Seplat Energy Plc · LSE:SEPL
Seplat Energy — Investor Day (July 2021)
72 slides from Seplat Energy's investor day presentation, Jul 29, 2021
Slide 1: Seplat Energy's Nigerian opportunity
Seplat Energy’s Nigerian opportunity Seplat Energy Plc 29/07/2021
Slide 2: Agenda
15.00 – 16.10 — Goodwill message from Temi Popoola, Chief Executive Officer, Nigerian Exchange Ltd — Proudly Nigerian — Introducing Seplat Energy — Building a sustainable business — Driving social development — Focusing on environmental care & reporting — Maximising financial returns BREAK 16.20 – 1
Slide 3: Proudly Nigerian
PROUDLY NIGERIAN Roger Brown Chief Executive Officer Seplat Energy's Nigerian opportunity 2
Slide 4: A land of opportunity…
A land of opportunity… POPULATION – Africa’s largest population, with more than 200m people and growing rapidly – Currently 7th largest, will be the world’s 3rd largest country in 2050 and second largest democracy – More children are born every day in Nigeria than in the whole of Europe ECONOMY – GD
Slide 5: …with strong potential for growth
…with strong potential for growth $973bn 329m 85% 240TWh 35.2GW 9.5GW 7.9GW GDP $468bn POPULATION 206m 30.4GW ACCESS TO ENERGY 57% ELECTRICITY DEMAND 121TWh Ç√ 25.6GW 4.1GW TOTAL GENERATING CAPACITY* GAS ON GRID 4.9GW SOLAR ON GRID 0.06GW 26.1GW TOTAL OFF-GRID CAPACITY 0.4GW OFF-GRID GAS 0.2GW OFF-G
Slide 6: …but there are impediments
…but there are impediments – Highest cost of energy in the world (52c/kWh) because most power is generated by small-scale diesel and petrol generators – Low access to energy (57%) because of lack of grid infrastructure, especially in rural areas – Despite around 12.5GW installed capacity, only 4-5GW
Slide 7: Energy access will drive Nigeria's development
ENERGY ACCESS WILL DRIVE NIGERIA’S DEVELOPMENT Seplat Energy's Nigerian opportunity 6
Slide 8: Our story so far
OUR STORY SO FAR Seplat Energy's Nigerian opportunity 7
Slide 9: Increased oil and gas production
Increased oil and gas production Increased total production by nearly 31kboepd 4x increase in gas production 60,000 Gas 51,183 50,787 49,867 50,000 17,469 48,239 24,198 46,498 20,758 Oil 19,698 43,372 22,563 14,369 40,000 36,924 19,070 boepd 30,823 33,714 30,000 28,341 6,571 29,003 25,877 30,029 4,8
Slide 10: Built a strong financial profile
Built a strong financial profile Raised $535 million equity at IPO $400+ million dividends Invested $1.9bn capex Declared and paid since IPO since IPO Raised $2.46bn debt Repaid $1.7bn debt since IPO since IPO Seplat Energy's Nigerian opportunity 9
Slide 11: Built a world-class Board and governance
Built a world-class Board and governance Only Nigerian company to be listed on both the Premium Board of the NGX and the Main Market of the LSE NON EXECUTIVE EXECUTIVE MANAGEMENT NON-EXECUTIVE DIRECTORS CHAIRMAN Dr. A.B.C. Engr. Effiong Orjiako Emeka Okon Nathalie Olivier de Non-Executive Roger Brow
Slide 12: Strengthened and reorganised leadership
Strengthened and reorganised leadership Executive Committee CHIEF EXECUTIVE CHIEF FINANCIAL OPERATIONS TECHNICAL DIRECTOR OFFICER OFFICER DIRECTOR Gary Thompson Roger Brown Emeka Onwuka Effiong Okon MANAGING DIRECTOR, MANAGING DIRECTOR, MANAGING DIRECTOR, MANAGING DIRECTOR, ELCREST SEPLAT WEST SEPLA
Slide 13: Contribution to Nigeria and its communities
Contribution to Nigeria and its communities To Nigeria To communities * To Nigerians * $6.2bn $3.2m $4bn Revenue share Education Local contractors $1.1bn $2.4m $919m Royalties Healthcare Wages & benefits $292m $1.8m Taxes Covid-19 relief $152m $16.7m to NDDC and NCD Other Since 2010 * Includes JV sh
Slide 14: Commitment to U.N. SDGs
Commitment to U.N. SDGs – Raising entrepreneurs among – Provision of potable water boreholes – We partner with communities to stakeholder communities to ensure for host communities provide infrastructure for improved financial independence – Awareness creation among pregnant community life through t
Slide 15: Social impacts
Social impacts HEALTHCARE EDUCATION EMPOWERMENT EYE CAN SEE SCHOLARSHIPS ENTREPRENEURS EMPOWERMENT 3,464 3,415 Eye surgeries performed 892 undergraduates 162 2,523 post-primary 33,755 SKILLS ACQUISITION Reading glasses distributed PEARLS QUIZ 840 80,585 45,140 Beneficiaries Eye disease treatments Se
Slide 16: Built a strong safety culture
Built a strong safety culture MAN HOURS WITHOUT FATALITY OR LTI AT SEPLAT ENERGY’S WESTERN ASSETS AS AT 30 JUNE 20.5 million Seplat Energy's Nigerian opportunity 15
Slide 17: Eland Oil & Gas Plc acquisition
FIRST NIGERIAN ACQUISITION OF A UK LISTED COMPANY December 2019 acquisition of Eland Oil & Gas Plc OML 40 and Ubima Increased 2P liquids reserves by 41 MMbbls Increased 2C resources by 24 MMbbls Added Sibiri exploration potential 78 MMbbl Enabled creation of technical centre in Aberdeen Seplat Energ
Slide 18: Introducing Seplat Energy
Introducing… SEPLAT ENERGY Seplat Energy's Nigerian opportunity 17
Slide 19: Our beliefs about the future
Our beliefs about the future THE GREATEST BUSINESS OPPORTUNITY AHEAD OF US IS TO SUPPLY THE RIGHT MIX OF ENERGY TO SUPPORT NIGERIA’S GROWTH. In doing so, Seplat Energy must make a positive social impact and contribute to Nigeria’s achievement of the United Nations’ Sustainable Development Goals GAS
Slide 20: Nigeria's energy transition journey
Nigeria’s energy transition journey 1 Increase energy access to achieve universal coverage and drive social and economic development Achieve a ‘Just Transition’ using Nigeria’s gas resources 2 to replace imported diesel, reducing economic burden, improving GDP and reversing FX drain 3 Increase use o
Slide 21: Our energy transition priorities
Our energy transition priorities 1 Achieve sustainable long-term growth by providing the optimal energy mix for Nigeria 2 Be a national energy champion and partner of choice to support Nigeria’s energy transition 3 Drive social and economic development through direct and indirect efforts Prepare for
Slide 22: Our strategic framework
Our strategic framework ENABLED BY STRONG GOVERNANCE STRATEGY Increasing BUILD A SUSTAINABLE BUSINESS DELIVER TRANSITION access to energy Social development Upstream Reducing emissions Environmental care Midstream Gas Transforming the economy Financial returns New Energy VALUE – INTEGRITY – PARTNERS
Slide 23: Build a sustainable business
Build a sustainable business Our key priorities DRIVE FOCUS ON ENVIRONMENTAL MAXIMISE RETURNS FOR SOCIAL DEVELOPMENT CARE & REPORTING ALL STAKEHOLDERS Make a positive impact on communities through Minimise our impact on local and global Manage our finances prudently, pay our share of improved access
Slide 24: Deliver transition
Deliver transition Our key priorities UPSTREAM MIDSTREAM GAS NEW ENERGY Develop our Upstream business by selectively Development of Nigeria’s gas resources to Achieve a world-class capability in renewable expanding our asset base, optimising the gas/oil accelerate the replacement of diesel and bioma
Slide 25: Driving social development
DRIVING SOCIAL DEVELOPMENT
Slide 26: Goal: positive impact on communities
GOAL Make a positive impact on communities through improved access to energy, opportunities for local employment and suppliers, and initiatives that foster entrepreneurship, education, health and resilience Seplat Energy's Nigerian opportunity 25
Slide 27: Partnerships with the community
Partnerships with the community Strong partnerships for mutual benefit, governed by GMOU GENERAL MEMORANDUM Social Investment – Aligned with U.N. SGDs and Africa Union 2063 goals particularly in health, education, economic empowerment, OF UNDERSTANDING – environmental care Health intervention progra
Slide 28: Focusing on environmental care and reporting
FOCUSING ON ENVIRONMENTAL CARE AND REPORTING
Slide 29: Current ESG ratings improving
Current ESG ratings improving Steady progress in reducing ESG risk, enhancing performance and reporting SUSTAINALYTICS ESG RISK RATING Carbon - own operations Carbon - products and services Emissions, Effluents and Waste Corporate governance Occupational Health & Safety RISK LEVEL Community relation
Slide 30: Goal: minimise environmental impact
GOAL Minimise our impact on local and global environments, drive improvements where possible, commit to global standards and transparently report our progress Seplat Energy's Nigerian opportunity 29
Slide 31: ESG: from baselining to reporting
ESG: from baselining to reporting Enhancing ESG performance and reporting is a priority, but first we must establish baselines and develop targets – ESG performance and reporting is an ongoing project built on Establishing 10 years of effort – Historic and current data will be used to calculate a ba
Slide 32: Maximising returns for all stakeholders
MAXIMISING RETURNS FOR ALL STAKEHOLDERS Emeka Onwuka Chief Financial Officer Seplat Energy's Nigerian opportunity 31
Slide 33: Goal: manage finances prudently
GOAL Manage our finances prudently, invest for the future, pay our share of taxes and royalties, service debt, and return dividends to shareholders. Seplat Energy's Nigerian opportunity 32
Slide 34: Responsible stewardship of assets
Responsible stewardship of assets Financial discipline has enabled Seplat Energy to manage Nigeria’s resources through difficult times Increasing gas volumes for growing market needs (boepd) Prudent cash and debt management ($m) 51,183 Gas $800 49,867 50,786 50,000 46,498 Oil $600 43,372 17,469 20,7
Slide 35: Focus on cash generation
Focus on cash generation Multi-pronged approach ensures strong cash position – Focus on asset integrity and safety – Increase gas in revenue mix for – Good community relationships improved visibility, higher cash Revenue assurance – minimise disruption Diversify export routes to reduce downtime, los
Slide 36: Capital allocation priorities
Capital allocation priorities We focus on low-risk strategies to grow the business and improve stakeholder returns Low-risk capex Return cash to investors Balance sheet strength Value-creating M&A Gas Maintain dividend payouts and Maintain net debt at less than Opportunities to consolidate Invest in
Slide 37: Building financial firepower
Building financial firepower – $300m cash at bank Available $650m liquidity – $350m available on RCF – Trusted partner to FG on strategic projects e.g. ANOH – Evidenced by progressive reduction in receivables High credibility – Solid credit ratings (Fitch: B- Positive; Moody’s: B2 Negative; S&P Glob
Slide 38: 6M 2021 highlights
6M 2021 highlights Six months to 30 June 2021 PRODUCTION 0.8% REALISED PRICE UNIT OPERATING COSTS 80% 28% 50,786 boepd Volumes within guidance $64.69 / bbl Oil price recovered strongly, averaging $63.8/bbl $9.7 / boe Continuous focus on costs 6M 2020: 51,178 boepd 6M 2020: $35.94 6M 2020: $7.6 / boe
Slide 39: Break
16.20 – 17.30 – Delivering transition – Upstream – Midstream Gas – New Energy – Q&A 18.00 RECEPTION BREAK Seplat Energy's Nigerian opportunity 38
Slide 40: Upstream
UPSTREAM Effiong Okon Operations Director
Slide 41: Goal: develop our Upstream business
GOAL Develop our Upstream business by selectively expanding our asset base, optimising the gas/oil mix, increasing production, reducing costs and carbon intensity, and increasing revenue assurance by diversifying routes to market. Seplat Energy's Nigerian opportunity 40
Slide 42: Portfolio development - oil
Portfolio development - oil Oil business: Five-year plan for oil New Export Pipeline OML4 OML40 53 SIBIRI ABIALA OBEN OML41 OPUAMA GBETIOKUN OKPORHURU SAPELE NIGERIA AMUKPE OROGHO ESCRAVOS TERMINAL OVHOR OML38 JISIKE Total number of oil wells to be RAPLE UMUSETI ASHAKA LACT UNIT WARRI IGBUKU OWERRI
Slide 43: Portfolio development - gas
Portfolio development - gas Five-year plan for gas Gas business: Lagos Industry Wagp Papalanto (CNL) Abuja Existing Power/Industries 4Q3 19 Egbin/AES Omotosho (CNL) Agura (CNL) Ajaokuta Steel Cluster CPF/Gas Supply Field Azura IPP ELPS Geregu (SPDC) Key Future Gas Supply Field Eyean NIGERIA Existing
Slide 44: Five-year investment programme
Five-year investment programme Plan is to invest $0.9bn to $1.2bn in existing assets, funded by cash flow * INVESTMENT BY ASSET (%) INVESTMENT BY ACTIVITY (%) INVESTMENT BY BUSINESS (%) 2% 9% 24% OML 4, 38, 41 Drilling Oil 12% OML 40 42% 47% OML53 Gas 58% Facilities OML 17 OML 56 76% 30% *Subject to
Slide 45: Reserves replacement
Reserves replacement WESTERN ASSETS EASTERN ASSETS ELAND Total Largest Prospect Total Largest Prospect Total Largest prospect (29 prospects & leads) (29 prospects & leads) (24 prospects & leads) Oil Gas Oil Gas Oil Gas Oil Gas Oil Gas Oil Gas (MMstb) (Bcf) (MMstb) (Bcf) (MMstb) (Bcf) (MMstb) (Bcf) (
Slide 46: Diversifying export routes
Diversifying export routes Improves revenue assurance by reducing impact of downtime, shut-ins 1. Forcados Terminal — Historically the primary export terminal for OMLs 4, 38, 40 and OPL 283 — Reliant on 3rd-party operated Trans Forcados Pipeline to transport oil 2. Warri Refinery — Alternative route
Slide 47: Amukpe-Escravos opens new possibilities
Amukpe-Escravos opens new possibilities – Seplat Energy’s major assets, OML 4, 38, 41, currently export via unreliable Trans Forcados Pipeline – TFP downtime was 18% for 6m 2021, with 12% reconciliation losses – Amukpe-Escravos pipeline projected operational September – First lifting expected in Q4
Slide 48: Increase production and reduce cost per boe
Increase production and reduce cost per boe 1. Current projects Project Cost reduction initiatives Current production opex per boe Amukpe LTF and facility Significantly reduce the crude handling charge by WESTERN $9.70 upgrade project removing 99.5% of water ASSETS Pumps Replacement Increase evacuat
Slide 49: Increase production and reduce cost per boe: innovation
Increase production and reduce cost per boe 2. Deploying innovation Maximise efficiency by deploying innovation — Use of business technology mapping to screen, evaluate and rank INNOVATION SCREENING AND APPLICATION technologies according to value drivers Examples of achievements Asset HSE integrity
Slide 50: Ending routine flares
Ending routine flares Q1 2021 SCOPE 1 AND 2 EMISSIONS (EXCLUDES ELAND ASSETS) — Around 90% of Seplat’s Scope 1 and 2 emissions 700,000 come from flaring of associated gas 600,000 — Fugitive emissions and in-field use are small by CO2 tonnes equivalent 500,000 comparison 400,000 300,000 — We plan to
Slide 51: Decarbonising field operations
Decarbonising field operations POWER GENERATION BY FUEL (EXCLUDING ELAND ASSETS) — Aside from ending routine flares, we are looking 12,000 for other ways to decarbonise our operations 10,000 8,000 — Replacing diesel with LPG or LNG will Diesel reduce emissions by 5% - 14% kVA 6,000 Gas 4,000 — Onsit
Slide 52: Focus on asset integrity
Focus on asset integrity 2010-2018 2021 ASSET INTEGRITY & PROCESS SAFETY MANAGEMENT (AIPSM) Improved reliability – Increase revenue assurance and availability of facilities and profitability AIPSM awareness 2019 Reduction in process 2023 – Increase assets’ life span and facility monthly status repor
Slide 53: Midstream Gas
MIDSTREAM GAS Yetunde Taiwo Director, New Energy
Slide 54: Goal: develop Nigeria's gas resources
GOAL Development of Nigeria’s gas resources to accelerate the replacement of diesel and biomass and support economic growth through the supply of reliable, low-cost energy. Gas-to-power provides baseload electricity to support renewables. Seplat Energy's Nigerian opportunity 53
Slide 55: Nigeria's gas utilisation challenge
Nigeria’s gas utilisation challenge NIGERIA HAS HUGE RESOURCES OF NATURAL GAS, ESTIMATED AT 203 TCF, OR 5.3 TRILLION CUBIC METRES, ABOUT 2% OF GLOBAL GAS RESERVES AND 37% OF KNOWN AFRICAN GAS RESERVES, BUT NIGERIA’S GAS INDUSTRY AND INFRASTRUCTURE IS RELATIVELY UNDEVELOPED HOW NIGERIA USES GAS AT PR
Slide 56: Benefits of gas in Seplat Energy portfolio
Benefits of gas in Seplat Energy portfolio Gas provides visibility, higher profitability and hedging against oil BUILDING MARKET STRENGTH GAS PROVIDES A NATURAL HEDGE AGAINST OIL PRICE VOLATILITY ($) DSO Gas — Increase utilisation of Oben gas processing plant 3.5 Price 109 3.0 — ANOH gas processing
Slide 57: Deliver ANOH
Deliver ANOH On track to deliver first gas in H1 2022 COMMERCIAL & FUNDING GAS PLANT DELIVERY PROGRESS: – Completed funding with $260m loan (plus accordion) – Installation phase underway – Power and rotating equipment undergoing customs clearing in February 2021 – All process equipment shipped and s
Slide 58: ANOH financial model
ANOH financial model Upstream supply Seplat Energy has Seplat Energy receives income from AHOH in two ways: 50-50 joint venture combining 40% revenue share of gas sold to AGPC OML 53 and OML 21 40% 50% share of wet + of dividends gas sales from AGPC AGPC Sales Seplat OML 53 AGPC Energy Less costs &
Slide 59: Scalable opportunity in domestic gas
Scalable opportunity in domestic gas Government sees gas as the transition fuel and plans to improve the market OPPORTUNITY 1. Capitalise on infrastructure capacity growth and secure OVERVIEW additional domestic gas market share 2. Partner with industrial customers and sell gas for use in industry a
Slide 60: Our focus on new markets
Our focus on new markets New gas markets provide significant additional future revenue potential GAS TO POWER GAS PRODUCTS • Industrial parks, large manufacturing plants, • Potential to displace extensive amounts universities, hospitals etc of biomass used for cooking by most households, c.110 Mtoe
Slide 61: Extend dominance of the gas market
Extend dominance of the gas market Capture additional value along the value chain On-Grid Gas Value Chain Currently, Seplat Energy has Pipeline Nigeria Bulk Distribution access to only $0.03/kWh Seplat Energy Power station Energy Trading companies (about 20%) of the $0.15/kWh Upstream $0.03/ $0.10/
Slide 62: New Energy
NEW ENERGY
Slide 63: Goal: world-class renewable energy capability
GOAL Achieve a world-class capability in renewable energies, through the development or acquisition of new skillsets that open up new and profitable markets Seplat Energy's Nigerian opportunity 62
Slide 64: Solar offers solid growth potential
Solar offers solid growth potential Requires capability building but offers long-term revenue visibility in a market underpinned by world-leading policy 1. Create off grid solar power distribution business to supply; Opportunity • Commercial and industrial (C&I) sector overview • Micro-grid 2. Creat
Slide 65: Nigeria's off-grid solar market
Nigeria’s off-grid solar market Projected to be worth nearly $17 billion by 2040 Indicative costs Indicative costs $0.29/kWh $0.52/kWh 2020 capacity 2020 capacity 0.1 GW 20 GW Off-grid solar market Total off-grid solar Based on additional capacity capacity growth above current 2020 levels 26 GW (202
Slide 66: Concluding, our future ambitions
Concluding, our future ambitions: Increase energy access to drive social and economic development Minimise environmental impact, drive improvement, report transparently Maintain dividend payouts and consider progressive dividend policy Invest $0.9bn - $1.2bn capex in existing assets Acquire signific
Slide 67: Q&A
Q&A
Slide 68: Thank you
THANK YOU
Slide 69: Appendix: Financial information
APPENDIX Financial information
Slide 70: 6M 2021 performance update
6M 2021 performance update Production within guidance and improved on 3M 2021 GROUP PRODUCTION 2012 - 6M 2021 FY 2020 reserves and 6M 2021 production by asset W.I. 2P reserves * W.I. production 60,000 MMboe 6M 2021 boepd Liquids Gas Block Share Partner Oil Gas Total Oil Gas Total 51,183 50,787 49,86
Slide 71: 6M 2021 financial results
6M 2021 financial results Strong recovery in revenues and profitability $ million 6M 2021 6M 2020 Change – Oil revenues up on higher price of Oil revenue 244.8 180.1 35.9% $64.69 vs $35.94, despite 13% lower Gas revenue 64.0 53.5 19.7% production Total revenue 308.8 223.6 32.2% – Gas revenues up on
Slide 72: Capex priorities for 2021
Capex priorities for 2021 Focus investment on gas and development of lowest-cost oil wells EXPECTED CAPEX ALLOCATION BY ASSET ($M) 2021 CAPEX PROJECTED TO BE $180M, OML 4, 38, 41 ALLOCATED AS BELOW OML 53 65 OML 56 OML 4,38,41 76 — Two gas wells, Oben 50 and 51 completed and onstream H1 Eland — Dril