Managing Director/Chief Executive Officer, Seplat  Petroleum Development Company Plc, Mr. Austin Ojunekwu Avuru, in this interview with Peter Egwuatu in his office shortly after the company was elevated to the Premium Board segment of the Nigerian Stock Exchange, NSE, in Lagos, spoke on challenges in the oil and gas sector, sales of oil in international market, performance of the company, corporate governance, sustainability report, capital market activities, among others.

Excerpts:

HOW has the nation’s macroeconomic challenges impacted on your business and how have you been able to sustain operations?

The biggest challenge to our operations is whatever impact the Niger-Delta crisis could have on our production and evacuation of our products. You saw within 16 months of minimal production when the Trans-Forcados was down and how it impacted on us. That is our highest risk. We are hedging against that by having multiple avenues or routes for evacuation of our products. We are working with Neighbours and other stakeholders to put the escravos pipeline in place, to complete and commission it and we still have option in Warri Refinery if we are pushed to the wall.

Mr . Austin Avuru, Seplat MD.

Here we consciously established three options of evacuating our products. In the East of the country,  we are trying to develop our OM 53 from the scratch. We would develop this along with two other options of evacuation. We try to build redundancy in evacuation to hedge against that risk.

Currently where do you sell your crude?

In Nigeria, once your crude gets to the terminal, it is sold already. We already have five years long-term marketing agreement with international traders, selling the crude has never been an issue. No producer will tell you he has not sold his crude. The marketers can play all the games and keep the ship somewhere hoping to get extra 20 cents or so. These are the marketers’ game, every producer sells its crude right there at the terminal from the day of bill of lading to when it is sold.

Three factors qualified your company to be listed on the Premium Board of the Nigerian Stock Exchange. These are liquidity around the stock, market capitalisation and corporate governance. How is your company going to sustain the three factors?

Starting with liquidity, you have to have free float of shares of over 20 per cent, but for us as  a company, our free float is closer to 50 per cent  than 20 per cent already and with a company like this, free float of shares can only increase, so you either tap from the market or you do a merger or whatever you can do in the future to dilute the shareholding of the existing shareholders and increase the free float.

So, we are consciously working on that to increase the liquidity on the stock. For market capitalisation other than liquidity, two critical elements are size and governance and size is about market capitalisation. So if we continue to do the right things and for us internally, we believe that if you consciously and as a matter of culture continue to do the right things, even without prompting, ultimately, you will see the benefit and the benefit will come in value creation and this will translate to increased value of the company. So all things being equal, except for things outside our control, we expect our market capitalisation to also continuously increase and not go lower than where we are now.

When we applied for listing on the Premium Board, our market capitalisation was just over N200 billion, so you just saw during the introduction of our company on the floor of the Exchange that our market capitalisation was N396 billion, and as at the end of trading on that day of our listing, it went up to N404 billion and so it doubles the minimum requirement for qualifying to be listed on the Premium Board. For us, the most critical is governance, we have spent seven and half years building a company we believe in.

If you make the best practice of corporate governance as a culture, you will ultimately see the result; that is what you are seeing. We are only four years old on the Exchange and we are already in the Premium Board. In fact, we are seven and half years as a company in operations and eight years as a registered company.

We started as a company August 1, 2010. We are less than eight years old and we have come this far; this is not by chance, it has been a deliberate effort by the Board and Management team and how to create this governance culture. So what you saw today (during listing) is an attestation of the result of what we have been doing in the past seven and half years.

What does listing on the Premium Board of the NSE mean for the company and the global market?

What Premium Board listing means is that the company stands out as a long-term entity that can be trusted by investors as you were told by the NSE. The Stock Exchange itself is a platform upon which investors around the world build the trust that they (NSE) present as the image of the company showing it is true and fair. So, first, the Stock Exchange has to be trusted by investors.

So  if the Stock Exchange says that this company is listed on the Premium Board, it means that the Exchange is sending a message across the world and to investors that indeed this is a company that can be trusted and has size, liquidity and most importantly that has world class governance and that is very critical message to send out to investors on our behalf by an Exchange where we are trading our shares.