Investors Panic As Seplat Energy Posts $1.9m Net Loss in Q1
Seplat Energy Plc posted net loss of $1.9 million in the first quarter of 2024 as a result of large deferred tax, which damaged its earnings performance.
According to details from its unaudited results, Seplat’ profit before taxation declined by 19.5% year on year to $69.3 million at the end of the first quarter (Q1) of financial year 2024 compared to $86.1 million posted in the comparable period in 2023.
However, primarily due to the significant deferred taxation charge in the period, the company reported a net loss of $1.9 million as opposed to a net profit of $57.5 million 12 months ago.
The company said profit attributable to equity holders of the parent company, representing shareholders, was $1.0 million, which resulted in basic earnings per share of $0.002/share for the period compared to $0.10/share in the comparable period in 2023.
In the period, revenue fell by about 46% year on year to $179.8 million, from $331 million in Q1-2023. Management explained that the crude oil price was steady year over year in the period.
It noted that Brent averaged $81.76 per barrel, representing a decrease of just 0.4% when compared $82.06/bbl at the end of Q1-2023 though the picture during the quarter was one of steadily increasing oil prices, as geopolitical tensions rose in the Middle East region.
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While Brent was stable, the Company achieved a 4.7% growth in average realised crude oil price to $86.17/bbl in 3M -2024, from $82.32/bbl in 3M 2023, according to its result.
Seplat said the greater than usual premium to Brent achieved in the quarter was due to timing, as liftings were biased to the end of the quarter when prices were higher.
Despite this, the company said crude oil revenue declined 49.4% to $150.8 million in 3M 2024, from $297.9 million in 3M 2023.
It explained that the year on year decline in reported crude oil revenue was attributed to the timing of liftings, exacerbated by the overlift reported in 3M 2023.
Total crude lifted during the period declined 51.1% to 1.8 MMbbls versus 3.6 MMbbls in the comparable period in 2023.
“Our lifting activities are expected to normalise in subsequent quarters”, the company said in an official statement.
In the period, gas revenue fell by 12.4% to $29.0 million compared to $33.1 million in 3M 2023, according to details from its unaudited financial statement.
The decline in gas revenue was attributed to lower gas volumes produced during the period, due principally to delays in new gas wells coming on stream.
Seplat said these are now expected onstream in Q2 2024. In the first three months, its crude oil production fell 10.8% to 10.0 Bscf in 3M 2024, from 11.2 Bscf in 3M 2023.
The decline was offset by the average realised gas price, which rose by 8.0% to $3.11/Mscf in 3M-2024, from $2.88/Mscf in 3M 2023. Management said the average realised gas price improvement reflects the impact of higher gas price negotiated with off-takers taking effect in the period.
Overall, Oil and Gas sales for 3M 2024 fell 45.7% to $179.8 million, from $331.0 million in 3M 2023, negatively impacted its earnings performance,
Direct operating costs, which encompass expenses related to crude-handling charges (CHC), barging/trucking, operations and maintenance, amounted to $42.8 million in 3M 2024, marking a 5.4% decrease from the $45.3 million incurred in 3M 2023.
The company attributed the decline to the lower operational and maintenance expenses in the period despite higher produced liquid volumes in 3M 2024.
Its operating profit decreased by 21.0% to $81.9 million, from $103.7 million achieved in 3M 2023. Its income tax expense of $71.2 million includes a current tax charge of $13.9 million and a deferred tax charge of $57.3 million.
The significant increase in deferred tax charge for the quarter was due to both the sizable under lift position and unrealised FX gains recorded during the period, resulting in an effective tax rate of 102.8% (3M 2023: 33.2%).
Commenting on the result, Roger Brown, Chief Executive Officer, said: “Seplat Energy continued its trend of strong operational performance in the first quarter. Oil production on OMLs 4, 38, 40 and 41 outperformed expectations, benefitting from low pipeline losses and deferments, which were ahead of plan. Cash flow was down in the first quarter, but this is largely due to timing difference of lifting oil from the terminals. The business remains strong, production is firmly on track this year and price realisations remain supportive of cash generation.
“In our FY 2023 results we outlined several growth opportunities for 2024. The first of these to start generating revenue for Seplat is Sibiri, which came on stream just a few weeks after the FDP approval was received from NUPRC.
“At Abiala (a marginal field within OML 40), the drilling programme is on track to start during 2Q. We were delighted to see resumption of operations on the Trans Niger Pipeline in April, approximately four months ahead of plan.
“Access to the pipeline will enable us to increase production from OML53, as well as providing the primary export route for condensate from AGPC, which remains on track for first gas in 3Q 2024”.
Seplat Chief announced that the company has discovered hydrocarbons in deeper reservoirs than had previously been tested at Sapele-37 and Okhorpuru-9.
“The initial results are promising, again highlighting the world class quality of the geology in Nigeria. In Nigeria, we were pleased to see more progressive actions taken by President Tinubu and the industry regulators”.
Recall that in March, the President signed executive orders that will provide fiscal incentives in gas and midstream businesses.
In addition, an executive order was signed and gazetted into law, which has potential to materially improve Seplat contracting process and bring the right level of efficiency that will support costs reductions, its CEO said. FBN Holdings Rises by 14% to N1.328 Trillion
