Seplat Energy Regulatory News (SEPL)

Seplat Petroleum Development Company Plc

Interim management statement and consolidated interim financial results for the three months ended 31 March 2017

Lagos and London, 28 April 2017: Seplat Petroleum Development Company Plc ("Seplat" or the "Company"), a leading Nigerian independent oil and gas company listed on both the Nigerian Stock Exchange and London Stock Exchange, today announces its first quarter results. Information contained within this release is un-audited and is subject to further review.

Key points

Alternative export route

- Upgrades and repairs recently completed on one of two jetties at the Warri refinery and barging operations are being re-established with loading of one 100,000 bbl cargo from the upgraded jetty completed on 27 April

- Work on the second jetty is progressing well and on-track to be operational during Q2. The upgraded jetties will enable sustained exports of 30,000 bopd (gross)

- Completion of the 160,000 bopd Amukpe to Escravos pipeline prioritised by the Nigerian government and anticipated in H2 2017

- The Forcados Terminal remains under force majeure at the date of this announcement

Strong performance of the gas business

- Net working interest gas production 95 MMscfd and gas revenues of US$25 million (53% of total Q1 revenues)

- Expansion of gross processing capacity to 525 MMscfd provides headroom to increase contracted gas sales (actively engaged with counterparties) and handle 3rd party volumes

Financials reflect lower oil exports via the Warri refinery route whilst jetty upgrades and repairs were undertaken

- Revenue US$47.3 million and gross profit US$19.1 million; 22% year-on-year reduction in G&A helped narrow operating loss to US$1.3 million; loss for the period after net finance costs US$18.3 million and loss after tax US$19.1 million

- Cash generated from operations US$51.6 million versus capex incurred of US$4.9 million

- Average oil price realisation US$48.34/bbl (2016 :US$35.4/bbl); average gas price US$3.05/Mscf (2016: US$2.98/Mscf)

Continued to reduce debt, improve balance sheet and preserve liquidity buffer

- US$33 million debt principal repayments made in Q1; gross debt at 31 March stood at US$643 million (down from US$676 million at 31 December 2016) and net debt US$487 million (down from US$516 million at 31 December 2016)

- Cash at bank at 31 March US$156 million

- NPDC headline receivable at 31 March US$230 million; net receivable US$220 million after adjusting for FX, interest and impairment†

- Discussions underway with lenders on the three year corporate facility with a view to extending the facility until end December 2018

Working interest production for the first three months of 2017(1)

(1) Liquid production volumes as measured at the LACT unit for OMLs 4, 38 and 41 and OPL 283 flow station. Volumes stated are subject to reconciliation and will differ from sales volumes within the period. Working interest sales volumes in the period were 1.9 MMboe, comprising 0.5 MMbbls oil and condensate and 1.4 MMboe gas.

† Note the commercial position does not follow accounting treatment as receivables are determined in the functional currency (i.e. US Dollar) which forms part of the "value for money" process currently underway with NPDC

Commenting on the results Austin Avuru, Seplat's Chief Executive Officer, said:

"The first quarter of 2017 is a transitionary period for Seplat in which our oil sales have been constrained whilst we electively undertook the necessary upgrade and repair work on two jetties at the Warri refinery to give us the future benefit of doubling barging volumes and stabilising exports via that route at a gross rate of 30,000 bopd. Alongside this we are collaborating with and supporting government on completion of the Amukpe to Escravos pipeline that will offer a third export route to Seplat and help to significantly de-risk the distribution of our oil production to market. These proactive management actions, combined with the consistently strong performance of our gas business and continued strict financial discipline to preserve a liquidity buffer, should lead to a much improved performance outlook over the remainder of 2017 and beyond, with a much greater level of in-built resilience to such external shocks".

Important notice

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

Certain statements included in these results contain forward-looking information concerning Seplat's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which Seplat operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within Seplat's control or can be predicted by Seplat. Although Seplat believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct. Actual results and market conditions could differ materially from those set out in the forward-looking statements. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in Seplat or any other entity, and must not be relied upon in any way in connection with any investment decision. Seplat undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

Enquiries:

Notes to editors

Seplat Petroleum Development Company Plc is a leading indigenous Nigerian oil and gas exploration and production company with a strategic focus on Nigeria, listed on the Main Market of the London Stock Exchange ("LSE") (LSE:SEPL) and Nigerian Stock Exchange ("NSE") (NSE:SEPLAT).

Seplat is pursuing a Nigeria focused growth strategy and is well-positioned to participate in future divestment programmes by the international oil companies, farm-in opportunities and future licensing rounds. For further information please refer to the company website, http://seplatpetroleum.com/

Interim condensed consolidated statement of profit or loss and other comprehensive income

for the first quarter ended 31 March 2017

Interim condensed consolidated statement of financial position

As at 31 March 2017

Interim condensed consolidated statement of financial position continued

As at 31 March 2017

The financial statements on pages 5 to 28 were approved and authorised for issue by the board of directors on 20 April 2017 and were signed on its behalf by

Interim condensed consolidated statement of changes in equity continued

for the first quarter ended 31 March 2017

Interim condensed consolidated statement of changes in equity continued

for the first quarter ended 31 March 2017

Interim condensed consolidated statement of cash flow

for the first quarter ended 31 March 2017

Notes to the interim condensed consolidated financial statements

1. Corporate structure and business

Seplat Petroleum Development Company Plc ('Seplat' or the 'Company'), the parent of the Group, was incorporated

on 17 June 2009 as a private limited liability company and re-registered as a public company on 3 October 2014, under

the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria 2004. The Company commenced

operations on 1 August 2010. The Company is principally engaged in oil and gas exploration and production.

The Company's registered address is: 25a Lugard Avenue, Ikoyi, Lagos, Nigeria.

The Company acquired, pursuant to an agreement for assignment dated 31 January 2010 between the Company, SPDC,

TOTAL and AGIP, a 45% participating interest in the following producing assets:

OML 4, OML 38 and OML 41 located in Nigeria. The total purchase price for these assets was US$340 million paid at the

completion of the acquisition on 31 July 2010 and a contingent payment of US$33 million payable 30 days after the

second anniversary, 31 July 2012, if the average price per barrel of Brent Crude oil over the period from acquisition up

to 31 July 2012 exceeds US$80 per barrel. US$358.6 million was allocated to the producing assets including US$18.6

million as the fair value of the contingent consideration as calculated on acquisition date. The contingent consideration

of US$33 million was paid on 22 October 2012.

In 2013, Newton Energy Limited (''Newton Energy''), an entity previously beneficially owned by the same shareholders

as Seplat, became a subsidiary of the Company. On 1 June 2013, Newton Energy acquired from Pillar Oil Limited (''Pillar

Oil'') a 40 percent Participant interest in producing assets: the Umuseti/Igbuku marginal field area located within OPL

283 (the ''Umuseti/Igbuku Fields'').

In 2015, the Group purchased a 40% participating interest in OML 53, onshore north eastern Niger Delta, from Chevron Nigeria Ltd for $ 259.4 million.

In 2017, the Group incorporated a new subsidiary, ANOH Gas Processing Company Limited. The principal activities of the Company is the processing of gas from OML 53.

The Company together with its subsidiary, Newton Energy, and five wholly owned subsidiaries, namely, Seplat

Petroleum Development Company UK Limited ('Seplat UK'), which was incorporated on 21 August 2014, Seplat East

Onshore Limited ('Seplat East'), which was incorporated on 12 December 2014, Seplat East Swamp Company Limited

('Seplat Swamp'), which was incorporated on 12 December 2014, Seplat Gas Company Limited ('Seplat GAS'), which

was incorporated on 12 December 2014, and ANOH Gas Processing Company Limited which was incorporated on 18 January 2017 are collectively referred to as the Group.

Notes to the interim condensed consolidated financial statements continued

2. Summary of significant accounting policies

2.1 Introduction to summary of significant accounting policies

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards which are set out below.

2.2 Basis of preparation

i) Compliance with IFRS

The interim condensed consolidated financial statements of the Group have been prepared in accordance with accounting standard IAS 34 Interim financial reporting.

ii) Historical cost convention

The financial information has been prepared under the going concern assumption and historical cost convention, except for contingent consideration and financial instruments on initial recognition measured at fair value. The historical financial information is presented in US Dollars and Nigeria Naira. All values are rounded to the nearest thousand ($000) and million (₦'m) respectively, except when otherwise indicated. The accounting policies are applicable to both the Company and Group.

iii) Going concern

Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for at least twelve months from the date of these financial statements.

iv) New and amended standards adopted by the group

There were a number of new standards and amendments to standards that are effective for annual periods beginning after 1 January 2017; the group has adopted these new or amended standards in preparing the condensed consolidation interim financial statement. The nature and impact of the new standards and amendments to the standards are described below.

Other than the changes described below, the accounting policies adopted are consistent with those of the previous financial year.

a. Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12

Amendments made to IAS 12 in January 2016 clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset's tax base. Specifically, the amendments confirm that:

· A temporary difference exists whenever the carrying amount of an asset is less than its tax base at the end of the reporting period.

· An entity can assume that it will recover an amount higher than the carrying amount of an asset to estimate its future taxable profit.

· Where the tax law restricts the source of taxable profits against which particular types of deferred tax assets can be recovered, the recoverability of the deferred tax assets can only be assessed in combination with other deferred tax assets of the same type.

· Tax deductions resulting from the reversal of deferred tax assets are excluded from the estimated future taxable profit that is used to evaluate the recoverability of those assets.

This amendment has no impact on the Group's financial statements as at the period ended 31 March 2017.

b. Annual Improvements to IFRSs 2014-2016 Cycle

IFRS 12 Disclosure of Interests in Other Entities clarify that the disclosure requirements for interests in other entities also apply to interests that are classified as held for sale or distribution.

Notes to the interim condensed consolidated financial statements continued

IAS 28 Investments in Associates and Joint Ventures - A venture capital organisation, or other qualifying entity, may elect to measure its investments in an associate or joint venture at fair value through profit or loss. This election can be made on an investment-by-investment basis. A non-investment entity investor may elect to retain the fair value accounting applied by an investment entity associate or investment entity joint venture to its subsidiaries. This election can be made separately for each investment entity associate or joint venture.

This amendment has no impact on the Group's financial statements as at the period ended 31 March 2017.

c. Disclosure initiative - Amendments to IAS 7

The Group is now required to explain changes in their liabilities arising from financing activities. This includes changes arising from cash flows (e.g. drawdowns and repayments of borrowings) and non-cash changes such as acquisitions, disposals, accretion of interest and unrealised exchange differences.

Changes in financial assets are included in this disclosure if the cash flows were, or are, included in cash flows from financing activities. This is the case, for example, for assets that hedge liabilities arising from financing liabilities.

The Group may include changes in other items as part of this disclosure, for example by providing a 'net debt' reconciliation. However, in this case the changes in the other items are disclosed separately from the changes in liabilities arising from financing activities.

The Group discloses this information in tabular format as a reconciliation from opening and closing balances, but may adopt a different format as the standard does not mandate a specific format.

The impact of this amendment can be found in note 14

v) New standards and interpretations not yet adopted

The Group has the following updates to information provided in the last annual financial statements about the standards issued but not yet effective that may have a significant impact on the Group's consolidated financial statements.

a. IFRS 9 Financial Instruments

IFRS 9 Financial instruments addresses the classification, measurement and de-recognition of financial assets and financial liabilities, the standard introduces new rules for hedge accounting and a new impairment model for financial assets. The standard does not need to be applied until 1 January 2018 but is available for early adoption.

The Group is currently performing a detailed assessment of the impact of the new standard on the classification and measurement of its financial assets, the Group does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets.

There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect

accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have

such liabilities.

The de-recognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and

have not been changed.

The new hedge accounting rules will align the accounting for hedging instruments more closely with the group's risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. The Group does not expect a significant impact on the accounting for its hedging relationships.

The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, debt instruments measured at FVOCI, contract assets under IFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. The Group is currently performing a detailed assessment of how its impairment provisions would be affected by the new guidance, it generally expects the adoption of IFRS 9 to result in earlier recognition of credit losses.

The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group's disclosures about its financial instruments particularly in the year of the adoption of the new standard.

Notes to the interim condensed consolidated financial statements continued

b. IFRS 15 Revenue from contracts with customers

The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers revenue arising from the sale of goods and the rendering of services and IAS 11 which covers construction contracts.

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer.

The standard permits either a full retrospective or a modified retrospective approach for the adoption. The new standard is effective for first interim periods within annual reporting periods beginning on or after 1 January 2018, and will allow early adoption.

The Group is currently performing an assessment of the effect of the new principles on the Group's financial statements. The Group will make more detailed assessments of the effect over the next nine months. The Group does not expect to adopt the new standard before 1 January 2018.

c. IFRS 16 Leases

This standard eliminates the classification of leases as either operating or finance leases for a lessee. Instead, all leases are treated in a similar way to finance leases under IAS 17. Leases are 'capitalised' by recognising the present value of the lease payments and showing them either as lease assets (right-of-use assets) or together with property, plant and equipment. If lease payments are made over time, the Group also recognises a financial liability representing its obligation to make future lease payments. IFRS 16 does not require a lessee to recognise assets and liabilities for (a) short term leases (b) leases of low-value assets. The Group is yet to assess the full impact of IFRS 16 and intends to adopt IFRS 16 no later than 1 January 2019 as required by the standard.

The Group is currently performing an assessment of the effect of the new principles on its financial statements. The Group will make more detailed assessments of the effect over the next nine months. The Group does not expect to adopt the new standard before 1 January 2019.

Other new standards are not expected to have any material impact on the Group's financial statements.

2.3 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 March 2017.

This basis is the same adopted for the last audited financial statements as at 31 December 2016.

2.4 Functional and presentation currency

The Group's financial statements are presented in United States Dollars, which is also the Company's functional currency and the Nigerian Naira as required by the Financial Reporting Council of Nigeria. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

i) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss.

Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other income or other expenses.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

Notes to the interim condensed consolidated financial statements continued

ii) Group companies

The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

· assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet

· income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not - a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

· all resulting exchange differences are recognised in other comprehensive income.

On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

3. Segment reporting

Segment reporting has not been prepared as the Group operates one segment, being the exploration, development and production of oil and gas related products located in Nigeria. Operations in the different OMLs are integrated due to geographic proximity, the use of shared infrastructure and common operational management.

4. Significant accounting judgements, estimates and assumptions

4.1 Judgements

Management judgements at the end of the first quarter are consistent with those disclosed in the recent 2016 Annual financial statements. The following are some of the judgements which have the most significant effect on the amounts recognsed in this consolidated financial statements.

i) OMLs 4, 38 and 41

OMLs 4, 38, 41 are grouped together as a cash generating unit for the purpose of impairment testing. These three

OMLs are grouped together because they each cannot independently generate cash flows. They currently operate

as a single block sharing resources for the purpose of generating cash flows. Crude oil and gas sold to third parties

from these OMLs are invoiced together.

ii) Advances on investment (note 15)

The Group considers that the advances on investment of US$65.7 million (₦20 million) in relation to the acquisition of additional assets is fully recoverable in accordance with the terms of the deposit.

4.2 Estimates and assumptions

The key assumptions concerning the future and the other key source of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are disclosed in the most recent 2016 annual financial statements.

The following are some of the estimates and assumptions made.

i) Impairment of financial assets

The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred since the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Notes to the interim condensed consolidated financial statements continued

Management has made certain assumptions about the recoverability of financial assets exposed to credit risk from NPDC. These are based on management's past experiences with NPDC, current discussions with NPDC and financial capacity of NPDC. However, wherever these assumptions do not hold, it might have a significant impact on the Group's profit or loss in future.

ii) Defined benefit plans

The cost of the defined benefit retirement plan and the present value of the retirement obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and changes in inflation rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate, management considers market yield on federal government bonds in currencies consistent with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The rates of mortality assumed for employees are the rates published in 67/70 ultimate tables, published jointly by the Institute and Faculty of Actuaries in the UK.

5. Financial risk management

5.1 Financial risk factors

The Group's activities expose it to a variety of financial risks such as market risk (including foreign exchange risk, interest rate risk and commodity price risk), credit risk and liquidity risk. The Group's risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.

5.1.1 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group manages liquidity risk by ensuring that sufficient funds are available to meet its commitments as they fall due.

The Group uses both long-term and short-term cash flow projections to monitor funding requirements for activities and to ensure there are sufficient cash resources to meet operational needs. Cash flow projections take into consideration the Group's debt financing plans and covenant compliance. Surplus cash held is transferred to the treasury department which invests in interest bearing current accounts, time deposits and money market deposits.

The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed maturity periods. The table has been drawn based on the undiscounted cash flows of the financial liabilities based on the earliest date on which the Group can be required to pay.

Notes to the interim condensed consolidated financial statements continued

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5.2 Fair value measurements

Financial instruments measured at fair value were based on the same assumptions as determined in the 31 December 2016 financial statements. There were no updates on the judgements and estimates made by the group in determining the fair values of the financial instruments since the last annual financial report. There were no transfers of financial instruments between fair value hierarchy levels during this first quarter.

Notes to the interim condensed consolidated financial statements continued

6. Revenue

The major off-taker for crude oil is Mercuria. The major off-taker for gas is the Nigerian Gas Company.

7. Cost of sales

8. General and administrative expenses

Directors' emoluments have been split between executive and non-executive directors. There were no non-audit services rendered by the Group's auditors during the period.

Other general expenses relate to costs such as office maintenance costs, telecommunication costs, logistics costs and others.

Notes to the interim condensed consolidated financial statements continued

9. Gain/ (loss) on foreign exchange - net

This is principally as a result of translation of naira denominated monetary assets and liabilities.

10. Fair value loss

Hedging payments represents the payments for crude oil price options charged to profit or loss. Fair value loss on contingent consideration arises in relation to remeasurement of contingent consideration on the Group's acquisition of participating interest in its OMLs. The contingency criteria are the achievement of certain production milestones.

11. Finance income/ (costs)