Wednesday, April 29, 2020 / 1:07 PM / CardinalStone
Research / Header Image Credit: Seplat Petroleum
Seplat
Petroleum Development Company Plc (SEPLAT:NGSE) reported a $106.6 million loss in its unaudited Q1'20
result. The loss was mainly driven by a $145.5 million impairment loss (vs.
gain of $.14.0 million in Q1'19) charged on its oil and gas assets during the
period.

Highlights:
- Q1'20
revenue declined by 18.2% YoY, reflecting the 19.1% YoY and 10.8% YoY
deteriorations in average realized crude and gas prices apiece. While working
interest liquid production (+ 52.4% YoY) was bolstered by the integration of
Eland Oil fields to the group's portfolio, lower realized prices combined with
weaker gas output to weigh on revenue. Notably, the company attributed the
38.5% decline in gas production to a 15-day maintenance exercise carried out in
its Oben Gas Plant and a 22.0% downtime on the Trans Forcados Pipeline (TFP)
during the period
- COGS rose by
24.7% YoY, leading to a 25.7 ppts plunge in gross profit margin to 25.37%.
Notably, cost pressures were linked to production-related expenses such as
royalties (+18.9% YoY), depletion, depreciation and armotisation (+21.5% YoY),
and crude handling fees (+39.2% YoY) possibly due to the integration of Eland.
We also note that the Eland production is not as cost efficient as that of
SEPLAT
- Similarly,
general and administrative expenses increased by a staggering 56.5% in the
period, with significant pressures from one-off director-retirement payments
and general expenses. However, administrative pressures related to greater
staff strength and wider office presence are likely to subsist for the rest of
the year
- The company
recorded an impairment charge of $145.5 million (vs. gain of $.14.0 million in
Q1'19) on its oil & gas properties as a result of re-assessments of
expected future cash flows from these assets due to significant fall in crude
oil prices.
- Earnings
were further weighed by the 55.1% YoY rise in finance costs to N20.3 billion,
which was mostly driven by the $350.0 million revolving credit facility drawn
down in December 2019 to finance the Eland Oil acquisition
- Despite the weak operating performance, net cashflow
from operating activities printed positive at $64.5 million (vs. $79.5 million
in Q1'19) underlined by the addition of non-cash impairment charge and
efficient working capital management
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