CLEAR AND TARGETED GROWTH

Nigeria 2019 | GAS & POWER | INTERVIEW

As one of the country's major players, Seplat is set to grow by organically expanding existing operations as well as acquiring others.

Austin Avuru
BIOGRAPHY
Austin Avuru started his career with NNPC in 1980, where he was a well-site geologist, production seismologist, and reservoir engineer. He left NNPC in 1992 to become technical manager/Deputy COO of a pioneer deep-water operator start-up, Allied Energy Resources. Buoyed by his appetite for value creation, in 2002 Avuru assembled an array of industry professionals to form Platform Petroleum Limited and became its managing director. Following the divestment program by IOCs, Avuru’s team at Platform worked with Shebah Exploration and Production Company to form SEPLAT in 2009. Under Avuru’s leadership, the company has grown to now produce 70kbd of crude oil and 280mmscfd of gas. Avuru is an alumnus of the Harvard Business School.

How have the past three years of low prices forced you to optimize your operation?

Prices fell in 2015, and six months later was the outage of Trans Forcados Pipeline, so this was a challenge. We were averaging about 10,000bpd at a low-price regime. We had to react quickly, and the first thing we did was to rejig our 2015 and 2016 work programs and reduce operations to a bare minimum. We combined this with also minimizing our OPEX costs. We had to improve efficiency and reduce costs, as our goal at the time was to survive. Finally, by mid 2017 we saw the light at the end of the tunnel, and by the end of 2017 we were back to full production. We were then able to start addressing the quality of our balance sheet, and the results were seen in 1Q2018.

What role will your recent USD350-million bond offering play?

The entire refinancing package was targeted at two things. The first was to reduce our cost of borrowing with Nigerian banks, which was approaching 12% dollar debt, and about 7% for our revolver with foreign banks. In the aggregate, the combined bond and bank loan gives us a gross debt of USD550 million at a cost that is closer to 8.15%, rather than 12%. Over the next three years, it gives us a great deal of room to accumulate cash, which we can then re-invest. This gives us some money to spend on increased CAPEX. In 2016 and 2017, CAPEX spending was minimal, and we now have to go on a more aggressive spending spree. For 2H2018, we were back to drilling wells, and in 2019 we will increase the number of wells and critical facilities to maintain production and eliminate any drop in production. We will also have a balance sheet strong enough to support any acquisition that falls our way. In addition to organic growth by spending more money on the ground, we are also looking at inorganic growth by acquisition.

What role has the government played in the development of the gas sector?

The government has done a fantastic job since 2012 to boost domestic demand and capacity to increase domestic supply through the gas master plan. Demand already captures a market-driven price. Any government intervention now will only be in the way; the transition is over and it should only supervise willing buyer and willing seller negotiations rather than impose prices.

What is your vision for the year ahead?

In 2018, we moved to the beginning of our build stage, which is where we are currently. 2018 and 2019 are years of building up our business, strengthening our balance sheet, and returning to and maintaining profitability. We have told the market that we want to be able to consistently pay dividends and be consistently profitable through growing the business with both oil and gas production and oil and gas reserves. By the end of 2019 we want a large chunk of our future business to be fairly predictable in terms of balance sheet quality, profit, and production. The building blocks in order to do so involves spending more CAPEX in drilling and so on and looking at acquisitions when they are available. We are preparing the balance sheet to be ready for those building blocks so that business will be more solid and predictable in the future no matter where the oil price takes us.