04 August 2015, Lagos – The management of Seplat Petroleum Development Company Plc, has a gain clarified it received the pioneer tax incentive after fulfilling all conditions for which such should be granted. The clarification came even as the company’s half year revenues dropped by 36 per cent to $247.58million and pretax profit down by 73.5 per cent to $41.26million.
Seplat in its half year, 2015 Annual Report said: “In early 2015, the Nigeria Investment Promotional Council, NIPC, notified oil and gas companies which are in receipt of the pioneer tax incentive of its intention to test compliance with the conditions under which the incentive was granted to all companies, including Seplat, in order that the final two out of five years of the incentive be received.
“The Company is currently in the third year of the scheme and considers that it has met or exceeded these requirements.” However, industry experts insist that the pioneer status “had been misapplied in many instances and thus huge sums of money – taxes lost.” They wondered, “Why give a marginal field producer who produces up to 40,000 bd a pioneer status when he paid little or nothing for the field?
Shops for $300m
Despite the tax relief, Seplat is faced with funding challenges, as the company revealed that it is seeking loan facilities of up to $300milion about N59billion to fund joint venture cash calls. The company had entered into strategic alliance agreements with Septa Energy and Atlantic Energy for the funding of some of the divested assets assigned to it by the NNPC in 2011.
The company said, “The NPDC and Seplat have agreed to jointly source loan facilities, up to a limit of $300m, to fund joint venture cash calls with effect from January 2015.” On agreement and workout of the field, both NPDC and Seplat would each contribute an allocation of crude oil production proportionate to their working interest in order to repay such loan facilities. However, Seplat has engaged with potential lenders to implement this arrangement.
The company said it had continued to fund the NPDC/Seplat JV despite being owed substantial sums in unpaid cash-calls by NPDC. More so, “The outstanding net NPDC receivable as of June 30, was $504million. On July 14, the company entered into a signed agreement with the NPDC on terms for the payment of arrears due to Seplat and for the future structure of joint venture funding to mitigate the risk of the receivable.
It further said the outstanding sums owed to Seplat in relation to joint venture expenditures up to December 31, 2014 would be settled by offsetting gas revenues attributable to the NPDC’s 55 per cent share of contracted gas sales.. “A total of $242million (N48.2billion) has been approved as cash calls for 2015 while a total of $320million (N63.7billion) is still undergoing various approval levels within the NPDC.
Receipts from the NPDC during the period amounted to $68.4m and payments amounted to $166.6m. “Having agreed with the NPDC to offset the NPDC’s gas revenues against the receivable balance in respect of sums owed to Seplat in relations to the period prior to December 31, 2014, the group has withheld gas revenues of $22.7million in the first six months that are attributable to the NPDC’s 55 per cent interest.
“An additional sum of $34.5millio payable to the NPDC in respect of crude handling charges for use of the TFS has also been withheld by the group to be offset against sums owed. Consequently, the adjusted net receivable as of June 30, 2015 stood at $504.2million,” Seplat concluded.