Seplat’s Dual Listings: 10-years of Economic Impact, Shareholders’ Value

Kayode Tokede writes on Seplat Energy milestone achievements 10 years listed on NGX and LSE, its drive to reward shareholders and giving back to communities where its assets are located  

Seplat Energy, formally known as Seplat Petroleum Development Company was April 14, 2014 listed on Nigerian Exchange Limited (NGX) and London Stock Exchange (LSE) with the aim to reward shareholders and drive Nigeria economy growth.

The leading indigenous company was first appeared on NGX before its listing on the LSE had made clear its intentions and purposes-to be the first and major Nigerian International Oil Company (IOC)

Getting listed on the premium official window of the NGX was no brainer, but the listing missed that of FTSE 250 index for technical reasons such as the required International Accounting Standards, 50 per cent minimum Free Float and the highest levels of Corporate Governance.

Since its listed, the company has grown its revenue from N124 billion in 2014, an increase of 460.3 per cent to N696.9 billion in 2023, and profit before tax increasing significantly by 210per cent to N125.54 billion in 2023 from N40.48 billion when it first declared its results to investing public.

As a corporate vehicle, the Seplat proposition is power-packed with managerial and operational experience and sophistication. Also as an investment vehicle, the organisation portended great equity value and operational profitability, having been built majorly through the acquisition of tested assets with proven reserves and operability.

The LSE listing also portends quality reporting and the highest standards of regulatory supervision and corporate transparency. As such, this hybrid breed of investment vehicle is worthy of analytical attention as it approaches the end of its first decade of existence on these exchanges.

The company, is differentiated through strong management and strategic development which are demonstrated in its financial strength and flexibility; production capability; and portfolio diversity.

Seplat Energy is underpinned by a high-quality asset base and has invested to consistently grow oil production and capacity. Also, the company has prioritised the commercialisation and development of the substantial gas reserves and resources identified at its blocks, positioning Seplat today as a leading supplier of processed natural gas to the domestic market in Nigeria that will help increase Nigeria’s power generation capacity and industrial output.

Its gas business is making an increasingly important financial contribution for Seplat Energy with gas prices de-risked from the volatility of the oil price.

Ten–years achievements

The management of Seplat Energy was making plans to acquire onshore assets of multinational oil and gas companies such as Shell and Chevron, estimated to require at least $2billion, as part of its aggressive Oil and Gas production portfolio.

Among the most notable achievements of the company is the acquisition of Eland Oil & Gas, first acquisition of UK listed company by Nigerian company in December 2019.

Eland held participating interests in OML 40 and the Ubima marginal field.  The Eland acquisition followed earlier acquisitions such as Belema Oil Producing (an Energy Exploration outfit) in February, 2015 and ANOH Gas Processing (an Energy refining company) in March 2019.

In June 2013, Newton Energy, a wholly-owned subsidiary of Seplat, reached an agreement with Pillar Oil to acquire a 40per cent participating interest (non-operated) in the Umuseti/Igbuku fields (OPL 283). Also In 2015, the Group purchased a 40per cent participating interest in OML 53, onshore north eastern Niger Delta, from Chevron Nigeria Ltd and a revenue interest in OML 55, south eastern Niger Delta.

In January 2017, the Group incorporated a new subsidiary, ANOH Gas Processing Company (AGPC) Limited, a midstream gas company committed to the processing of gas from OML 53 for distribution to the local market. In August 2018, the Group entered into a shareholder agreement with Nigerian Gas Processing and Transportation Company (NGPTC) to subscribe for equal ownership of AGPC.

The Seplat Energy portfolio now comprises eight oil blocks – direct interests in seven blocks in the Niger Delta area, four of which Seplat operates and one further of revenue interest. The company also established a robust Global Memorandum of Understanding with the local communities in the Niger Delta, setting out rules of engagement and mutual beneficiation.

The major effect of these acquisitions has been to position the company as the leading partner for Nigerian domestic gas supply for the power sector and a significant contributor to the crude supply to the export markets. They also culminate in delivering key performance indicators such as 478 million barrels of Oil Equivalent (MMBOE) in 2P reserves, 47,758 Barrels of Oil Equivalent per Day (BOEPD) production capacity, Adjusted Revenue of $1.06 billion, Adjusted EBITDA  of $448 million $0.15c per share dividend and share value of GBP867.96 million (N1.98 Trillion) recorded as at its last reporting period in December 2023. The company has about 588 million shares outstanding on the Nigeria Exchange.

Away from the numbers and fundamentals, the key qualitative performance indicators for the company have also been very encouraging, Considering the fact that quality human resources is a key performance factor, the company has successfully marshalled its HR Function to ensure retention of personnel, above average industry standard for reward and motivation, on-going training to ensure career growth for all employees, recruitment policy that offers promotion from within as much as possible. The staff turnover has been less than four per cent on the average. Seplat has also been an equal opportunity employer with special consideration for the female gender. Seplat Energy currently features up to 60per cent Board Independence. In terms of sustainability, the company’s 91% CGRS and MSCI –BBB ratings are positive indicators.

Contribution to host communities

Speaking on the Company dual listing, the chief executive officer, Seplat Energy Plc, Mr. Roger Brown noted that the Company has achieved local and international accountability, by complying with industry recognised best practice and standards, whilst strictly adhering to international and local laws and regulations; and ensure experienced and skilled leadership, Board accountability, high standards of corporate governance and Consistent delivery of targets.

According to him, the Company has been able to maintain strong cash position and good liquidity management; environmental commitment and social commitment.

He added that the dual listing has enabled Seplat Energy to increase its access to capital whilst its shares have become more liquid, explaining “post-IPO, we generated $1.7 billion in FCF. Excluding 2014 and 2015 where we made significant capex investments. Post-IPO, we have generated an average annual FCF of $264 million.

“Bolstered our brand visibility, credibility and reputation. Today, Seplat Energy is a strong voice and a thought leader in the African energy landscape. Diversified Seplat Energy investor base, enhancing relationships with current and potential investors across the world, risk mitigation, and currency flexibility.

The CFO-Designate, Seplat Energy, Mrs. Eleanor Adaralegbe stated that the Company has maintained consistent production and reserves growth with 2023 gross production averaged 106 kboepd; 2P reserves CAGR since inception of 13 per cent; 2023 Reserves Replacement Ratio of 292 per cent; and Diversified evacuation routes.

She added that Seplat Energy completed major acquisitions since 2014, unlocking upside value: Current portfolio includes seven onshore blocks; Acquired Chevron’s OML 53, transferred in 2016 (resulted in development of the ANOH Gas plant); Acquired Eland in 2019; and Signed SPA with Exxon for MPNU in Feb 2022.

Speaking on shareholders’ value, Adaralegbe pointed out that $575 million returned to shareholders from IPO to 2023, equivalent to 107 per cent of $535 million IPO proceeds, saying that “core dividend increased 20 per cent in 2023 to US$12cent per share. Special dividends paid in 2022 ($5cent per share) and 2023 ($3cent per share).”

According to her, despite our aggressive capex investments and acquisitions, we continue to have adequate cash flow to pay our shareholders best-in-class dividend. With $575 million paid as dividends since our IPO in 2014, we have successfully returned all the capital we raise at IPO. Dividend paid in nine out of past 10 years due to unavailability of infrastructure, not oil price, main reason for reduced dividend in 2016 and 2017 (Forcados offline for 16 months).

Host Communities development

Seplat Energy is known to drive positive socio-economic benefits for its country and host communities. Seplat CFO-Designate stated that “the Company is making an enduring difference to communities where we operate and Nigeria; approximately $57.2 million invested over 10 years in community projects focused on healthcare, education, infrastructure and empowerment to date (Eye Can See, Safe Motherhood, Pearls Quiz, Scholarship, Teachers Empowerment programmes, road construction, hospitals, skills empowerment, and entrepreneurship programmes).

“Seplat Energy has made a $2.8 billion contribution to the Federal Government of Nigeria over the past 13 years, $2.0 billion since IPO, $1.54 billion on Royalty till date, $329 million on Petroleum Profits Tax, $273 million on Value Added Tax, $259 million on Withholding Tax, $126 million on PAYE, $276 million on NDDC and others.”

Potentials of Seplat Energy

The Nigerian economy is currently undergoing major energy transitions. Gas resources and products (LNG, CNG & LPG) will play key roles. The Nigerian domestic market is deep enough to absorb whatever Seplat Energy can come up with from its Gas Production plant, ANOH Gas Plant. Aside from contract for supplying the gas required for firing the electricity generators, there is increased potential for CNG infusion into the transportation systems as well as LPG for domestic use by the ever-increasing population of about 250 million people, as well as in regional markets of the ECOWAS. Incidentally, this increased demand for gas coincides with Seplat Energy program for reduction in gas flaring.

Another potential for the company is to consummate the development of 13 additional wells already identified as priorities for 2024. This will greatly improve on its daily production output and revenue potentials as the world market prices appear to be rallying now.

Seplat outlook

As can be gleaned from the foregoing, Seplat Energy promised to be a veritable vehicle for investment for discerning corporate and individual investors who desire continual growth in their equity values as well as sustained and predictable returns in dividends. The growth opportunities in its operational trajectory ensure it will continue to seek both debt and equity finance from the stock markets