22 April 2024
Seplat Energy PLC ("Seplat" or "the Company")
Publication of 2023 Annual Report and Notice of AGM
Seplat Energy PLC confirms it has today published its Annual Report & Accounts for the year ended 31 December 2023. In the report we have adopted for the first time and ahead of requirement, the IFRS Sustainability Standards, improving the level of non-financial disclosures. We also publish the notice of the Company's eleventh Annual General Meeting ("AGM") and forms of proxy. The Company will hold its AGM at 11:00am (WAT) on Thursday, 16 May 2024 virtually. The virtual meeting link for the AGM is https://www.seplatenergy.com/agm-2024/
In accordance with Listing Rule 14.3.6 copies of the Company's Annual Report and Accounts for the year ended 31 December 2023, the Notice of AGM and proxy forms have also been submitted to the FCA for publication through the document viewing facility of the National Storage Mechanism and will shortly be available for inspection at https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
In accordance with Disclosure Guidance and Transparency Rule ("DTR") 6.3.5R(3), copies are available on the Company's website, https://www.seplatenergy.com
The Company's audited financial statements and extracts of the management report were included in the Company's Final Results announcement on 29 February 2024. That information, together with the Appendices to this announcement, which contains the following additional information that has been extracted from the
2023 Annual Report, constitutes the material required for the purposes of compliance with DTR 6.3.5 only:
- the Directors' Responsibilities Statement;
- a description of principal risks and uncertainties that the Company faces; and
- related party transactions.
This announcement should be read in conjunction with and is not a substitute for reading the full 2023 Annual Report. Page and note references in the text below refer to page numbers and notes in the 2023 Annual Report and terms defined in that document have the same meanings in these extracts.
Enquiries:
Seplat Energy Plc
Emeka Onwuka, Chief Financial Officer | +234 1 277 0400 | |||
Eleanor Adaralegbe, Chief Financial Officer, Designate | ||||
James Thompson, Head of Investor Relations | ir@seplatenergy.com | |||
Edith Onwuchekwa, Director, Legal & Company Secretary | ||||
Chioma Afe, Director External Affairs & Social Performance | ||||
FTI Consulting | ||||
Ben Brewerton / Christopher Laing | +44 203 727 1000 | |||
seplatenergy@fticonsulting.com | ||||
Citigroup Global Markets Limited | ||||
Tom Reid / Peter Catterall | +44 207 986 4000 | |||
Investec Bank plc | ||||
Chris Sim / Charles Craven / Jarrett Silver | +44 207 597 4000 | |||
About Seplat Energy
Seplat Energy PLC (Seplat) is Nigeria's leading indigenous energy company. Listed on the Nigerian Exchange Limited (NGX: SEPLAT) and the Main Market of the London Stock Exchange (LSE: SEPL), we are pursuing a Nigeria-focused growth strategy in oil and gas, as well as developing a Power & New Energy business to lead Nigeria's energy transition.
For further information please refer to our website, https://seplatenergy.com/
Appendices
Appendix A: Statement of Directors' responsibilities
The following Statement of Directors' responsibilities is extracted from the 2023 Annual Report and Accounts (page 167).
The Companies and Allied Matters Act, 2020, requires the Directors to prepare financial statements for each financial year that give a true and fair view of the financial position of the Group at the end of the year and of its profit or loss. The responsibilities include ensuring that the Group:
- keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Group and comply with the requirements of the Companies and Allied Matters Act, 2020.
- establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other irregularities; and
- prepares its financial statements using suitable accounting policies supported by reasonable and prudent judgements and estimates and are consistently applied.
The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards (IFRS), the requirements of the Companies and Allied Matters Act, 2020 and Financial Reporting Council of Nigeria Act, No. 6, 2011.
The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Group and of its financial performance and cash flows for the year. The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the Directors to indicate that the Group will not remain a going concern for at least 12 months from the date of this statement.
Signed on behalf of the Directors by:
B. Omiyi | R.T. Brown |
Chairman | Chief Executive Officer |
FRC/2016/IODN/00000014093 | FRC/2014/ PRO/DIR/003/00000017939 |
29 February 2024 | 29 February 2024 |
Appendix B: Principal risks and uncertainties
The following principal risks and uncertainties table is extracted from the 2023 Annual Report and Accounts (pages 79 to 83).
The implementation of our strategy can be hindered by various risks and uncertainties. The risks that the Board considers most significant are described here.
Operational risks |
Risk: | Field operations and project |
deliverability | |
Definition: Failure to manage operational | |
activities in line with planned | |
expectations can lead to | |
production misses, project | |
delays and cost overruns, high | |
production costs and earlier | |
than expected field | |
decommissioning. |
Links: | KPI/Performance metric | |
Net working interest production | ||
Operating costs per boe | ||
Strategy | 3/4/5 | |
Material | 1/2/3/4/5/6/8/9/ | |
issues | 11 | |
Assessment | High | |
Mitigation: Focus on risk management at planning phase and mitigation plans activated. Compulsory 'peer-to- peer' review for high-value projects and better project management techniques. Protracted land acquisition, preparation and rig startup have been contributory factors which have received focused attention and significant process improvements and improved communications with JV partner and approving regulators to mitigate
delays. Use of smart/intelligent wells to improve recovery and improved
rig performance monitoring and reporting to manage Non-Productive Times (NPTs).
Trend: | Steady. We continue to redefine our project |
management approach for improved speed of | |
delivery and efficiency; Acquired the ISO 55001 | |
Asset Management System certification for Asset | |
Integrity, successfully preserved the certification by | |
passing two follow-up surveillance Audits, | |
consolidate performance across board, maximize | |
production, maintain a strong balance sheet, and | |
strategically position the company for future growth. |
Risk: | Third party infrastructure |
downtime | |
Definition: An over-reliance on third party | |
operated transportation | |
infrastructure can expose the | |
Company to extended period of | |
production being shut-in. |
Links: | KPI/Performance metric | ||
Net working interest production | |||
Days downtime | |||
EBIT | |||
Strategy | 3/4/5 | ||
Mitigation: Amukpe to Escravos pipeline (AEP) since commissioning in Q3 2022 has continued to compliment the Trans Forcados Pipeline in the event of a shutdown of the latter. The company continues to explore other export options via barging and crude trucking as a back-up option in extreme cases. All associated Upgrades of existing Amukpe Flowstation & LTF Facilities which were embedded in the Amukpe LTF Upgrade Project Scope shall be individually reviewed and progressed (if necessary) as part of Amukpe Facility Development.
Trend: | Steady. The Forcados export system recorded |
significant downtime during the year - however the | |
AEP since coming onstream has provided | |
evacuation support for the business and helped | |
enhance bottom-line liquidity. Risk trend is kept at |
Material | 2/4/5/6/9 | steady with the AEP availability providing support in | ||
issues | the event of an outage of the TFP. | |||
Assessment | Very high | |||
Risk: | HSSE risks | ||
Definition: | Oil and gas activities carry | ||
significant levels of HSSE risks | |||
which must be properly | |||
managed. As activity levels | |||
continue to increase there is a | |||
strong focus on preventing | |||
major environmental (including | |||
the emerging Climate Change - | |||
GHG emissions risk), health or | |||
safety incidents | |||
Links: | KPI/Performance metric | ||
HSE scorecards | |||
LTIR | |||
TRIR | |||
Strategy | 1/2/3/4/5 | ||
Material | 2/4/5/6/7/8 | ||
issues | |||
Assessment | Very high | ||
Mitigation: Deployment of an HSSE Management System in line with best practices. Monitoring and reporting of HSSE performance scorecards at management and Board levels. Our HSSE systems and process are subjected to independent review and identified improvement initiatives are deployed. Continual focus on HSSE training and initiatives on incidence prevention. Emergency Response plan set for any eventuality and comprehensive Incident Review panels to identify and channel lessons learnt to improvement activities. Focus on the delivery on projects earmarked to reduce and or eliminate gas flaring as spelt out under the company's "gas flares out roadmap" and new energy transition plan.
Trend: | Steady. Though the risk is inherent, we will continue |
to deploy our HSSE | |
risk management in line with best practices and with | |
strong emphasis | |
on prevention. |
Operational risks (cont.) |
Risk: | Climate-related risks |
Definition: IFRS S2 defines climate risk as | |
the potential negative effects of | |
climate change on an entity. | |
These risks are categorised as | |
climate-related physical risks | |
and climate related transition | |
risks. |
Links: | KPI/Performance metric |
HSE scorecards | |
LTIR |
Mitigation: The company has identified a number of projects to deliver on projects earmarked to reduce and or eliminate routine gas flaring as spelt out under the "gas flares out roadmap"; projects include (i) delivery of the LPG projects at Sapele and Oben, (ii) Installation of booster compressors, and (iii) the commissioning of the Sapele integrated gas plant project.
Other mitigation includes (1.) seek alternative options for cleaner energy, (2.) Participate in all industry discussions and initiatives aimed at the introduction and deployment of Carbon-emissions trading schemes in a developing carbon-trading oil and gas economy.
Trend: | Steady. The risk trend is being kept steady following |
the company's focus continued drive and | |
commitment to deliver all key projects towards |
TRIR
Strategy | 1/2/3/4/5/6 |
Material | 1/2/3/4/5/6/9/1 |
issues | 0/11 |
Assessment | Very high |
reducing and or eliminating routine gas flaring as spelt out under the "gas flares our road map". Additionally, the company has developed climate change and sustainability/ESG policies.
Risk: | Sustaining Exploration and | Mitigation: | Strict compliance with reservoir management | |
Appraisal (E&A) programme | guidelines. Building internal capacity with skilled | |||
sub-surface expertise. Drill a minimum of two | ||||
Definition: | Exploration and appraisal | |||
exploration wells, as well as continuous M&A work to | ||||
activities carry significant levels | secure available opportunities at the right price | |||
of subsurface risk. Sustained | ||||
E&A drilling failure will impact | ||||
the Company's ability to | ||||
organically replace reserves and | ||||
production. | ||||
Links: | KPI/Performance metric | Trend: | Steady. High grading our exploration portfolio | |
Reserve replacement | through a thorough prospect screening exercise. In | |||
the near term, plan is to commence exploration | ||||
Strategy | 4 | drilling campaign in the West. | ||
Material | 1/2/3/7/9/11 | |||
issues | ||||
Assessment | Very high | |||
External risks |
Risk: | Niger Delta stability and | ||
security | |||
Definition: | Seplat Energy's core operations | ||
are located in the Niger Delta | |||
region of Nigeria and that | |||
comes with significant risks. | |||
Historically, the Niger Delta has | |||
always been a high-risk | |||
environment with security | |||
incidents such as kidnappings, | |||
vandalism and criminal attacks | |||
on O&G installations. | |||
Links: | KPI/Performance metric | ||
LTIR | |||
TRIR | |||
Security incidents | |||
Operating cashflow | |||
Strategy | 1/2/3/4/5 | ||
Mitigation: The Company, working with other industry players in the region, continue to put pressure on government to find a lasting solution to Niger Delta restiveness and the current security measures put in place by the facility operators, consolidated with government's strategy of dialogue with stakeholders in the region seems to be working.
Trend: | Steady. Efforts by the Govt and industry pressure |
groups, aimed at enhancing security in the region | |
seems to be paying off as the business recorded | |
zero occurrence in militant attacks, similar to the | |
previous year 2022. Our monitoring of the response | |
plans/mitigation actions, remains top notch. |
Material | 1/2/3/4/5/6/7/9/ | ||||
issues | 10/11 | ||||
Assessment | Very high | ||||
Risk: | Stakeholder management |
relationships | |
Definition: Failure to manage stakeholders | |
can result in business disruptions | |
and interference. The Company | |
prioritises the effective | |
management of relationships | |
with all stakeholders including | |
host communities, JV partners, | |
government, regulatory bodies | |
and shareholders. |
Links: | KPI/Performance metric | |
Net working interest production | ||
LTIR | ||
TRIR | ||
Host community incidences | ||
Strategy | 1/2/3/4/5 | |
Material | 1/2/3/4/5/6/7/8/ | |
issues | 9 | |
Assessment | Very high | |
Mitigation: | Ensure consistent delivery of CSR Initiatives (as well |
as full compliance with the terms of the GMOU) | |
across all operational areas. Sustain local content | |
development with priority to community contractors. | |
Tailored CSR programmes, capacity building and | |
infrastructure development with the host | |
communities. Organisational focus and clear strategy | |
to deliver shareholder value pursued by the Board | |
and management. Implementation of the new PIA | |
(Petroleum industry Act) - inclusion of impacted | |
communities as a driver for annulling community | |
agitation from our immediate host communities | |
(GMOU vs PIA). Corporate governance, transparency | |
and proactiveness in dealings with regulators and JV | |
partners. | |
Trend: | Steady. We continue to enjoy good working relations |
with all stakeholders | |
of the business. | |
External risks (cont.) |
Risk: | Geo-political risk | ||
Definition: | Nigeria has at times in its history | ||
faced political uncertainties and | |||
threats such as terrorism aimed | |||
at de-stabilising and | |||
undermining the orderly and | |||
effective rule of central | |||
government. | |||
Links: | KPI/Performance metric | ||
Occurrences of civil unrest and | |||
terrorism | |||
Strategy | 1/2/3/4/5 | ||
Mitigation: Scenarios and response options plan set. Crisis management team in place for high alert political periods. Continue to partner/network with security stakeholders and share intelligence regarding security. Business continuity plans actioned in light of current geo-political situation.
Trend: | Steady. During the year 2023, the company |
recorded no incidents of terrorism and secessionist | |
agitations. As a mitigation strategy, the company | |
continued to monitor Niger Delta geo-political | |
developments and issued regular reports to |
Material issues
Assessment
1/11
High
management, as well as partnered with security stakeholders in the sharing of intelligence regarding security.
Financial risks |
Risk: | Oil price volatility | ||
Definition: | Oil prices have exhibited a | ||
history of volatility and can | |||
fluctuate sharply in line with | |||
external factors. | |||
Links: | KPI/Performance metric | ||
Realised oil price | |||
Operating cashflow | |||
Strategy | 3/4 | ||
Material | 1 | ||
issues | |||
Assessment | High | ||
Mitigation: Hedging continues to be our price risk management tool. We conduct price sensitisation on project economics and enforce cost discipline for capital projects sanctioning. Aggressive focus on cost reduction.
Trend: | Steady. Seplat's risk management strategy is to protect |
itself against adverse oil price movements through our | |
oil price hedging policy, which targets hedging c. 6 | |
months in advance via out-of-the-money puts (i.e., | |
"disaster protection insurance"). In the year 2023, we | |
kept focus on our price risk management policy to | |
protect the company's cash flow stream from | |
downside scenarios. We will also continue to take | |
hedge positions and apply cost reduction strategies. | |
Hedging has been important to several stakeholders, | |
including our bond investors, our banks and our rating | |
agencies. |
Risk: | Changes to tax status and | Mitigation: | Perform evaluation of business plan and | |||
legislation | performance metrics exclusive | |||||
of tax benefits. Project economics were conducted | ||||||
Definition: | If the tax regime/legislation | |||||
to ascertain the impact | ||||||
under which the Company | of the new PIA on the company's bottom line. All | |||||
operates its assets were to | Impact assessment | |||||
change (e.g. new PIA tax | of potential tax legislation is monitored at the Board | |||||
regime), profitability may be | level. | |||||
impacted. | ||||||
Links: | KPI/Performance metric | Trend: | Steady. The company is participating in all ongoing | |||
Effective tax rate | engagement with stakeholders including community | |||||
Tax status | leadership for a better understanding/implementation | |||||
of the PIA mechanism. | ||||||
Strategy | 3 | |||||
Material | 1/2/3/4/5/6/9/1 | |||||
issues | 0/11 | |||||
Assessment | Medium | |||||
Risk:
Availability of capital
Mitigation: Emphasis on compliance with requirements of the JV operating agreement for effective/strict JV
Definition: | The oil and gas industry is highly | |
capital intensive. Significant | ||
amounts of capital are required | ||
to continue development | ||
activities and fund M&A. Non | ||
funding of cashcalls by JV | ||
partners impacts activities and | ||
liquidity. | ||
Links: | KPI/Performance metric | |
JV receivables | ||
CAPEX | ||
New M&A activities | ||
Strategy | 3/4/5/6 | |
Material | 1/2/4/5/6/10/11 | |
issues | ||
Assessment | Very high | |
partner concurrence. Board review and approval of financial strategy and debt portfolio management with strong banking relationships.
Trend: | Decreasing. JV partners continues to remain current in |
paying cash calls. |
Financial risks (cont.) |
Risk: | Cost control risk | ||
Definition: | Cost reduction remains central | ||
to the Company's current | |||
operating strategy. High | |||
operating cost and ineffective | |||
capital cost control negatively | |||
impacts operating cash flows | |||
and profitability. | |||
Links: | KPI/Performance metric | ||
Operating cost per boe | |||
EBIT | |||
CAPEX | |||
Well costs | |||
Strategy | 3/4/5 | ||
Material | 1/3/4/5/6/7/9/1 | ||
issues | 0/11 | ||
Assessment | High | ||
Mitigation: Comprehensive budgeting process approved by the joint venture partner and the Board. Clear cost management targets. Grading of portfolio opportunities and project ranking for capital allocation. Focus on reducing drilling costs at well design phase. Cost monitoring and periodic reporting. Focus on effective contracting strategies for cost reduction.
Trend: | Steady. Cost discipline remains key focus of the |
business |
Risk: | Liquidity |
Definition: | Liquidity risk is the risk that the |
Company will | |
not be able to meet its financial | |
Mitigation: Manage liquidity risk by ensuring that sufficient funds are available to meet commitments as they fall due. Uses both long-term and short-term cash flow projections to monitor funding requirements for activities and to ensure there are sufficient cash resources to meet operational needs. Cash flow
obligations as they fall due.
Links: | KPI/Performance metric | ||
Operating cashflow | |||
CAPEX | |||
Strategy | 3 | ||
Material | 9/10/11 | ||
issues | |||
Assessment | Medium | ||
projections take into consideration the Company's | |
debts and covenant compliance. Surplus cash held is | |
transferred to the treasury department which invests | |
in interest bearing current accounts, time deposits | |
and money market deposits. | |
Trend: | Decreasing. The combination of the AEP and the |
Trans-Forcados Pipeline assisted Seplat's liquidity | |
position significantly in the year. We manage liquidity | |
risk by ensuring that sufficient funds are available to | |
meet commitments as they fall due, using both long- | |
term and short-term cash flow projections to monitor | |
funding requirements for activities. | |
Risk: | Foreign exchange risk | ||
Definition: | The Company is exposed to | ||
exchange rate | |||
risk to the extent that balances | |||
and transactions are | |||
denominated in a currency | |||
other than the | |||
US dollar. | |||
Links: | KPI/Performance metric | ||
Operating cashflow | |||
CAPEX | |||
Strategy | 3 | ||
Material | 9/10/11 | ||
issues | |||
Assessment | High | ||
Mitigation: The company has options to manage its foreign exchange exposure including financial hedge instruments such as forward exchange contracts.
Trend: | Rising. Historically, the Company holds majority of its |
cash and cash equivalent in US dollar. Gas contracts | |
are indexed in US dollar. The Federal Govt Policy on | |
FX resulted in significant exchange rate fluctuations, | |
impacting on cost of essential commodities in-country. |
Strategic risks |
Risk: | Portfolio concentration risk |
Definition: | High dependency on a |
concentrated portfolio of | |
producing blocks and limited | |
number of wells can leave the | |
Company more susceptible to | |
declining long-term growth and | |
reserves depletion. | |
Links: | KPI/Performance metric |
Mitigation: Focus on portfolio expansion strategy from the Board level to diversify current portfolio. Integrated long-term planning on crude oil, gas and other renewables business.
Trend:
Successful execution of new acquisition and farm-in opportunities.
Strategy | 3/4/5/6 | ||
Material | 6/10/11 | ||
issues | |||
Assessment | Very high | ||
Steady. The company strategic direction is targeted at accessing oil and gas reserves and resources to support growth in Pillar2 (midstream) and Pillar 3 (new energy)
Risk: | Merger & acquisition (M&A) |
risk | |
Definition: Growth through M&A activities | |
is part of the Seplat's strategy to | |
pursue a focused acquisition | |
and farm-in. M&A deals and | |
transactions come with | |
significant risks including | |
structural, commercial and | |
integration risks. There is also | |
the risk of non-achievement of | |
acquisition targets due to highly | |
competitive landscape. |
Links: | KPI/Performance metric | |
Successful execution of new | ||
acquisition and farm-in | ||
opportunities. | ||
Strategy | 3/4/5/6 | |
Material | 5/6/10/11 | |
issues | ||
Assessment | Very high | |
Mitigation: New business development unit is always looking for the right opportunities for Seplat. Decision review board (EXCOM) process in place to ensure deals are properly vetted and proper due diligence is done for new opportunities:
A Structured ExCom is now in place. The Decision Review board (DRB) process is in place to ensure deals are properly vetted and adequate due diligence done on new opportunities. The ExCom ensures the commercial, structural, KYC and integration risks are fully considered and addressed with mitigation plans approved and in place prior to deal closing.
Trend: | Steady. We have a robust process in place to vet |
opportunities and deals. | |
Risk trends are steady following an ongoing strategy | |
to acquire more strategic assets. M&A landscape | |
remains competitive. |
Risk: | Bribery and corruption risk | Mitigation: | Extensive training on anti-bribery and corruption. | ||
Embedding corporate governance principles with | |||||
key focus on areas of the business which may | |||||
Definition: | Bribery and corruption presents | ||||
be more susceptible to corruption such as the | |||||
a risk throughout the global oil | contracting and procurement process. Processes | ||||
and gas industry and represents | exist to guide dealings with public officials. | ||||
an ongoing risk to any oil and | |||||
gas company. | |||||
Links: | KPI/Performance metric | Trend: | Steady. Our geographical location continues to be | ||
Whistle blowing reports. | susceptible to corruption. However, the risk trend is | ||||
Number of disciplinary cases. | kept at decreasing following lower cases of whistle | ||||
blowing recorded during the year. | |||||
Strategy | 3 | ||||
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Seplat Energy plc published this content on 22 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 April 2024 07:45:07 UTC.