The Chief Executive Officer, Seplat Petroleum Development Company, Mr. Augustine Avuru, in this interview with FRANCIS KADIRI, says companies can recover from major financial losses if they embrace corporate governance, disclosing that he organization bounced back to profitability after losing N166bn. Excerpts
Attracting investment is a tough task in Nigeria, how would you harness the fund needed to meet your growth targets?
It takes a lot of discipline and effort to be where we are to be in the Premium Board. People talk about reporting, transparency, and discipline; it looks that simple, you have to do the right things to be proud to discharge what you are doing. If you are cutting corners even before disclosure, you won’t get there. When we say we are proud of what has happened; this is an attestation of what we really believe in, that we needed to belong to this class of companies. For us, just keeping doing the right things as consistently as you can has taken us thus far. To us, we think we have put the building blocks in place to be able to deliver sustainable performance or result in the future.
We already have a five – year 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
How are you grappling with the challenges of doing business in Nigeria?
Our strategy emphasises on sustainable growth and delivery on our promises on sustainable basis. When we release our Q1 result and year on year, we would like to meet the promises we made to our investors and deliver value in a sustainable manner. We have a strong strategic department and when you do all these; that will reflect on your share price and market capitalisation. We have seen the growth of our market capitalisation in boosting the market.
Seplat recently got enlisted on the Nigerian Stock Exchange. What expectation does this bring to the company?
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 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 is true and fair. So, first, the Stock Exchange has to be trusted by investors. So, if the Stock Exchange says a 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, with size, liquidity and most importantly, 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.
Could you discuss the growth of the company and your short term and long term investment targets?
As a growth-oriented company, we took over asset and we consciously worked the asset and more than triple production in about four years, from 18,000 barrels per day, bpd to 60,000 bpd. Prices were good until between mid-2015 and 2017.
Two things happened to us simultaneously, prices dropped and production crashed due to crisis outside our control and Trans-Escravos led the dip in our production performance, revenue generation, productivity and profitability. In fact, in 2016 full year, we had a loss of about N166 billion.
We only worked out through 2017, to turnaround the position to profitability. Let’s return to corporate governance again. It is through this same corporate governance practice upon which we operate that we were able to navigate the company from this two years of treacherous condition outside our control. I hope you are aware that we raised $350 million bond just last month and $300 million revolver credit. So, our overall average cost of debt has gone down by 300 per cent from our creditors. Our balance sheet is completely restructured.
As a company that has been restored to profitability, what should investors expect?
Our intention is to reinstate dividend as a matter of policy. We suspended dividend in 2016 because of crises beyond our control, which means, any year we fail to pay dividend , it was as a result of force majeure. But in a normal course of business, we will normally be able to pay a certain level of
dividend.
Analysts have set price target of 40 per cent increase in your share price. Are there things that people are not seeing that you are
doing regarding your future?
I think they are seeing what you are seeing in our company. They have seen our past performance and how we have navigated the most difficult situation in Niger Delta crisis. Many of our competitors of our size are not listed. So, the reason why you cannot measure how well we did in navigating ourselves from that terrible situation is because our competitors of the same size are not listed to be able to
compare us.
If they were listed , you can be able to compare apple for apple since it is not easy to turn around within 12 months with the kind of situation we were. So, I think when they see our past performance like that and project that there might be no back breaking situation like we had in 2016; so in future they will expect consistent growth and if you plot on any growth trajectory from where we are both in production and even if you held the price constant at $60 per barrel you will see substantial cash flow and profitability. But for us, we focus on delivery on objectivity and let the market determines what our value is.
Where do you market crude?
In Nigeria, once your crude gets to the terminal, it is sold already. We already have a five -year 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.
