Seplat piles on debt at the wrong time

Currently the oil and gas company’s finance chief, he will take over as chief executive from Austin Avuru in August. “Of course, we'd all want to take it over at $100/bbl oil, but the reality is that I have enough institutional knowledge of the company and know how it functions, and at some point, we'll get a recovery in oil,” he said.

Last time oil prices crashed, the company suspended its dividend but this time it has maintained the payment. The company will cut spending, with fewer rigs to be drilled than planned this year. 

It’s not going to be an easy year, however, with Seplat’s cash reserves tapped out after the Eland acquisition. The $457m payment (net of Eland’s cash balance) took the company from net cash of $135m at the end of 2018 to net debt of $456m (excluding $9m in lease liabilities). Meanwhile, it has pushed back first gas from the ANOH plant from the beginning of 2021 to the end of the year. 

On the plus side, Eland will add around 6,000-10,000 barrels of oil per day (bopd) of production and its complex structure means Seplat will get 45 per cent of cash from its production from an effective ownership of 20 per cent. 

Production and sales last year were both down 7 per cent on 2018, at 46,498 barrels of oil equivalent per day (boepd) and $698m.