2020 Annual Report for SEPLAT Plc

Seplat Petroleum Development Company Plc
Annual Report and Accounts 2020

POWERING
NIGERIA’S
ENERGY
TRANSITION

Resilience and strength 10
Seplat delivered a robust performance in 2020, within Coping with Covid: How Seplat responded
the guidance we set, despite the unprecedented to the challenges of a global pandemic
shocks of the Covid-19 pandemic that tragically and maintained business continuity while
claimed more than a million lives. Never before have helping our host communities.
energy companies experienced a market in which
demand and prices fell so quickly, nor have they
faced such a stark realisation that the market may
never be the same again. Our continued resilience,
proven in crises past, is possible because of our
prudent approach to financial management, our
careful management of risk and our considered
approach to capital allocation. Despite the crises
of 2020, we were able to increase investment, repay
debt and honour our commitment to shareholders
in the form of a $0.10 dividend for the year.

Highlights 12 New CEO Roger Brown
talks about taking over in
Group production 51,183boepd a pandemic and what we
within guidance 8,855bopd can expect from Seplat in
101MMscfd the future.
Liquids contribution $530.5m
from Eland $8.90 Seplat is committed to
$80.2m being a best practice
Gas for Nigeria's $150.1m operator and a responsible
domestic market $258.7m and accountable corporate
$440m citizen as demonstrated
Revenues impacted in the approach to
by Covid-19 our operations.

Unit cost per boe 58
including Eland assets

Loss before tax, after
non-cash impairments

Capital investment
increased

Cash at bank after $100m
voluntary loan repayment

Net debt steady

Dividend per share $0.10
maintained

42 Find out more about Strategic report 2 Strategic Report   01—77
our four point oil value
creation strategy. At a glance 2
Chairman’s statement 4
Building a resilient business 8
Coping with Covid 10
Chief Executive Officer’s interview 12
Strategy 16
Value creation 18
Key performance indicators 20
Additional performance metrics 22
Risk management 24
Principal risks and uncertainties 30
Operational overview 37
Value creation strategy 42
Financial review 52
Corporate social responsibility 58

50 Governance 78 Governance Report   78—144

How we are diversifying Chairman’s overview 80
our production base and Board of Directors 82
exploring or creating new Corporate governance report 87
export routes over which Board Committee reports 96
we have more control. Directors’ remuneration report 113
Report of the Directors 137
Statement of Directors’ responsibilities 142
Audit Committee’s report 143
Statement of Corporate Responsibility 144

Financial statements 145 145 Our financial statements and Financial Statements   145—308
related notes and reports.
Independent auditors’ report 146
Consolidated statement of profit Additional information 294
or loss and other comprehensive income 149
Consolidated statement of financial position 151 Payments to governments (unaudited) 295
Consolidated statement of changes in equity 152 Notice of eighth Annual General Meeting 296
Consolidated statement of cash flows 154 Unclaimed dividend list 298
Notes to the consolidated financial statements 155 General information 306
Separate statement of profit or loss Glossary of terms 307
and other comprehensive income 238
Separate statement of financial position 239
Separate statement of changes in equity 240
Separate statement of cash flows 242
Notes to the separate financial statements 243

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 1

Seplat at a glance

OML 4 Onitsha

OML 40 OML 41 Oben
Polobo Sibiri Abiala Sapele Okporhuru
Okwefe
Opuama Gbetiokun Mosogar

Ubaleme Amukpe Orogho
Ovhor
OML 38
Okoporo

Umuseti (Pillar)

Escravos Jisike

Warri OPL 283 Igbuku (Pillar) OML 53

Ohaji
South Owerri

Iheoma

Forcados Odinma
Emeabiam

Alaoma

Omerelu Owu
Ubima

Port Harcourt

OML 55 Krakama

Soku Dama

Nembe

Robert Kiri Akaso
Ke Bonny
Belema
Inda Bonny
Brass

NIGERIA’S
ENERGY LEADER

Seplat is Nigeria’s leading indigenous, Seplat’s operating portfolio comprises seven
independent oil and gas producer, with oil and gas blocks in the prolific Niger Delta
a working interest production of nearly region of Nigeria, which we operate with
34,000 barrels a day of liquids for export partners including the Nigerian Government
and 101MMscfd of processed natural and other oil producers. We have a revenue
gas used for domestic power generation. interest in OML 55. We have a 465MMscfd
gas processing plant at Oben, in OML4,
2 Annual Report and Accounts 2020 we are upgrading our Sapele Gas Plant in
OML 41 to 75MMscfd, and are building the
300MMscfd ANOH Gas Processing Plant
in OML53.

Read more
Page 37

Seplat Petroleum Development Company Plc

Average daily volume Strategic Report   01—77

51,183boepd

Liquids exported in 2020

12.3 million barrels

Gas supplied to Nigeria’s energy sector PROUDLY NIGERIAN
HOW WE BENEFIT OUR COUNTRY
36.9 billion cubic feet
Seplat’s oil generated foreign currency income of $380 million
for Nigeria in 2020. On this, we paid $72.7 million royalties and Governance Report   78—144
a further $107 million in taxes and levies. These contributions
support Nigeria’s economy, including its healthcare and
educational systems and its creation of essential infrastructure.

At times, our gas powered up to 30% of Nigeria’s domestic grid
in 2020 and by increasing gas production we can help to reduce
Nigeria’s dependence on small-scale, costly and polluting
generators. In addition, we spent $14.7 million supporting our
host communities, focusing on jobs and business opportunities,
security, medical and other assistance during the pandemic.

R ead more
Page 295

33,714 241MMbbl
bopd
101
MMscfd 1,501Bscf

Gas/ Production/2P reserves Oil / Production/2P reserves Seplat is the Financial Statements   145—308
investment partner
Seplat’s gas business consists The ANOH plant is considered Seplat's oil portfolio was of choice for Nigeria’s
of gas fields and associated one of Nigeria’s most important strengthened by the acquisition transition to cleaner
infrastructure in OML 4, strategic energy projects and of Eland Oil and Gas Ltd, in energy production.
which supports our Oben Gas will help Nigeria’s transition December 2019, along with its
Processing Plant, and OML 53, away from small-scale domestic interests in OML 40 and the
where our independent joint and business generation. It is Ubima field. Together they
venture ANOH Gas Processing expected to produce first gas produced 26% of Group liquids
Company is building a 300MMscfd in 2022. in 2020.
gas processing plant.

Read more R ead more 3
Page 48 Page 44

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020

Chairman’s statement

STRENGTH Our ANOH Gas Processing
THROUGH Plant will be a major step
EXPERIENCE forwards in Nigeria’s drive
to reduce carbon emissions,
Ambrosie Bryant Chukwueloka Orjiako (‘A.B.C.’) replacing potentially millions
Non-Executive Chairman of small-scale, inefficient,
and polluting generators with
We will be seeking your approval in cleaner utility-scale power
this AGM to change our name from generation fired by Nigerian
Seplat Petroleum Development natural gas.
Company Plc to Seplat Energy Plc.
I believe this move reflects our Dear Shareholders
intention to be at the forefront of Our tenth year will be remembered as an
Nigeria’s energy transition in the extraordinary time, one full of challenge and
next decade of our journey. change, not just for Seplat but for the entire
global economy. The Covid-19 pandemic
4 Annual Report and Accounts 2020 spread quickly across the world, forcing
entire societies into lockdown, the new
reality of “working from home” and serious
economic downturns that naturally
impacted demand for oil.

But thanks to our prudent approach to
managing our Company, I am pleased to
report that Seplat has emerged from this
crisis in robust health and prepared for an
exciting future under its new leadership.

Economic challenges of the
Covid-19 pandemic
The pandemic that emerged in the first
quarter of the year was an unprecedented
shock to the global economy, with
consequent impact on the demand for
oil and gas.

Nigeria’s economy contracted by just 1.9%
in 2020, proving more resilient than many
other countries, such as the UK, which
experienced a 10% fall as a result of the
pandemic. Global GDP, according to IMF
estimates, fell by 3.5%, as did the economy
of the United States.

The economic shock was reflected in lower
demand for oil. The International Energy
Agency, in its December 2020 Oil Market
Report, predicted that daily demand would
have fallen by 8.8MMbbl/day in 2020, to
91.2MMbbl/day. Having started the year at
US66/bbl, the price of Brent slid sharply as
the scale of the pandemic and its necessary
responses became clear.

B uilding a resilient business
Page 8

C oping with Covid
Page 10

Seplat Petroleum Development Company Plc

On 4 April, as a result of the Saudi-Russia In November we announced the retirements Strategic Report   01—77
supply war, it reached a low of almost $19 of Michael Alexander, Senior Independent
before recovering to exit the year at $52/bbl, Since we raised $535 million Non-Executive Director, and Mrs. Ifueko M. Governance Report   78—144
rising in the last few weeks in response to at our initial public offering in Omoigui Okauru, Non-Executive Director, both
positive news about vaccines. Overall, Brent May 2014, we have returned retiring on 31 January 2021. Mr. Basil Omiyi Financial Statements   145—308
averaged $43 across 2020, compared to $344 million to shareholders assumed the role of Senior Independent
$64 in 2019. in the form of dividends. Non-Executive Director on the same day.

The challenges were reflected in the In August we strengthened the I would like to thank all our Directors for the
performance of our shares, with the UK line independence of our Board with the wisdom and guidance they have shared with
opening the year at 127p, falling to 40p as the appointments of M. Xavier Rolet, KBE and us over what has been a very challenging
pandemic took hold, before recovering to Ms. Arunma Oteh, OON, both of whom bring year and look forward to their continued
65p at the end of the year. The Nigerian line significant experience of international counsel in the future.
opened at ₦658, reached a low of ₦282 and business and corporate governance.
ended 2020 at ₦402. I am pleased to say that M. Rolet was CEO of the London Stock Business reorganisation and imperatives
both lines have performed well so far Exchange for ten years, during which time Having acquired Eland Oil & Gas late in 2019,
in 2021. its market value rose from £800 million to I am pleased to report that it is now fully
£15 billion. He is currently the Chairman, integrated into Seplat. Its headquarters
Board and management changes Board of Directors at Phosagro PJSC, a in Aberdeen have become our Centre for
At the end of July, as we celebrated the tenth member of the Board of Directors of the Excellence, responsible for technical
anniversary of our founding, our Co-founder, Saudi Stock Exchange Tadawul as an training and development across the Group,
Austin Avuru, stepped down as Chief appointee of the Public Investment Fund, subsurface expertise, and the appraisal
Executive Officer. He guided Seplat and an Expert Adviser to the Shanghai of new energy technologies. Supporting
management from its inception, through Institute of Finance for the Real Economy. functions such as IT and HR were integrated,
many major milestones and his impact on as was the management of community
our growth and success of this Company Ms. Oteh is a seasoned business executive relations. In addition, we have begun sharing
cannot be underestimated. It is a tribute to with many years’ experience at the highest expertise and best practices with Elcrest,
his management that we are in such a strong levels at major multilateral agencies, global which is a joint venture with Starcrest, and
position today and we are grateful for the financial institutions and in Government. which jointly operates OML 40 with NPDC.
insights he will continue to share with us She has been an academic scholar at the
as a Non-Executive Director on our Board. University of Oxford since January 2019 and In October, our new CEO Roger Brown
a member of the London Stock Exchange announced a streamlining of the organisation
Austin was succeeded as Chief Executive Africa Advisory Group since January 2020. to improve efficiency at Seplat. Notable
Officer by the Chief Financial Officer Roger Ms. Oteh served as Treasurer and Vice changes to the organisational structure
Brown, who has already brought a fresh President of the World Bank from 2015 to included Asset Managers reporting directly
approach to leadership, announcing in 2018 and was the Director General of the to the CEO, the creation of a Corporate
October a streamlining of the organisation Securities and Exchange Commission Services Department to include HR, IT and
to improve efficiency, as I will detail later. Nigeria from 2010 to 2015. Business Services, and the creation of a
Roger joined Seplat in 2013 as the Chief Research & Sustainability function within
Financial Officer and played a key role in the External Affairs Department.
the successful dual listing of the Company
in both the London and Nigeria Stock In addition, Roger created a New Energy unit,
Exchanges in 2014. Also, since joining the under the leadership of Yetunde Taiwo,
Company, he has played significant roles tasked with managing our gas business and
in various asset acquisitions by Seplat. exploring ways that Seplat can develop a
He brings to the CEO role a deep knowledge new renewables business for longer-term
of the Company as the erstwhile CFO and creation of value.
as a member of the Board. He has strong
financial, commercial and merger and A major force in our gas strategy will be
acquisition (M&A) experience as well as the ANOH Gas Processing Plant that we
proven people skills that will be an asset are developing in a joint venture with the
as the Company embarks on implementing Nigerian National Gas Company. I am
our transformation strategy. pleased to report that we completed equity
funding of the project at the end of 2020 and
With Roger stepping up from the role of CFO, in February 2021, we announced that our
we announced the appointment of Emeka AGPC joint venture has successfully raised
Onwuka, OON, as our new Chief Financial $260 million of debt to complete the project
Officer and Executive Director. He assumed funding. The fact that a consortium of
the role in August. A former tax partner at Nigerian and international banks were
Anderson Tax Nigeria, Emeka brings more prepared to commit up to $450 million was
than 30 years’ experience in financial a strong sign of confidence in ANOH, which
services within Sub-Saharan Africa, is one of the most important strategic
including roles as Group Managing Director/ infrastructure projects in the country.
CEO of Diamond Bank Plc. He has held
various Board positions as Chairman, FMDQ
Securities Exchange Limited; Director, FMDQ
Holdings Limited; Director, Ecobank Nigeria
Limited; and Director, Bharti Airtel Nigeria.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 5

Chairman’s statement |continued

Although its completion has experienced We drilled six oil wells and three gas wells However, our cash position remained strong
some inevitable delays because of Covid-19 during the year, choosing to focus on and the $318 million of cash we generated
restrictions on imports, the ANOH project higher-margin oil wells in the first six months from operations was significantly more
will significantly enhance Seplat’s position of 2020 and the development of gas fields in than the $150 million we invested for future
as Nigeria’s leading supplier of processed the second half of the year. growth. In fact, our capital expenditure in
gas for the domestic energy market. this difficult year was higher than the
As I have mentioned, a tragic accident at $125 million we spent in 2019, which
Although driving Nigeria’s transition to gas OML 40, operated by NPDC and Elcrest, demonstrates our commitment to growth.
remains our priority, it is essential that we sadly claimed the lives of seven third-party Furthermore, we voluntarily repaid $100
ourselves transition for a long-term future workers working on a maintenance barge. million of our Revolving Credit Facility and
in which renewables are an important part Our thoughts and prayers remain with their ended the year with $225 million in cash
of Nigeria’s energy mix. families and friends. and net debt of $440 million.

Performance in 2020 Three investigations were launched, led by Dividend commitment maintained
Our operational and financial performance the DPR, a team from NPDC/Elcrest and an Our financial performance enabled us
reflects the very challenging conditions I independent investigator. The investigations to maintain our commitment to paying
have described above. Our average working identified failures in the Permit to Work dividends. While other companies were
interest production was 51,183boepd, system and 18 safety recommendations cutting back or cancelling payments for the
including 33,714bopd of liquids and were subsequently implemented to ensure 2019 financial year, because of prevailing
101MMscfd gas (17,469boepd). Of this, that such a tragic event can never happen uncertainties, we honoured our commitment
our Eland assets contributed 8,855bopd, again. Furthermore, we redoubled our and paid a final dividend of US$0.05, for a
or 26% of total liquid volumes. efforts to drive a strong safety culture total dividend of US$0.10 for 2019.
throughout the organisation.
The performance of our oil business was In October 2020, we announced an interim
affected by falling demand, the quotas Our financial performance was as good as dividend of US$0.05 and the Board has since
imposed upon Nigeria by OPEC+, problems could be achieved in such a difficult year. approved an additional top-up of US$0.05,
with the Trans Forcados Pipeline, a Revenues of $530 million reflected the maintaining our US$0.10 dividend for the
suspension of production resulting from lower demand and pricing environment 2020 financial year.
an accident at OML 40 in July and a further and non-cash impairment provisions of
suspension following problems with a $153 million, obliged by revaluation of assets Since we raised $535 million at our initial
storage vessel at the same site. Our gas at lower oil prices, reversed an operating public offering in May 2014, we have
business was affected by turnaround profit of $121 million to a reported loss of returned $344 million to shareholders
maintenance at our Oben gas plant as well $32 million. in the form of dividends.
as gas wells ceasing production earlier than
anticipated, and of course the impact of Towards world-class governance
Covid-19 related lockdowns on demand The strengthening of our Board that I have
in the Nigerian economy. already described is part of our ongoing
desire to achieve world-class governance of
our Company. Six of our 13-member Board
are independent and we continue to work
towards increasing diversity.

In addition, as we announced in March, we
have taken the bold decision to eliminate all
Related-Party Transactions – a move that
exceeds the requirements of the UK Code
of Corporate Governance. I know that
shareholders will applaud this move as
a sign of our commitment to the highest
standards of governance.

Sustainability initiatives
It is the responsibility of the Board to plan for
the long-term sustainability of our Company.
We have conducted scenario analyses on our
assets under different climate change and
demand scenarios, as well as looking
towards a future in which Seplat is much
more involved in promoting low carbon
environment in our operations. Such a
transition will involve significant new
innovations, technology, skills and
relationships, compared to our existing
expertise of subsurface exploration, drilling
and hydrocarbon processing, but we are
determined to be a major part of Nigeria’s
future energy mix and help drive the country
towards more sustainable energy generation.

6 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

At a national level, Seplat was one of Strategic Report   01—77
33 organisations that donated a combined
Thanks to the cost-cutting Selpat’s Covid-19 total of US$30 million to support the Federal Governance Report   78—144
initiatives we implemented in donations for Imo. Government’s efforts at curbing the spread
2020, as well as our prudent of the pandemic. In addition, Seplat provided
financial management, we are Our ANOH Gas Processing Plant will be food assistance, medical and protective
positioned very strongly to a major step forwards in Nigeria’s drive equipment worth ₦50 million to help local
take advantage of the global to reduce carbon emissions, replacing State authorities. We remain committed to
recovery we are beginning potentially millions of small-scale, the wellbeing of our host communities and
to see. inefficient, and polluting generators with will continue to provide health and education
cleaner utility-scale power generation programmes, as well as opportunities for
fired by Nigerian natural gas. training and employment in the future. Financial Statements   145—308

We commissioned an environmental Outlook for 2021
consultancy, Critical Resource, to conduct Having proved our resilience again, and in
a gap analysis on our efforts in the field of the most challenging and unprecedented
sustainability, focusing on the environmental, environment we have ever experienced,
social and governance aspects of our I am confident that Seplat will build on its
business. Their extensive report identified strong foundations to become a larger,
numerous areas that we are committed to more diverse, and more sustainable
improving to global standards and we have energy company in the years to come. Given
begun programmes across the Company to Nigeria’s need to improve access to energy
ensure we embed sustainability thinking and the potential for significant market
across the organisation. growth, I hope you will agree that we are
very well positioned to consolidate and
In addition, we intend to increase our strengthen Nigeria’s energy champion.
disclosure of environmental, social and
governance (ESG) data, by adopting the As part of this transition, we will be seeking
recommendations of the Task Force on your approval in this AGM to change our
Climate-related Financial Disclosures and name from Seplat Petroleum Development
will commit to reporting CO2 emission data Company to Seplat Energy Plc. I believe
to the Carbon Disclosure Project in the this move reflects our intention to be at the
near future. forefront of Nigeria’s energy transition in the
next decade of our journey. We will continue
Helping our communities to build value for you, our shareholders,
Part of our ESG commitment is already either through organic growth or through
apparent in the long-term projects we carefully selected acquisitions that will
implement in our host communities. As the deliver the scale or expertise we will need
Covid-19 pandemic struck Nigeria, it was in the coming years.
our duty to help our host communities
and States in whatever ways we could. As the pandemic and its impacts recede,
demand for oil and gas is already recovering
and, thanks to the cost-cutting initiatives we
implemented in 2020, as well as our prudent
financial management, we are positioned
very strongly to take advantage of the global
recovery we are beginning to see.

I extend my heartfelt thanks to all our staff,
who have performed so well under the
difficult circumstances of the pandemic
and the necessity of working from home.

I also thank you, our shareholders, for your
patience and trust in our Company in what
was a very difficult time for your investments
and assure you that we will do everything in
our power to justify your faith.

A.B.C. Orjiako
Non-Executive Chairman

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 7

Building a resilient business

A HISTORY OF
RESILIENCE

Financial discipline is the key Financial discipline and
Since our foundation, most of our revenues a robust business model
have come from oil, a product whose price is have protected Seplat
beyond our control. Given this uncertainty, through difficult times
we have always operated with a strong
philosophy of financial discipline, believing Oil price crisis (Jul 14 – Jan 16)
that ‘cash is king’ and we must generate as
much of it as we can. The protracted oil price crisis that ran from mid-2014 to
We focus on prudent investment to drive the early 2016 focused our attention on the need to operate
highest possible returns, reducing the cost at the lowest possible cost and hedge against future
of our operations and ensuring the maximum price volatility. As can be seen in the charts, we controlled
possible cash flow from our products, to our cash position by significantly paring back capital
maintain a manageable level of net debt. expenditure, focusing only on projects that would generate
This provides a strong cash buffer that, in near-term, higher-margin returns. At the same time, our
normal times, enables us to invest, repay gas revenues increased, diversifying our risk away from oil
debt and return money to shareholders in price volatility.
the form of dividends.
In addition, we have increasingly diversified Trans Forcados (Feb 16 – Jun 17)
from oil into gas, which provides long-term, force majeure
more stable cash flows compared to the
volatility of oil. Gas provides great potential Repeated problems with the Trans Forcados infrastructure
for growth, given Nigeria’s need to replace have driven us to look at alternative routes to get our oil
small-scale diesel generation with utility- to export centres on the coast. Although significantly
scale power stations powered by much delayed, the Amuke-Escravos Pipeline will offer an
cleaner nature gas, which our country has alternative and more secure underground route to
in abundance. the coast that will immediately increase revenues
This philosophy saw us through the by reducing reconciliation losses and losses from
protracted crises of the oil price collapse maintenance downtime or pipeline vandalism.
and the Trans Forcados force majeure that
followed soon after. It is why, in 2020, we Covid-19 (Mar 20 – )
were able to maintain investment for growth, pandemic
repay US$100m of debt and honour our
commitment to shareholders with a dividend The pandemic was and still is an existential crisis for the
of US$0.10 per share. oil industry, resulting in lower demand and lower prices
that may persist for some years as economies and global
8 travel recover from its effects. Our business continuity
plan, strong cash balance, low cost base, astute risk
management and hedging strategy helped us pull through.
Furthermore, we remain committed to increasing our gas
business to reduce our level of exposure to oil.

Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Focused cash $1,000 Strategic Report   01—77
management $800
strategy $600
$400
$200 $310 $588 $900 $664 $570 $446 $789 $698
$0 $169 $285 $326 $160 $437 $585 $333 $259

$321 $152 $52 Gross Debt ($m) Cash ($m)

Flexibility $350
with capital $300
investment ($m) $250
$200
$150 $150 Governance Report   78—144
$100
$50 $120 $125
$0
$88

$33

Increasing gas 50,000 49,867 46,498 51,183
volumes for 24,198 22,563 17,469
growing market 43,372
needs (boepd) 14,369 25,669
29,003
40,000 36,923
13% 19,070
30,000 28,341 30,823 $77.0 25,877 23,935 33,714
20,000 4,867 6,571 $493.5 15,786 17,853
10,000 24,252 10,091
23,474
4% 41%
0 $27.4 $105.6
$747.6 $148.8
Oil Gas

Gas diversification $1,000 2% Financial Statements   145—308
reduces revenue $800 $18.1
exposure to oil
price ($m)

$600 $862.1 28% 21% 29% 21%
$400 $124.0 $155.6 $202.4 $112.5

$318.2 $590.5 $495.1 $417.9

$200

$0

Oil Gas

2013 2014 2015 2016 2017 2018 2019 2020

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 9

Coping with Covid

A ROBUST BUSINESS
RESPONSE TO THE
PANDEMIC

Seplat has delivered a robust
performance despite the
unprecedented crises we have
experienced since March.

Nigeria’s response Brent Oil price ($)
to Covid-19 60

Thanks to its experience in dealing with 55
previous challenges such as Ebola, the
direct impact of Covid-19 has been far 50
less severe in Nigeria than in many other
countries. In the year since March 2020 45
the Nigeria Centre for Disease Control has
recorded approximately 160,000 cases and 40
nearly 2,100 deaths. Now, in 2021, a year
after the outbreak and with multiple vaccine 35
options available, the threat is beginning
to recede and life is returning to normal. 30
The question for all of us is whether that
pre-pandemic ‘normal’ was inherently 25
unsustainable and what lessons should
be learned from this great shock the world 20
has  experienced.
15 FEB ‘20 MAR ‘20 APR ‘20 MAY ‘20 JUN ‘20 JUL ‘20 AUG ‘20 SEP ‘20 OCT ‘20 NOV ‘20 DEC ‘20

JAN ‘20

Oil market impact

The price of our main product suffered greatly in the
pandemic as economic activity fell and local and
international travel collapsed. As demand for oil fell,
the crisis was exacerbated by a pricing and supply
dispute between Saudi Arabia and Russia that shocked
the market so badly it responded with negative pricing
in April on fears that storage capacity would soon run
out. As the year progressed, however, the price of oil
recovered on optimistic news about vaccines. In
response to the market crisis and OPEC+ decisions
on supply, Seplat abided by quotas and purposefully
hedged to protect our cash flows from downside shocks.
We booked hedging income of $26.4 million in 2020, with
$8.3 million hedging costs being recognised as fair
value charges.

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Page 52

10 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Strategic Report   01—77

Field operations We will continue to monitor the Helping our host Governance Report   78—144
impact of Covid-19 to ensure communities
Despite the pandemic, our fields remained that we provide appropriate
in operation throughout 2020. Although the support for our employees, We immediately recognised the need to help
Federal Government placed restrictions on host communities and other our host communities through the difficult
internal travel, essential industries such as stakeholders. times of Covid-19. At a national level, Seplat
ours were exempted so we could serve was one of 33 organisations that donated a
Nigeria’s need for exports of oil and gas for Business continuity combined total of $30 million to support the
local consumption. Recognising the need to was assured through Federal Government’s efforts at curbing the
adapt our field operations for the health and the use of secure spread of the pandemic. In addition, Seplat
wellbeing of our colleagues, we implemented technologies by staff provided food assistance, medical and
essential-only staffing of field operations, working from home. protective equipment worth ₦50 million
based upon 28-day rotations instead of to help local State authorities.
14-day, with strict quarantines to be
observed in the week before deployment. R ead more
Backed by regular testing, this ensured Page 91
that all our fields remained Covid-free
throughout the crisis. Financial Statements   145—308

Adapting to
‘working from home’

Working from home became the new
normal in 2020 as offices were shuttered
and travel restrictions took hold. Thanks to
our business continuity plans we were fully
prepared and continued to run the business
from homes offices and kitchen tables,
using secure IT and remote collaboration
tools for meetings. Our Annual General
Meeting was a hybrid affair, broadcast live
on the internet as a small audience attended
in person with full regard to social distancing
protocols. We introduced earnings calls at
the first and third quarter results and
continued our active engagement with
investors by video calls and virtual investor
conferences. We even held virtual parties to
celebrate our 10th anniversary so we could
maintain the strong sense of community we
would normally experience through
teamwork in the office.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 11

CEO interview

Q&A — I truly feel that we have
PLANNING made a positive difference
FOR THE for our host communities
FUTURE and will continue to do so
long into the future.

Seplat CEO, Roger Thompson Brown You took leadership of a healthy business
talks about taking over in a pandemic surviving a pandemic, what were your
and what we can expect from Seplat initial priorities?
in the coming years. A: It’s very challenging to take on the role
of CEO when your staff are all working from
Roger Thompson Brown Annual Report and Accounts 2020 home, so visibility and communication were
Chief Executive Officer essential to motivating staff and reassuring
them about the future.
12
For the business itself, priority number one
was to increase operational efficiency as
well as reducing costs, not simply as a
response to the lower oil price but because
I believe that a constant focus on improving
efficiency will drive us to become a better
and more sustainable business. Part of this
cultural shift was about motivating our
people, breaking down hierarchies and
promoting more creativity and innovation.
We have an extremely skilled and
experienced workforce and I want to harness
that potential. Seplat’s staff responded
magnificently to the challenge of keeping the
business running from home and I commend
their efforts in what was an unprecedented
and challenging year.

As to our longer-term priorities, it is clear
that the oil and gas industry is changing
rapidly, and the Covid-19 pandemic may
have accelerated the drive for energy
transition in Nigeria. As the country’s largest
indigenous independent energy producer,
Seplat will play a major role in that transition,
helping Nigeria forge ahead with the
development of its existing resources and
developing new ways to produce energy
at low economic cost and at low cost to
the environment. Assessing those new
opportunities and preparing Seplat to be
at the forefront of implementing them is
my major focus going forwards.

Seplat Petroleum Development Company Plc

Strategic Report   01—77 Governance Report   78—144 Financial Statements   145—308

13

Annual Report and Accounts 2020

Seplat Petroleum Development Company Plc

Seplat turned in a robust performance
against a very challenging year, to what
do you attribute this success?
A: We have faced challenging years before
and survived because we had a strong
balance sheet that was sustained through
prudent financial management and this
disciplined approach helped us through
2020, which had the twin shocks of
reduced demand and lower prices.

We responded by negotiating deeper cost
reductions, focusing on efficiency, and
adjusting our production and operations to
reflect the realities of the pandemic and its
impact on demand. Much of that is down to
the Seplat team who responded quickly to
the changes required by Covid-19, ensuring
we could remain safe and continue
operations throughout.

Despite these very considerable challenges
we maintained our dividend, voluntarily
repaid debt, invested for growth and still
managed to progress our key projects.
That sets us apart from many of our peers.

How will you build on the integration Nexant forecasts Nigeria’s gas demand
of  Eland? to grow by c.20 Bcm by 2035, with most
A: The steps we have taken already will growth in the power sector.
deliver long-term benefits. We have reduced
barging costs, improving the profitability of How does oil remain relevant in today’s It’s important to recognise that Nigeria
the Eland production, and we have created climate-conscious world? is a developing country with low access
a Centre of Excellence at what was Eland’s A: There is much debate on whether to energy and a rapidly growing young
technical centre in Aberdeen, Scotland. global demand for oil may have peaked population. Hydrocarbons are the country’s
This team in Aberdeen will also support the and whether it will reduce over the coming main resource and provide significant help
recently created New Energy unit and it is in decades as transport is fuelled by electricity for its economy. The proceeds from the oil
a great location for access to industry and instead of oil. That said, the EIA forecasts industry fund a wide range of Sustainable
academic expertise in all kinds of energy that demand will still be 96.9 million barrels Development Goals (SDGs) and are crucial to
technologies including renewables. per day in 2021, only slightly lower than in the country’s societal development. Nigeria
2019 before the disruption caused by needs to achieve significant growth in its
If the oil price remains stable, we will the pandemic. capacity to deliver education and health
allocate capital to drill more production services, food production and energy
wells at Gbetiokun and Opuama as well as Of course, there is pressure to reduce oil security. Without the development of its
replacing the barging operation at Gbetiokun extraction and the carbon emissions it indigenous oil and gas industry these goals
with a dedicated oil pipeline. creates, but that depends on the rest of will become very difficult to achieve and so
the world adopting less oil-intensive ways in Nigeria, the industry remains not just
In the longer term, there is potential to to travel and generate power. Nigeria’s relevant but essential.
significantly upgrade our reserves by drilling per-capita energy consumption and carbon
the high-potential Sibiri (formerly Amobe) emissions are actually very low, and its Since oil and gas was first discovered in
exploration prospect at OML 40. national electricity grid is still very poorly Nigeria in 1956, the country has struggled to
developed. This is why the country is so fully capture and share with the population
reliant on small-scale diesel generation the benefits of its abundant natural
to satisfy its energy needs and this is the resources. Finding a way to do so now,
problem we need to address most urgently. even as the world responds to the threat
of climate change, is essential for a
just transition.

14 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

What opportunities does the imperative Government policy Strategic Report   01—77
of climate change hold for Seplat? is also focused on
A: Seplat is embracing climate change addressing the How do you build on success into 2021? Governance Report   78—144
opportunities on two fronts. Firstly, we undersupply of gas What initiatives can we expect?
continue to invest heavily in expanding and extending access A: The oil price has started to recover
our domestic gas business in line with the to electricity. and thanks to our cost-saving initiatives
Government’s strategy to achieve universal I believe we will translate this into higher
access to electricity, and to make that What progress did Seplat make with cash generation this year, which will enable
energy cheaper and cleaner by replacing sustainability in 2020? What future us to invest more for the future.
diesel generation, which is very damaging initiatives can we expect?
to the environment and the economy. Gas is A: We already support most of the UN’s In the second half, the long-delayed
clearly the next step for Nigeria, and we have 17 SDGs through the taxes and royalties Amukpe-Escravos Pipeline is expected
a leading position domestically with the we pay to government, which support to come onstream and reduce downtime,
Nigerian Government declaring the ANOH things like health, education, and reconciliation and other losses, which will
project as one of the seven critical gas infrastructure, and through our own provide a further boost to Seplat’s cash flow.
development projects for the country. community support programmes. It will provide a reliable, secure alternative to
the Trans Forcados route that has frequently
Secondly, we have created a New Energy On a practical front, we retained a leading shut in our production because of
unit to focus on lower carbon to zero carbon ESG consultancy, Critical Resource, to maintenance and other problems.
fuel sources and the natural extension undertake a ‘gap analysis’ and identify
beyond gas is for Seplat to participate in where our efforts in sustainability could We continue to focus on the ANOH Gas
renewable energy, such as solar power, be improved, and not just in the domain Processing Plant, and although this has
and in emerging technologies such as of emissions. The result of this analysis is experienced some inevitable delays because
carbon capture and storage. Our view is that enabling us to undertake scenario planning of the pandemic, it will be transformational for
Nigeria will benefit from being able to deploy to forecast the impact of climate change on Seplat and for Nigeria when it opens in 2022.
renewable energy on its electricity grid an asset-by-asset basis.
rather than solely developing an off grid In addition to these two key factors, a
renewable solution. By providing a base load The analysis will also enable us to align number of other planned initiatives will
of cheaper, lower carbon gas on the grid, the our reporting with best practice for ESG provide further operating and financial
acceleration of grid-based renewables will disclosure and we aim to be TCFD and IPIECA benefits. Exploration drilling and new gas
be possible, which is why we are currently compliant as soon as possible. wells are likely to increase production and
focusing on accelerating our midstream gas reserves whilst an increased focus on
business and additionally expanding into On a practical front, it was our responsibility operational improvements will improve
LPG, which is a good fuel source for cooking, to provide whatever help we could for local production uptime.
preventing deforestation. communities hit by the pandemic and its
restrictions, and we were involved in several Having survived the worst year in the history
The priority for 2021 is to address our initiatives, both on our own and with industry of the oil and gas industry, the actions we’ve
responsibilities as part of the global energy and government partners. taken before and during 2020 have left us in
transition and to set realistic targets for a position of strength and I am confident
how we as a company evolve to drive that that as demand recovers and the imperative
transition along. for gas increases, Seplat will exit 2021 a
larger, stronger, more profitable company
and strengthen its position as Nigeria’s Financial Statements   145—308
indigenous energy leader.

Roger Thompson Brown
Chief Executive Officer

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 15

Strategy

A ROBUST STRATEGY
FOR GROWTH

Strategic pillars 1 2
Description
Increase our resources Increase production and
Progress improve its profitability

Measuring our performance We must constantly replenish our reserves to Our value chain involves developing fields and
See page 20 assure future supplies. However, we must also then extracting, processing and exporting the
increase reserves if we are to maintain growth. hydrocarbons they produce. We will maximise
Risk overview We aim to drill at least one exploration well per profitability and return on investment by
year, focusing on prospects that offer rapid maintaining strict cost control, implementing
Risk categories and low-cost production, using existing the most appropriate technologies and
See page 30 infrastructure if possible. Our development organising ourselves and our service providers
drilling programmes also enable us to assess to deliver development projects on time
Outlook the upside potential of fields, allowing us and within budget. Once operational, we
to maximise hydrocarbon recovery from aim to safely extract the maximum volume
reservoirs and capitalise on low-risk reserve of hydrocarbons for lowest possible cost.
addition opportunities. Following the In the export phase, we must maximise uptime
successful integration of Eland, we will look and reduce reconciliation losses, if necessary
to acquire new assets where appropriate. developing our own export routes, to mitigate
• Converted 151MMbbls oil and 84MMboe asset concentration and reliance on third-
party infrastructure.
gas from 2C resources to 2P reserves and
revisions since 2010 • Focused on highest-impact, value-adding
work programme prioritising gas

• Eland assets integrated into Group portfolio,
immediately contributing 26% of Group
liquids volumes

• Ongoing cost-saving achievements and
continuing negotiations with supplier driven
by crisis of 2020

• Work to establish alternative, more reliable
export routes

• Discretion over level and timing of spend
allows alignment with cash flow

• Reserves replacement • Working interest production
• Earnings before interest and tax (EBIT)
Exploration activities are focused on • Opex per boe
determining the presence of hydrocarbons
whilst appraisal activities are focused on better Oil and gas production operations have a
defining and assessing the commerciality of a number of risks attached, above and below the
hydrocarbon discovery. Both activities by ground. The Company has a skilled technical
definition carry significant geological risk, so team with a detailed knowledge of the geology
the technical maturity of an E&A target is key and reservoir dynamics to allow optimal
to narrowing the range of risk and uncertainty. production solutions to be implemented. Above
Seplat seeks to use available technologies the ground, the Company has clear systems
including seismic analysis to minimise pre-drill and procedures in place to ensure the safe and
risks and maximise chances of a successful secure operation of its operated oil and gas
drilling outcome. production, processing and transportation
facilities. The Company does, however, rely on
• Operational risks third-party operated export infrastructure that
• Financial risks has been susceptible to interruptions.
• Strategic risks
• Operational risks
• Continued evaluation and high-grading of • External risks
the E&A potential within Seplat’s portfolio • Financial risks
• Strategic risks
• Execute plans to drill one exploration well a
year as oil prices and free cash flow permit • Continue to pursue cost-saving initiatives
• Improve efficiency with new technology
• Amukpe-Escravos Pipeline delayed but

expected to become operational in H2 2021,
providing a more reliable export route
• Develop new export routes
• Increase contribution of gas

16 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Since inception we have been guided by a clear and consistent Strategic Report   01—77
strategy that is supportive of our long-term strategic vision to be
the leading indigenous African independent oil and gas company.

34 5

Develop gas to drive Pursue profitable Behave responsibly,
Nigeria’s energy transition new opportunities and share our success

Nigeria has vast resources of natural gas and a We see rich opportunities for growth in Nigeria Being a responsible and accountable corporate Governance Report   78—144
pressing need to improve access to affordable including future licensing rounds, asset citizen is a key priority. We recognise that
energy and bring the country’s energy divestments from international oil companies, minimising the effects of our activities on
consumption towards global norms, by asset farm-ins and acquisition opportunities the environment, understanding local issues,
replacing millions of inefficient diesel and petrol amongst independent E&P companies. Our positively contributing to our host
generators with utility-scale gas power stations. focus is on securing blocks in the onshore and communities, being a first-rate employer
The growth of our gas business is therefore a offshore areas of the Niger Delta that offer and providing our staff with a safe working
priority that will deliver multiple benefits such near-term production growth, cash flow and environment and career development
as protection from oil price volatility, greater reserve replacement potential. In the longer opportunities are essential enablers that
earnings visibility, higher cash generation and term we may diversify our hydrocarbon allow us to achieve our goals. Supporting all of
cleaner production. Our 465MMscfd Oben portfolio by pursuing assets outside Nigeria. this is a strict adherence to strong corporate
Gas Processing Plant, one of Nigeria’s largest, In addition, we will actively look for new governance and business integrity culture
will soon be augmented by OML 53’s new opportunities in renewable energy to ensure throughout our organisation. We will share
300MMscfd ANOH facility, which will come we are a major player in this important and our success in the form of remuneration,
onstream in late 2021. potentially very profitable growth sector for taxes, royalties, community investment and
Nigerian energy companies. dividends for shareholders.

• Seplat is a major supplier of processed gas • Acquired direct interests in seven blocks and • Proven community engagement model aligns
to the domestic market further revenue interest in one block to date Seplat with host communities

• Oben Phase I and II expansion projects • Completed the acquisition of Eland Oil and • High retention rate of skilled and motivated
expanded plant processing capacity to Gas that holds interests in OML 40 and workforce
465MMscfd from 90MMscfd Ubima marginal field
• Paid $180 million in taxes and royalties
• $680 million fund raising completed in • Well positioned to access future deal flow in 2020
February 2021 for the 300MMscfd onshore and offshore
joint‑venture ANOH Gas Processing Plant • Paid $344 million in dividends to
shareholders since IPO

• Embarked on new ESG initiatives with view
to adopting TCFD and emissions reporting

• G as reserves, production • Portfolio expansion • Lost time incident frequency (LTIF) Financial Statements   145—308
and revenues • 2P reserves and 2C resources • Corporate responsibility initiatives
• Working interest production
Despite the abundance of resources in the Failure to adhere to the highest standards of
ground, the natural gas sector in Nigeria is at a Competition for upstream oil and gas blocks in corporate responsibility can severely impede
relatively nascent stage of development and Nigeria is intense and there are an increasing the Company’s ability to efficiently operate its
requires significant ongoing investment to grow number of industry participants seeking to current portfolio, access new business
capacity. The pace at which the sector grows grow their presence in or gain access to the opportunities, secure capital and ultimately
and scale of investment will to a large extent sector. High levels of competitive tension can deliver value accretion to its shareholders.
dictate the timing and magnitude of drive acquisition prices higher. Oil price
opportunities for producers such as Seplat. volatility also presents increased uncertainty
when evaluating opportunities and access to
capital can also constrain ability to
successfully execute transactions.

• Operational risks • Financial risks • Operational risks
• External risks • Strategic risks • External risks
• Financial risks • Financial risks
• Strategic risks • Continued long-term pursuit of our focused • Strategic risks
acquisition strategy • Strong focus on driving improvements in
• Capitalise on Oben Phase II expansion of
processing capacity to increase production • Price discipline and seek to implement safety and environmental performance
innovative structures to protect the • ESG thinking at heart of Board
• Expect ANOH joint venture to deliver first gas balance sheet
in H1 2022, further develop OML 53’s decision making
strategic gas resource • Targeting both oil and gas • Explore new energy possibilities
• Deliver positive community outcomes
• Completion of new Sapele Gas Plant • Continue to pay dividends as appropriate
expected in 2022
17
• Focus on monetising new opportunities,
e.g. flared gas, LPG market

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020

Value creation

GENERATING VALUE
FOR ALL OF OUR
STAKEHOLDERS

Inputs Value Creation Strategy
Resources and Relationships

Unified and motivated Our expertise Acquire Explore & appraise
workforce
Acquire 1 Increase our 2 Increase production
500+ resources and improve its
We have an enviable track profitability
multi-discipline employees record of acquiring assets
that create value through our Maximise profitability and
Operational expertise transformational expertise return on investment by
and control in getting the most out of delivering development
the ground. projects on time and within
81% budget. Once operational,
Explore & appraise extract the maximum volume
of production is under Seplat's control of hydrocarbons for lowest
The addition of Eland has possible cost. On evacuation,
Strong financial management added significant subsurface we must maximise uptime
and access to capital expertise that will allow us to and reduce reconciliation
maximise exploration and losses, if necessary
$259m development opportunities developing our own export
across our expanding portfolio. routes to reduce reliance on
Cash at bank third-party infrastructure.
Develop
Effective HSSE and
risk management Despite the challenging
conditions we drilled eight
0.00 new wells in 2020, recognising
our need for continuous
LTIF development of our assets
to ensure future streams
Good corporate governance of oil and gas that drive
profitable cash flow.
88%
Produce, process & sell
Corporate Governance
Risk Rating System We aim to maximise production
of oil and reduce downstream
Strong relationships losses wherever possible, if
with host communities necessary by developing our
own infrastructure. Our ANOH
$14.7m gas development will increase
our share of the Nigerian
invested in our communities in 2020 power market.

Our strategic pillars

Seplat’s value creation We must replenish our
strategy is the day-to-day reserves and increase them
execution of the five strategic if we are to maintain growth.
pillars that underpin and We aim to drill at least one
guide our business activities. exploration well per year,
They express the priorities we focusing on prospects that
have as a business to grow offer rapid and low-cost
profitably but responsibly, production, using existing
increase our reach and scope infrastructure if possible.
and share our success with We will also acquire new
our stakeholders. assets where appropriate.

S ee page 16

18 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Our business model leverages our core strengths, Strategic Report   01—77
relationships and experience to create long-term value
and shared prosperity for all of our stakeholders.

Outputs in 2020:
What we delivered

Develop Our competitive For our shareholders Governance Report   78—144
Produce, process &sell advantages
– Capital growth Financial Statements   145—308
Industry expertise – Dividends

We are Nigeria’s leading $59m
independent oil and gas
producer with a long track Dividends paid to
record of expertise in the shareholders in 2020
geology and business of
Nigerian oil and gas. We build For government
on this expertise every day.
– Royalty and tax revenue
Strong relationships – F oreign and local capital

We are a trusted partner to the investments
Nigerian Government and to
other operators in the region. $564m
Our ANOH project is classed
as strategically important Payments and production
for Nigeria, to which we are entitlement to government
leading supplier of gas. reported in 2020

Low-cost production For Nigeria

Our focus is on maximising – Infrastructure development
output for the lowest cost – M ultiplier effect from
and this enables us to remain
profitable even at the low improved gas-to-power supply
oil prices experienced in the
second quarter of 2020. 1/3

Strong cash generation of Nigeria’s current power generation can
be underpinned by our gas production
Our prudent approach to
investment and low cost base For our host communities
enable strong cash generation
to repay debt, invest for the – Economic empowerment
future and pay dividends. This – Healthcare and education
gives us the strength to tap
capital markets when needed. c.20,000

Jobs created by Seplat’s operations

3 Develop gas to 4 Pursue profitable 5 Behave responsibly, For our employees
drive Nigeria’s new opportunities and share our
energy transition success – Training and development
There are opportunities for – Shares awarded
Growing our gas business growth in Nigeria including Being responsible and
will deliver multiple benefits future licensing rounds, asset accountable is a priority, 26,241
such as protection from divestments, asset farm-ins minimising our impact on the
oil price volatility, greater and acquisition opportunities environment, understanding hours of employee training in 2020
earnings visibility, higher amongst independent E&P local issues, positively
cash generation and cleaner companies. We will also contributing to our host
production. Our 465MMscfd look for new opportunities communities, being a
Oben Gas Processing Plant, outside Nigeria and in first-rate employer and
one of Nigeria’s largest, will renewable energy to ensure providing our staff with a
soon be augmented by OML we are a major player in this safe working environment
53’s new 300MMscfd ANOH important and potentially and career development
facility, coming onstream very profitable sector. opportunities. We will share
in late 2021. our success with our staff,
community, shareholders
and Nigeria.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 19

Key Performance Indicators

MEASURING
OUR PROGRESS

Key performance indicator Working interest production  Gas Oil 2P reserves movement  Gas Oil
(boepd) (% increase/decrease)

51,183  +10.1% 499 -2.0%

2020 17,469 33,714 51,183 2020 258 241 499
46,498 2019 257 252 509
2019 22,563 23,935 2018 254 227 481
49,867
2018 24,198 25,669

Year-on-year progress In line with expectations Below expectations

Linked to remuneration? (See page 121) (See page 121)

Delivering on our strategic pillars 1234 134
Definition
The Company’s share of oil and gas produced The number of barrels of oil equivalent
Relevance during the year proportionate to its working added to the 2P reserves base during
interest in each producing block. Volumes the year, expressed as a percentage
expressed are as measured at the Company’s increase/decrease.
facilities, prior to any reconciliation losses.
An indicator of production strength at the An indicator of the Company’s ability to
Company’s current blocks and the impact capitalise on organic opportunities within
of development activities at organic and its portfolio and inorganic opportunities
inorganic projects. to replenish its reserves base.

Progress Working-interest production averaged 51,183 Working interest 2P reserves at the end 2020
boepd, with liquids up 40.9% reflecting the stood at 499MMboe, a 2% decrease on 2019.
Outlook first-time contribution of the acquired Eland The change represents an organic decrease in
Risk management assets, whilst gas production was down 22.9% overall 2P reserves of 1.9% year-on-year, due
because of Q1 maintenance and the impact of to production of 12.3MMbbls but mitigated by
See page 24 Covid-19 on the economy. The overall 10.1% revisions of previous estimates.
increase on 2019 was achieved despite
constrained production levels in Nigeria A working interest 2C resource base of
following cuts in OPEC+ production quotas and 95MMboe, comprising 59.7MMbbls oil and
tank-top issues at the terminal arising from the condensate and 203Bscf gas, offers good
pandemic and the general impact of Covid-19 on long-term reserves with significant growth
operations. There was 83% uptime for the Trans potential. Sanctioning of additional exploration
Forcados Pipeline and liquid volumes from OMLs projects will increase Seplat’s reserves further.
4, 38 and 41 had 9.4% reconciliation losses. The Company will also continue to evaluate
The Company expects to drill eight oil wells and acquisition opportunities and undertake a
three gas wells in 2021 to achieve working focused E&A drilling programme.
interest production in the range 48-55Kboepd. The Company high grades its inventory of
exploration and appraisal opportunities,
The Company has in depth understanding of the each being subject to rigorous technical and
subsurface and constantly monitors individual commercial evaluation to de-risk as far as
well and reservoir performance in order to possible prior to committing capital. When
optimise the drawdown rate on each well and evaluating new acquisitions the Company is
maximise long-term economic recovery of oil careful to maintain price discipline and
and gas from the reservoirs. It has also undertakes rigorous analysis.
prioritised the establishment of alternative oil
export routes to mitigate high concentration risk.

20 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Strategic pillars Strategic Report   01—77

1 Increase our resources
2 Increase production and improve its profitability
3 Develop gas to drive Nigeria’s energy transition
4 Pursue profitable new opportunities
5 Behave responsibly, and share our success

See page 16

Production opex +44% EBIT LTIF
($/boe) ($m) (number of incidents per million man hours)

8.90 -32 -110% 0

2020 8.90 2020 -32 2020 0

2019 6.20 2019 312 2019 0

2018 5.77 2018 310 2018 0.14 Governance Report   78—144

Below expectations Below expectations In line with expectations

(See page 121) (See page 121)

234 234 12345

The operating costs (excluding non-cash flow The Company’s earnings before the deduction of The number of lost time incidents recorded per
expenses, and financing costs) net to the interest and tax expenses. million man hours worked.
Company divided by the Company’s working
interest barrels of oil and equivalent produced
in the period.

An indicator of how cost efficiently the Company An indicator of the Company’s earnings ability. An indicator of health and safety performance
is able to produce its oil and gas reserves. By An increase in EBIT requires growth in revenue that is widely established within the oil and
controlling its operating cost base the Company and/or strong cost control. gas industry.
is able to be more resilient to periods of
depressed oil prices.

On a cost-per-barrel basis, production opex was After adjusting for non-cash impairments and Lost Time Injury Frequency (LTIF) has dropped
higher at $8.90/boe because of the effect of fair value losses, the operating profit was $121.4 steadily from 0.33 in 2016 to 0 in 2019. This was
OPEC+ restrictions that curtailed production million. Including all adjustments, the operating also sustained in 2020.
volumes, as well as the trucking and barging loss for the year was $31.7 million (operating
costs at Gbetiokun on OML 40. However, profit 2019: $311.9 million). The loss reflects Financial Statements   145—308
benefits of the successful streamlining of the lower oil prices realised and an impairment
Gbetiokun operations have driven barging costs provision of $144.3 million booked in the period,
down from $14/bbl to $5/bbl. which includes a non-financial asset charge of
$114.4 million (IAS 36) and financial asset
charges of $29.9 million (IFRS 9).

The Company remains focused on cost control. Higher oil prices, improved production, In 2020 efforts will continue to minimise the
Whilst increases in certain cost components are continuing tight cost controls and growth in frequency of lost time incidents in all areas
expected year-on-year there are areas where gas production will drive earnings potential in of operations to achieve the zero target for
downwards pressure can be applied with the future. incidence. The Company will continue to
the objective of achieving a stable unit cost. ensure high HSE standards are met and
assess opportunities to constantly improve
its HSE systems and protocols.

The Company carefully monitors expenditures The Company has robust financial processes in The Company has in place extensive and
and continually analyses its underlying cost place and carefully monitors revenues, cost of well developed HSE policies and reporting
base, making comparisons to prevailing market sales and admin costs to ensure continued procedures with an emphasis on the early
rates in order to ensure that the Company is strong profitability. Oil price is a major identification and mitigation of HSE risks.
identifying and able to action cost saving and influencing factor on the Company’s revenue. The Company closely monitors its HSE
efficiency gains, keeping it competitively The Company analyses hedging strategies to performance and is constantly evaluating
positioned on the cost curve. help mitigate exposure to oil price volatility. ways to improve its performance.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 21

Additional performance metrics

TRACKING OUR
PERFORMANCE

Key performance indicator Net cash flow from operations Capital expenditure
(US$m) (US$m)

309   -8.60% 150

2020 309 2020 150
2019 338 2019 125
2018 2018 88
502

Delivering on our strategic pillars 234 1234
Definition
Relevance The Company’s operating cash flow in the year The total amount of capital expenditure made
before taking into account movements in during the year, excluding acquisition costs.
Progress working capital.
Strong underlying wellhead oil production An indicator of the Company’s level of
Outlook capacity and anticipated future growth in gas investment activities in production,
Risk management production will ensure continued robust cash development and exploration and
flow generation. Development of the recently appraisal activities.
See page 24 acquired OML 40 block together with OML 53
and OPL 283 will also significantly augment
future cash flow potential.

Net cash flows from operating activities, Capital expenditures were $150.1 million in 2020
after movements in working capital, were and included costs of around $83.5 million for
$308.7 million (2019: $337.8 million). An income drilling and completion of nine wells including
tax payment of $10.4 million was made in the three gas wells (completion of Oben 48; Oben 49
period (2019: $3.5 million). The Group received and Oben 50) and six development oil wells
$188.1 million from the major JV towards the (Sapele-35, Ovhor-6ST, Ovhor-20, Ohaji
settlement of outstanding Dollar-denominated South-5, Ohaji South-6 and Gbetiokun-5) that
cash calls and $154.2 million (Naira equivalent) were completed earlier in the year. Associated
to offset Naira cash calls totalling $342.3 million facilities and engineering costs amounted to
received in 2020. This compares favourably to $61.3 million.
$179 million received in 2019. The major JV The Company will continue to invest in the
receivable balance now stands at $107.0 million, development of its portfolio, allocating capital
down from $222.3 million at the end of 2019. to the opportunities that offer the best returns
The Company has budgeted to drill at least six and volume growth potential whilst scaling and
oil and three gas wells in 2021 to achieve an timing investments at appropriate levels to
average net working interest of between closely match cash flow generation.
48-55kboepd.

The Company has in depth understanding of the Project investments are monitored closely
subsurface and constantly monitors individual against budgets to minimise the risk of
well and reservoir performance in order to over-runs. The Company benchmarks every
optimise the drawdown rate on each well and investment opportunity to ensure capital is
maximise long-term economic recovery of oil deployed to only the highest return projects,
and gas from the reservoirs. It has also and adheres to a price disciplined
prioritised the establishment of alternative acquisition strategy.
oil export routes to mitigate high
concentration risk.

22 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

In addition to its key performance Strategic Report   01—77
indicators, Seplat also tracks performance
against additional metrics that further
assist in measuring progress.

Realised oil price -38% Staff turnover Strategic pillars
($/bbl) (%)
1 Increase our resources
39.95 4.45 2 Increase production and improve its profitability
3 Develop gas to drive Nigeria’s energy transition
2020 39.95 2020 4.45 4 Pursue profitable new opportunities
2019 64.4 2019 3.6 5 Behave responsibly, and share our success
2018 70.1 2018
2.2 See page 16 Governance Report   78—144

1234 2345

The average oil price per barrel sold by the The rate at which full time staff of Seplat choose
Company during the period. to leave the Company voluntarily, expressed as a
percentage of average full time headcount
The Company’s financial performance is closely during the year.
linked to the oil price. An indicator of the Company’s ability to attract
and retain personnel. The loss of people can
result in skills shortage, loss of knowledge and
higher recruitment costs.

The Brent oil price averaged $43.21/bbl over The Company has continued to develop its
2020 (2019: $64.04/bbl). Brent remained volatile employment policies with the aim of attracting
throughout the year, following the twin shocks and retaining high calibre industry talent. Staff
of the Saudi Arabia – Russia price war and the turnover remained low in 2020 at 4.5%.
Covid-19 pandemic, trading between a high of
$68.91/bbl in January and a low of $19.33/bbl
in April, before exiting the year at $51.80/bbl.

The Company has historically sold its produced The industry is still expected, over the longer Financial Statements   145—308
oil under the Forcados blend that has generally term, to continue to face skills shortages in key
received a premium to a Brent marker price. Oil areas with competition for high performing
prices are expected to remain subject to individuals amongst competitors being intense.
macroeconomic volatility, but have recovered The Company’s policy is to provide industry
strongly from the lows of last year’s pandemic competitive benefits packages and provide
and associated price and supply war. progressive career opportunities to retain
The management continue to closely and attract high performing employees.
monitor prevailing oil market dynamics
and will consider further measures and take
advantage of opportune periods to implement
additional hedges to provide appropriate levels
of cash flow assurance.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 23

Risk management

PROTECTING
OUR BUSINESS

Basil Omiyi Managing risk in protecting our business Seplat recognises that risk management is
Chairman, Risk Management Risk management is an integral part of all a continuous journey of improvement and not
and HSSE Committee business activities of Seplat. The Company’s a destination and will continue to develop its
risk-management policy is focused on the risk management processes to ensure the
early identification of risks and future risks Company is fully equipped to deal with the
that are central to achieving its strategy, constantly evolving operating and business
corporate objectives and annual business environment of the oil and gas industry.
plans; their possible impacts on the
business and measures that can be
implemented to mitigate the identified risks
so that Seplat can continue to operate safely
and effectively.

Strong and effective risk Our risk management framework
management is central to ISO 31000 based, top-down and bottom-up approach
how we run our business
and enables the delivery Board of Directors
of our strategy. – Company strategy
– Risk appetite
– Strategic risks oversight

Risk Management and HSSE Committee of the Board
– Approves and update risk management policy and system
– Defines risk appetite
– Oversees and monitors enterprise risks

Key principles that underpin the Executive Management Risk Management Team Internal
Company’s risk management – Delivery of Company – Coordinate enterprise risk Audit
framework and system:
strategy management activities – Independent
• Strong focus on safety assurance
throughout the organisation. – I dentify key risks against – Articulate and update
the a chievement of risk management policy – Reports to
• Close oversight by senior strategy and system Audit a nd
management in day-to-day Finance
business operations. – Proffer and deploy – Risk identification, C ommittees
actions and c ontrols to assessment, quantification of the Board
• ‘Risk owners’ throughout address key risks and rating
the business.
– Monitor enterprise risks – Risk reporting and
• Accountability of staff monitoring
and/or key personnel.
– Enterprise risk register
• Regular and timely reporting. and dashboard

• Clear line of sight on the system – Risk champion activities
of internal controls.
Business Units
• Monitoring and independent – Business objectives
reviews.
– Risk identification, assessment and rating

– Mitigation actions and controls

– Monitor risks and mitigation actions

– Report risks and mitigation actions status

Risk identification, monitoring, mitigation action implementation and monitoring
are bottom-up from assets, projects and function levels

24 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Our risk management system The Company’s risk The Federal Government of Nigeria (FGN) Strategic Report   01—77
The Company’s risk management system is management policy is through the Presidential Task Force (PTF)
based on guidelines provided in ISO 31000, the focused on the early on Covid-19 introduced several measures Governance Report   78—144
international standards for risk management. identification of risks to manage the pandemic locally. These
The system is built on top-down and and future risks that are measures worked to a large extent for the Financial Statements   145—308
bottom-up approach with the Board of central to achieving its first wave of the pandemic until when the
Directors (Board) determining the right risk strategy, corporate second wave set in around November 2020
appetite necessary to achieve the Company’s objectives and annual and the number of infected persons and
corporate objectives while the business units business plans… casualties escalated thereafter. NAFDAC
identify and mitigate risks at the unit and has indicated that no vaccine has been
asset levels. Activities in 2020 approved for use in Nigeria except those
During the year 2020, our risk landscape that have been imported by FGN.
The Risk Management and HSSE Committee remained largely stable with respect to
assists the Board in overseeing the Company’s existing exposures since our last update In the wake of the ongoing pandemic,
risk management framework and the risk/ in 2019. However, an unprecedented Seplat Leadership through the COVIMOG
reward strategy as determined by the Board. infectious disease outbreak that emerged and in collaboration with Human Resources
The Committee ensures that the Company has and escalated during the first quarter, and the Operations teams have sustained
adequate risk management system in place to leading to WHO declaring it a pandemic, the Company’s business throughout
manage the diverse and changing risks and introduced a new outlook to the risk the pandemic period and observed all
opportunities faced by the Company as it landscape. Accordingly, the key highlight recommended preventive measures advised
creates value for shareholders. It meets at of this update is on the infectious diseases by both the PTF and State Governments.
least three times in a year to analyse and outbreak (Covid-19), a new risk item now
evaluate the Company’s key risk profiles, included for monitoring and management Accordingly, the Company’s operations were
proposed mitigation strategies, mitigation on the enterprise risk dashboard. We also therefore not significantly impacted during
actions taken by management and any introduce two new risk items, viz, OPEC the year 2020, as production operations, as
residual risk exposures. quota restriction, as well as Climate Change, well as delivery of target capital projects and
a risk drawing increasing global attention. new production wells, continued unabated.
The meetings are attended by Executive Our robust business continuity plans also
Directors who have accountability for Outbreak of the SARS-CoV-2 virus that enabled staff to work from home with secure
ensuring that risk identification is causes the Covid-19 illness was first IT infrastructure.
comprehensive and proposing mitigating declared by the World Health Organization
measures that are effective in achieving the on 31 December 2019. Since that date, the Overall, in 2020, the Committee analysed and
desired objectives. Reports on the Company’s virus has infected over 104 million and killed evaluated the various key risk exposures for
corporate risk register, key risk exposures in more than 2.2 million persons. Responses the Company. In doing so, the Corporate Risk
the business operations and reviews of its from around the world varied but were Register was reviewed, and the risk reports
risk management systems are compiled largely non-pharmaceutical until about presented by management. These reports
and presented to the Board of Directors. August 2020 when the first vaccine against detail the key risks, the potential impact of
the virus was produced and deployed in the risks and the likelihood of occurrence.
While key risks and associated risk appetites Russia. To date although many countries Mitigating strategies were comprehensively
are determined at the top, the business units have vaccination programmes underway, considered, including but not limited to those
and functional managers are accountable for much of the world is still struggling with the related to the stability in the Niger Delta, oil
the respective risks within their areas. The virus which has now mutated into different price volatility, export line breaches and
Company’s enterprise risk management variants originating in South Africa and alternative crude oil evacuation options.
(ERM) system, coordinated by the Head, the United Kingdom. Other risks considered are Government and
Enterprise Risk Management and overseen JV relations management, liquidity, market,
by the Risk Management and HSSE Various governments around the world have contractual and litigation risks. The status
Committee, supports risk management responded differently to the management and effectiveness of mitigation actions were
across the business and functions. The of the pandemic. While some countries reviewed, and any residual gaps or follow-up
Company’s ERM includes a robust risk followed directive of the World Health actions were identified. Key performance
identification, assessment, reporting and Organization on recommended preventive indicators as well as other risk indicators and
monitoring mechanisms and approaches that measures, some others chose to approach trends were monitored. Key risks requiring
include maintenance of both corporate and it differently. In one or two other instances, risk tolerance considerations and strategic
functional/operational levels risk registers, the leaders chose to do nothing for a long actions were presented to and debated by
risk dashboard, mitigation actions monitoring time. These discretionary approach to the Board.
and risk reporting. management of the pandemic resulted in
the level of infection and casualties that The Committee reviewed the risk
In a bid to continually embed risk the illness has claimed to date. management systems including the risk
management across the business and dashboard and assessment tables. The
functions, the Company utilises specially Committee gave further consideration
appointed and trained Risk Champions to to the achievements made by the Risk
ensure common methodology, language Champions appointed with a view to unify
and approach in the way risks are managed risk management approaches and embed
across the business. risk culture across the organisation.

The Internal Audit unit undertakes periodic
audits of the various business units including
the Company’s corporate governance
systems and risk management processes.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 25

Risk management | continued

HIGH-PROFILE RISKS
AND UNCERTAINTIES

Highlighted below are the high-profile risks that the Company
dealt with in 2020 and will continue to monitor going into 2021.

1. Infectious Diseases In Nigeria, the rise of the virus was initially The risk was viewed from two key perspectives
Outbreak (Covid-19) slow, but the month of March 2020 in relation to Seplat’s operations:
witnessed a sharp rise of cases of those
The ongoing global impact of the infected, affecting up to the presidency. 1. Risk of an index case manifesting
Coronavirus Disease, declared a pandemic Seplat demonstrated support to the nation in Seplat offices or field locations
by the World Health Organization, triggered and states of its operation (Edo, Delta & Imo) This leading to an unsuccessful initial
the need for businesses globally to put by making notable cash donations during Q1 control of an index case (probably resulting
in place adequate business continuity 2020, at the national and state levels, in communal spread of the disease in the
strategies, in the wake of such similar respectively aimed at curbing the spread Seplat community as a result of late
outbreak of infectious diseases in the of Covid-19 disease. detection of secondary contact cases which
near future. may have had close contacts with an index
At the national level, the donation was case or close contacts from other external
The Covid-19 global pandemic swept consolidated into the pool of funds the Oil primary sources). Major effects of this may
at an alarming rate during the year 2020. Producers Trade Section (OPTS) put together be near impossible or very long post-
The scourge of the virus, first recorded in to assist the Federal Government on behalf epidemic economic recovery of the business
Wuhan, China in December 2019 continued of the Oil and Gas Industry. At the state level, resulting in liquidity crisis, overhead cuts
in an upward trajectory globally during the donation was used to provide specific and going concern issues. Also, the business
the year 2020. According to WHO, the requirements by each host community may be badly hit if personnel productivity is
pandemic is manifesting in over 212 state covering two broad areas: severely impacted by increased lockdowns
countries and territories (152 of these as a result of worsening spread of the virus.
with reported fatalities) in the world, • Provision of Personal Protective Equipment
crippling business activities and putting (PPE) and other medical accessories; and
desperate amount of pressure on health
infrastructures of nations. Worldwide, • C reation of education and awareness
frantic efforts are being made by the through rigorous public enlightenment
medical and scientific communities campaigns.
to find a cure or at least a containment
for the spread of the virus.

26 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Strategic Report   01—77

2. Severe supply chain disruptions Additional measures put in place include: The Company, working with other industry Governance Report   78—144
following prolonged outbreak of the players in the region, continued to put
disease resulting in adverse impact • Visitors are still not allowed in our offices pressure on the Government to find a Financial Statements   145—308
to the planned work programme except for critical business needs lasting solution to Niger Delta restiveness
Resultant impact on sub-suppliers in the and clearance issued by the Human and the current security measures put in
countries where the disease is severe leading Resources team. place by the facility operator, consolidated
to significant delays in the supply of items. with the Government’s strategy of dialogue
This risk therefore covers the extent to which • Meetings and events continue to be held with stakeholders in the region seems to
the disease will have an impact on all key via electronic media. All indoor meetings be working.
projects of the Company as designed in the take place by exception only and require
work programme (impacting the supply approval from the Human Resources team. With respect to extended production
chain and major contractors scheduled to Attendance at such meetings are limited shut-in due to third-party interference,
deliver in a few months). The ability of the to not more than 20 persons including the third-party operated Trans Forcados
contractors to deliver as scheduled is supporting personnel and all non- export system remains Seplat’s primary
threatened leading to major delays and pharmaceutical preventive measures are crude evacuation for its main assets (OMLs
revisions to the project schedules. put in place to be observed throughout 4, 38 & 41) and this poses a significant risk
the event. to Seplat. The system was out of operation
In terms of managing this exposure, Seplat for more than a year between 2017 and
has continued to maintain status quo on 2. N iger Delta stability/ 2016 due to sustained breaches by the
NCDC guidelines even in the wake of extended production militants leading to extended shut-in
the second wave of the pandemic, at shut-in due to third- of  production.
all locations. party infrastructure
downtime, and Even though there was no major breach of
The Company’s existing risk management geo-political risk the line in the year 2020, the risk remains
plans were able to activate the business significant. The Company is mitigating the
continuity protocols and it has been a major The risk of Niger Delta Militancy and risk by seeking a second major export line.
achievement that the Management team extended production shut-in due to The focus for the Company remains to have
has been able to run the Company so third-party interference, was consolidated at its disposal, two major export systems
effectively even in the face of the at the year 2020 risk register review session to evacuate crude from its main assets.
implemented work from home policy. with the operations/technical teams. Seplat
core operations are located in the Niger 3. L ow oil price
However, Seplat Leadership continues to Delta region of Nigeria and that comes environment
monitor key indices in considering the return with significant risks.
of office-based employees to the Company Seplat’s operating results are highly
facilities, especially in the wake of the highly Historically, the Niger Delta has always dependent on the prices of crude oil and
contagious second wave of the pandemic. been a high-risk environment. Cases of natural gas. The Company’s estimated
As at year end, management has continued militancy, crude oil theft, pipeline vandalism, proved reserve, revenue, operating cash
to maintain the work from home policy, environmental pollution arising from illegal flows and margins, liquidity and future
until the indices give indication for bunkering activities, and other lawless earnings are all impacted by the volatility
re‑consideration of a phased return activities are rife in the region. However, in of crude oil and natural gas prices. Seplat’s
to the office. the year 2020, the business recorded zero price risk management policy is to protect
occurrence in militancy activities, similar the Company’s crude oil cash flow from
With regards to field operations, normal to the previous year 2019. Accordingly, the downside scenarios with hedging. During
crew change happens only after the Trans Forcados export system (major export the year 2020, the volume of protection
incoming crew have taken the PCR test with route for Seplat) remained operational stood at c.67-80% and rose alongside the
the resultant negative result after 48 hours throughout the year, with a remarkable acquisition of Eland. This translates into
when it is expected that the test result uptime as with the previous year 2019. purchasing between 2-2.5mmbbls/quarter
should have been issued. This requirement of put protection. Overall, the Company
is complemented by compliance with other protected about 6 million barrels of crude
established non-pharmaceutical measures oil at an average strike of US$45/bbl in
of regular hand washing, hand sanitising, 2020. Our long-term natural gas contracts
frequent cleaning of commonly touched have escalation clauses that protect the
surfaces, mandatory wearing of face Company against severe price decline.
masks and social distancing. Application of
non-pharmaceutical preventive measures
are mandatory in all the Company’s
office environments.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 27

Risk management | continued

4. O PEC quota
restrictions

A deep-dive assessment was conducted
on the OPEC quota restrictions risk which
was introduced in the third quarter of 2020.
The risk is considered based on the impact
due to production shut-in emanating as a
result of the OPEC quota imposed on
companies in the oil and gas sector. The
Company continues to manage this risk
through measured operational and
commercial tactics and engagements
with relevant industry regulators.

5. Climate change

Seplat’s contribution to domestic 6. JV Receivable and 7. Liquidity risk
gas/energy supply comes with some future cash call
implications for climate change, as the gas funding The Trans Forcados Pipeline remained
production activities are accompanied by mostly operational throughout 2020 and
some gas flaring, which the Company has Seplat has the Nigerian Government as this assisted Seplat’s liquidity position
made concerted efforts to manage within Joint Venture (JV) partner in significant significantly in the year. We manage liquidity
the requirements of regulation. parts of its business. Cash call funding from risk by ensuring that sufficient funds are
the Government partners has historically available to meet commitments as they fall
The risk considers the direct impact on the been poor, resulting in build-up of legacy due, using both long-term and short-term
ecosystem as a result of heightened gas cash call receivables over time. In 2020, cash flow projections to monitor funding
flaring activities, resulting in considerable the Government JV partners continued requirements for activities; and to ensure
weather (temperature) changes, major to remain current in paying cash calls. there are sufficient cash resources to meet
ecosystem collapse/damage with serious However, the risk of cash calls sliding back operational needs. Our cash flow projections
economic and social consequences, as to pre-2019 practice of late payments is take into consideration the Company’s debts
well as biodiversity loss. still there. To mitigate this exposure, the and covenant compliance. Surplus cash held
Company continues to manage its JV is transferred to the treasury department
A number of mitigation actions have been relationships very closely and actively which invests in interest-bearing current
put in place to manage this risk. These engages the respective Government accounts, time deposits and money
include focus on the delivery on projects partners on timely payment of cash calls. market deposits.
earmarked to reduce and or eliminate gas
flaring as spelt out under the Company’s
‘Gas Flares Out’ roadmap. The projects
include (i) delivery of the LPG projects at
Sapele and Oben, (ii) installation of booster
compressors, and (iii) the Sapele
Integrated Gas Plant project.

Other actions include focused delivery on
alternative options for cleaner energy. The
Company has also put in place a calculator
to estimate actual greenhouse gases
emissions to determine actual carbon
footprint/emissions and determine
measures for reduction of greenhouse
gases emissions.

28 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Strategic Report   01—77

Conclusion Mapping our risk

In conclusion, the year 2020 was generally a The mapping of our risks considered both quantitative and
challenging year for the oil and gas industry, qualitative factors. Seplat’s risk mapping is underpinned by a
following the unprecedented headwinds two-factor spectrum – Likelihood and Impact, which are further
posed by oil price volatility occasioned by plotted on the basis of Seplat 5x5 methodology, to arrive at a final
the shock of the Covid-19 pandemic. The assessment for each risk.
debilitating impact of plummeting oil prices
was exacerbated by the OPEC quota Certain
restrictions imposed in H2 2020. Despite
these challenges faced, the Company Expected 15 14 Governance Report   78—144
demonstrated resilience and commitment 11
to delivering the 2020 work programme while Possible 18 9
proactively monitoring and managing the 16 8
threat of the Covid-19 pandemic across 17 12 13
our operations. 51 4

The OPEC quota restrictions was effectively 26
managed through measured operational and
commercial tactics and engagements with Unlikely 19 3
relevant industry regulators. Accordingly, 7
the Company successfully drilled four oil Rare
and two gas wells across its portfolio and 10
delivered a consolidated average oil and gas Negligible Minor Moderate Significant Severe
production within the full year guidance of
48kboepd – 52kboepd. Assessment Movement trend
Very high Decreasing
Other laudable achievements in 2020 were High Increasing
the safe completion of the first Turnaround Medium Steady
Maintenance (TAM) for the Oben gas plant Low
within schedule and cost, the successful
implementation of Covid-19 protocols Topic Assessment Trend Financial Statements   145—308
across the Company’s operations without
interruption, laying of a foundation and 1. Infectious diseases outbreak in Seplat (Covid-19)
renewed focus towards strengthening the
Company’s approach and credibility on 2. Niger Delta militancy/third-party interference
Environment, Social and Governance (ESG)
issues in response to sustainability needs, 3. Portfolio concentration risk
as well as the introduction of the Company’s
footprint and greenhouse gas (GHG) 4. Sustaining E&A programme
emissions quantification.
5. Oil price volatility
Overall, the Committee is satisfied that the
Company has a robust Risk Management 6. Merger & acquisition (M&A) risk
System that serves to ensure integrity of
business processes, decisions and activities 7. Stakeholder management relationships
going into the future. The Company’s HSSE
Management System is also mature and 8. HSSE risks
reliable and has continued to deliver good
HSSE performance year-on-year. 9. Availability of capital

Basil Omiyi 10. Liquidity
Chairman, Risk Management
and HSSE Committee 11. Changes to tax status and legislation

Seplat Petroleum Development Company Plc 12. Bribery and corruption risk

13. Fraudulent activity risk

14. Field operations and project deliverability

15. Geopolitical risk

16. Cost control risk

17. Foreign exchange risk

18. Information security risk

19. Loss of key employees

Annual Report and Accounts 2020 29

Principal risks and uncertainties

MONITORING AND
MITIGATING RISKS
TO THE BUSINESS

Operational risks

Field operations and Third-party infrastructure downtime HSSE risks
project deliverability Description
Oil and gas activities carry significant levels of HSSE
Description Description risks if not properly managed. As activity levels
Failure to manage operational activities in line An over-reliance on third-party operated continue to increase there is a strong focus on
with planned expectations can lead to production transportation infrastructure can expose the preventing major environmental (including the
misses, project delays and cost overruns, high Company to an extended period of production emerging climate change – GHG emissions risk),
production costs and earlier than expected field being shut in. health or safety incidents.
decommissioning. Risk also expanded to cover the
emerging OPEC quota restriction risk on production,
resulting in production shut-ins.

Mitigation Mitigation Mitigation
Focus on risk management at planning phase Work is ongoing to secure a second export line Deployment of an HSSE Management System in
and mitigation plans activated. Compulsory to complement the Trans Forcados Pipeline. line with best practices. Monitoring and reporting
‘peer-to-peer’ review for high-value projects Continue to explore export via barging as a of HSSE performance scorecards at management
and better project management techniques. back-up option in extreme cases. Have two and Board levels. Our HSSE systems and process
Protracted land acquisition, preparation and contingency tanks in Amukpe for partial storage are subjected to independent review and
rig startup have been contributory factors which during shut-in over shorter periods. More tanks identified improvement initiatives are deployed.
have received focused attention and significant are planned. Additional plans to scope FEED/DED Continual focus on HSSE training and initiatives
process improvements and improved of a new export line in the coming year 2021. on incidence prevention. Emergency Response
communications with JV partner and approving plan set for any eventuality and comprehensive
regulators to mitigate delays. Use of smart/ Incident Review panels to identify and channel
intelligent wells to improve recovery and lessons learnt to improvement activities. Focus
improved rig performance monitoring and on the delivery on projects earmarked to reduce
reporting to manage NPTs. and or eliminate gas flaring as spelt out under the
Company’s ‘gas flares out roadmap’.

KPI/Performance metric KPI/Performance metric KPI/Performance metric
• Net working interest production • Net working interest production • HSSE scorecards
• Operating costs per boe • Days downtime • LTIF
• EBIT • TRIR
Strategic pillars
Strategic pillars Strategic pillars
123
23 235
Assessment
Very high Assessment Assessment
Trend Very high High

Trend Trend

Steady. We continue to refine our project Steady. Remarkably improved uptime of Forcados Steady. Though the risk is inherent, we will
management approach for improved speed of export system. However, risk trend is Steady, even continue to deploy our HSSE risk management in
delivery and efficiency, conclude the integration though there is no near term line of sight for an line with best practices and with strong emphasis
of the newly acquired Eland Assets into our alternative evacuation line, in the sudden event of on prevention.
business, consolidate performance across board, prolonged outage of the TFP. Alternative line (AEP) is
maximise production, maintain a strong balance now scheduled for Q2 2021 delivery.
sheet, and strategically position the Company for
future growth.

30 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

The implementation of our strategy can be hindered Strategic pillars Strategic Report   01—77
by various risks and uncertainties. The risks that the
Board considers most significant are described here. 1 Increase our resources
2 Increase production and improve its profitability
3 Grow our gas business to serve Nigeria
4 Pursue profitable new opportunities
5 Behave responsibly, and share our success

See page 16

Infectious diseases outbreak in Seplat Sustaining E&A programme
(e.g. Covid-19)

Description Description Governance Report   78—144
Risk of an index case manifesting in Seplat offices Exploration and appraisal activities carry
or field locations. This leads to an unsuccessful significant levels of subsurface risk. Sustained E&A Financial Statements   145—308
initial control of an index case (probably resulting drilling failure will impact the Company's ability to
in communal spread of the disease in the Seplat organically replace reserves and production.
community as a result of late detection of secondary
contact cases which may have had close contacts Mitigation
with index case or close contacts from other Strict compliance with reservoir management
external primary sources). Risk also covers supply guidelines. Building internal capacity with skilled
chain disruptions emanating from the pandemic i.e. sub-surface expertise. Drill a minimum of two
the extent to which the disease will have an impact exploration wells, as well as continuous M&A
on all key projects of the Company (including ANOH) work to secure available opportunities at the
as designed in the work programme (impacting the right price.
supply chain and major contractors scheduled to
deliver in a few months). KPI/Performance metric
• Reserve replacement
Mitigation Strategic pillars
Appointment of the COVIMOG (monitoring and
response team) to assess the dynamics of the 1235
virus and report to leadership weekly. Install hand
washing and sanitiser dispensers across all
business locations. Avoid large crowd and physical
meetings of more than 50 people. Avoid external
meetings; encourage online meetings. Encourage
staffs and other tenants on the building on
washing of hands and use of sanitiser. Suspend all
non critical travel plans and in the event of critical
travels, put in place mandatory self quarantine
and testing. Put in place mandatory PCR testing
for all field operations. LT alignment on business
scenarios to gain stability post-epidemic. Have a
Business Continuity Plan in place to curb
post-economic recovery challenges. Run an
operations impact assessment and trigger
identification of quick remediation strategies/wins
across the business. Manage press/publicity and
communication to avoid mis-communication/
wrong press. Declare work from home with
effective IT support.

KPI/Performance metric
• HSSE scorecards
• LTIF
• TRIR

Strategic pillars

1234

Assessment Assessment
High Very high
Trend Trend

Rising. Trend is rising given the second wave of Steady. High grading our exploration portfolio
the pandemic with its attendant contagious through a thorough prospect screening exercise.
spread and the notable cases recorded. The In the near term, plan is to commence exploration
Company will sustain the deployment of our HSE drilling campaign in the West.
risk management in line with best practices and
with strong emphasis on reducing the impact of
this unprecedented pandemic.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 31

Principal risks and uncertainties | continued

External risks

Niger Delta stability Stakeholder management relationships Geopolitical risk
and security Description
Nigeria has at times in its history faced political
Description Description uncertainties and threats such as terrorism
The Company operates in a region where security Failure to manage stakeholders can result in aimed at de-stabilising and undermining the
incidents such as kidnappings, vandalism and business disruptions and interference. The orderly and effective rule of central government.
criminal attacks on O&G installations can occur. Company prioritises the effective management
of relationships with all stakeholders including
host communities, JV partners, government,
regulatory bodies and shareholders.

Mitigation Mitigation Mitigation
Continuous security monitoring and intelligence Successful operation of the GMOU agreement Scenarios and response options plan set. Crisis
work. Quick mechanism for security advisory to with host communities, periodic engagement management team in place for high alert political
staff and movement restriction for high alert and feedback forums. Tailored CSR programmes, periods. Continue to partner/network with
situations. Active participation in the industry capacity building and infrastructure developments security stakeholders and share intelligence
pressure groups to find lasting solution. with the host communities. Sustain local content regarding security. Business continuity plans
development with priority to community actioned in light of current geo-political situation.
contractors. Organisational focus and clear
strategy to deliver shareholder value pursued
by the Board and management. Corporate
governance, transparency and proactiveness
in dealings with regulators and JV partners.

KPI/Performance metric KPI/Performance metric KPI/Performance metric
• LTIR • Net working interest production • Be a highly responsible corporate citizen
• TRIR • LTIR • Maximise production and cash flows from
• Security incidents • TRIR
• Operating cash flow • Host community incidences existing assets
• Commercialise and produce gas reserves
Strategic pillars Strategic pillars Strategic pillars

25 235 125

Assessment Assessment Assessment
Very high High High
Trend
Trend Trend Steady.

Steady. Efforts by the Government and industry Steady. We continue to enjoy good working Seplat Petroleum Development Company Plc
pressure groups, aimed at enhancing security in the relations with our stakeholders.
region seems to be paying off as there was a
significant drop in targeted oil and gas facilities
attacks in the region in year 2020. We will continue
our monitoring and vigilance.

32 Annual Report and Accounts 2020

Strategic pillars Strategic Report   01—77

1 Increase our resources
2 Increase production and improve its profitability
3 Grow our gas business to serve Nigeria
4 Pursue profitable new opportunities
5 Behave responsibly, and share our success

See page 16

Financial risks

Oil price volatility Changes to tax status and legislation Availability of capital

Description Description Description Governance Report   78—144
Oil prices have exhibited a history of volatility and If the tax regime/legislation under which the The oil and gas industry is highly capital intensive.
can fluctuate sharply in line with external factors. Company operates its assets were to change, Significant amounts of capital are required to
profitability may be impacted. continue development activities and fund M&A.
Non funding of cashcalls by JV partners impacts
activities and liquidity.

Mitigation Mitigation Mitigation
Hedging continues to be our price risk Perform evaluation of business plan and Emphasis on compliance with requirements of
management tool. Price sensitisation on project performance metrics exclusive of tax benefits. the JV operating agreement for effective/strict
economics and cost discipline for capital projects Project economics were determined on maximum JV partner concurrence. Board review and
sanctioning. Aggressive focus on cost reduction. tax basis to mitigate the impact of the now expired approval of financial strategy and debt portfolio
pioneer tax status. Impact assessment of potential management with strong banking relationships.
tax legislature monitored at the Board level.

KPI/Performance metric KPI/Performance metric KPI/Performance metric Financial Statements   145—308
• Realised oil price • Effective tax rate • JV receivables
• Operating cash flow • Tax status • Capex
• New M&A activities
Strategic pillars Strategic pillars
Strategic pillars
2 23
235
Assessment Assessment
High High Assessment
Trend Trend Very high

Decreasing. In the year 2020, we kept focus of Steady. PIB is going through legislative process. Trend
our price risk management policy to protect the Versions in circulation currently being reviewed
Company’s cash flow stream from downside to assess the impact on Seplat valuation. Decreasing. JV partners continues to remain
scenarios. We will also continue to take hedge current in paying cash calls.
positions and apply cost reduction strategies.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 33

Principal risks and uncertainties |continued

Financial risks continued

Cost control risk Liquidity Foreign exchange risk

Description Description Description
Cost reduction remains central to the Company's Liquidity risk is the risk that the Company will not The Company is exposed to exchange rate risk
current operating strategy. High operating cost be able to meet its financial obligations as they to the extent that balances and transactions
and ineffective capital cost control negatively fall due. are denominated in a currency other than the
impacts operating cash flows and profitability. US Dollar.

Mitigation Mitigation Mitigation
Comprehensive budgeting process approved by Manage liquidity risk by ensuring that sufficient The Company has options to manage its foreign
the joint venture partner and the Board. Clear funds are available to meet commitments as they exchange exposure including financial hedge
cost management targets. Grading of portfolio fall due. Uses both long-term and short-term instruments such as forward exchange contracts.
opportunities and project ranking for capital cash flow projections to monitor funding
allocation. Focus on reducing drilling costs at requirements for activities and to ensure there
well design phase. Cost monitoring and periodic are sufficient cash resources to meet operational
reporting. Focus on effective contracting needs. Cash flow projections take into
strategies for cost reduction. consideration the Company’s debts 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.

KPI/Performance metric KPI/Performance metric KPI/Performance metric
• Operating cost per boe • Operating cash flow • Operating cash flow
• EBIT • Capex • Capex
• Capex
• Well costs Strategic pillars Strategic pillars
Strategic pillars
2 23
235
Assessment Assessment
Assessment Medium High
High
Trend Trend
Trend
Steady. Improved uptime of TFP; improved JV cash Steady. Historically, the Company holds majority
Steady. Cost discipline remains key focus of call payment; oil price rally; and strategic debt of its cash and cash equivalent in US Dollar. Gas
the business. refinancing all have greatly improved liquidity risk. contracts are indexed in US Dollar.

34 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Strategic pillars Strategic Report   01—77

1 Increase our resources
2 Increase production and improve its profitability
3 Grow our gas business to serve Nigeria
4 Pursue profitable new opportunities
5 Behave responsibly, and share our success

See page 16

Strategic risks

Portfolio concentration risk Merger & Acquisition (M&A) risk Bribery and corruption risk

Description Description Description Governance Report   78—144
High dependency on a concentrated portfolio of Growth through M&A activities is part of Seplat’s Bribery and corruption presents a risk throughout
producing blocks and limited number of wells can strategy to pursue a focused acquisition and the global oil and gas industry and represents an
leave the Company more susceptible to declining farm-in. M&A deals and transactions come with ongoing risk to any oil and gas company.
long-term growth and reserves depletion. significant risk including structural, commercial
and integration risks. There is also the risk of non
achievement of acquisition targets due to highly
competitive landscape.

Mitigation Mitigation Mitigation
Focus on portfolio expansion strategy from New business development unit is always looking Extensive training on anti-bribery and corruption.
the Board level to diversify current portfolio. for the right opportunities for Seplat. Decision Embedding corporate governance principles with
Integrated long-term planning on crude oil review board (DRB) process is in place to ensure key focus on areas of the business which may
and gas business. deals are properly vetted and adequate due be more susceptible to corruption such as the
diligence done on new opportunities. The DRB contracting and procurement process. Processes
ensures the commercial, structural, KYC and exist to guide dealings with public officials.
integration risks are fully considered and
addressed with mitigation plan approved and in
place prior to deal closing.

KPI/Performance metric KPI/Performance metric KPI/Performance metric Financial Statements   145—308
• Successful execution of new acquisition and • Successful execution of new acquisition and • Whistleblowing reports
• Number of disciplinary cases
farm-in opportunities farm-in opportunities

Strategic pillars Strategic pillars Strategic pillars

23 135 5

Assessment Assessment Assessment
High Very high Very high

Trend Trend Trend

Steady. The Company is in build/transform phase. Steady. DRB process in place to vet opportunities Decreasing. As geographical location continues to
and deals. Risk trend steady following ongoing be susceptible to corruption, risk trend changed
integration of Eland Oil and Gas Plc, as well as from steady to decreasing.
ongoing strategy to acquire more strategic assets.
M&A landscape remains competitive.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 35

Principal risks and uncertainties | continued

Strategic pillars

1 Increase our resources
2 Increase production and improve its profitability
3 Grow our gas business to serve Nigeria
4 Pursue profitable new opportunities
5 Behave responsibly, and share our success

See page 16

Strategic risks continued

Loss of key employees Fraudulent activity risk Information security risk

Description Description Description
The oil and gas industry is very specialised in Fraudulent activity presents a risk throughout Potential cyber attacks and information
certain areas and there is competition within the global oil and gas industry and represents technology security breaches could result in
the industry to secure talent and highly-skilled an ongoing risk to any oil and gas company. loss or compromise of sensitive proprietary
and experienced personnel in core areas. information, communication and IT business
continuity disruption across operations.

Mitigation Mitigation Mitigation
Annual benchmark reviews to ensure Extensive whistleblowing campaign. Continuous We monitor and regularly upgrade the Company’s
competitiveness in reward and recruitment. monitoring and improvement of the system of information technology and security systems.
Succession planning in place as part of internal controls by all lines of defence with The Company has a clearly defined employee
business continuity. Focus on training strong internal audit activity. Automation user policy and control of access rights. Our
as a key differentiating factor in the of processes where possible to reduce information security framework and
operating environment. manual intervention. infrastructure have been externally reviewed in
line with requirements of ISO 27001. IT business
continuity plan is in place for quick deployment.

KPI/Performance metric KPI/Performance metric KPI/Performance metric
• Staff turnover • Number of reported cases • Information security identification and

containment reports

Strategic pillars Strategic pillars Strategic pillars

25 5 25

Assessment Assessment Assessment
Medium Very high High
Trend Trend Trend

Steady. Risk trend changed to steady this period. Steady. Risk is kept at very high and the Company Rising. While cyber security continues to hold
continues to maintain a zero tolerance policy. international attention, there has not been material
IT breach on our operations. However, the triggering
of the work from home policy has resulted in a rising
trend of the risk, given the greater number of
employees working externally.

36 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

OPERATIONAL Strategic Report   01—77
REVIEW

Governance Report   78—144

Financial Statements   145—308

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 37

Operational Review | continued

OUR ASSETS

Seplat’s portfolio comprises OML 40 OML 4
direct interests in seven oil
and gas blocks and a revenue Polobo Sibiri Abiala OML 41 Okwefe Oben
interest in one further block, Sapele Mosogar Okporhuru
all of which are located in the Opuama Gbetiokun
onshore land and swamp areas
of the prolific Niger Delta, close Ubaleme Amukpe Orogho
to essential infrastructure. Ovhor

This portfolio provides the Company with Okoporo
a robust platform of oil and natural gas
reserves and production capacity, together Escravos
with significant opportunities for future
development projects, 2C to 2P conversion
and exploration and appraisal drilling. We
also continue to view the shallow and
deep-water offshore assets of the Niger
Delta as potentially appealing opportunities
for future expansion.

Warri

Forcados

Oil producing assets

OML 40 W.I. 2P reserves W.I. production 2020

Share 45% (MMboe) (boepd)

Partner NPDC Starcrest Oil 27 Oil 7,884

OML 55 W.I. 2P reserves W.I. production 2020

Share Revenue interest (MMboe) (boepd)
Partner Belema Oil
Oil 5 Oil –

Ubima W.I. 2P reserves W.I. production 2020

Share 88% (MMboe) (boepd)

Partner All Grace Energy Oil 4 Oil 971

38 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Oil & gas Strategic Report   01—77
producing assets

Our major assets at OML 4/38/41 and OML 53 have
substantial reserves of both oil and gas and are
ideally located to supply oil for export or local
refining, or for the supply of gas to nearby power
stations. Gas processing takes place at Oben and
Sapele and the new ANOH Gas Processing Plant
will be commissioned in 2022 at OML 53.

Onitsha

OML 4/38/41

Share 45%
Partner NPDC

W.I. 2P reserves W.I. production 2020
(boepd)
OML 38 (MMboe) Oil 21,249
Gas 17,469
Oil 156 Total 38,718 Governance Report   78—144

Umuseti (Pillar) Gas 119

Total 275

OPL 283 Igbuku (Pillar) Jisike OML 53  (not yet producing gas)

OML 53

Ohaji
South Owerri

Iheoma

Odinma Share 40%
Emeabiam Partner NAPIMS

Alaoma W.I. 2P reserves W.I. production 2020
(boepd)
(MMboe) Oil 2,639
Gas –
Omerelu Owu Oil 44 Total 2,639
Ubima
Gas 128

Total 172

OPL 283(not yet producing gas) Financial Statements   145—308

Port Harcourt Share 40%

Partner Pillar Oil

OML 55 Krakama W.I. 2P reserves W.I. production 2020
(boepd)
Soku (MMboe) Oil 970
Gas –
Nembe Dama Oil 5 Total 970

Gas 12

Total 17

Robert Kiri Akaso
Ke Bonny
Belema
Inda Bonny
Brass

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 39

Operational Review |continued

Effiong Okon CONTINUING
Operations Director FOCUS ON
IMPROVING
OUR EFFICIENCY

Seplat delivered Reserves Production
production within Seplat’s portfolio comprises direct interests Our oil and gas assets are located in the
guidance despite in seven oil and gas blocks and a revenue onshore land and swamp areas of the
challenging operating interest in one other block. This portfolio prolific Niger Delta in Nigeria. Principal
conditions and the provides the Company with a robust platform areas of production are Edo, Delta, Imo
collapse of demand of oil and gas reserves and production and Rivers States.
caused by the capacity, together with material upside
Covid-19 pandemic. opportunities through future development. Full-year total working-interest production
for 2020 was within guidance and averaged
51,183 boepd Total working-interest 2P reserves, as 51,183 boepd. Within this, liquids production
assessed independently by Ryder Scott was up 40.9% year-on-year, reflecting the
Volume within guidance Company, L.P., at 1 January 2021, stood at first-time contribution of the acquired
499.4 MMboe, comprising 240.5 MMbbls Eland assets whilst gas production was
$8.90/boe of oil and condensate and 1,501.3 Bscf of down 22.9% year-on-year, because of Q1
natural gas. The change represents an maintenance and the impact of the Covid-19
Cost of production organic decrease in overall 2P reserves pandemic on the economy. Production
of 1.9% year-on-year, due to production decline rates are at levels typical of the
$150m of 12.3 MMbbls but mitigated by revisions region at 10-15% per annum.
of previous estimates. Working-interest 2C
Capital investment resources stood at 94.8 MMboe, comprising This represents an overall production
59.7 MMbbls of oil and condensate and increase of 10.1% compared with 2019
203.3 Bscf of natural gas. despite constrained production levels in
Nigeria following cuts in OPEC+ production
Consequently, the Group’s working-interest quotas and tank-top issues experienced at
2P reserves and 2C resources stood at the terminal arising from the pandemic and
594.1 MMboe at 1 January 2021, comprising the general impact of Covid-19 on operations.
300.2 MMbbls oil and condensate and
1,704.7 Bscf of natural gas. There was 83% uptime for the Trans
Forcados Pipeline during the period and
the produced liquid volumes from OMLs 4,
38 and 41 were subject to 9.4%
reconciliation losses.

40 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

2020 performance highlights Seplat turned in a robust performance 2020 working interest production (boepd) Strategic Report   01—77
despite the most challenging year in
its history, during much of which the 60,000 49,867 46,498 51,183
Company was kept running by staff 50,000 24,198 22,563 17,469
working from home. 40,000
Successful drilling 30,000 25,877 36,924 33,714
programme – Six oil wells 19,070
– Three gas wells
Production within – Focus drilling on gas 15,786 25,669 23,935
guidance 20,000
and high-return oil
Development of Eland 17,853
– 51,183boepd total
Focus on cost – 33,714bopd liquids 10,000 10,091
and efficiency – 101MMscfd gas (17,469 boepd)
0 2017 2018 2019 2020 Governance Report   78—144
Update on – Integration of assets, staff 2016 Gas
key projects and infrastructure Oil

– Contributed 26.3% of Group liquids
– Aberdeen office becomes Seplat’s

Centre of Excellence

– US$8.90/boe opex
– Reduced OML40 barging costs from

$14/bbl to $5/bbl
– Other cost-saving initiatives driven

throughout operations

– ANOH project expected to produce
first gas in H1 2022 after Covid-related
delays

– New Sapele Gas Plant expected
operational H2 2022

– Amukpe-Escravos Pipeline (third-
party) expected operational H2 2021

Safety initiatives – Implemented recommendations of ESG developments Financial Statements   145—308
independent BRVS safety investigations In our continuing drive to improve our
W.I. 2P reserves by block (MMboe) environmental performance and prepare
– Seplat operations achieve zero LTI for both the opportunities and challenges
– Leadership reinforcing safety culture posed by climate change, we are working
with external consultants Environment
across organisation Resource Management and Critical
Resource to conduct scenario analysis of
W.I. 2P reserves by type (MMboe) our assets under the IEA’s Stated Policies
Scenario (STEPS) and its Sustainable
5 252 4 Development Scenario to simulate a
27 well-below 2°C outcome against which
we can test the resilience of our portfolio.
509 240.5 258.9
In addition, we are developing a carbon
MMboe 275 footprint calculator so that we can more
accurately measure our emissions. We will
172 publish the results of these initiatives in
17 due course and use the insights they
deliver to drive our corporate strategy and
sustainability initiatives going forward.

OML245,378,41 OPL 283 Oil Gas R ead more:
OML25537 OML 55 Annual Report and Accounts 2020 Corporate social responsibility
OML24507 Ubima
Page 59

Seplat Petroleum Development Company Plc 41

Operational Review | continued Increase
reserves
SEPLAT OIL Increase
VALUE production
CREATION
STRATEGY

Seplat pursues a four-
pronged approach to
value creation for its
oil assets.

Diversify export
routes

Acquire
assets

42 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

W.I. 2P reserves (MMbbl) Future prospects Strategic Report   01—77
– Unlock existing 2C resources of 59.7MMbbl
156 44
oil and condensate
OML 4,38,41 OML 53 55
27 – Explore, appraise and develop OML 40’s Sibiri field
OPL OML (formerly called Amobe) for potential 78MMbbl at
OML 40 283 55 relatively low risk
4
Ubima – Acquire new blocks in future government
licensing rounds, but at appropriate value

– Acquire established operating assets from
exiting/divesting IOCs or local operators

– Acquire distressed operators and improve
exploration and efficiency

Liquids production – Average W.I. production was 33,714bopd in 2020

OMLs 4, 38 & 41 21,249 – Includes maiden contribution from Eland assets Governance Report   78—144
OML 40 7,884 of 7,884bopd from OML 40 and 97bopd from Ubima;
OML 53 2,639 combined contribution was 26.3% of
OPL 283 970 Group liquids volume
Ubima 971
– 83% uptime on Trans Forcados export route,
9.4% reconciliation losses

– Six oil wells drilled or completed

– Sapele 35
– Ovhor 6ST, Ovhor 20
– Ohaji South 5, Ohaji South 6
– Gbetiokun 5

– Focus on increasing efficiency at wellheads

– Deploy innovative drilling and production
technologies to increase productivity

OML 40 OML 41 OML 4Amukpe-Escravos Onitsha
Polobo Sibiri Abiala Sapele – Third-party project
Okwefe Oben not managed by OML40
Opuama Gbetiokun Mosogar Seplat – C urrently evacuated

– Delayed with likely through Trans Escravos
commissioning in Pipeline, with lower
reconciliation and
downtime losses than TFP

Ubaleme Amukpe OrogHh2o2021 – Option to connect AEP
Ovhor
OML 38– New underground and TEP via 8km spur line, Financial Statements   145—308
Okoporo pipe will significantly thereby creating additional
reduce losses from route for OML 4, 38, 41
poor maintenance, liquidsUmuseti (Pillar)

Escravos vandalism, other – Potential to use offshore Jisike

Warri OPL 283damage etc Floating Storage and O
Offloading (FSO) facility
– Seplat can inject up to and use it aIgsbauckruud(ePiolillar) Ohaj
40,000bopd capacity Sout
export terminal, reducing

costs of using third-party

infrastructure

Increases Reserves Increases PFroodrucctaiodnos Add Export Routes Enhances Expertise Em
– Eland added 31MMbbl – OML 40 added – Eland brings significant Omerelu
– OML 40 added
W.I. 2P reserves 7,884bopd in 2020 with substantial production sub-surface,
potential to increase resource not exploration, and
– High-quality Sibiri in 2021 dependent on Trans technical expertise
prospect has potential Forcados Pipeline
to add 78MMbbl at – Ubima added 971bopd – Eland’s HQ now Seplat’s
low risk – Potential for new Centre of Excellence in
– New Gbetiokun wells export routes as Scotland’s energy hub,
expected to increase detailed above close to industry and
output academic expertise

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 OML 55 Port H
43
Soku

Operational Review – Oil assets

SEPLAT’S OIL Oil business performance
PRODUCING The Group’s oil operations continued despite the Covid-19 crisis and
ASSETS produced an average 33,714bopd on a working-interest basis during
2020 2020, up 40.9% on 2019.
IN REVIEW
This increase reflects a maiden contribution of 8,855bopd (26.3% of
Group liquid volumes) from the OML 40 and Ubima assets, as well as
higher production from OML 53 compared to 2019. Exports from the
Group’s operations were constrained by approximately 410,000 bbls
on a gross basis as a result of the OPEC+ production cuts implemented
in the third quarter of 2020. Production output increased as a result
of wells drilled earlier in the year, which has necessitated discussions
with the DPR and NNPC for increased quotas to reflect this uptick.

During the period, six oil wells were drilled/completed (Sapele-35,
Ovhor-6ST, Ovhor-20, Ohaji South-5, Ohaji South-6 and Gbetiokun-5),
while the Extended Well Test for Ubima continued with production
up to 1,200bopd. The wells flowed at a combined initial rate of
approximately 18,700bopd. Production improvement through Well,
Reservoir and Facilities Management (WRFM) interventions included
rigless restoration and optimisation activities that resulted in
optimised well head production and LTF performance.

The average price realised per barrel in 2020 was $39.95
(2019: $64.40).

Working interest liquids OMLs 4/38/41
production 2020 (Bopd)

OPL 283 970 Operator: Seplat holds a 45% working The upgrade ensures the
Ubima 971 Seplat interest in OMLs 4, 38 and 41, ability to produce more than
OML 53 2,639 Working interest: with the Nigerian Petroleum 40,000bopd of dry crude.
45.0% Development Company (NPDC) Further optimisation of the LTF,
OML 40 7,884 Partner: holding the remaining 55% with additional automation to
NPDC interest. achieve less than 0.5% dry crude
OMLs 4/38/41 21,249 Main fields: and 60,000bopd dry crude, is
Oben, Amukpe, Okporhuru, Ovhor, In OML 4, the partners drilled expected to be completed in the
Orogho, Sapele two new gas production wells first half of 2021.
Acreage: in the second half of the year.
267km2,094km2/291km2 Oben-49 was completed in The two wells completed in the
Available export route: the period with an initial gross period, Ovhor-6ST and Ovhor-20,
Forcados, Warri Refinery, Escravos production rate of 35MMscfd of came onstream at a combined
Concession expiry date: gas and 600bopd of condensate. average gross rate of 5,200bopd.
October 2038 Oben-50 came onstream in the In a bid to realise the full
2020 working interest first quarter of 2021. potential of the wells in
liquids production: this area, additional bulk lines
21,249bopd In OML 38, further to the earlier were laid and we expect will be
2020 working interest commissioning of the liquid commissioned in first quarter
gas production: treatment facility (LTF) at of 2021.
101MMscfd Amukpe, we undertook a crude
Remaining working interest quality upgrade project aimed In OML 41, the ongoing focus
2P oil reserves: at achieving an export-grade was on full development of
156MMbbls specification of 0.5% BS&W. By Sapele Shallow, which overlies
Remaining working interest doing this, we have eliminated the productive reservoirs in
2P gas reserves: the cost component of crude the main Sapele field and is
693Bscf handling charges that have estimated to hold a significant
2021 activities: historically been incurred for accumulation of oil (around
Production and development evacuating wet crude to the 500 MMbbls STOIIP). In 2020, one
Forcados terminal and freed well, Sapele-35, was completed
up additional ullage on the with a potential initial gross rate
export pipeline for dry crude. of approximately 1,000bopd.

44 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

OML 4 Onitsha Strategic Report   01—77

OML 40 OML 41 Oben OML 53
Polobo Sibiri Abiala Sapele Okporhuru
Okwefe Operator:
Opuama Gbetiokun Mosogar Seplat
Working interest:
Ubaleme Amukpe Orogho 40.0%
Ovhor Partner:
OML 38 NNPC
Okoporo Main fields:
Jisike (producing) and Ohaji South
Umuseti (Pillar) (producing) and Owu (discovery)

Escravos Jisike Acreage: In December, Seplat signed
1,585km2 a Crude Purchase Agreement
Warri OPL 283 Igbuku (Pillar) OML 53 Available export route: (CPA) with Waltersmith
Bonny, Brass Petroman Oil Limited. The CPA is
Ohaji Concession expiry date: for the supply of between 2,000
South Owerri June 2027 and 4,000bopd from existing
2020 working interest working-interest production
Heoma liquids production: from the Ohaji South Field within
2639bopd OML 53, for Waltersmith’s new
Forcados Odinma 2020 working interest 5,000bopd modular refinery at
Emeabiam gas production: Ibigwe Field, in Imo State.
n/a
Alaoma Remaining working interest Previously, Seplat’s share of
2P oil reserves: Ohaji South crude was primarily
Omerelu Owu 44MMbbls evacuated to the export terminal
Ubima Remaining working interest via a third-party Crude Handling
2P gas reserves: Agreement with Waltersmith.
Port Harcourt 742Bscf This new agreement benefits
2021 activities: Seplat by selling its crude oil
OML 55 Krakama Production, development and directly to Waltersmith for
field appraisal refining, thereby eliminating
Soku Dama crude losses and downtime
Seplat holds a 40% working experienced along the
Nembe interest in OML 53, with evacuation and export route.
the National Petroleum The transaction will also boost
Robert Kiri Akaso Investment Management the capacity of Waltersmith
Ke Bonny Services (NAPIMS) holding in providing its products
Belema the remaining 60% interest. particularly to the immediate
Inda Bonny region of our operations thereby
Brass Seplat completed two wells at supporting Seplat’s commitment
the Ohaji South (OHS) oil field, to national energy security.
OPL 283 OHS-5 and OHS-6. The two wells Governance Report   78—144
came onstream in the third Apart from its oil, OML 53 has
Operator: Seplat holds a 40% working quarter of 2020 at a combined substantial gas reserves that Financial Statements   145—308
Pillar Oil/OPGC interest in OPL 283, alongside average production rate of can provide feedstock for the
Working interest: partner Pillar Oil. 5,000bopd, thus ramping up ANOH Gas Processing Plant that
40.0% production from the acreage Seplat is building in partnership
Partner: Following the conclusion of from c.6,500bopd to achieve with the National Gas Company
Pillar Oil the Anagba-1 appraisal well, an exit rate of c.11,500bopd. (NGC). A portion of dry gas
Main fields: Pillar-Newton JV and other production (70MMscfd) from
Umuseti and Igbuku Partners have executed the Infrastructure projects the plant has been earmarked
Acreage: Pre-Unitisation Agreement, completed during the year to meet the domestic supply
102.2km2 Crude Handling Agreement were focused on supporting obligations associated with
Available export route: and Facility Services Agreement production growth from Ohaji the OML 53 reserves.
Forcados, Escravos for the Ashaka/Anagba fields. South field, which included the
Concession expiry date: Production allocation to Newton upgrade of existing 10,000bopd At the upstream supplying
October 2028 commenced in September. Early Production Facility (EPF) ANOH, four wells are planned
2020 working interest to 15,000bopd capacity, to be delivered by the upstream
liquids production: The Igbuku 3D seismic data construction of 4”x10km operator, Shell Petroleum
970bopd acquired by Pillar-Newton JV flowlines, 8”x12km bulkline and Development Company (SPDC)
2020 working interest was interpreted and formed capacity expansion of remote in 2021. SPDC has commenced
gas production: the basis for the Integrated manifold at Ohaji South Field. the drilling for the first set of two
n/a Petroleum Engineering Studies, wells scheduled to be completed
Remaining working interest which along with the Field in Q2 2021, which will be
2P oil reserves: Development Plan will underpin followed by another set of two
5MMbbls the Igbuku gas development. wells scheduled to be completed
Remaining working interest The planned Igbuku re-entry in Q4 2021.
2P gas reserves: was temporarily put on hold due
66Bscf to cuts in capital expenditure,
2021 activities: given the challenging year.
Production and development However, the team ensured that
the Interim Crude Supply and
Associated Gas for power swap
agreements were executed in
the period.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 45

Operational Review – Oil assets | continued

OML 55 OML 40

Operator: In accordance with the revised Operator: In 2020, Gbetiokun-5 was
Asset Management Team commercial arrangement that NPDC completed, with initial well
Working interest: was agreed in July 2016, which Working interest: production capacity of
Revenue interest provides for a discharge sum of 45% c.5,000bopd. While the possibility
Partner: $330 million to be paid to Seplat Partner: of a permanent export pipeline
NNPC, Belemaoil over a six-year period through NPDC, Starcrest solution is being explored,
Main fields: allocation of crude oil volumes Main fields: evacuation of processed
Robertkiri, Idama and Inda produced from OML 55, Seplat Opuama (producing), Gbetiokun, crude via shuttle tankers from
(producing) received payments amounting Amobe, Abiala Gbetiokun to the injection point
Acreage: to $4.8 million in 2020. Total Available export route: on the main OML 40 export
840km2 payments received from Forcados, Barging pipeline has been enhanced
Available export route: inception to the end of 2020 Concession expiry date: with the mooring facilities
Brass, Bonny stood at $124.8 million and the October 2038 rehabilitation and crude injection
Concession expiry date: outstanding discharge sum to be 2020 working interest system upgrade. This allowed the
June 2027 paid to Seplat is $205.2 million. liquids production: successful streamlining of the
2020 working interest Recovery during the year was 7,884bopd Gbetiokun barging operations
liquids production: impacted by OPEC+ production 2020 working interest with the use of a self-propelled,
n/a cuts and low oil prices. gas production: 28 kbbl capacity vessel to
2020 working interest n/a evacuate liquids and has driven
gas production: In a bid to sustain production Remaining working interest barging costs down from $14/bbl
n/a from this block, Seplat’s Asset 2P oil reserves: to $5/bbl. Facility projects
Remaining working interest Management Team has received 27MMbbls progressed during the year
2P oil reserves: the field data for technical Remaining working interest included Gbetiokun-Adagbasa
5MMbbls evaluation to resolve production 2P gas reserves: pipeline, Opuama flow station
Remaining working interest challenges that have delayed n/a upgrade, BRVS and Gbetiokun
2P gas reserves: target recovery of the investment. 2021 activities: EPF upgrades.
n/a Production and development
2021 activities: In 2021, Seplat will continue to The Opuama focus was on
Recovery of discharge sum monetise liftings towards full Seplat completed the acquisition deferment management,
recovery of the $330 million in the United Kingdom of the reservoir management ranging
Ubima discharge sum. entire issued share capital of from incorporation of recently
Eland in December 2019. Eland drilled well results into
Technical partner: Seplat’s Eland subsidiary, has a 45% interest in Elcrest, subsurface models, production
Wester Ord through Wester Ord, owns a 40% which in turn owns a 45% monitoring, reduction of Mean
Working interest: working interest in the Ubima working interest in OML 40. Time-to-Repair, well optimisation
88% marginal field, with All Grace Elcrest is a joint venture between and the identification of further
Partner: Energy Limited (AGEL) owning Starcrest (55%) and Eland (45%). opportunities to increase
All Grace Energy Ltd 60%. Wester Ord is the Technical OML 40 is operated by the overall recovery.
Main fields: and Financial partner to AGEL in Nigerian Petroleum Development
Ubima the Ubima development. Company (NPDC) on behalf of the Preparatory activities for
Available export route: NPDC/Elcrest Joint Venture. drilling of the high-impact,
Trucking The Extended Well Test for Since inception, Eland has near-field Sibiri (formerly
Concession expiry date: Ubima continued through arranged the funding of Elcrest’s Amobe) exploration prospect
the year with a production share in OML 40. The current continued during the year with
2020 working interest of c.1,200bopd. The Field aggregate loan balance owed by the evaluation of possible
liquids production: Development Plan for Elcrest at the end of 2020 was acceleration of first oil in the
971bopd Ubima has been finalised. $520 million (including RBL) and event of exploration success.
2020 working interest until the $417 million shareholder Sibiri carries a risked best
gas production: loan is repaid, Seplat will estimate gross prospective
n/a continue to consolidate oil resource of 78 MMbbls.
Remaining working interest Elcrest into its results.
2P oil reserves:
4MMbbls
Remaining working interest
2P gas reserves:
n/a
2021 activities:
Production and development

46 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc

Following the tragic BRVS Strategic Report   01—77
accident in July, operations at
Gbetiokun were suspended for Maintenance and Development of Eland Governance Report   78—144
several weeks but exports were safety are a constant The acquisition of the entire issued share capital of Eland Oil
able to recommence at the end of focus for Seplat’s & Gas PLC completed in the United Kingdom at the end of 2019
August. The three investigation operational employees. and was Seplat’s first corporate acquisition. Seplat acquired the
teams deployed identified failure jointly operated OML 40 through its indigenous joint-venture
of the Permit to Work system as subsidiary Elcrest, the share of Ubima, and the Aberdeen-based Financial Statements   145—308
the root cause of the incident and technical and service support of the Eland organisation.
recommended improvement
actions. Sixteen of the Between them, OML40 and Ubima produced 26.3% of the Group’s
recommendations, including all liquids in 2020.
high-urgency items, have been
closed out and the final two Eland provides Seplat with increased production and reserves
items will be concluded shortly. and further exposure to exploration potential, as well as
furthering Seplat’s access to international technical expertise
Operations were further and services in Aberdeen to augment our staff in Nigeria.
impacted by the incident on the
MT Harcourt, a 180,000 bbls From December 2019, we have been focused on identifying ways
storage vessel used at in which the Seplat and Elcrest organisations could work
Gbetiokun that occurred in effectively together, and ways in which the joint venture company
November. A JV led investigation Elcrest could leverage the Seplat corporate organisation to
team identified poor contractor enhance its capabilities and improve operations at OML40.
practices as the root cause of
the incident which led to a From the start of 2020, despite the challenging environment
rupture of the vessel’s ballast of the Covid-19 pandemic and suppressed oil prices, Aberdeen-
tank hull. MT Harcourt is a based staff continued to support OML 40 operations and, as
self-contained vessel operated the year progressed the inherent value of the Aberdeen office
by Union Maritime leased under emerged and in December 2020 it was reorganised to become
the Project Management Team a Centre of Excellence for the Seplat group. It will allow Seplat
arrangement between NPDC greater access to the global energy hub of Aberdeen for
and Elcrest for the development traditional oil and gas expertise, together with expertise in
of OML 40 Gbetiokun field. power, renewables and carbon capture. This will include access
Three of the six actions to vendors, technology development and industry networks, and
recommended have been importantly to build university links between Nigeria and Scottish
closed out, including a marine universities and enable knowledge transfer to Nigeria through
audit of all OML 40 vessels and training of Seplat staff, government partners and communities.
spill clean-up completed.
The Seplat Aberdeen office will also host teams for exploration,
Elcrest’s management has technical support for business development and new energy,
prioritised building a robust subsurface, engineering and finance. All of these teams report
HSE culture across the into the Seplat corporate organisation.
organisation and aims to finalise
implementation of the enhanced Within Nigeria, Seplat has supported Elcrest in areas such
standards across its locations. as corporate social responsibility (CSR), drawing upon the
experience and expertise of Seplat to develop improved policies
and procedures, community engagement structures and
sustainability strategy.

Seplat Petroleum Development Company Plc Annual Report and Accounts 2020 47

Operational Review – Gas assets

SEPLAT’S Gas business performance
GAS ASSETS Alongside the oil business, the Company has also prioritised the
2020 development and commercialisation of the substantial gas reserves
IN REVIEW identified in its assets. Today, Seplat is a leading supplier of processed
natural gas to the Nigerian domestic market.

Seplat’s working-interest production for the year was 101MMscfd at
an average selling price of $2.87/Mscf (2019: 131MMscfd, $2.84/Mscf).
Gas contributed $112.5 million of Group revenues, or 21.2%. This was
lower than planned as a result of the indirect impact of Covid-19 on
Nigerian businesses for most of the year, which affected bulk offtake
from Oben. Delays in production from Oben-50 gas well further
exacerbated the effect, following a restoration in demand in the
later part of the year.

An electricity tariff increase, that saw prices to consumers rise
by an average of 75%, became effective in November 2020. This
cost-reflective tariff has improved the collection system recently
implemented by the Government and is expected to improve cash
flow to the power sector and therefore future invoice settlements.

Oben Gas Plant Sapele Gas Plant

We successfully completed a The Oben-48 gas well, drilled Decommissioning of the surface The project is expected to be
15‑day turnaround maintenance in late 2019, came onstream in infrastructure of the existing gas completed in the second half of
(TAM) for the Oben Gas Plant in the first quarter of 2020, while plant reached completion in the 2022, with Sapele’s processing
March and lessons learned were Oben-49 came onstream in the fourth quarter of the year. Site capacity increasing from
successfully embedded. Gas fourth quarter of 2020. Both preparation and civil 60MMscfd to 75MMscfd. The
production was affected during wells are currently producing construction works for the new upgraded facility will produce
the maintenance period and a gross 42MMscfd combined. plant have commenced gas that meets export
this impact was amplified by Oben-50 was drilled in the fourth alongside piling activities. specifications, and the LPG
third-party infrastructure quarter, coming onstream in processing unit module will
downtime of 17% due to Q1 2021. For the new plant, we have taken enhance the economics of the
associated condensate delivery of the Associated Gas plant, as well as ensuring that
handling challenges. Compressors and seven gas any gas flaring is eliminated.
generators have been completed
ex-works. Procurement of the
remainder packages and the
balance of the plant equipment is
at various stages of contracting,
detailed engineering design and
fabrication.

48 Annual Report and Accounts 2020 Seplat Petroleum Development Company Plc