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Nigerian independent E&P producer Seplat delivers 51K boepd against difficult backdrop #SEPL

Nigerian Oil & Gas independent Seplat, perhaps Nigeria’s largest indigenous oil and gas producer, has just announced half year results in what has been a challenging environment for oil and gas producing companies. In a video interview with London South East the newly appointed CEO Roger Brown, who spent 7 years as CFO, stressed stability as he laid out Seplat’s plans for future growth, both organic and by acquisition. Roger describes Seplat as a Nigeria-focused company with 8 assets 'on-shore Nigeria', which gives a sense of its scale.

It owns a mid-stream gas processing business, #ANOH, which will drive the next phase of growth for the company and is only 18 months away from first gas. Currently #SEPL supply a third of all gas used to create electricity for the Nigerian grid, and ANOH looks set to supply up to 1200 megawatts of electricity, with offtakers for that energy already lined up and soon to be contracted. It will also move into the gas supply chain and produce LPG and so on.

Roger sees gas as critical to the energy needs of Nigeria as the country's population looks set to grow from 200 million to 400 million over the next 30 years, which will make it the third most populous country after India and China. Currently most energy needs are met off grid by diesel generators and demand for gas outstrips supply. Seplat's H1 numbers show the scale of the business. Even though the oil price in H1 "was half of last year's equivalent, the business still generated $200M in cash, we stabilised our production, drilled out six wells in the half, with another 2 in Q3.

The business is robust, with $350M in cash, and net debt of $450M" said Roger. #SEPL produced 51kboepd in H1 in line with guidance, and Roger reiterated 2020 guidance of 47-57k boepd, with the large range due to OPEC production cuts and Covid uncertainty. Seplat is the only oil and gas producer to be dual-listed in both Nigeria and on the London Main Market, which gives it international credibility when it comes to making deals as oil majors like Shell plan to divest their Nigeria holdings over the next few years, yet still be a local player the new CEP believes.

AIM-listed Eland Oil & Gas was taken over for what may seem like a high price of £382M in cash at 166 pence per share, yet the purchase funds itself very quickly from production, and for Roger the investment case remains compelling. "Eland was our neighbour, just North of our Western assets. It has really strong sub surface reservoirs and this geology is something we know inside out. There are economies of scale because we are in the same area and they export through the same terminal as us. It is about drilling out some more of these prolific 'dual string completion' wells which bring in 5,000 or 6,000 boepd each. From there we are looking at economies of scale by creating a one-point export route for all our oil, potentially by reviving an old oil terminal."

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