Last year turned out to be a disappointing period for many oil companies, and Seplat Petroleum was one of them as it also recorded significant losses. The oil firm recorded a loss of $114.4 million.
That’s a significant amount when converted to naira, N41.1 billion. This loss was incurred on a disputed oil block, OML 55, which Seplat co-manage with Belemaoil in Niger Delta.
According to the audited report of the company, the loss was blamed on decline in oil price which was sent downwards by the COVID-19 pandemic and lockdown of global trade. Global oil price hit its lowest in over three decades after falling to as low $20 in April 2020.
The statement reads that the impairment loss was due to “result of re-assessment of future cash flows from the Group’s oil and gas properties due to significant fall in oil prices”.
The loss was the biggest in five years since it incurred N45.3 billion in 2016, and adding to the company’s N30.7 billion full-year loss in 2020. The oil price started to improve strongly when global trade resumed to full capacity in the first quarter of this year.
The revised OML55 commercial arrangement with Belemaoil for the monetisation of 67.5 kbbls enables Seplat to collect total proceeds of $4.8 million.
What you need to know
Prior to the deal between both companies, Belemaoil co-own the oil block with Nigerian National Petroleum Corporation (NNPC) – which accounts for 60 percent – after purchasing the 40 percent stake Chevron Nigeria Limited had in the OML 55.
Seplat entered an agreement to purchase 56.25 percent working interest in the stake Balemaoil has in the oil block six years ago in order to gain from the OML 55 block.
Later, Seplat claimed that it has 22.5 percent in Belemaoil’s shares in OML 55, but Belemaoil denied the oil giant’s claim.