SEPLAT H1'16 results - Suspension of Exports at Forcados Cut Earnings


Thursday, July 28, 2016 1:25pm/Cardinal Stone Research

SEPLAT reported a 42% YoY decline in H1'16 revenue and a net loss of US$61 million as performance for the period continued to be impacted by the suspension of oil exports at the Forcados terminal from mid-February onwards due to damage of pipeline infrastructure at the loading arm.

Crude oil sales for the period was down by 57% YoY whilst gas revenue was up by 78% YoY. Average working interest production during the first six months was 25,695 boepd (compared to 32,580 boepd in 2015) and comprised 11,526 bopd liquids and 85 MMscfd gas. 

Conference Call Take-aways

·         Owing to the disruption caused by the longer than expected suspension of oil exports at the Forcados terminal where force majeure remains in effect, full year 2016 working interest production guidance of 41,000 to 48,000 boepd that was set in Q1 is no longer valid. According to management, guidance for the full year will be re-set and communicated once force majeure is lifted and exports have resumed from the Forcados terminal. We will review our estimates once management has communicated their guidance.


·         Management states it has successfully trialled an interim export solution via the Warri refinery jetty with off-taker Mercuria. The target is to export an average of 30,000 bopd on a gross basis. In addition, management intends to keep this alternative export route available for the foreseeable future and run in parallel with exports via the Forcados terminal when it becomes available again and full production can be resumed. On the bright side, exports via the Warri refinery jetty will not be subject to the reconciliation losses (typically in the order of 10% to 12%) or crude handling charges which will result in some savings for the company.


·         Gas continues to remain a priority and the Oben Phase II expansion project is accelerating into full gear. The new processing modules have arrived and clearing/site delivery is expected to be completed in August. Installation of the new modules and commissioning activities will be carried out in Q3/Q4 2016. On completion of the expansion project, processing capacity will increase to 525 MMscfd by year-end. To put this in perspective, the company will be able to supply gas to equip a third of Nigeria's power generation needs.

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