Seplat Energy Plc

Hello, everybody, and welcome to CEPLA Energy's financial results for the full year 2023. On the call today, we are joined by our CEO, Roger Brown, CFO Emeka Onwuka, and our COO, Samson Ezeghori. We'll first present our business and financial highlights, followed by the outlook, and after this, we'll move to Q&A. Before we start the presentation in detail, I encourage you to take note of the forward-looking statements on slide two. Now I'll pass over the call to Roger. Over to you Roger.

Thank you James and hello everyone. Welcome to the full year 2023 CEPLA Energy results. So you can see on the slide four we have set out our 2023 highlights and underpinning that is a strong operational and fiscal performance in what was a quite a challenging year for CEPLA but I'm glad to say that our policies, procedures, and very important, our staff really rose to the challenge in 2023. So I've set out five main highlights. First one there is on our 2P reserves. We just had an upgraded CPR, and we've seen a 9% increase in our reserves, both in gas and oil. And so they've moved up to 478 million barrels of oil equivalent, which is a very good increase year on year. The next one, looking at the daily production, and we were within guidance, we just slightly short of 48,000 barrels of oil equivalent. Roughly 60% of that was oil and 40% was gas. And that production's up 8% year on year Now, it's largely we saw reduced losses and lower deferments. And importantly, in terms of operation performance, we hit mechanical completion on a very important strategic gas plant. We'll talk about that in a couple of slides time. A third one there is our 2020 through revenue. And you can see that we've gone through the billion dollars of turnover, up 12% on last year, and very monumentally through that billion-dollar turnover milestone for us. And those two ones at the bottom there is looking at the year-end net debt. And that is obviously decreased. Cash flow has increased. Rupert Clayton- Through the year in a mecca when he goes through his slides will pick up on that, and then the final one, there is in terms of our commitments to dividends and we are continue our dividends pay out, so we have declared. A six cents a share dividend split between a three cents core dividend, which makes it 12 cents for the year. And then we're also declaring a three cents special dividend, which will be paid, assuming it's approved to the AGM shortly after May. So next slide. On the slide, we like to set out just some of our achievements. Obviously this year we're going through our 10 year anniversary of being on both the Nigerian Stock Exchange and the London Stock Exchange. And we look back through our perspectives. We looked back at what objectives we set for ourselves in 2014 and how we actually achieved that looking at achievements up to 2023. It's quite interesting sort of tasks to do this. And you can see it on the left hand side. I'm not going to go through every single one of them, but there are commitments on production, acquisition strategy, commercialising gas production, progressive dividend policy and maintain good relations and integrate with our host communities. And on the right hand side, we talk a little bit about what we've achieved. And you can see there that we exceeded our gross production targets which was 85 and it's it's we've at the end of 23 was 106 that's gross uh and obviously the working interest is is less than that our 2p reserves um have increased since inception a reserve replacement ratio very healthy for 2023, and then diversified evacuation routes. In terms of our acquisitions, we've been pretty active through the years. So we now have a portfolio of seven onshore blocks, We acquired Chevron's OML53 back in 2016, and that was a critical acquisition because this delivered the Anno gas opportunity. And we see the east of the country really giving massive potential for the country and obviously our partners and ourselves. In 2019, we acquired Elend, and we've been spending years betting that in. You can start to see the real improvement in results from Elend or Elbrest. And then the last one there, we signed the sale and purchase agreement for MP&U. That's gone through its two year anniversary. And we remain hopeful that the government will finally approve this and we can move ahead and grow those assets. And in terms of gas, which is a very big part of what we do. Our processing capacity really is leading in the market next to government when we bring on stream the Anno gas plants and the Sapley gas plant, which we're aiming to do this year. And then obviously gas revenues have increased quite dramatically there. We've paid back in terms of dividends. We've returned more than we raised at IPO. And I think that's quite critical. And we continue to return dividends to investors. The core dividend itself has increased and the special dividends. And look, over time, what we want to be able to do is increase our dividends subject to certain constraints around our lending and bond components, et cetera. And the final one there is really important is how we interact with our investors. our communities, our GMOU, which is a global memorandum of understanding, investment in host communities. That's approaching $60 million of investments over the years, and it's very critical that we continue that going forward. So on to the next slide, I will cover briefly just our sustainability dashboard. We put sustainability right at the heart of our strategy, in a three-pillar strategy. and obviously we'll be increasingly reporting on various metrics. We just put some up here in this dashboard for the first presentation. Looking at it, if you look in terms of the environment and climate, the big reduction of that is going to be our end of routine flaring. We have a number of projects underway at the minute and they'll largely be completed this year. And we'll be in terms of end of routine flaring, we're now guiding the second half of 2025. Then you'll start to see those carbon intensity reduce, the flaring emissions significantly reduce by over 80%. In the middle bit of dashboard, we look at what we're doing with our people, partners and communities and social spending is quite critical. It's 10 million in 23. It was 9 million in 22. And in terms of our employees, Every year we have the separate people voice, employment engagement, and we actually measure ourselves against a global index. And that's 77%. That's an improvement on last year. And then in terms of governance standards, the board independence, and we'll talk about that in a second. But, you know, obviously we are announcing today a new chair. and Senior INED, and you can see the independence of the board is set at 60%. And then we're obviously rated by various sustained, well, ASG ratings indexes, Sustain Analytics, MSCI, and other ones there below. So just before I leave this dashboard, in terms of the staff at CEPLAT, 27.5% of our scorecard for the entire company is related to ESG and safety. So that's how importantly we take it. Almost a third of comp is related to ESG metrics, et cetera. So I'm just going to stop now and pass over to Sam, who will cover our 2023 operational highlights. Thank you very much, Roger.

Good morning, good afternoon, good evening, everyone, depending on where you are joining us from. I would like to deepen on the operational highlights already presented by Roger, starting with our resource volume and our life going forward. On the bars, you will see the resource volume journey and evolution since 2013, and it demonstrates how healthy our funnel is. And coming to the end of 2023, where we ended with 478 million barrels of oil equivalent in terms of resource volumes. If you just reference this back to our end position in 2022, where we ended at 438 million barrels, this reflects a 9% growth in our resource base. The key areas where we experienced this growth around the drilling outcome in OML 40, where we had the Sibiri Wells outcome, and then also our farming into Abiala marginal fields. And last but not the least is the conversion of 2C to 2P in our OML 53. All these translates to a future life of about 25 years of production life for Surplat. If you then go to the next slide, That tries to present to you our core operational performance in the year. As already highlighted, we ended the year at nearly 48,000 barrels of oil equivalent working interest, which represents 8%, 8.3% growth relative to 2022. The production is again split around 60, 40%, 60 for liquids, 40% for gas. And our production performance is underscored and supported by our diversification of the export routes. Our AEP continues to come very strong into our operational performance, reducing the downtime in the Western asset. Our drilling performance also in OML40 really helps us to deliver a very strong production operational performance in the year. And our partner relationships, supply chain, security management, interface with our host communities continues to also drive higher performance in our operations. Also to highlight that our production unit OPEX went up by 1%, and this is essentially driven by higher crude handling charges. Overall, we continue to see and address the challenges that evacuation presents to our operations, especially in the eastern asset. But I'm also happy to say that our renewed effort working with the key stakeholders is yielding some good efforts and we see TMP Zone 6 being restated in the coming months. Going to the next slide. Our midstream business also continued to show some great resilience. Our gas revenue reached 12% of our underlying group revenue in 2023. And while our gas is sold into the domestic market, all our contracts are priced in USD and settled in Naira. And in line with our commitment to support the industry growth and foster economic growth in Nigeria, We recorded some improved performance in our gas supply out of urban, with 114 million scoffs of gas averaging for the whole year 2023. This is additional 2% increase year-on-year average, while our average gas price ended at $2.90 per thousand scoffs. This is also a 3% increase year-on-year. By end of last year, we reported the mechanical completion of our annual gas plant and all the four upstream wells been delivered as of quarter four, 2023. We continue to work with our government partners on the OB3 and Sporeline with an outlook for their completion by quarter one, 2024. Moving on to our accelerated gas plant in Adesaple, I would also like to report that three out of the four compressors are now commissioned, and the upgrade will increase our capacity to 90 million scopes per day export, and with a new export module for LPG, which will bring a new product into the market. So overall, we continue to see resilience in our midstream gas business while we continue to explore actively additional exploration and appraisal opportunities and third-party gas opportunities to ensure that we fully maximize installed capacities in our gas plants. Moving on to the next slide, just to spend the last moment and talk about our CAPEX program and CAPEX performance for 2024, I'm happy to say that We delivered on the 14-well program that we reported to you in a revised guidance as of quarter three last year. And our CAPEX outlook for 2024 is already underway. We have already commenced the drilling of our 2024 activity program, where we have a plan to deliver 13 wells in the course of the year. So this is where I would like to hand over to Emeka, our CFO, to give you further insight into the financial performance. Thank you very much. Thank you so much, Sam. I will now run you through our financial performance for full year 2023. On slide 13, we present the highlights of financial performance. We delivered a very strong financial results despite the prevailing oil price during the year falling by 18% with $3.4 per barrel. However, Arara gas price was 3% higher at $2.9 per scoff as we renegotiated commercial agreement with some of our off-takers while also signing on new customers during this period. Revenue performance was impressive and we caught the $1 billion mark in gross revenue, growing by 12% to $1.06 billion. were driven by a strong lifting program, which offset the weaknesses in oil prices, which I referred to earlier. This consequently drove higher profitability, as adjusted EBITDA grew by 7% to $4.8 million. Wide net income grew 18% to $124 million, further added by lower tax experts during the year. Car generation remained strong, In 2023, we had pre-tax cash flow from operations of $520 million and $445 million after tax, which more than funded our CAPES program, dividend, and debt repayment in the year. Our overall average position continues to improve, supported by ability to generate cash as net debt dropped by 60% to $306 million. For year 2023, total dividend, including special dividend is maintained at 15 cents per share. More details on dividend, I'll talk about in the following slides. I'll take you to the next slide. We recorded growth in both gas and oil revenues on the prior year. As you can see, the cost of sales rose with high operating costs following our investment in alternative evacuation routes. GAA has a number of one-off items, When you exclude these items, we'll be closer to $1.5 million, but we'll still work in 2024 to reduce that G&A on a unit basis. Now that the valuation is a majority between 2003, I will continue to be a focus in Nigeria. It drove a non-cash impact of $27.5 million during this period. Net finance costs improved as we paid off $22 million of debt principal in the year, given a profit before tax of $191 million, down 6% in 2022. Black chart for the year benefit from deferred tax credits, given an effective tax rate of 37%, and leading to a reported net income of $124 million, more than covering our card dividend during this period. I'll take you to slide 15. On slide 15, we're looking at our cash generation, which we started in 2020 with a cash balance of $404 million and ended with $450 million and 11% growth in cash. We generated $520 million in pre-tax operating cash flow. These were down 10% on prior period. After-tax and other operating cash flow items made capital appropriations of $445 million. also down about 10% on 2022 figures. But benefiting from the strong leaf is achieved across the year. Cash flow more than covered $184 million of carpets. We're currently generating about $281 million, 261 million that feed cash flow during this year. Product cash benefit came from the Obamacare disposal process which continued during the year. On financial activity, we paid about $99 million in cash dividend during this calendar year, while we also paid $22 million in debt principal repayment during this period on the outstanding Westport RBL facility. We also paid $69 million in interest on loans and borrowing. Due to the values of the NARA, which I referenced earlier, We recorded an FAS loss of $40 million in converting our NARA balances at a prevailing exchange rate. This movement led to a net increase in cash balance of $45 million during the year, bringing our year-end 2023 cash balance to $450 million. I'll take it to the next slide. Our balance sheet continued to strengthen through 2023, despite weak hourly prices. following a principal repayment on the facility, which I referenced earlier, broad debt included amortized interest, fell by 2% to $756 million. Part of the growth, the great cash balance of $450 million, and net debt position fell by 16% to $306 million at year end. This balance sheet strength is reflected in our key leverage ratios. Our net debt to EBITDA fell by 0.7 times in 2023, staying well above our day coverage of 33.0 times and our business plan benchmark of 2.0 times. Our debt-to-capital ratio was 22% at the end of 2023. We continue to implement a robust hedging program derived solely of deferred premium puts For the first half of 2024 already, we have had 3 million barrels at an average price of $60 per barrel. We'll continue to add more barrels for the many parts of 2024. On slide 17, I'm focusing on liquidity and debt profile. Expanding on the balance sheet, we extend adequate duration on our debt facilities with our $650 million euro bond maturity in 2026. We repaired the first $22 million of the West Point Loan I referenced earlier during the year in line with the parties' dramatization and leaving a balance of $18 million as at the end of the year, and a further $19.25 million will be repaired this March. We also have a fully undrawn average sale for $250 million We begin to amortize later on in 2024. If you combine the RCF and our cash balance, we have a valuable liquidity at the end of 2023 of $800 million. The primary plan usage of this strong position is to support our M&A ambition, principally in the near term, because this will be used for the MPAU acquisition. We manage our balance sheet with a conservative eye, reflected in our historic leverage chart, At the end, the balance sheet was at its strongest level in recent years. Also, though not shown here, at the cost of the year, aircrafts committed to payment of the shelter loan between them and Westport. The 2003 loan, they repaid about $28.4 million. I'll take you to the next slide. This slide focuses on the award to shelters. In 2022, we sustained our traditional awarding our shelter by returning more cash via dividends. We paid out a record net $9 million in dividend in 2023, a combination of the timing of the 2022 special dividend and increased quarter dividend, quarter dividend wrong rates in 2022, which will raise to 3 cents per quarter and the altogether about 12 cents of core dividend for 2023. Of note, in 2003 distribution, brought cumulative card dividend pay to shareholders to $5.5 million, which is about 1.7% above the fact that $5 million we raised during the IPO in 2014. I would like to add to the fact that this year we'll be celebrating our 10 years of listing of both the Nigerian and the London Stock Exchange. For the quarter of 2023, the board approved the dividend payment of $0.06 per share, we're going to call them up three cents per share, leading the total payouts, as mentioned earlier, to 15 cents per share for 2023. I'll now hand over to Roger to summarize and take you through our outlook for 2024.