==============
Loss before taxation (26,454) (57,533) (8,136) (42,539)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Taxation 13 (1,119) (3,632) (300) 3,918
=========================================== ==== =============== ================== ============== ==============
Loss for the period (27,573) (61,165) (8,436) (38,621)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
-
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Loss attributable to equity holders of
parent (27,573) (62,506) (8,436) (43,677)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Profit attributable to non-controlling
interest - 1,341 - 5,056
------------------------------------------- ---- --------------- ------------------ -------------- --------------
-
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Other comprehensive income/(loss):
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Items that may be reclassified to profit or - -
loss: -
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Foreign currency translation difference - - - -
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Total comprehensive loss for the period (27,573) (61,165) (8,436) (38,621)
=========================================== ==== =============== ================== ============== ==============
- -
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Loss attributable to equity holders of
parent (27,573) (62,506) (8,436) (43,677)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Profit attributable to non-controlling
interest - 1,341 - 5,056
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Loss per share ($) 14 (0.05) (0.11) (0.01) (0.08)
------------------------------------------- ---- --------------- ------------------ -------------- --------------
Diluted loss per share($) 14 (0.05) (0.11) (0.01) (0.08)
=========================================== ==== =============== ================== ============== ==============
Interim condensed consolidated statement of financial
position
As at 30 June 2017
As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
Unaudited Audited
------------------ -----------------
Note $'000 $'000
=========================================== ==== ================== =================
Assets
------------------------------------------- ---- ------------------ -----------------
Non-current assets
------------------------------------------- ---- ------------------ -----------------
Oil and gas properties 1,206,623 1,224,400
------------------------------------------- ---- ------------------ -----------------
Other property, plant and equipment 5,914 7,967
------------------------------------------- ---- ------------------ -----------------
Other asset 17 229,000 250,090
------------------------------------------- ---- ------------------ -----------------
Prepayments 31,624 33,616
------------------------------------------- ---- ------------------ -----------------
Total non-current assets 1,473,161 1,516,073
=========================================== ==== ================== =================
Current assets
------------------------------------------- ---- ------------------ -----------------
Inventories 102,106 106,213
------------------------------------------- ---- ------------------ -----------------
Trade and other receivables 18 433,282 390,694
------------------------------------------- ---- ------------------ -----------------
Prepayments 3,215 6,672
------------------------------------------- ---- ------------------ -----------------
Cash & cash equivalents 201,506 159,621
=========================================== ==== ================== =================
Total current assets 740,109 663,200
=========================================== ==== ================== =================
Total assets 2,213,270 2,179,273
=========================================== ==== ================== =================
Equity and liabilities
------------------------------------------- ---- ------------------ -----------------
Equity
------------------------------------------- ---- ------------------ -----------------
Issued share capital 19 1,826 1,826
------------------------------------------- ---- ------------------ -----------------
Share premium 497,457 497,457
------------------------------------------- ---- ------------------ -----------------
Share based payment reserve 19 14,808 12,135
------------------------------------------- ---- ------------------ -----------------
Capital contribution 40,000 40,000
------------------------------------------- ---- ------------------ -----------------
Retained earnings 651,349 678,922
------------------------------------------- ---- ------------------ -----------------
Foreign currency translation reserve 3,675 3,675
=========================================== ==== ================== =================
Total equity 1,209,115 1,234,015
=========================================== ==== ================== =================
Non-current liabilities
------------------------------------------- ---- ------------------ -----------------
Interest bearing loans & borrowings 16 435,386 446,098
------------------------------------------- ---- ------------------ -----------------
Deferred tax liabilities 76 -
------------------------------------------- ---- ------------------ -----------------
Contingent consideration 23 12,937 12,040
------------------------------------------- ---- ------------------ -----------------
Provision for decommissioning obligation 644 597
------------------------------------------- ---- ------------------ -----------------
Defined benefit plan 6,228 5,112
=========================================== ==== ================== =================
Total non-current liabilities 455,271 463,847
=========================================== ==== ================== =================
Current liabilities
------------------------------------------- ---- ------------------ -----------------
Interest bearing loans and borrowings 16 189,200 217,998
------------------------------------------- ---- ------------------ -----------------
Trade and other payables 20 356,756 261,528
------------------------------------------- ---- ------------------ -----------------
Current taxation 2,928 1,885
------------------------------------------- ---- ------------------ -----------------
Total current liabilities 548,884 481,411
=========================================== ==== ================== =================
Total liabilities 1,004,155 945,258
=========================================== ==== ================== =================
Total shareholders' equity and liabilities 2,213,270 2,179,273
=========================================== ==== ================== =================
Interim condensed consolidated statement of financial position
continued
As at 30 June 2017
The financial statements on pages 34 to 56 were approved and
authorised for issue by the board of directors on 20 July 2017 and
were signed on its behalf by
A. B. C. Orjiako A. O. Avuru R.T. Brown
FRC/2013/IODN/00000003161 FRC/2013/IODN/00000003100 FRC/2014/IODN/00000007983
Chairman Chief Executive Officer Chief Financial
Officer
27 July 2017 27 July 2017 27 July 2017
Interim condensed consolidated statement of changes in equity
continued
for the half year ended 30 June 2017
for the half year ended 30
June 2016
=============================================== ======= =========== ======== ========= =============== =========
Share Foreign
Issued based currency
share Share Capital payment translation Retained Non-controlling Total
capital premium contribution reserve reserve earnings Total interest equity
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
At 1 January
2016 1,821 497,457 40,000 8,734 325 865,485 1,413,822 (745) 1,413,077
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
(Loss)/Profit
for the
period - - - - - (62,506) (62,506) 1,341 (61,165)
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Other
comprehensive
income - - - - - - - - -
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
Total
comprehensive
loss for the
period - - - - - (62,506) (62,506) 1,341 (61,165)
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
Transactions
with owners
in their
capacity
as owners:
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Share based
payments - - - 1,650 - - 1,650 - 1,650
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Dividends - - - - - (22,534) (22,534) - (22,534)
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
Total - - - 1,650 - (22,534) (20,884) - (20,884)
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
At 30 June
2016
(unaudited) 1,821 497,457 40,000 10,384 325 780,445 1,330,432 596 1,331,028
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
for the half year ended 30 June 2017
======================================================================================================================
Share Foreign
Issued based currency
share Share Capital payment translation Retained Non-controlling Total
capital premium contribution reserve reserve earnings Total interest equity
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
At 1 January
2017 1,826 497,457 40,000 12,135 3,675 678,922 1,234,015 - 1,234,015
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Loss for the
period - - - - - (27,573) (27,573) - (27,573)
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Other
comprehensive
income - - - - - - - - -
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
Total
comprehensive
loss for the
period - - - - - (27,573) (27,573) - (27,573)
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
Transactions
with owners
in their
capacity
as owners:
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Share based
payments - - - 2,673 - - 2,673 - 2,673
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Dividends - - - - - - - - -
-------------- ------- -------- ------------ ------- ----------- -------- --------- --------------- ---------
Total - - - 2,673 - - 2,673 - 2,673
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
At 30 June
2017
(unaudited) 1,826 497,457 40,000 14,808 3,675 651,349 1,209,115 - 1,209,115
============== ======= ======== ============ ======= =========== ======== ========= =============== =========
Interim condensed consolidated statement of cash flow
for the half year ended 30 June 2017
Half year Half year ended
ended 30 June 2016
30 June
2017
--------- -----------------
$'000 $'000
--------- -----------------
Note Unaudited Unaudited
============================================================================================================================== ========= =================
Cash flows from operating activities
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Cash generated from operations 21 106,241 39,907
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Net cash inflows from operating activities 106,241 39,907
============================================================================================================================== ========= =================
Cash flows from investing activities -
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Acquisition of oil and gas properties (11,202) (15,519)
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Acquisition of other property, plant and equipment (386) (1,236)
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Receipts from other asset 17 22,604 -
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Interest received 883 25,886
============================================================================================================================== ========= =================
Net cash inflows from investing activities 11,899 9,131
============================================================================================================================== ========= =================
Cash flows from financing activities
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Repayments of bank financing (41,500) (121,509)
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Dividends paid - (22,534)
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Interest paid (34,526) (41,216)
============================================================================================================================== ========= =================
Net cash outflows from financing activities (76,026) (185,259)
============================================================================================================================== ========= =================
Net decrease in cash and cash equivalents 42,114 (136,221)
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Cash and cash equivalents at beginning of period 159,621 326,029
------------------------------------------------------------------------------------------------------------------------------ --------- -----------------
Effects of exchange rate changes on cash and cash equivalents (229) (10,008)
============================================================================================================================== ========= =================
Cash and cash equivalents at end of period 201,506 179,800
============================================================================================================================== ========= =================
Notes to the interim condensed consolidated financial
statements
1. Corporate structure and business
Seplat Petroleum Development Company Plc ('Seplat' or the
'Company'), the parent of the Group, was incorporated on 17 June
2009 as a private limited liability company and re-registered as a
public company on 3 October 2014, under the Companies and Allied
Matters Act, CAP C20, Laws of the Federation of Nigeria 2004. The
Company commenced operations on 1 August 2010. The Company is
principally engaged in oil and gas exploration and production.
The Company's registered address is: 25a Lugard Avenue, Ikoyi,
Lagos, Nigeria.
The Company acquired, pursuant to an agreement for assignment
dated 31 January 2010 between the Company, SPDC,
TOTAL and AGIP, a 45% participating interest in the following
producing assets:
OML 4, OML 38 and OML 41 located in Nigeria. The total purchase
price for these assets was US$340 million paid at the completion of
the acquisition on 31 July 2010 and a contingent payment of US$33
million payable 30 days after the second anniversary, 31 July 2012,
if the average price per barrel of Brent Crude oil over the period
from acquisition up to 31 July 2012 exceeds US$80 per barrel.
US$358.6 million was allocated to the producing assets including
US$18.6 million as the fair value of the contingent consideration
as calculated on acquisition date. The contingent consideration of
US$33 million was paid on 22 October 2012.
In 2013, Newton Energy Limited ("Newton Energy"), an entity
previously beneficially owned by the same shareholders as Seplat,
became a subsidiary of the Company. On 1 June 2013, Newton Energy
acquired from Pillar Oil Limited ("Pillar Oil") a 40 percent
Participant interest in producing assets: the Umuseti/Igbuku
marginal field area located within OPL 283 (the "Umuseti/Igbuku
Fields").
On 27 March 2013, Seplat Energy Limited ("Seplat Energy") was
incorporated. The principal activities of the Company is the
exploration, development and transportation of petroleum products
and Seplat Gas Company Limited ("Seplat Gas") was incorporated on 9
December 2013 as a private limited liability company to engage in
oil and gas exploration and production.
In 2015, the Group purchased a 40% participating interest in OML
53, onshore north eastern Niger Delta, from Chevron Nigeria Ltd for
$ 259.4 million.
In 2017, the Group incorporated a new subsidiary, ANOH Gas
Processing Company Limited. The principal activities of the Company
is the processing of gas from OML 53.
The Company together with its subsidiary, Newton Energy, and six
wholly owned subsidiaries, namely, Seplat
Petroleum Development Company UK Limited ('Seplat UK'), which
was incorporated on 21 August 2014, Seplat East
Onshore Limited ('Seplat East'), which was incorporated on 12
December 2014, Seplat East Swamp Company Limited
('Seplat Swamp'), which was incorporated on 12 December 2014,
Seplat Gas Company Limited ('Seplat GAS'), which was incorporated
on 12 December 2014, Seplat Energy Limited ('Seplat Energy'), which
was incorporated on 27 March 2013 and ANOH Gas Processing Company
Limited which was incorporated on 18 January 2017 are collectively
referred to as the Group.
Subsidiary Country of incorporation and
place of business Shareholding % Principal activities
================================= ================================ ============== =================================
Newton Energy Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat Petroleum Development UK Oil & gas exploration and
United Kingdom 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat East Onshore Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat East Swamp Company Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat Gas Company Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
Seplat Energy Limited Oil & gas exploration and
Nigeria 100% production
--------------------------------- -------------------------------- -------------- ---------------------------------
ANOH Gas Processing Company Nigeria 100% Gas processing
Limited
================================= ================================ ============== =================================
Notes to the interim condensed consolidated financial statements
continued
2. Significant changes in the current reporting period
During the reporting period ended 30 June 2017, the Group
renegotiated its lending arrangements resulting in a twelve month
extension of its revolving credit facility till 31 December 2018.
The Group also significantly increased its production volumes as a
result of the lift in the force majeure which had in the previous
financial year restricted exports from the Forcados terminal. The
Group plans to open up other export lines to ensure sustained
growth in production volumes.
Resumption of exports via the Forcados terminal, has
strengthened the Group's financial performance and position during
the period ended 30 June 2017.
3. Summary of significant accounting policies
3.1 Introduction to summary of significant accounting policies
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards which are set
out below.
3.2 Basis of preparation
i) Compliance with IFRS
The interim condensed consolidated financial statements of the
Group for the half year reporting period ended 30 June 2017 have
been prepared in accordance with accounting standard IAS 34 Interim
financial reporting.
ii) Historical cost convention
The financial information has been prepared under the going
concern assumption and historical cost convention, except for
contingent consideration, other asset and financial instruments on
initial recognition measured at fair value. The historical
financial information is presented in US Dollars and all values are
rounded to the nearest thousand ($000) except when otherwise
indicated. The accounting policies are applicable to both the
Company and Group.
iii) Going concern
Nothing has come to the attention of the directors to indicate
that the Company will not remain a going concern for at least
twelve months from the date of these financial statements.
iv) New and amended standards adopted by the Group
There were a number of new standards and amendments to standards
that are effective for annual periods beginning after 1 January
2017; the Group has adopted these new or amended standards in
preparing the interim condensed consolidated financial statements.
The nature and impact of the new standards and amendments to the
standards are described below.
Other than the changes described below, the accounting policies
adopted are consistent with those of the previous financial
year.
a) Disclosure initiative - Amendments to IAS 7
The Group is now required to explain changes in their
liabilities arising from financing activities. This includes
changes arising from cash flows (e.g. drawdowns and repayments of
borrowings) and non-cash changes such as acquisitions, disposals,
accretion of interest and unrealised exchange differences.
Changes in financial assets are included in this disclosure if
the cash flows were, or are, included in cash flows from financing
activities. This is the case, for example, for assets that hedge
liabilities arising from financing liabilities.
The Group may include changes in other items as part of this
disclosure, for example by providing a 'net debt' reconciliation.
However, in this case the changes in the other items are disclosed
separately from the changes in liabilities arising from financing
activities.
Notes to the interim condensed consolidated financial statements
continued
The Group discloses this information in tabular format as a
reconciliation from opening and closing balances, but may adopt a
different format as the standard does not mandate a specific
format.
The Group discloses this information in Note 16.
v) New standards, amendments and interpretations not yet adopted
The Group has the following updates to information provided in
the last annual financial statements about the standards issued but
not yet effective that may have a significant impact on the Group's
consolidated financial statements.
a. Amendments to IFRS 2 Share-based payments
In June 2016, the IASB made amendments to IFRS 2 Share-based
payments which clarified the effect of vesting conditions on the
measurement of cash-settled share-based payment transactions, the
classification of share-based payment transactions with net
settlement features and the accounting for a modification of the
terms and conditions that changes the classification of the
transaction from cash-settled to equity-settled.
The amendments are effective for reporting periods beginning on
or after 1 January 2018. The Group will adopt the amendments from 1
January 2018.
b. IFRS 9 Financial Instruments
IFRS 9 Financial instruments addresses the classification,
measurement and de-recognition of financial assets and financial
liabilities, the standard introduces new rules for hedge accounting
and a new impairment model for financial assets. The Group has
decided not to adopt IFRS 9 until it becomes mandatory on 1 January
2018.
The Group is undergoing a detailed assessment of the impact of
the new standard on the classification and measurement of its
financial assets. From the preliminary results, the Group does not
expect the new guidance to have a significant impact on the
classification and measurement of its financial assets for the
following reason:
-- All of the Group's financial assets are currently classified
as loans and receivables and are measured at amortised cost and
will satisfy the conditions for classification at amortised cost
under IFRS 9.
There will be no impact on the Group's accounting for financial
liabilities, as the new requirements only affect accounting for
financial liabilities that are designated at fair value through
profit or loss and the Group does not have such liabilities. The
de-recognition rules have been transferred from IAS 39 Financial
Instruments: Recognition and Measurement and have not been changed.
The new hedge accounting rules will align the accounting for
hedging instruments more closely with the Group's risk management
practices. As a general rule, more hedge relationships might be
eligible for hedge accounting, as the standard introduces a more
principles-based approach. The Group does not expect a significant
impact on the accounting for its hedging relationships as a result
of the adoption of IFRS 9, as they have not formally elected to
apply hedge accounting.
The new impairment model requires the recognition of impairment
provisions based on expected credit losses (ECL) rather than only
incurred credit losses as is the case under IAS 39. It applies to
financial assets classified at amortised cost, debt instruments
measured at fair value through OCI (FVOCI), contract assets under
IFRS 15: Revenue from Contracts with Customers and lease
receivables. Based on assessments undertaken on the Group's
portfolio of NPDC receivables, it estimates that should the new
rules had been adopted as at 1 January 2017, there would have been
an
increase to its loss allowance for NPDC receivables of
approximately $4 million at that date and retained earnings would
decrease by the same amount.
The new standard also introduces expanded disclosure
requirements and changes in presentation. These are expected to
change the nature and extent of the Group's disclosures about its
financial instruments particularly in the year of the adoption of
the new standard.
c. IFRS 15 Revenue from contracts with customers
The IASB has issued a new standard for the recognition of
revenue. This will replace IAS 18 which covers revenue arising from
the sale of goods and the rendering of services and IAS 11 which
covers construction contracts.
The new standard is based on the principle that revenue is
recognised when control of a good or service transfers to a
customer.
Notes to the interim condensed consolidated financial statements
continued
The standard permits either a full retrospective or a modified
retrospective approach for the adoption. The new standard is
effective for first interim periods within annual reporting periods
beginning on or after 1 January 2018. The Group will adopt the new
standard from 1 January 2018.
Management identified the following areas that are likely to be
affected:
-- Accounting for under lifts and over lifts: IFRS 15 is
applicable only if the counterparty to the contract is a customer.
The standard defines a customer as a party that has contracted with
an entity to obtain goods or services that are an output of the
entity's ordinary activities. IFRS 15 makes a distinction between
customers and partners or collaborators who share in the risks and
benefits that result from the activity or process. If the
over-lifter does not meet the definition of a customer or the
transaction is a non-monetary exchange, then over lifts and under
lifts will not be recognised as revenue from contracts with
customers. If the Group were to adopt the new rules as at 1 January
2017, it estimates that revenue would have reduced by $16 million
and other operating income would have increased by the same
amount.
-- Accounting for consideration payable to the customer: The
standard requires that an entity accounts for consideration payable
to a customer as a reduction of the transaction price and,
therefore, net of revenue unless the payment to the customer is in
exchange for a distinct good or service that the customer transfers
to the entity. The Group incurs barging costs in the course of the
satisfaction of its performance obligations i.e. delivery of crude
oil and gas. These costs do not transfer any distinct good or
service to Seplat and as such represent consideration payable to
customer and will be accounted for as a direct deduction from
revenue. If the Group had adopted the new rules as at 1 January
2017, revenue would have reduced by an additional $18 million as a
result of barging costs.
-- Presentation of contract assets and contract liabilities in
the balance sheet - IFRS 15 requires separate presentation of
contract assets and contract liabilities in the balance sheet. This
will result in some reclassifications as of 1 January 2018 in
relation to advances for future oil sales which are currently
included in deferred revenue.
-- Other likely areas of impact are in relation to advances for
future oil sales that may have a significant financing component
and variable consideration arising from gas pricing based on an
index as well as optional pricing on crude oil sold to
customers.
d. IFRS 16 Leases
IFRS 16 was issued in January 2016. It will result in almost all
leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a
financial liability to pay rentals are recognised. The only
exceptions are short-term and low-value leases. The accounting for
lessors will not significantly change.
The standard will affect primarily the accounting for the
Group's operating leases. As at the reporting date, the Group has
non-cancellable operating lease commitments of $0.39 million.
However, the Group has not yet determined to what extent these
commitments will result in the recognition of an asset and a
liability for future payments and how this will affect the Group's
profit and classification of cash flows.
Some of the commitments may be covered by the exception for
short-term leases, while none of the leases will be covered by the
exception for low value leases. Some commitments may relate to
arrangements that will not qualify as leases under IFRS 16,
principally because they are service contracts.
The standard is mandatory for first interim periods within
annual reporting periods beginning on or after 1 January 2019. At
this stage, the Group does not intend to adopt the standard before
its effective date.
3.3 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 30 June
2017.
This basis is the same adopted for the last audited financial
statements as at 31 December 2016.
3.4 Functional and presentation currency
The Group's financial statements are presented in United States
Dollars, which is also the Company's functional currency. For each
entity the Group determines the functional currency and items
included in the financial statements of each entity are measured
using that functional currency.
Notes to the interim condensed consolidated financial statements
continued
i) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies
at year end exchange rates are generally recognised in profit or
loss. Foreign exchange gains and losses that relate to borrowings
are presented in the statement of profit or loss, within finance
costs. All other foreign exchange gains and losses are presented in
the statement of profit or loss on a net basis within other income
or other expenses.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the
fair value gain or loss.
ii) Group companies
The results and financial position of foreign operations that
have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of the balance sheet
-- income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the
dates of the transactions), and
-- all resulting exchange differences are recognised in other comprehensive income.
On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation
is recognised in profit or loss.
4. Segment reporting
Segment reporting has not been prepared as the Group operates
one segment, being the exploration, development and production of
oil and gas related products located in Nigeria. Operations in the
different OMLs are integrated due to geographic proximity, the use
of shared infrastructure and common operational management.
5. Significant accounting judgements, estimates and assumptions
5.1 Judgements
Management's judgements at the end of the half year are
consistent with those disclosed in the recent 2016 Annual financial
statements. The following are some of the judgements which have the
most significant effect on the amounts recognised in this
consolidated financial statements.
i) OMLs 4, 38 and 41
OMLs 4, 38, 41 are grouped together as a cash generating unit
for the purpose of impairment testing. These three
OMLs are grouped together because they each do not independently
generate cash flows. They currently operate as a single block
sharing resources for the purpose of generating cash flows. Crude
oil and gas sold to third parties from these OMLs are invoiced
together.
ii) Advances on investment (note 18)
The Group considers that the advances on investment of US$65.7
million (2016: US$65.7 million) in relation to the acquisition of
additional assets is fully recoverable in accordance with the terms
of the deposit.
Notes to the interim condensed consolidated financial statements
continued
5.2 Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amount of assets and
liabilities are disclosed in the most recent 2016 annual financial
statements.
The following are some of the estimates and assumptions
made.
i) Impairment of financial assets
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred loss event)
and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include
indications that the debtor or a group of debtors is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation and observable
data indicating that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Management has made certain assumptions about the recoverability
of financial assets exposed to credit risk from NPDC. These are
based on management's past experiences with NPDC, current
discussions with NPDC and financial capacity of NPDC. However,
wherever these assumptions do not hold, it might have a significant
impact on the Group's profit or loss in future.
ii) Defined benefit plans
The cost of the defined benefit retirement plan and the present
value of the retirement obligation are determined at the end of the
financial year using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual
developments in the future. These include the determination of the
discount rate, future salary increases, mortality rates and changes
in inflation rates. Service and interest costs are recognised at
each reporting period based on an estimate of the periodic benefit
expense for the financial year.
The defined benefit obligation recognised in this period has
been based on the same assumptions as in the previous financial
year The subsequent financial year end balance was estimated as at
31 December 2016 and has been recognised in this half year period
on a pro rata basis. Therefore, no actuarial gains or losses have
been recognised given that last year's assumptions have been
adopted.
iii) Contingent consideration
The fair value of the contingent consideration arrangement of
US$12.9 million was estimated calculating the present value of the
future expected cash flows. The estimates are based on a discount
rate of 15.45%. Refer to note 23 for further details.
6. Financial risk management
6.1 Financial risk factors
The Group's activities expose it to a variety of financial risks
such as market risk (including foreign exchange risk, interest rate
risk and commodity price risk), credit risk and liquidity risk. The
Group's risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the Group's financial performance.
Risk management is carried out by the treasury department under
policies approved by the Board of Directors. The Board provides
written principles for overall risk management, as well as written
policies covering specific areas, such as foreign exchange risk,
interest rate risk, credit risk and investment of excess
liquidity.
Notes to the interim condensed consolidated financial statements
continued
Risk Exposure arising Measurement Management
from
------------ ------------------------- --------------------- --------------------
Market risk Future commercial Cash flow forecasting Match and settle
- foreign transactions Sensitivity foreign denominated
exchange Recognised financial analysis cash inflows
assets and liabilities with foreign
not denominated denominated cash
in US dollars. outflows.
------------ ------------------------- --------------------- --------------------
Market risk Long term borrowings Sensitivity None
- interest at variable rate analysis
rate
------------ ------------------------- --------------------- --------------------
Market risk Future sales transactions Sensitivity Oil price hedges
- commodity analysis
prices
------------ ------------------------- --------------------- --------------------
Credit risk Cash and cash Aging analysis Diversification
equivalents, trade Credit ratings of bank deposits.
receivables and
derivative financial
instruments.
------------ ------------------------- --------------------- --------------------
Liquidity Borrowings and Rolling cash Availability
risk other liabilities flow forecasts of committed
credit lines
and borrowing
facilities
------------ ------------------------- --------------------- --------------------
6.1.1 Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
The Group manages liquidity risk by ensuring that sufficient
funds are available to meet its commitments as they fall due.
The Group uses both long-term and short-term cash flow
projections to monitor funding requirements for activities and to
ensure there are sufficient cash resources to meet operational
needs. Cash flow projections take into consideration the Group's
debt financing plans and covenant compliance. Surplus cash held is
transferred to the treasury department which invests in interest
bearing current accounts, time deposits and money market
deposits.
The following table details the Group's remaining contractual
maturity for its non-derivative financial liabilities with agreed
maturity periods. The table has been drawn based on the
undiscounted cash flows of the financial liabilities based on the
earliest date on which the Group can be required to pay.
Notes to the interim condensed consolidated financial statements
continued
Variable rate Less than 1 -2 2 - 3 3 - 5 After Total
1 year years years years 5 years
============= ========== ============= ============== ============== ======== ==========
% $ '000 $ '000 $ '000 $ '000 $ '000 $ '000
============= ========== ============= ============== ============== ======== ==========
30 June 2017
====================== ============= ========== ============= ============== ============== ======== ==========
Non - derivatives
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Variable interest rate
borrowings (bank
loans):
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Allan Gray 8.5%+LIBOR 4,328 5,333 4,904 3,038 - 17,603
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Zenith Bank Plc 8.5%+LIBOR 59,315 73,081 67,203 41,636 - 241,235
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
First Bank of Nigeria 8.5%+LIBOR 32,743 40,343 37,098 22,984 - 133,168
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
United Bank of Africa
Plc 8.5%+LIBOR 37,072 45,676 42,002 26,022 - 150,772
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Stanbic IBTC Bank Plc 8.5%+LIBOR 5,556 6,845 6,294 3,900 - 22,595
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
The Standard Bank of
South Africa Limited 8.5%+LIBOR 5,556 6,845 6,294 3,900 - 22,595
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Standard Chartered
Bank 6.0%+LIBOR 14,859 9,240 - - - 24,099
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Natixis 6.0%+LIBOR 14,859 9,240 - - - 24,099
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Citibank Nigeria
Limited and Citibank
N.A. 6.0%+LIBOR 11,557 7,186 - - - 18,743
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
First Rand Bank
(Merchant Bank
Division) 6.0%+LIBOR 9,906 6,160 - - - 16,066
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Nomura International
Plc. 6.0%+LIBOR 9,906 6,160 - - - 16,066
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Ned Bank Ltd London
Branch 6.0%+LIBOR 9,906 6,160 - - - 16,066
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
The Mauritius
Commercial Bank Plc 6.0%+LIBOR 9,906 6,160 - - - 16,066
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Stanbic IBTC Bank Plc 6.0%+LIBOR 7,429 4,620 - - 12,049
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
The Standard Bank of
South Africa Limited 6.0%+LIBOR 10,733 6,674 - - - 17,407
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Other non-derivatives
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Trade and other
payables - 155,304 - - - - 155,304
---------------------- ------------- ---------- ------------- -------------- -------------- -------- ----------
Contingent
consideration - - - 18,500 - - 18,500
====================== ============= ========== ============= ============== ============== ======== ==========
398,935 239,723 182,295 101,480 922,433
====================== ============= ========== ============= ============== ============== ======== ==========
Notes to the interim condensed consolidated financial statements
continued
Variable Less 1 - 2 - 3 - After Total
rate than 2 3 5 5 years
1 year year years years
-------- ------- -------- -------- -------- -------- --------
% $ '000 $ '000 $ '000 $ '000 $ '000 $ '000
======== ======= ======== ======== ======== ======== ========
31 December 2016
========================= ======== ======= ======== ======== ======== ======== ========
Non - derivatives
------------------------- -------- ------- -------- -------- -------- -------- --------
Variable interest
rate borrowings
(bank loans):
------------------------- -------- ------- -------- -------- -------- -------- --------
8.5%
Zenith Bank Plc + LIBOR 37,406 76,006 70,109 74,477 - 257,998
------------------------- -------- ------- -------- -------- -------- -------- --------
First Bank of 8.5%
Nigeria Limited + LIBOR 23,379 47,504 43,818 46,548 - 161,249
------------------------- -------- ------- -------- -------- -------- -------- --------
United Bank for 8.5%
Africa Plc + LIBOR 23,379 47,504 43,818 46,548 - 161,249
------------------------- -------- ------- -------- -------- -------- -------- --------
Stanbic IBTC Bank 8.5%
Plc + LIBOR 3,504 7,119 6,567 6,976 - 24,166
------------------------- -------- ------- -------- -------- -------- -------- --------
The Standard Bank
of South Africa 8.5%
Limited + LIBOR 3,504 7,119 6,567 6,976 - 24,166
------------------------- -------- ------- -------- -------- -------- -------- --------
Standard Chartered 6.0%
Bank + LIBOR 27,711 - - - - 27,711
------------------------- -------- ------- -------- -------- -------- -------- --------
6.0%
Natixis + LIBOR 27,711 - - - - 27,711
------------------------- -------- ------- -------- -------- -------- -------- --------
Citibank Nigeria
Ltd and Citibank 6.0%
NA + LIBOR 27,711 - - - - 27,711
------------------------- -------- ------- -------- -------- -------- -------- --------
Bank of America
Merrill Lynch 6.0%
Int'l Ltd + LIBOR 18,474 - - - - 18,474
------------------------- -------- ------- -------- -------- -------- -------- --------
FirstRand Bank
Ltd (Rand Merchant 6.0%
Bank Division) + LIBOR 18,474 - - - - 18,474
------------------------- -------- ------- -------- -------- -------- -------- --------
JP Morgan Chase
Bank NA, London 6.0%
Branch + LIBOR 18,474 - - - - 18,474
------------------------- -------- ------- -------- -------- -------- -------- --------
NedBank Ltd, London 6.0%
Branch + LIBOR 18,474 - - - - 18,474
------------------------- -------- ------- -------- -------- -------- -------- --------
Stanbic IBTC Bank 6.0%
Plc + LIBOR 13,856 - - - - 13,856
------------------------- -------- ------- -------- -------- -------- -------- --------
The Standard Bank
of South Africa 6.0%
Ltd + LIBOR 13,856 - - - - 13,856
------------------------- -------- ------- -------- -------- -------- -------- --------
Other non - derivatives
------------------------- -------- ------- -------- -------- -------- -------- --------
Trade and other
payables - 161,773 - - - - 161,773
------------------------- -------- ------- -------- -------- -------- -------- --------
Contingent consideration - - - - 18,500 - 18,500
========================= ======== ======= ======== ======== ======== ======== ========
437,686 185,252 170,879 200,025 - 993,842
========================= ======== ======= ======== ======== ======== ======== ========
6.2 Fair value measurements
Financial instruments measured at fair value were based on the
same assumptions as determined in the 31 December 2016 financial
statements. The judgements and estimates made by the Group in
determining the fair values of the financial instruments have
remained the same since the last annual financial report. There
were no transfers of financial instruments between fair value
hierarchy levels during this half year.
Notes to the interim condensed consolidated financial statements
continued
7. Revenue
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
======================= =============== =============== ============== ==============
Crude oil sales 111,183 69,952 81,073 33,457
----------------------- --------------- --------------- -------------- --------------
(Over lift)/under lift (33,732) 35,930 (25,863) 16,334
======================= =============== =============== ============== ==============
77,451 105,882 55,210 49,791
----------------------- --------------- --------------- -------------- --------------
Gas sales 54,363 47,140 29,305 19,815
======================= =============== =============== ============== ==============
Revenue 131,814 153,022 84,515 69,606
======================= =============== =============== ============== ==============
The major off-taker for crude oil is Mercuria. The major
off-taker for gas is the Nigerian Gas Company.
In the prior period to 30 June 2016, realised fair value losses
on crude oil hedges of US$9,999 ('000) were included in Revenue.
This is now classified under Fair Value Loss (note 11).
8. Cost of sales
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
========================================= =============== =============== ============== ==============
Crude handling fees 5,006 10,833 4,458 1,151
----------------------------------------- --------------- --------------- -------------- --------------
Barging cost 6,524 - 4,384 -
----------------------------------------- --------------- --------------- -------------- --------------
Royalties 18,753 13,376 13,809 4,568
----------------------------------------- --------------- --------------- -------------- --------------
Depletion, depreciation and amortisation 28,974 28,509 17,619 9,573
----------------------------------------- --------------- --------------- -------------- --------------
Niger Delta Development Commission levy 2,381 2,961 1,240 1,060
----------------------------------------- --------------- --------------- -------------- --------------
Rig related expenses 1,630 1,813 630 765
----------------------------------------- --------------- --------------- -------------- --------------
Operations & maintenance expenses 14,919 26,250 7,863 12,845
========================================= =============== =============== ============== ==============
Cost of sales 78,187 83,742 50,003 29,962
========================================= =============== =============== ============== ==============
9. General and administrative expenses
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
===================================== =============== =============== ============== ==============
Depreciation 2,362 2,744 1,244 1,431
------------------------------------- --------------- --------------- -------------- --------------
Employee benefits 10,776 10,465 4,939 4,252
------------------------------------- --------------- --------------- -------------- --------------
Professional and consulting fees 11,276 11,174 6,831 5,525
------------------------------------- --------------- --------------- -------------- --------------
Auditor's remuneration 306 56 156 -
------------------------------------- --------------- --------------- -------------- --------------
Directors emoluments (executive) 1,382 1,613 800 404
------------------------------------- --------------- --------------- -------------- --------------
Directors emoluments (non-executive) 1,555 2,395 802 1,480
------------------------------------- --------------- --------------- -------------- --------------
Rentals 732 1,008 494 418
------------------------------------- --------------- --------------- -------------- --------------
Other general expenses 7,926 20,137 4,290 14,633
===================================== =============== =============== ============== ==============
General and administrative expenses 36,315 49,592 19,556 28,143
===================================== =============== =============== ============== ==============
Directors' emoluments have been split between executive and
non-executive directors. There were no non-audit services rendered
by the Group's auditors during the period. Other general expenses
relate to costs such as office maintenance costs, telecommunication
costs, logistics costs and others. Share based payment expenses are
included in the employee benefits expense.
Notes to the interim condensed consolidated financial statements
continued
10. Loss on foreign exchange - net
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
============== =============== =============== ============== ==============
Exchange loss (866) (28,330) (2,596) (25,889)
============== =============== =============== ============== ==============
This is principally as a result of translation of naira
denominated monetary assets and liabilities.
11. Fair value loss
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
================================================= =============== =============== ============== ==============
Realised fair value losses on crude oil hedges (9,827) (9,999) (4,834) (9,999)
------------------------------------------------- --------------- --------------- -------------- --------------
Unrealised fair value losses on crude oil hedges - (20,787) - (20,787)
------------------------------------------------- --------------- --------------- -------------- --------------
Fair value loss on contingent consideration (897) (2,559) (457) (1,758)
------------------------------------------------- --------------- --------------- -------------- --------------
Fair value gain on other assets 1,514 - 1,514 -
================================================= =============== =============== ============== ==============
Fair value loss (9,210) (33,345) (3,777) (32,544)
================================================= =============== =============== ============== ==============
Realised fair value losses on crude oil hedges represent the
payments for crude oil price options, while unrealised fair value
losses represent losses on crude oil price hedges charged to profit
or loss. Fair value loss on contingent consideration arises in
relation to remeasurement of contingent consideration on the
Group's acquisition of participating interest in its OML 53. The
contingency criteria are the achievement of certain production
milestones. Fair value gain on other assets arises from the fair
value remeasurement of the Group's rights to receive the discharge
sum of US$308 million.
In the prior period to 30 June 2016, realised fair value losses
on crude oil hedges of US$9,999 ('000) were included in Revenue
(note 7). This is now classified under Fair Value Loss.
12. Finance income/ (costs)
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
==================================================== =============== =============== ============== ==============
Finance income
---------------------------------------------------- --------------- --------------- -------------- --------------
Interest income 883 25,886 673 23,655
---------------------------------------------------- --------------- --------------- -------------- --------------
Finance costs - -
---------------------------------------------------- --------------- --------------- -------------- --------------
Interest on bank loan and other bank charges 34,526 41,216 17,368 19,262
---------------------------------------------------- --------------- --------------- -------------- --------------
Unwinding of discount on provision for
decommissioning 47 216 24 -
==================================================== =============== =============== ============== ==============
34,573 41,432 17,392 19,262
==================================================== =============== =============== ============== ==============
Finance (cost)/ income - net (33,690) (15,546) (16,719) 4,393
==================================================== =============== =============== ============== ==============
13. Taxation
Income tax expense is recognised based on management's estimate
of the weighted average effective annual income tax rate expected
for the full financial year. The estimated average annual tax rate
used for the period to 30 June 2017 is 65.75% for crude oil
activities and 30% for gas activities. As at 31st December 2016,
the tax rates were 65.75% and 30% for crude oil and gas activities
respectively.
Deferred income tax assets are recognised for tax losses carried
forward to the extent that the realisation of the related tax
benefit through future taxable profits is probable. The Group did
not recognise deferred income tax assets of US$235
Notes to the interim condensed consolidated financial statements
continued
million (2016: US$192 million) in respect of temporary
differences amounting to US$357 million (2016: US$292 million). Out
of this, deferred tax asset of $71 million (2016: US$47 million)
relates tax losses of US$109 million (2016: US$71 million). There
are no expiration dates for the tax losses.
14. Loss per share (LPS)
Basic
Basic LPS is calculated on the Group's loss after taxation
attributable to the parent entity and on the basis of the weighted
average of issued and fully paid ordinary shares at the end of the
period.
Diluted
Diluted LPS is calculated by dividing the loss attributable to
ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on
conversion of all the dilutive potential ordinary shares (arising
from outstanding share awards in the share based payment scheme)
into ordinary shares.
Half year ended Half year ended 3 months ended 3 months ended
30 June 2017 30 June 2016 30 June 2017 30 June 2016
--------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
==================================================== =============== =============== ============== ==============
Loss for the period attributable to equity holders
of the parent (27,573) (62,506) (8,436) (43,677)
==================================================== =============== =============== ============== ==============
Share Share Share
- '000 '000 '000
==================================================== =============== =============== ============== ==============
Weighted average number of ordinary shares in issue 563,445 560,576 563,445 560,576
---------------------------------------------------- --------------- --------------- -------------- --------------
Share awards 4,943 2,223 4,943 2,223
---------------------------------------------------- --------------- --------------- -------------- --------------
Weighted average number of ordinary shares adjusted
for the effect of dilution 568,388 562,799 568,388 562,799
==================================================== =============== =============== ============== ==============
$ $ $ $
---------------------------------------------------- --------------- --------------- -------------- --------------
Basic loss per share (0.05) (0.11) (0.01) (0.08)
---------------------------------------------------- --------------- --------------- -------------- --------------
Diluted loss per share (0.05) (0.11) (0.01) (0.08)
---------------------------------------------------- --------------- --------------- -------------- --------------
$'000 $'000 $'000 $'000
==================================================== =============== =============== ============== ==============
Loss attributable to equity holders of the parent (27,573) (62,506) (8,436) (43,677)
==================================================== =============== =============== ============== ==============
Loss used in determining diluted loss per share (27,573) (62,506) (8,436) (43,677)
==================================================== =============== =============== ============== ==============
15. Dividend
Half year ended Half year ended
30 June 2017 30 June 2016
--------------- ---------------
$'000 $'000
================================ =============== ===============
Dividend paid during the period - 22,534
================================ =============== ===============
$ $
================================ =============== ===============
Dividend per share ($) - 0.04
================================ =============== ===============
Notes to the interim condensed consolidated financial statements
continued
16. Interest bearing loans & borrowings
Below is the net debt reconciliation on interest bearing loans
and borrowings.
Borrowings due Borrowings due
within 1 year above 1 year Total
US$'000 US$'000 US$'000
============================= ============== ============== =========
Balance as at 1
January 2017 217,998 446,098 664,096
Effective interest - 36,515 36,515
----------------------------- -------------- -------------- ---------
Effect of loan restructuring (28,798) 28,798 -
----------------------------- -------------- -------------- ---------
Repayment - (76,025) (76,025)
----------------------------- -------------- -------------- ---------
Balance as at 30
June 2017 189,200 435,386 624,586
============================= ============== ============== =========
17. Other asset
As at 30 June 2017
------------------
$'000
=========================================== ==================
Initial fair value of investment in OML 55 250,090
------------------------------------------- ------------------
Receipts from crude oil lifted (22,604)
------------------------------------------- ------------------
Fair value adjustment as at 30 June 2017 1,514
=========================================== ==================
Fair value as at 30 June 2017 229,000
=========================================== ==================
Other asset represents the Group's rights to receive the
discharge sum of US$308 million (2016: US$330 million) from the
crude oil reserves of OML 55.The asset is measured at fair value
through profit or loss (FVTPL) and receipts from crude oil lifted
reduce the value of the asset. At each reporting date, the fair
value of the discharge sum is determined using the income approach
in line with IFRS 13: Fair Value Measurement. As at 30 June 2017,
the fair value of the discharge sum is US$229 million (2016: US$250
million).
18. Trade and other receivables
As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
$'000 $'000
========================================================== ================== =================
Trade receivables 134,378 73,427
---------------------------------------------------------- ------------------ -----------------
Nigerian Petroleum Development Company (NPDC) receivables 224,915 239,034
---------------------------------------------------------- ------------------ -----------------
National Petroleum Investment Management Services 6,001 8,233
---------------------------------------------------------- ------------------ -----------------
Advances on investment 65,705 65,705
---------------------------------------------------------- ------------------ -----------------
Under lift 2,445 4,498
---------------------------------------------------------- ------------------ -----------------
Advances to suppliers 7,513 8,921
---------------------------------------------------------- ------------------ -----------------
Other receivables 2,585 1,136
---------------------------------------------------------- ------------------ -----------------
-
========================================================== ================== =================
Impairment loss on NPDC receivables (10,260) (10,260)
========================================================== ================== =================
433,282 390,694
========================================================== ================== =================
18a. Trade receivables:
Included in trade receivables is an amount due from NGC of US$87
million (2016: US$67 million) with respect to the sale of gas.
Notes to the interim condensed consolidated financial statements
continued
18b. NPDC receivables:
NPDC receivables represent the outstanding cash calls due to
Seplat from its JV partner, Nigerian Petroleum Development Company.
The receivables have been discounted to reflect the impact of time
value of money, and an impairment loss has been recognized in the
financial statements. As at 30 June 2017, the undiscounted value of
this receivable is US$225 million (2016: US$239 million).
18c. Advances on investment:
This comprises an advance of US$45million on a potential
investment in OML 25 and US$20.5 million currently held in an
escrow account. Proceedings commenced against Newton Energy
Limited, a wholly owned subsidiary of Seplat Plc by Crestar Natural
Resources relating to the US$20.5 million currently held in an
escrow account. The escrow monies relate to the potential
acquisition of OML 25 by Crestar which Newton Energy has an option
to invest into. These monies were placed in escrow in July 2015
pursuant to an agreement reached with Crestar and the vendor on
final terms of the transaction.
19. Share capital
19a. Authorised and issued share capital
As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
$'000 $'000
=============================================================================== ================== =================
Authorised ordinary share capital
------------------------------------------------------------------------------- ------------------ -----------------
1,000,000,000 ordinary shares denominated in Naira of 50 kobo per share 3,335 3,335
=============================================================================== ================== =================
Issued and fully paid
------------------------------------------------------------------------------- ------------------ -----------------
563,444,561 (2016: 563,444,561) issued shares denominated in Naira of 50 kobo
per share 1,826 1,826
=============================================================================== ================== =================
19b. Employee share based payment scheme
As at 30 June 2017, the Group had awarded shares of 25,726,262
(2016: 25,448,071 shares) to certain employees and senior
executives in line with its share based incentive scheme. During
the half year ended 30 June 2017, no shares were vested (31
December 2016: 2,868,460 shares had vested, resulting in an
increase in number of issued and fully paid ordinary shares of 50k
each from 561 million to 563 million).
20. Trade and other payables
As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
$'000 $'000
============================ ================== =================
Trade payables 104,866 108,140
---------------------------- ------------------ -----------------
Accruals and other payables 88,724 83,850
---------------------------- ------------------ -----------------
NDDC levy 5,145 19
---------------------------- ------------------ -----------------
Deferred revenue 121,671 35,170
---------------------------- ------------------ -----------------
Royalties 36,350 34,349
============================ ================== =================
356,756 261,528
============================ ================== =================
Included in accruals and other payables are field-related
accruals US$36 million (2016: US$35m) and other vendor payables of
US$53m (2016: US$48m). Deferred revenue includes advance payments
for crude oil sales of US$120m (2016: US$34m) and royalties include
accruals in respect of gas sales for which payment is outstanding
at the end of the period.
Notes to the interim condensed consolidated financial statements
continued
21. Computation of cash generated from operations
Half year ended Half year ended
30 June 2017 30 June 2016
--------------- ---------------
$'000 $'000
============================================================================ =============== ===============
Loss before tax (26,454) (57,533)
============================================================================ =============== ===============
Adjusted for:
---------------------------------------------------------------------------- --------------- ---------------
Depletion, depreciation and amortisation 31,336 31,253
---------------------------------------------------------------------------- --------------- ---------------
Interest on bank loan and other bank charges 34,526 41,216
---------------------------------------------------------------------------- --------------- ---------------
Unwinding of discount on provision for decommissioning 47 216
---------------------------------------------------------------------------- --------------- ---------------
Interest income (883) (25,886)
---------------------------------------------------------------------------- --------------- ---------------
Fair value loss on contingent consideration 897 2,559
---------------------------------------------------------------------------- --------------- ---------------
Unrealised fair value loss on crude oil hedges - 20,787
---------------------------------------------------------------------------- --------------- ---------------
Fair value gain on other asset (1,514) -
---------------------------------------------------------------------------- --------------- ---------------
Unrealised foreign exchange loss 866 28,330
---------------------------------------------------------------------------- --------------- ---------------
Share based payments expenses 2,673 1,650
---------------------------------------------------------------------------- --------------- ---------------
Defined benefit expenses 1,116 (930)
---------------------------------------------------------------------------- --------------- ---------------
Loss on disposal of other property, plant and equipment 82 -
---------------------------------------------------------------------------- --------------- ---------------
Changes in working capital (excluding the effects of exchange differences):
---------------------------------------------------------------------------- --------------- ---------------
Trade and other receivables, including prepayments (26,589) 74,407
---------------------------------------------------------------------------- --------------- ---------------
Trade and other payables 86,031 (52,333)
---------------------------------------------------------------------------- --------------- ---------------
Inventories 4,107 (23,829)
============================================================================ =============== ===============
Net cash from operating activities 106,241 39,907
============================================================================ =============== ===============
22. Related party relationships and transactions
The Group is controlled by Seplat Petroleum Development Company
Plc (the 'parent Company'). As at 30 June 2017, the parent Company
is owned 8.39% either directly or by entities controlled by A.B.C.
Orjiako ('SPDCL BVI') and members of his family and 13.15% either
directly or by entities controlled by Austin Avuru ('Professional
Support Limited' and 'Platform Petroleum Limited'). The remaining
shares in the parent company are widely held.
22a. Related party relationships
The services provided by the related parties:
Abbeycourt Trading Company Limited: The Chairman of Seplat is a
director and shareholder. The company provides diesel supplies to
Seplat in respect of Seplat's rig operations.
Berwick Nigeria Limited: The Chairman of Seplat is a shareholder
and director. The company provides construction services to Seplat
in relation to a field base station in Sapele.
Cardinal Drilling Services Limited (formerly Caroil Drilling
Nigeria Limited): Is owned by common shareholders with the parent
Company. The company provides drilling rigs and drilling services
to Seplat.
Charismond Nigeria Limited: The sister to the CEO works as a
General Manager. The company provides administrative services
including stationary and other general supplies to the field
locations.
Helko Nigeria Limited: The Chairman of Seplat is shareholder and
director. The company owns the lease to Seplat's main office at 25A
Lugard Avenue, Lagos, Nigeria.
Keco Nigeria Enterprises: The Chief Executive Officer's sister
is shareholder and director. The company provides diesel supplies
to Seplat in respect of its rig operations.
Montego Upstream Services Limited: The Chairman's nephew is
shareholder and director. The company provides drilling and
engineering services to Seplat.
Nabila Resources & Investment Ltd: The Chairman's in-law is
a shareholder and director. The company provides lubricant to
Seplat.
Ndosumili Ventures Limited: Is a subsidiary of Platform
Petroleum Limited. The company provides transportation services to
Seplat.
Nerine Support Services Limited: Is owned by common shareholders
with the parent Company. Seplat leases a warehouse from Nerine and
the company provides agency and contract workers to Seplat.
Oriental Catering Services Limited: The Chief Executive Officer
of Seplat's spouse is shareholder and director. The company
provides catering services to Seplat at the staff canteen.
ResourcePro Inter Solutions Limited: The Chief Executive Officer
of Seplat's in-law is its UK representative. The company supplies
furniture to Seplat.
Shebah Petroleum Development Company Limited (BVI): The Chairman
of Seplat is a director and shareholder of SPDCL (BVI). SPDCL (BVI)
provided consulting services to Seplat.
The following transactions were carried by Seplat with related
parties:
22b. Related party relationships
ii) Purchases of goods and services Half year ended Half year ended
30 June 2017 30 June 2016
--------------- ---------------
$'000 $'000
================================================= =============== ===============
Shareholders of the parent company
------------------------------------------------- --------------- ---------------
M&P (MPI SA) - 38
------------------------------------------------- --------------- ---------------
SPDCL (BVI) 564 576
================================================= =============== ===============
564 614
================================================= =============== ===============
Entities controlled by key management personnel:
------------------------------------------------- --------------- ---------------
Contracts > $1million in 2017
------------------------------------------------- --------------- ---------------
Nerine Support Services Limited 2,700 6,215
================================================= =============== ===============
2,700 6,215
================================================= =============== ===============
Contracts < $1million in 2017
------------------------------------------------- --------------- ---------------
Abbey Court trading Company Limited 349 183
------------------------------------------------- --------------- ---------------
Charismond Nigeria Limited 31 20
------------------------------------------------- --------------- ---------------
Cardinal Drilling Services Limited 621 5,632
------------------------------------------------- --------------- ---------------
Keco Nigeria Enterprises 73 27
------------------------------------------------- --------------- ---------------
Ndosumili Ventures Limited 554 1,036
------------------------------------------------- --------------- ---------------
Oriental Catering Services Limited 211 284
------------------------------------------------- --------------- ---------------
ResourcePro Inter Solutions Limited 1 77
------------------------------------------------- --------------- ---------------
Berwick Nigeria Limited - 28
------------------------------------------------- --------------- ---------------
Montego Upstream Services Limited - 11,704
------------------------------------------------- --------------- ---------------
Nabila Resources & Investment Limited - 5
------------------------------------------------- --------------- ---------------
Helko Nigeria Limited - 411
================================================= =============== ===============
1,840 19,407
================================================= =============== ===============
Total 4,540 25,622
================================================= =============== ===============
* Nerine charges an average mark-up of 7.5% on agency and
contract workers assigned to Seplat. The amounts shown above are
gross i.e. it includes salaries and Nerine's mark-up. Total costs
for agency and contracts during the half year ended 30 June 2017 is
US$2.6 million.
Notes to the interim condensed consolidated financial statements
continued
22c. Balances
The following balances were receivable from or payable to
related parties as at 30 June 2017:
Prepayments / receivables As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
$'000 $'000
================================================ ================== =================
Entities controlled by key management personnel
------------------------------------------------ ------------------ -----------------
Cardinal Drilling Services Limited 6,200 6,211
================================================ ================== =================
6,200 6,211
================================================ ================== =================
Payables As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
$'000 $'000
================================================ ================== =================
Entities controlled by key management personnel
------------------------------------------------ ------------------ -----------------
Cardinal Drilling Services Limited 621 1,009
------------------------------------------------ ------------------ -----------------
Abbey Court Petroleum Company Limited 291 -
------------------------------------------------ ------------------ -----------------
Charismond Nigeria Limited 21 -
------------------------------------------------ ------------------ -----------------
Ndosumili Ventures Limited 457 -
------------------------------------------------ ------------------ -----------------
ResourcePro Inter Solutions Limited 1 -
------------------------------------------------ ------------------ -----------------
Nerine Support Services Limited 2,616 11,411
------------------------------------------------ ------------------ -----------------
Montego Upstream Services Limited - 11,540
================================================ ================== =================
4,007 23,960
================================================ ================== =================
23. Commitments and contingencies
23a. Operating lease commitments - Group as lessee
The Group leases drilling rigs, buildings, land, boats and
storage facilities. The lease terms are between 1 and 5 years. The
operating lease commitments of the Group as at 30 June 2017
are:
Operating lease commitments As at 30 June 2017 As at 31 Dec 2016
------------------ -----------------
$'000 $'000
================================================== ================== =================
Not later than one year 119 119
-------------------------------------------------- ------------------ -----------------
Later than one year and not later than five years 271 271
================================================== ================== =================
390 390
================================================== ================== =================
23b. Contingent consideration
As part of the purchase agreement of OML 53, a portion of the
consideration is contingent on the performance of the producing
asset. There will be additional cash payments to the previous
owners should the oil price rise above US$90/bbl in the three year
period following the acquisition date.
Significant unobservable valuation inputs are shown below:
Discount rate 15.45%
A significant increase or decrease in the discount rate would
result in a lower/ (higher) fair value of the liability.
The fair value of the contingent consideration determined at 31
December 2016 reflects the current and projected crude oil prices,
amongst other factors and a fair value adjustment has been
recognised in profit or loss.
A reconciliation of the fair value of the contingent
consideration liability is provided below:
As at 30 June 2017
------------------
$'000
============================================================================================== ==================
Initial fair value of the contingent consideration at acquisition date 10,427
---------------------------------------------------------------------------------------------- ------------------
Unrealised fair value changes recognised in profit or loss during year ended 31 December 2016 1,613
============================================================================================== ==================
Financial liability for the contingent consideration as at 31 December 2016 12,040
============================================================================================== ==================
Fair value adjustment as at 30 June 2017 897
============================================================================================== ==================
Contingent consideration as at 30 June 2017 12,937
============================================================================================== ==================
23c. Contingent liabilities
The Group is involved in a number of legal suits as defendant.
The estimated value of the contingent liabilities for the period
ended 30 June 2017 is US$ 174 million (2016: US$15.5 million). No
provision has been made for this potential liability in these
financial statements. Management and the Group's solicitors are of
the opinion that the Group will suffer no loss from these
claims.
24. Events after the reporting period
There was no significant event after the reporting date which
could have a material effect on the state of affairs of the Group
as at 30 June 2017 and on the profit or loss for the half year
ended on that date, which have not been adequately provided for or
disclosed in these financial statements.
25. Compliance with FRC Rule 1
In compliance with the regulatory requirement in Nigeria that
the CFO, who signs the Annual Report and Accounts, must be a member
of a professional accountancy body recognised by an Act of the
National Assembly in Nigeria, the CFO of Seplat, Roger Brown, has
been granted a waiver by the Financial Reporting Council of Nigeria
to sign the accounts of the Group.
26. Reclassification
Certain comparative figures have been reclassified in line with
the current year's presentation.
General information
Company secretary Mirian Kachikwu
------------------------------
Registered office and business
Address of directors 25a Lugard Avenue
Ikoyi
Lagos
Nigeria
Registered number RC No. 824838
FRC number FRC/2015/NBA/00000010739
Auditors Ernst & Young
10(th) & 13th Floor, UBA House
57 Marina Lagos.
Registrars DataMax Registrars Limited
7 Anthony Village Road
Anthony
P.M.B 10014
Shomolu
Lagos, Nigeria
Solicitors Abraham Uhunmwagho & Co
Adepetun Caxton-Martins Agbor & Segun ('ACAS-Law')
Austin and Berns Solicitors
Chief J.A. Ororho & Co.
Consolex LP
Freshfields Bruckhaus Deringer LLP
G.C. Arubayi & Co.
Herbert Smith Freehills LLP
J.E. Okodaso & Company
Norton Rose Fulbright LLP
Ogaga Ovrawah & Co.
Olaniwun Ajayi LP
O. Obrik. Uloho and Co.
Streamsowers & Kohn
Thompson Okpoko & Partners
V.E. Akpoguma & Co.
Winston & Strawn London LLP
Bankers Citibank Nigeria Limited
First Bank of Nigeria Limited
HSBC Bank
Skye Bank Plc
Stanbic IBTC Bank Plc
Standard Chartered Bank
United Bank for Africa Plc
Zenith Bank Plc
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKADDDBKBKOB
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