One of Nigeriaâ€™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.
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.