The Chairman of Seplat Petroleum Development Company Plc, Mr. ABC Orjiako spoke to journalists on the operations and future plan of the company shortly after its annual general meeting in Lagos last week. Goddy Egene presents the excerpts:

You have been talking about inorganic expansion plans. When are you looking forward to closing a deal in that respect?

Seplat remains focused about our growth plans both organically and inorganically. Organic growth is what you are seeing today in our increasing production in oil and gas. We have increased production in terms of oil and gas. Another area you are seeing in terms of our inorganic growth is the diversity we have been talking about. Diversity in terms of geography, location, and competencies and that is therefore driving the kind of acquisition we are going to have. So the company remains focused and I cannot tell you specifically about the acquisition. But you will be seeing us very active in mergers and acquisitions both for assets as well as corporate acquisitions.

But are you in talks with any organisation presently?
None that I am in a position to tell you now, but we are continuously looking at all of those areas that fit into our vision for growth, acquisitions and any mergers that are valuable to owners of the company and shareholders and all the stakeholders.

You said it is more lucrative to put gas in the domestic market and the company is doing between 25 and 30 per cent currently. Are you comfortable with that range?

I did say before that we are the highest indigenous producer in that area and we can only improve on it. And if it is profitable to do this both in terms of the revenue we make from it as well as a Nigerian company supporting the power development in Nigeria, that is really what we are focusing on.

Gas contributed about 27 per cent to your revenue in 2017, do you hope to do more in 2018?
Gas is major area of expansion, so we will see that ratio continue to grow. From our perspective, if gas can do 50 per cent, we are happy to have it. If you look at the gas price in domestic market, it is more stable than the global oil price that has remained very volatile. So, the more gas you produce, the more consistency you exhibit in that sector and the better for shareholders. So, we are focusing on that area very well.

There is the need for local refineries in order to boost supply of petroleum products to the domestic market. Is Seplat planning to set up a refinery?
We are a very dynamic company and we are looking at the very broad spectrum of the value chain of energy not just oil and gas. So at this point, we are not going to make any categorical statement to say we will not invest in refinery. But at this point, we do not have any investment in refinery. It is a wide spectrum we are looking at. But for today, we are focusing on one area that we know that we can consolidate on our strength and that is oil and gas production. We are doing well in that and we need to consolidate on that.

You have a partnership agreement with Azura, are we looking at more of such agreements going forward?
Definitely, there are many companies making enquires and we are negotiating with a good number of them. And many of them who have track records of delivery have been approaching us and we are looking at having more willing buyers and willing sellers.

Seplat had a good outing in the first quarter of 2018 and apart from the rising crude oil price, what other factors contributed to the improved performance?

One thing we do is to ensure that we remain a low cost producing company. And all things we have done during this period are to give the assurance and guarantee to make sure our production comes to the market. That is why you hear about the alternative export route. Most of these we initiated either from beginning to the end or we are part of. There is hardly any export route that is working very well that Seplat is not involved in and that is the main reason while we will continue to achieve success and increase revenue.

Oil price is trending well, what price will enable Seplat break even and assuming the current price remains, what will that mean to your earnings?
Normally, when oil price is high, there is this mistake oil companies make and that is once oil price goes high, you just go spending. But at Seplet, we keep our eyes on cost. If you look at the cost of a barrel production, it one of the lowest in the country and we continue to improve on it regardless of oil price. That is what makes our business profitable in the long-term. And this is what you see consistently. If we can save any dollar, any kobo, we will make sure we save and so our cost reduction is not just based on oil price. What I can tell you is that this company is in a profitable business.

We have continued to deliver profit year-on-year and we will continue to do that in a very long future. Remember, what we have consistently told our shareholders and stakeholders is that this company will grow in revenue, we will grow our reserves and we will grow our production. We will commercialise gas and make all of these profitable. We are going to deliver value to all stakeholders and these are things we continuously do every year and that measures our success. We have also promised shareholders capital growth, that is why we are focusing on making that our shares trade well and the fundamentals are right. That is why we make a very strong policy about giving a dividend. So, apart from capital growth, we also put money in their pockets.

Will you say your plan for capital growth was what delayed payment of dividends?
When we look at capital growth for shareholders, you are looking at their cost per share and the real value of whatever quantum of shares they have. We want to make sure that if you came in with one dollar, the value of your one dollar should be trending higher. And when you look at the dividend, the reason we did not pay till 2015 was because we wanted to be a prudent company. There are companies that go to borrow money to pay dividend. At the time we did not pay dividend, if you look at our net cash flow, it was positive but we felt it is important as a board to remain prudent. Now we decided to pay dividend and because we have very enlightened and educated shareholders, we make sure that we do what is best for them. If we had paid them dividend when the company was making losses, I bet you, many of them would have asked questions. But our policy favours consistent dividend payment.

What will be is your capital expenditure plan over the medium term and how do you intend to deploy these funds?
Most of our capital expenditure will to gas. We are also going to have capital expenditure in drilling wells in the coming years. On our production guidance we very optimistic of meeting it but we do not take production guidance in isolation. When we increase production, we also ensure that there is an increase in our reserves. So really, in taking the guidance, we are looking at reserves production ratio. What this means is that we do not want to produce oil today and do not reserves for tomorrow. We make sure we balance it not only just balancing because we want to be extremely professional in the way we operate, but we want to make sure that revenue streams of the company are sustained in the long term.

Now with Oben 11 completed, are expecting Oben 111?
Obviously, you know we looking to improve on Sapele gas but the ANOH gas project is the key for our gas development in the immediate term. A lot of the things and there is engagement with the communities. One of the experiences and that is what Seplat has been doing, talking to the communities, once you engage and manage the communities well, they are extremely reasonable and cooperate well. Most of the things we hear about the Niger Delta is because of inadequate engagements and inappropriate relationship. These people require respect, both for themselves, the environment and the way you conduct your business. Once you get this done, you find them very amiable and cooperative.

Will Seplat raise capital in the near future, especially now that you have acquisition plans?
We do not raise capital in isolation and whenever we have a need for more capital, we know what to do. One of the things we are happy about is our strong balance sheet. We have a very good business going on and whenever we are going to have any project that we will put on, experience has shown that our access and ability to raise capital within very short time is assured.