Seplat Petroleum Development Company Plc has broken the high speed at which it built a huge loss in the first quarter of 2020. Its audited accounts for the half-year ended June 2020 show that it incurred a loss of N3 billion in the second quarter compared to the first quarter loss figure of nearly N35 billion.
Despite the drop, however, it remains a bad financial year in the making for the petroleum company with a half-year loss of close to N38 billion at the end of June 2020.
This is a sudden change in fortunes from a half-year profit of over N37 billion in 2019 and from a five-year profit peak of N85 billion in the year. The loss stretches all the way from operating results to the bottom line – the worst performance for the company in years.
The reduced loss in the second quarter reflects two major developments during the period. The first is a no-further record of impairment loss on non-financial assets – that was as large as N50 billion in the first quarter. The second is the appearance of a tax credit of N15.5 billion in the second quarter that erased much of a pre-tax loss of close to N19 billion for the quarter.
Revenue losses remain the major challenge for the company this year, as drop-in turnover gained further speed in the second quarter. A 6 percent drop in sales revenue last year accelerated to 13 percent in the first quarter and further to 26 percent at half-year.
The loss of sales reflects the global economic lockdown under the coronavirus pandemic that crashed crude oil and gas prices. The company realised an average crude oil price of $34.94/bbl at half-year 2020, down from $65.16/bbl in the same period last year. This is also a further drop from an average of $50.9/bbl in the first quarter.
An adverse cost-income shift seen in the first quarter extended further in the second, as costs continued accelerating upward while revenue accelerated downward. Cost of sales sped up from 32 percent growth year-on-year in the first quarter to 47 percent at half-year, consuming 84 percent of sales revenue against 75 percent in the first quarter. That reduced gross profit to one-fifth of the corresponding figure last year.
Added to the considerable loss of gross profit is a 17 percent increase in general and administrative expenses compared to a drop of over 11 percent at the end of 2019. It is however a sharp slowdown from a 66 percent rise in administrative cost in the first quarter.
The result of the company’s operating activities at half-year is a loss of N38.7 billion – a plunge from an operating profit of N42.7 billion in the same period in 2019. This is a further increase in operating loss from N25 billion in the first quarter.
Net finance expenses more than doubled at 106 percent to almost N12 billion at the end of June 2020, as finance income dropped to insignificance, and finance cost rose by 65 percent. Net finance expenses had dropped by 57 percent to N6 billion at the end of last year. The company’s interest-bearing debts remained huge at N288 billion at the end of the half-year.
Good news came from tax saving in the second quarter, as the company shifted from a tax expense of N3.5 billion in the first quarter to a tax credit of over N12 billion at half-year. That helped to mow down a pre-tax loss of roughly N50 billion at the end of the review period.
Seplat Petroleum closed half year operations with a turnover of over N80 billion, a drop of 26.5 percent year-on-year. An increase in the group’s average working-interest liquids production was more than countered by drops in the average crude oil price and the volume of gas sales.
The group’s average working-interest liquids production grew by 48.5 percent to 34,117 bpd at half-year due to sustained increase in output from two oil wells. At $34.94/bbl, the average crude oil price realised over the half-year is only slightly above one-half of the figure in the same period last year.
Gas sales volume dropped by 31 percent to 99 mmscf, reflecting increased downtime at the third-party infrastructure and a 15-day shutdown of Oben gas plant for turnaround maintenance in March. However, the average realised gas price for the company has reversed from an 11 percent drop in the first quarter to a 4.7 percent gain year-on-year at $2.88/mscf.
Reduced gas sales volumes led to a drop of close to 17 percent in gas revenue to over N18 billion at the end of half-year. Gas contribution to group revenue has however improved from 17.7 percent in the first quarter to almost 23 percent at half-year. This follows the gain in the average selling price for gas over the period.
The company’s management expects greater stability in revenue performance in the second half in the reflection of steps taken to hedge against low oil prices and with improving the contribution of gas to group revenue.
The group closed half year operations with a loss of N37.8 billion against an after-tax profit of N37.5 billion in the same period in 2019. The change in fortune is spelt by the bearish turn of the global oil market in the midst of the coronavirus pandemic.
The company lost N65.32 per share at the end of half-year operations in June 2020 against earnings per share of N65.92 in the same period in 2019.
Comments are closed.