Seplat Petroleum Development Company Plc’s 32.82 percent drop in profit is raising concern about the indigenous upstream oil and gas giant’s rising cost of sales and borrowing costs.
Profit was N4.87 billion in the first three months through March 2015, compared with N7.25 billion, the Lagos-based company said on the website of the NSE.
Sales fell by 12.50 percent to N25.56 billion as the company struggles with a 16 percent decrease in crude oil sales due to lower realized oil price.
The faltering earnings is mainly due to a 138.91 percent surge in borrowing costs to N3.56 billion and a 36.91 rise in cost of sales to N11.38 billion.
Seplat’s to equity ratio (D/E) of 70 percent means the over 50 percent of the company’s balance sheet are funded by lender’s money. Interest bearing loans and borrowings surged by 112.52 percent to N173.16 billion in 2015, from N81.48 billion in 2014.
The company has $700 million owed to a consortium of banks in Nigeria comprising First Bank of Nigeria Limited, Stanbic IBTC Bank Plc, United Bank for Africa Plc and Zenith Bank Plc. The facility is repayable quarterly from end June 2015 and has a margin of LIBOR +8.75% per annum, according to its website.
It also closed a revolving credit facility of $300 million three year with a consortium of eight international banks comprising Bank ofAmerica Merrill Lynch, Citibank, JP Morgan Limited, Natixis, Nedbank Limited, Rand Merchant Bank, Standard Bank and Standard Chartered Bank, with a quarterly reduction schedule from end December 2015 and has a margin of LIBOR +6.00% per annum.
This makes the total amount of loans owed by the company $1 billion, according to its website.
Seplat couldn’t manage direct costs attributable to projects as gross profit were flattish at N14.17 billion while gross profit margin fell to 55.43 percent in 2015 as against 63.0 percent in 2014.
Net margin, another measure of profitability and efficiency reduced to 19.05 percent, from 31.20 percent the previous year.
Seplat recorded 35811 boepd in working interest production to 35,811 for the first three months, this represents a 63 percent increase for the previous years. It also maintained an 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.
“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.
Source : BusinessDay