Seven Energy International Limited, an integrated gas company in south east Nigeria with upstream oil and gas interests in the region, has taken a serious beating from the shutdowns of Forcados and Qua Iboe terminals.
The company, which stated this in its results for the six months ended June 30, 2016, said gross production under the Strategic Alliance Agreement between Seven Energy and the Nigerian Petroleum Development Company from Oil Mining Leases 4, 38 and 41 averaged 18,800 barrels of oil per day in the first half of this year, compared to 47,200 bopd in the same period last year.
It said the fall in production was due to the shutdown of the Forcados terminal and declaration of force majeure by Shell from mid-February, adding “Current expectations are that the force majeure will be lifted late in the third quarter of 2016.”
Seven Energy said it lifted no oil from the OMLs during the first half of the year, compared to 1.8 million barrels last year.
It said liftings from Stubb Creek and Uquo fields during the period totalled 182,000 barrels, down from 85,000 barrels in the first half of 2015.
“In July, ExxonMobil declared force majeure at its Qua Iboe terminal which is currently shut down and has resulted in oil production from Uquo and Stubb Creek being suspended for an undefined period,” the company said.
Seven Energy posted a loss after tax of $4.5m in the first half of 2016, compared to the $53m loss it recorded in the same period last year. The reduction in the loss was as a result of a $40m foreign currency exchange gains from the recent decline in the value of the naira.
The Chief Executive Officer, Seven Energy, Phillip Ihenacho, said, “The macro-environment in Nigeria and the ongoing issues within our industry present our company with an extremely challenging environment. So far during 2016 we have received no revenue from our interests in OML 4, 38 and 41 as a result of the shutdown of the Forcados terminal.
“While our flagship gas business continues to increase delivery volumes, we have experienced some setbacks. The rate at which our customers are able to bring their demand to full contractual quantities is behind schedule. Additionally, whilst our gas sales are priced in US dollars we receive payment in naira due to foreign currency exchange controls, which is difficult to convert to service our US dollar loans.”
Ihenacho said, “These factors are putting intense pressure on the Group’s liquidity,” adding that the company remained totally committed to delivering gas for domestic electricity generation and industrial use in Nigeria.
According to the company, a new funding plan to reduce the payables balance relating to OMLs 4, 38 and 41, is in the process of being agreed between Seven Energy, Nigeria Petroleum Development Company and Seplat Petroleum.
It said under this plan, NPDC would fund Seven Energy’s share of cash calls for 2016, given that Seven Energy was already in an under-lifted position at the beginning of the year and has received no oil lifts from the blocks this year.
“In addition, during 2016, Seven Energy would be allocated $120m of oil lifts, of which $100m would be used to reduce approved operating expenses of $223m. During 2017 and 2018, the majority of Seven Energy’s allocation of liftings would be used to fund ongoing cash calls and to complete payment of the payables balance,” the company said.