Seplat Announce Interim management statement and consolidated interim financial results for the first quarter ended 31 March 2015

Seplat Announce Interim management statement and consolidated interim financial results for the first quarter ended 31 March 2015

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, announced average working interest production for the first three months of 35,811 boepd, up 63% from the same period last year, and maintains average working interest guidance of 32,000 to 36,000 boepd for the full year. Working interest 2P reserves are up 24% year-on-year at 281 MMboe following an independent assessment completed in the period.

After lifting adjustments, crude revenue was US$120 million, 16% lower than in 2014 while gas revenue increased by 170% year-on-year to US$11 million. Gross profit stood at US$73 million and net profit US$23 million reflecting the significantly lower realised oil price during the first three months.

Capital investments during the first three months were US$14 million against operating cash flow before working capital of US$62 million. Statutory reported cash at bank was US$191 million at period end. The Company successfully completed in January a US$1 billion debt refinancing with a number of local and international banks and in February completed, with an effective date of 1 July 2013, the acquisition of interests in two blocks, OML 53 and OML 55, materially adding to its inventory of reserves and production growth opportunities. Expansion plans for the gas business gathered pace as final commissioning work on the new 150 MMscfd Oben gas processing facility was undertaken that will allow for increased supply to the domestic market in 2015 and beyond.

“The first quarter has been a busy period for Seplat. Production has been strong, we have delivered material reserves growth when many of our peers have seen reserves decrease, grown our footprint in the Niger Delta to six blocks, re-financed our debt and expanded our gas business to increase domestic supply,” said Austin Avuru, Seplat’s Chief Executive Officer. “Whilst we continue to deal with the challenges presented by the lower oil price environment head-on, and have set the 2015 work programme accordingly, we are excited about the numerous growth opportunities available to us in our current portfolio and will remain opportunistic in respect of new business ventures,” he added. Information contained within this release is un-audited and is subject to further review.

Production update

· Average working interest production during the first quarter of 35,811 boepd (compared to 21,494 boepd in 2014) and comprised 27,935 bopd liquids and 47.3 MMscfd gas

· Reported production figures reflect 25 days of downtime on the third party operated Trans Forcados System (TFS) in the first three months. There were no shut-ins recorded at OML 53 and OML 55. Excluding downtime, average working interest production in the first three months was 41,040 boepd (comprising 33,164 bopd liquids and 47.3 MMscfd gas)

· Deliveries to the Warri refinery via the Seplat operated alternative export pipeline were 246,702 bbls

· During the first three months, approximately 95% of liquids production from OMLs 4, 38 and 41 was transported through the TFS. This volume was subject to an average of 9.67% reconciliation losses for the quarter

· Average oil price realisation of US$52.8/bbl (2014: US$112.9/bbl), achieving an average US$1.52/bbl premium to Brent, and an average gas price of US$2.6/Mscf (2014: US$1.41/Mscf)

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Reserves and resources

· Independent reserves assessment completed by Degolyer and MacNaughton in the first quarter confirmed working interest 2P reserves of 281 MMboe at 31 December 2014, comprising 139 MMbbls of oil and condensate and 827 Bscf of natural gas, representing an overall increase of 24% year-on-year

– Key drivers of the upwards revision are the recognition of reserves at Orogho, Sapele Shallow and Okwefe following a review of 2014 well performance data and the conversion from 2C to 2P as a result of 2014 development activities

· Working interest 2C resources (including management estimates for OML 53 and OML 55) stand at 281 MMboe

– 2P + 2C working interest volumes of 562 MMboe, split evenly between oil and gas

Drilling and capital projects update
· Commissioning work has been completed for the new 150 MMscfd Oben gas plant, gas has been introduced to the system and final pre-start up audits and checks are underway. The expansion of processing capacity at Oben is a major step forward for Seplat’s gas business and increases gas supply available to the domestic market in Nigeria

· Work is progressing on the construction of two 50,000 bbl storage tanks at the Amukpe field, with tanks one and two 90% and 74% complete respectively. Commissioning of the tanks and ancillary plant is expected in Q2

· Following the installation of three 10 MMscfd compressors, the Oben associated gas compression project is set for commissioning in the second quarter and is designed to eliminate the flaring of gas and process those volumes to sales quality

· The Ovhor – Amukpe associated gas compressor is fully operational with continual gaslift enhancing production

· Modification work is ongoing at the liquid treatment facility to address issues with the composition of separated water to enable full continuous injection

· The Company completed two oil production wells at OML 38, three gas production wells at OMLs 4 and 38 during the first three months and presently has three rigs operating

New ventures
· Completed the acquisition of a 40.0% working interest in OML 53 and an effective 22.5% working interest in OML 55 from Chevron Nigeria Limited (“CNL”) in February with an effective date of 1 July 2013. Both blocks fit neatly with Seplat’s strategy of prioritising opportunities in the onshore and shallow water areas of Nigeria that offer near term production, cash flow and reserve replacement potential. Seplat has been designated as operator of both blocks

· The Company estimates net recoverable hydrocarbon volumes attributable to its working 40.0% working interest in OML 53 to be approximately 51 MMbbls of oil and condensate and 611 Bscf of gas (total 151 MMboe). The Jisike oil field is currently the only producing field on the block. The block also contains the large undeveloped Ohaji South gas and condensate field, the development of which will be co-ordinated with the SPDC operated Assa North field on adjacent OML 21 with the expectation of further boosting gas supply to the domestic market. Seplat expects to focus initial work on increasing oil production at the Jisike field as plans to develop Ohaji South are finalised

· The Company estimates net recoverable volumes attributable to its effective 22.5% working interest in OML 55 to be approximately 20 MMbbls of oil and condensate and 156 Bscf of gas. The block contains five producing fields (Robertkiri, Inda, Belema North, Idama and Jokka). The majority of production on the block is from the Robertkiri, Idama and Inda fields. All produced liquids from OML 55 are delivered via third party infrastructure to the Bonny terminal for processing and shipping. Seplat expects to focus initial work on optimising and increasing oil production, taking advantage of the significant infrastructure capacity that already exists on the block

· In 2014 the Company reported that US$453 million had been allocated as a refundable deposit against a potential investment of which US$408 million is in an escrow account. The investment was not consummated as expected and the Company has demanded repayment of the full amount of US$453 million with accrued interest. The Company is also pursuing legal remedies to facilitate the repayment of these sums. As at 31 March 2015 the US$453 million was recognised within the reported balance of trade and other receivables

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