Tuesday, November 19,
2019 / 09.40PM / Teslim Shitta-Bey, Managing Editor/ Header Image Credit: @seplatpetroleum
One of Nigeria’s largest indigenous oil and gas
company, Seplat Petroleum Development Company Plc , is about to see a strategic shift in its operations as it
appoints a new chief executive officer, Mr. Roger Brown to replace its outgoing
boss, Mr. Austin Avuru. The charge of guards at the company will likely result
in a charge of corporate direction and empasise as a change in the global oil
and gas markets puts pressure on global corporate margins.
The New Boss on The Block
The new Seplat boss, Brown, may be fresh to corporate boardroom
players in Nigeria, but he is not new to the oil and gas business. Brown joined
Seplat in 2013 as the CFO and played a key role in the successful dual listing
of the Company in 2014 on both the London and Nigerian Stock Exchanges.
Similarly, since joining the Company, he appears to have played significant
roles in various asset acquisitions by the Company.
Brown brings to the leadership of the company, a deep
knowledge of its critical operating and financial cashflows being chief
financial officer (CFO) of the business for the last six years. Seplat's in-coming CEO is likely to lead a major corporate reengineering campaign leveraging
his strong financial, commercial and Mergers and Acquisition (M&A)
experience as well as his, according to company officers, 'people skills.'
The CFO turned CEO is quite familiar with the local
and international business environments, which should help him navigate a
trying period with global oil prices dipping and margins thinning down. With
Shale Oil enthusiasm waning and global oil demand flattening, Seplat will need
to reconsider its present business model and prepare for a gas-dominated future
with a whole new set of pricing, sales and marketing templates. Brown should be
comfortable with the emerging local and global industry scenarios as he played
critical roles in the company's successful landmark transactions, IPO and
financial structure of debt and acquisitions, as well as the company's ability
to sustain competitive shareholder returns.
Before joining Seplat, Brown has since 2010, been an
advisor to the Company, especially when he was the Managing Director and head
of EMEA Oil and Gas at Standard Bank Group. During his time at the Banking
Group, he was instrumental to providing advice and deploying capital across the
African continent in the Oil & Gas, Power & Infrastructure and the
renewable energy sectors, providing him privileged insight into the oil and gas
and energy businesses in different global markets.
Brown: A Portrait
Seplat is likely to see a slight twist of style over
the next few years, with Brown bringing a more aggressive financial
optimization approach to Seplat's business model. Seplat's incoming CEO is a Chartered
Accountant from the Institute of Chartered Accountants of Scotland. Brown holds
an MSc in Finance from University of Ulster; BSc (Hons) in Finance from
University of Dundee and he also attended Belfast Royal Academy.
The Numbers Man
In the last few years, a major role for Brown at Seplat has been to navigate the company passed difficult financial situations,
particularly at periods when international oil prices plummeted. He led the
fiscal charge during eighteen months when the company was not producing oil as
a result of a shut-in of its major oil pipeline.
The Art of Structuring
While at Standard Bank Group Brown put in place a total
of $1.75billion of financing, which included an inaugural $350million Eurobond
as well as bringing in some top tier banks into the syndicate. He is
responsible for reporting, corporate finance, investor relations, enterprise
risk management, internal audit, commercial negotiations/contracts and business
development. He currently runs a team of 55 people.
The
Global group had some 70 professionals focused on oil and gas. Brown headed the CEEMEA team
based in London, focusing on Debt, Mezzanine and Equity investments in the
sector. In addition to capital, the group also provided structuring
advice and M&A services to both buy side and sell side clients.
Brown was a senior originator and structured all forms of financing
for industry clients such as Project Finance, Structured Commodity Finance,
Acquisition Finance, Corporate Lending and Debt Capital Markets.
Seplat's new CEOs
other key
achievements included up-tiering the banks positioning in the markets
with clients and also originating and closing some high-profile transactions.
Before
focusing on the Oil and Gas sector, Brown previously led Standard
Bank's Renewable Energy and Power and Infrastructure teams based in London.
As
Senior Manager in the Project Finance Department at Price Waterhouse Coopers,
London focusing on providing advice to governments and private sector
developers in the UK and Middle East. At Coopers & Lybrand, he served as
Manager in the corporate finance department, focusing on servicing of
multinational companies with offices in Singapore. At the Coopers & Lybrand
Edinburgh, Brown was the Manager in the audit department, focusing on
manufacturing and industrial companies.
The Oil Man Cometh
Beyond broad multinational finance transactions Brown has had major
footprints in the oil and gas business including a few big ticket transactions
such as Tullow Oil: $2.5 million RBL and $600 million corporate loan facility
for Uganda - Mandated Lead Arranger; Afren: $450 million RBL - Mandated Lead
Arranger; Seplat: Lead advisor for Seplat's IPO, one of the largest IPO's in
sub-Saharan Africa.
Also lead a $250 million pre-IPO share disposal and
various other advisory mandates; FHN: $180 million acquisition and development
facility for the acquisition of OML 26 from Shell; Neconde: $470 million
development facility for the refinancing of the acquisition of OML 42 from
Shell; BP: $1.5 billion - managing the global account and responsible for
various credit facilities; Socar - $250 million credit facilities for Socar
Trading - Mandated Lead Arranger; Shoreline Natural Resources: $765 million
guarantee and a $550 million bridge facility to acquire OML 30 from Shell - Lead Advisor and Arranger; Heritage Oil and Gas - Financial Advisor for sale of
Miran Block to Genel; Ophir - syndicate member for the listing of Ophir on the
Main Board of the London Stock Exchange; Heritage Oil and Gas - Sell side
advisor.
Approximate deal size $2billion; Confidential: Sell
side advisor to a private oil and Gas company in a merger with a major stock
exchange listed Oil and Gas company; PUMA - $300 million acquisition of BP's
downstream assets in African - Mandated Lead Arranger; West African Gas
Pipeline - $600 million adviser to the government of Ghana on its investment in
the West African Gas Pipeline project and negotiation on the Gas Sales
Agreement between WAPCO and VRA; and Adviser and Arranger on a 550km gas
pipeline in Brazil.
Beyond Finance
Seplat's new boss
is undoubtedly an accomplished finance man, but running a good business goes
beyond having a good head for numbers. Seplat will have to cope with a changing
world with growing trade uncertainty, increasing economic nationalism and
falling global commodity prices, the combination of these factors speak to a troubled
international business environment in months ahead.
Information by the company's management suggest that looking
forward, Seplat plans to position itself for a next phase growth ambition,
which would see the expansion of its footprint in terms of energy business
activities, as well as a plan to pursue offshore assets as well as opportunity-driven
entry into different geographies.
Seplat's management
in its recent press release notes that the Company "believes that such a
corporate transition would require a different kind of organisational
structure, people skills set, and mentality to compete well in the expanded
space. Given this, Seplat will be reviewing its current organisational and
systems structure."
The company's Q3 2019 results saw the oil Group's top
line earnings slide by -12.57% from N173.71bn in
Q3 2018 to N151.88bn in Q3 2019. Profit before tax equally fell -12.81% from N65.05bn in Q3 2018 to N56.71bn in Q3
2019. Tax optimization, however, saw the company grow a strong bottom line
position over the period with profit after tax rising by +102.55% from N27.98bn
in Q3 2018 to N56.65bn in Q3 2019. The tax optimization is one-off and is not
expected to re-occur, so Brown will have to come to terms with growing top line
income to sustain an attractive equity return in 2020 (see Table 2
below).
Table 2 Seplat Petroleum Development Company Q3 2019 Result
Source: Proshare Market
Apparently ambivalence about the
companies underlying profit outcome for 2019 has resulted in high variability
in the oil and gas company's stock price movement over the last year with price
crawling along a bearish tunnel in the first seven months to July before
renewed optimism in September began to to push prices back up to their April
and May 2019 values (see chart 2 below).
Chart 2 Seplat Petroleum
Development Company's Price and Volume movement 2019
Source: Proshare Market
Cutting A New Path
If Seplat is to sustain
its premier status as an oil and gas major, it must begin to rethink past
strategies and reimagine a new world with oil prices being more of a buyers market
than a sellers. The new oil market power balance means that the company would
need to look for fresh markets at prevailing or lower prices to retain market
share or break into new product lines that provide higher margins. Whichever
way things turn out in the domestic and global markets, Brown is taking over
the helms at Seplat at a challenging
but very interesting time.
Related News
1. SEPLAT Announces Retirement of Mr. Avuru; Appoints
Roger Brown As New CEO
2. SEPLAT Announces Revision To Q3 2019 Interim Dividend
Currency Exchange Rates
3. SEPLAT Announces Q3 2019 Interim Dividend Currency
Exchange Rates
4. SEPLAT Declares N56.65 billion PAT in 2019 Q3'19
Results,(SP:N517.00k)
5. SEPLAT Publishes Scheme Document To Eland Shareholders
6. SEPLAT And Eland Reached An Agreement On The terms of A
Recommended Cash Acquisition
7. SEPLAT Notifies of Board Meeting
8. SEPLAT Announces Its Closed Period
9. SEPLAT Relocates All Lagos Offices To One Location
10. SEPLAT Issues Notification Of Dealing In Shares By A PDMR
11. SEPLAT Issues Notification Of Dealing In Shares By A PDMR
12. H1 2019 Earnings Update: SEPLAT Remains On Track To
Deliver Solid Gains
13. SEPLAT Issues Notification of Dealing in Shares by a PDMR
14. SEPLAT Declares N37.49 billion Profit in Q2 2019
Results,(SP:N490.00k)
15. SEPLAT Announces the Appointment of Madame Nathalie
Delapalme as a Non-Executive Director
16. SEPLAT Reschedules Capital Markets Day at the Nigerian
Stock Exchange
17. SEPLAT to Host Capital Markets Event at the London Stock
Exchange