Seplat Petroleum Development Company Plc lost sales revenue in 2020 against major cost increases, resulting in a net loss of roughly N31 billion at the end of the year.
The audited accounts of the energy company for the year shows a deep plunge from an after-tax profit of N85 billion it reported at the end of the 2019 operations.
Loss of revenue reflects a big drop in the average crude oil price realised during the year from $64/barrel in 2019 to S39.95/barrel in 2020. The full impact of the drop in the average realised crude oil price was moderated by a 10 per cent growth in overall production operations during the year.
The increase in production level is despite production limits imposed by a cut in OPEC’s output quotas and the adverse impacts of coronavirus pandemic. The production cuts however constrained gross exports by as much as 41,000 bbls through the second half of the year.
Liquids production accounted exclusively for the increase in the overall production level with a year-on-year increase of 41 per cent. The upturn reflects the first time contribution of newly acquired Eland assets.
Gas production dropped by 23 per cent during the year due to the effects of maintenance operations in the first quarter as well as the setbacks caused by the Covid-19 pandemic. Revenue losses in dollar terms were however countered by naira depreciation – leaving crude oil and gas revenue only slightly down at the end of the year.
The main drop in local currency revenue was caused by a complete disappearance of the gas processing fee that contributed more than N20 billion to group revenue in 2019.
The company’s return to a modest profit in the third quarter was sustained in the final quarter. It generated an after-tax profit of N3 billion in the fourth quarter, which dropped into a loss figure of N33.7 billion at the end of the third quarter.
That lowered the closing loss figure for the year to N30.7 billion for Seplat Petroleum at the end of 2020.
The major incursion from costs on earnings seen in the interim reports followed the company to a full year. Cost increases came largely from impairment losses on non-financial assets, input cost and finance expenses. Rapid growths in these expense lines plus fair value loss of over N7 billion undermined the company’s profit capacity for the year.
A strong growth in revenue that was recorded in the third quarter was also maintained in the final quarter. With that, the year-on-year revenue drop slowed down sharply in the last two quarters of the year from 26.5 per cent at half-year to less than 11 per cent at full year.
Seplat Petroleum closed the 2020 full year operations with a turnover of N190.9 billion, representing a revenue drop for the second year. In dollar terms, crude oil sales revenue dropped by 15.6 percent to N$418 million while gas earnings went down by 17 percent to over $112 million.
Gas contribution to group revenue is however improved from 19.5 percent at the end of 2019 to 21.2 percent at the end of last year. This reflects greater stability of the average price of gas than crude oil. The company’s average selling price of gas for the year improved from $2.84/mscf to $2.87/mscf over the review period.
The main challenge for the company in 2020 was that costs grew generally while revenue declined. Cost of sales rose by 57.6 percent to N146 billion, consuming close to 77 percent of sales revenue at the end of the year. That caused a drop of 63 percent in gross profit to N44.8 billion.
Impairment losses on non-financial assets of over N41 billion blew the pressure from costs out of proportion, leading to an operating loss of N11.4 billion at the end of the year.
The figure is however a sustained reduction from an operating loss of N38.7 billion at half-year and N27.7 billion at the end of the third quarter. It is nevertheless a big plunge from an operating profit of nearly N96 billion in 2019.
Net finance cost went close to tripling at 193 per cent growth to N18 billion at the end of the year. The company’s huge interest-bearing debts grew further in the year from N242 billion at the end of 2019 to over N265 billion at the end of 2020.
The increase in finance expenses created a pre-tax loss of almost N29 billion against a pre-tax profit of nearly N90 billion in the preceding year.
A tax credit of close to N12 billion reported at the end of the third quarter changed into a tax expense of N1.8 billion at full year.
Septal Petroleum, therefore, closed the 2020 financial year with a net loss of N30.7 billion, down from an after-tax profit of N85 billion at the end of 2019.
The company lost N46.42 per share in the 2020 operations against earnings per share of N142.25 in 2019. It has proposed a final cash dividend of 5 cents per share in addition to an interim of 5 cents per share.
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