THUR, MARCH 07 2019-theG&BJournal-Seplat Petroleum Development Company has been hit by tax liability that prevented the Nigerian oil producer from turning each Naira invested in sales into higher profit.
This is the worst results since 2016 when incessant attacks on oil facility at the Forecados Terminal and a drop in crude oil price saw the company record a loss, but it has been sustaining profitability for six successive quarters.
For the year ended December 2018, Seplat’s net profit fell by 44.69 percent to N44.86 billion from N81.11 billion as at December 2017.
The reduction in profit was due to an income tax expense of N35.74 billion as the company recognised the effect of post pioneer tax status while preparing 2018 financial statement.
“In May 2015, in line with Sections of the Companies Income Tax Act which provides incentives to companies that deliver gas utilisation projects, Seplat was granted a tax holiday for three years with a possible extension of two years,” the company said in notes to the account.
“In 2018, on review of the performance of the business, the Group provided a notification to the Federal Inland Revenue Service (FIRS) for the extension of claim for the additional two years tax holiday,” said the company.
The oil and gas giant’s net profit margins fell to 19.64 percent in December 2018 as against 56.84 percent the previous year.
While profit was hard hit by exceptional items, a strong uptick at the top lines buoys operating performance.
Sales were up 65.19 percent to N228.39 billion in December 2018 from N138.39 billion the previous year, thanks to from higher oil production in 2018 and higher oil price realisations.
Also, gas revenue reached a new record of N47.58 billion in the period under review, up 26 percent year-on-year and accounting for 21 percent of total revenue.
The full resumption of a full year of productions after force majure was lifted combined with higher oil price was a boon for Seplat as gross profit spiked by 84.87 percent to N119.45 billion in the period under review as against N84.62 billion as at December 2017.
Operating profit for the year surged by 176.02 percent to N94.87 billion as at December 2018, but impairment adjustments based on International Financial Reporting Standard (IFRS) 9 requirements affected prior year numbers and resulted in an increase in G&A expenses for 2017 to N28.06 billion.
Further to this, the board of Seplat is recommending a final dividend of US$0.05 per share. Subject to approval of shareholders, the dividend will be paid shortly after the AGM which will be held on16 May 2019 in Lagos, Nigeria.
Having emerged from a period of weak macro conditions and a disrupted operating environment in 2016 and 2017, the board of Seplat has recommended a final dividend of $0.05 or N15.25 per share for 2018 financial year.
Seplat’s share price closed at N596.90 as of 2:00 pm Lagos time Wednesday, valuing it at N596.90 billion.
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