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Seplat has no plan to sack workers despite COVID-19 challenges  – Dr Orjiako

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Seplat has no plan to sack workers despite COVID-19 challenges  - Dr Orjiako
Dr Orjiako

By Peter Egwuatu

The Chairman, Seplat Petroleum Development Company Plc, Dr. A.B.C. Orjiako in this interview with Vanguard shortly after its first virtual 7th Annual General Meeting, AGM speaks on why the Company won’t sack its workers despite the challenges of COVID-19.

He also narrated Company’s support to the Federal Government in closing the gap in power infrastructure by investing in gas, future acquisition plans, the need for cleaner energy ; the sustenance of improved shareholders’ value, financial performance among others.


Giving the challenges of coronavirus, COVID-19 pandemic and the volatility in crude oil prices, is there any plan by the Company to cut down its labour force?

This is not the first time that the oil industry was challenged. In 2016 and 2017, following the force majeure in Trans-forcado pipeline terminal, a lot of companies including Seplat were challenged and we did not have the ability to export our production efficiently.

Despite that difficulty, we did not downsize our labour force because we recognised all the effort by our staff in making sure that this company grows. In 2020, we have no plan to cut down our staff strength despite the challenges of COVID-19 and volatility in crude oil prices and we believe that we will put our complement of staff as part of our strategy to go through the survival mode as well as see growth even in the face of the difficulties.

What is your Company doing in the area of gas supply to boost electricity in the country?

One of the areas of our strategy is prioritising our gas. Gas before the pandemic, remained a continuous project in terms of commercialisation for a very long time. The reasons are not farfetched because we want to identify with the Federal Government in terms of closing the gap in power infrastructure and as a result of that we have invested heavily in gas. Today, Seplat is happy to say that we have provided 30 percent of gas in Nigeria which is still growing.

We have made sure that we support the government to make sure that the narrative of the diversification of the economy is built on a platform of growth in power infrastructure and this is where Seplat is doing a lot of work looking at statistics as regards off grid power supply in homes through gas, and diesel generators. Petrol is accounting as high as 20 gigawatts of power that tells you that the level of pollution in the environment is very high and if you play this against the gas supply that we are doing, it means that we will continue to contribute to cleaner energy form of power supply.

The other point is that gas is very lucrative and we are getting good rewards from the gas we have invested as evident in our revenues and we are going to see this continue to increase year-on-year as the volatilites in oil price continues to happen, you would see that our gas contribution will continue to increase mainly because there is no reduction in the price of gas due to increased demand for gas in the domestic market. So, in 2020, we will leverage on all of this and make sure that this year, we would not only survive the hardship but we will remain positive with our performance indicators.

What is your consolidation plan in the industry after the acquisition of Eland and do we expect to see further acquisition going forward?

We have not changed from our very long term plan as we are constantly looking at acquisition opportunities. We did a successful acquisition of an entity which was Eland at the end of last year and despite the collapse of oil price globally and hardship in the global economy, we remained focused on acquisitions.

When we see an acquisition, we said we are committed to price sensitive acquisition which means that we will not over pay, so, as the industry changes, it means that the prices that buyers are willing to pay will continue to change and we will change with this and continue to do acquisitions. The real reasons why we stretch our balance sheet is because it puts us in competitive situation or advantage because being that we are listed on the Nigerian Stock Exchange (NSE) and London Stock Exchange (LSE) means that we have access to global investible capital which is why you would see that our cost of borrowing is one of the lowest among peers, our access to investible capital in terms of equity is very strong and so at the back of all of this, there is strong and robust balance sheet, availability of capital and strong competitive advantage to play in the consolidation market as well as acquisitions.

The Company’s share price has not been encouraging in view of the potentials and impressive performance of its financials?

Our shares have not been doing quite well as they have been low as a result of the pandemic which is a global problem too. Capital markets all over the world are actually depressed and we are hoping that global economies recover, the capital market would recover and oil price will also recover which would impact massively on our share price.

What is the strategy put in place to sustain positive return to shareholders given the COVID-19 challenges?

From inception, we made it clear that our shareholders will continue to reap two major things. One is dividend and the other is growth in their investments. We have kept faith in the payment of dividend and have continued to do that and we have no plans to moving away from this. 2020 will be a challenging year but we will ensure we will do all we can to ensure shareholders’ value are sustained.

Briefly talk on your 2019 financial performance. Did it meet your target?

The achievements of Seplat were very many and we remained profitable and we have continued to be cash generative which resulted into us being a strong revenue earner. We recorded a profit after tax (PAT) of $277million which is quite remarkable and at the back of that, we have maintained healthy cash balances in the bank amounting to $337 million and obviously we maintained payment of dividend which is a very good return on investment.

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We have continued to pay tax levies as well as royalties to the FG and maintained robust Corporate Social Responsibility, CSR initiatives in areas where we operate and have continued to produce oil by maintaining low cost production of about $6 per barrel. Obviously there are areas of improvement and I believe that Seplat has an important role to play throughout the energy transition that is set to occur in the years and decades ahead, not least through the impact we can have by scaling up our domestic gas supply business and displacing imported diesel fuels that are being burned for power generation and helping Nigeria benefit from the social and economic multiplier effects that reliable and affordable power availability can bring.

 What funding strategy is put in place to ensure that the Company is not debt burden?  

Our funding strategy is such that the Company would remain minimally leveraged only at the appropriate level and we are not going to see this Company being excessively leveraged and the next point of call is that we will make sure that the cost of funding remains very manageable. One of the reasons we took a corporate bond is because of our strategy as it relates to our financing strategy and we will make sure this remains very solid.

We will also re-invest our revenues so that we can take loans when it is absolutely necessary to do so. It is noticeable that even though we had financial institutions having confidence in us and giving us loan facilities, we never took these facilities until it was necessary which we did when we acquired Eland at the close of last year and today our net cash remains positive.

What strategies are taken to arrest the impact of COVID-19?

Strategies taken to arrest the impact of COVID-19 on business

For a Company that has had profit after tax (PAT) of $277 million, that is quite significant and that means that 2020 challenges is something we will keep in mind and as I did say, we have prioritized four main areas to arrest the situation already happening this year. Firstly, we are looking to take care of our staff and stakeholders.

We had to have a quarantine programme for all staffs who travelled outside Nigeria to stay isolated for 14 days before they came to work. This predicated what was happening at the national level, even before the FG declared closure of all offices both in Lagos and Abuja, we had already taken a decision to close our offices and reduce the number of staffs we had at the fields to make sure that adequate social distancing was maintained.

What are the factors that could shape the oil industry in 2020?

Firstly, cost sensitivity will come into play as any company that would like to survive in the oil and gas industry have to be a low cost producer of oil. This is because the oil has become a marginal business and so price volatility will continue and so, only the companies that are able to continue to produce at low cost can survive and make it.

Secondly, the world as a whole is changing and this means that the narrative of cleaner energy is real which is why we are making a lot of emphasis on our gas business. Over and above that, we also keep very close eyes on everything that will make us reduce carbon footprints and so we are keeping in view and we will possibly be launching renewable energy programmes and launched robust mainstream business to make sure that we continue to reduce the level of carbon emission in the environment.

We would also make sure that going forward, we will contribute our quota in making sure that the entire populace is well aligned with healthy environment, the social impact on our business and making sure the part of business as regards the government remains strong.


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