RESULTS (UNAUDITED) FOR THE FIRST HALF 2016
London, Lagos, 26 August 2016: Seven Energy Finance Limited, together with its parent company Seven
Energy International Limited (“Seven Energy” or the “Group”), the leading integrated gas company in south
east Nigeria, with upstream oil and gas interests in the region, today announces its results for the six
months ended 30 June 2016.
Highlights for the six months ended 30 June 2016

Total gas deliveries from the south east Niger Delta gas business continued to show growth, with
an average of 95 million standard cubic feet per day (“MMcfpd”) (H1 2015: 57 MMcfpd)

Net oil entitlement averaged 16,000 bopd (H1 2015: 16,000 bopd). No liftings were received from
OMLs 4, 38 and 41 as a result of the prolonged, and ongoing, shutdown of the Forcados terminal;
as a result the only oil revenue received was $7 million (H1 2015: $5 million) from interests in the
south east Niger delta

48% reduction in Administrative Expenses following cost reduction initiative

EBITDAX of $66 million (H1 2015: $66 million)

Loss after tax of $4.5 million (H1 2015 loss: $53.0 million)

Cash flow provided by operating activities $41 million (H1 2015: $83 million)

A $40 million foreign exchange gain was recognised in the period, arising from a devaluation of
the Naira
Phillip Ihenacho, Chief Executive Officer, Seven Energy, commenting on the results 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.
Whilst our flagship gas business, located in the south east Niger delta, 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.
These factors are putting intense pressure on the Group’s liquidity. Despite this, Seven Energy continues to
operate its gas business to the highest international standards, and remains totally committed to delivering
gas for domestic electricity generation and industrial use, a key growth area in Nigeria’s developing
economy with its rapidly urbanising population.”
OPERATIONAL UPDATE
South east Niger Delta
During the first half of 2016, Seven Energy gas deliveries in the south east Niger Delta averaged 95 MMcfpd
(H1 2015: 57 MMcfpd). Due to delays in the ramp-up of demand from our key customers, deliveries in the
second quarter 2016 averaged 89 MMcfpd, down versus the first quarter average deliveries of 101
MMcfpd. The increase from the 2015 average gas deliveries of 70 MMcfpd was due to the increase in gas
sales to the Calabar NIPP and Alaoji NIPP power stations as they increase their electricity generation into
the power grid.
Alaoji NIPP, with whom we have a short term supply contract, has not taken any gas from Seven Energy
since June whilst a new third party gas delivery line is tied in to the gas distribution system. We remain
optimistic that Alaoji NIPP will commit to a long term supply contract, though there is no certainty that such
a contract will be agreed. Increased delivery volumes in the second half of 2016 rely on: completion of
expanded electricity distribution lines from Calabar; completion of our Oron to Creek Town pipeline; and
also completion of the plant expansion to double capacity at the Unicem cement works. Once both NIPP
Calabar and Unicem move to a position of operating at full capacity we project our gas deliveries to be in
the range of 150-200 MMcfpd, and we forecast to reach the lower end of this range by the end of 2016 and
the upper end in 2018.
Seven Energy’s gas infrastructure in the south east Niger Delta is complete and operational, apart from the
section of pipeline that runs from Oron to Creek Town. A 2.4 km river crossing section of this pipeline, which
uses a high deviation drilling technique under a river, has had to be redrilled. Completion of this pipeline, is
now forecast to be in October.
Average gross oil production from the Stubb Creek and Uquo fields was 2,400 bopd for the period (H1 2015:
1,600 bopd), with net entitlement to Seven Energy of 900 bopd (H1 2015: 600 bopd). Liftings during the
period totalled 182 Mbbls (H1 2015: 85 Mbbls), realising an average oil price of $39/bbl (H1 2015: $63/bbl).
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.
North west Niger Delta
During the first half of 2016 gross production under the Strategic Alliance Agreement between Seven
Energy and the Nigerian Petroleum Development Company from OMLs 4, 38 & 41 (the “OMLs”) averaged
18,800 bopd (H1 2015: 47,200 bopd). As previously reported, the fall in production during 2016 is due to
the shutdown of the Forcados terminal and declaration of force majeure by Shell from mid-February.
Current expectations are that the force majeure will be lifted late in the third quarter of 2016.
Seven Energy’s average net entitlement from the OMLs for the first half of 2016 was 15,100 bopd (H1
2015: 15,400 bopd). The fall in gross production and lower development activity, and thus expenditure
levels on the blocks, has led to a drop in net entitlement. This was offset by the fall in the oil price to an
average of $32/bbl during the period, which results in a greater proportion of production being allocated
to recover costs. During the first half of 2016, the Group lifted no oil from the OMLs (H1 2015: 1.8 MMbbl),
due to the extended shutdown at the Forcados terminal, compared to an entitlement volume of 2.7
MMbbl for the same period (H1 2015: 2.8 MMbbl).
FINANCIAL UPDATE
EBITDA (and EBITDAX) for the first half of 2016 was $66 million (H1 2015: $66 million). In contrast to 2015
however the contribution to EBITDAX from the south east Niger Delta business for the period rose to $32
million (H1 2015: $12 million) which highlights the growing importance of the south eastern gas business
to Seven Energy reflecting the increase in gas sales in the region. In contrast the contribution from the
OMLs decreased to $43 million (H1 2015: $64 million) due to a reduction in entitlement as stated above,
and no oil lifting from the Forcados terminal to date in 2016.
Corporate costs for the half year, before taking into account a one-off restructuring expense, reduced to
$13 million (H1 2015: $26 million). As previously reported, following our restructuring activities, we are
forecasting annual cost savings of 20-30% with total administrative running costs for the year (before
allocation of costs, with approximately 25% to capital expenditure and 25% to operational expenditure)
expected to be in the region of $55 million, decreasing to $40 million in 2017. The total expense charged to
date for the restructuring programme is $8 million.
A new funding plan to reduce the payables balance relating to OMLs 4, 38 & 41, is in the process of being
agreed between Seven Energy, Nigeria Petroleum Development Company and Seplat Petroleum. Under
this plan, NPDC would fund Seven Energy’s share of cash calls for 2016, given that Seven Energy was
already in an underlifted 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 $120 million of oil lifts, of which $100
million would be used to reduce approved operating expenses of $223 million. 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.
In February, we announced the successful closure of a $100 million equity raise. This comprised $50 million
from existing shareholders of the Group, and $50 million invested by the IDB Infrastructure Fund II,
sponsored by the Islamic Development Bank and other institutional investors.
A number of initiatives are being pursued to address our current liquidity position, and to align our debt
with the forecast cash inflows from our midstream infrastructure assets.

We are making good progress in agreeing a revision to the amortisation schedule of our Accugas
infrastructure facility, which will reduce the near term debt service obligations while our gas
revenues build up during 2017. At the same time certain financial covenants are being amended or
waived.

Work is ongoing to replace by the end of 2017 a portion of this Accugas debt facility with longer
term funding from a number of potential providers including Nigerian banks, international banks
and Development Finance Institutions who are able to provide debt with a longer tenor more
suited to our mid-stream assets and long term gas delivery contracts.
The loss after tax for the first half of 2016 was $4.5 million (H1 2015: $53.0 million loss), a result
significantly benefited by $40 million of foreign currency exchange gains (both realised and unrealised)
from the recent decline in the value of the Nigerian Naira. The currency remains under significant pressure
and the ability for the company to convert Naira to US dollars remains effectively blocked. This was
partially offset by the $8 million charge for restructuring costs. Production expenses reduced by $42
million to $67 million compared to the same period last year (H1 2015: $109 million) due to a reduction in
activity at the OMLs, partially offset by an increase to $20 million (H1 2015: $17 million) from the south
east Niger Delta gas assets. Production expenses are now estimated to be $30 million for 2016 in the south
east Niger Delta, increasing to approximately $45 million in 2017 in line with forecast increased gas sales in
the region.
The first half of 2016 saw a reduction in capitalised expenditure to $44 million (H1 2015: $138 million).
Expenditure was predominantly related to the Oron to Creek Town pipeline, with minimal capital
expenditures incurred on OMLs 4, 38 & 41, as activity was slowed during the extended production
shutdown.
Cash and cash equivalents at 30 June 2016 was $33 million (31 December 2015: $30 million). Cash
provided by operating activities decreased by 51% to $41 million compared to the same period last year
(H1 2015: $83 million), impacted by the shutdown at the Forcados terminal and by an increase in our
debtor days from 80 days to 142 days from our gas customers, with $52 million outstanding at 30 June
2016. The Group spent $72 million on capital expenditures in the first half of 2016 (H1 2015: $72 million)
which predominantly related to $43 million cash paid on the OMLs relating to prior period costs and $29
million on the south east Niger Delta gas assets.
Capital expenditures on the south east Niger Delta gas assets for the full year 2016 are forecast to be in the
region of $50-55 million and the same in 2017 before increasing to $70 million in 2018, then $110 million
for 2019 due to additional gas and oil well developments and associated facilities before reducing to
approximately $30 million in 2020 to 2021.
For further enquiries, please contact:
Seven Energy International Limited
Phillip Ihenacho, CEO
+44 20 7518 3850
Bruce Burrows, CFO
Joe Kaye, Group Head, Finance
John Arthur, Investor Relations Officer
Brunswick Group
Patrick Handley
+44 20 7404 5959
William Medvei
Caritas Communications
Okwudili Oniya
Africa Practice
Tim Newbold
+234 809 996 1007
+234 805 494 9866
About Seven Energy
Seven Energy, founded in 2004, is the leading integrated gas company in south east Nigeria, with upstream
oil and gas interests in the region. With a deep understanding of the domestic Nigerian gas market,
supplying gas to the power generation and manufacturing industries, principally through its own
integrated processing and pipeline infrastructure, and the backing of strategic long-term investors, the
Group has a unique focus on the emerging Nigerian domestic gas market. The Group’s midstream gas
infrastructure assets, focused in the south east Niger Delta, include the 200 MMcfpd Uquo gas processing
facility and a gas pipeline network of 227 km with distribution capacity of 600 MMcfpd. Its upstream assets
include licence interests in the Uquo Field and the Stubb Creek Field (south east Niger Delta), an indirect
interest in OMLs 4, 38 & 41 through a Strategic Alliance Agreement with Nigerian Petroleum Development
Company (north west Niger Delta) and a licence interest in OPLs 905, 907 and 917 (Anambra Basin). The
Group has its main offices located in Lagos and London.
Seven Energy Finance Limited is a wholly owned subsidiary of Seven Energy International Limited
incorporated in the British Virgin Islands. The Company is the issuer of $300 million, 10.25% Senior Secured
Loan Notes, due 2021, which are listed on the Irish Stock Exchange.
For more information on Seven Energy please visit www.sevenenergy.com
Seven Energy International Limited
Condensed consolidated statement of comprehensive income
Note
Revenue
Change in underlift
Production expenses
Depletion
3
Six months ended Six months ended
30 June 2016
30 June 2015
Unaudited
Unaudited
$000
$000
66,538
88,694
(66,737)
(59,291)
144,798
58,346
(109,022)
(78,100)
29,204
16,022
(1,184)
(1,153)
(8,466)
(13,228)
(1,643)
(2,384)
(25,680)
5,173
326
(51,786)
11,363
28,356
(13,685)
39
(47,442)
(224)
6,277
(6,568)
2,055
(55,035)
2,128
Loss for the period
(4,513)
(52,907)
Loss for the period
Total other comprehensive expense for the period
(4,513)
-
(52,907)
-
Total comprehensive expense for the period
(4,513)
(52,907)
Attributable to:
Owners of the company
Non-controlling interests
(4,589)
76
(52,050)
(857)
(4,513)
(52,907)
(1.06)
(1.06)
(13.23)
(13.23)
10
Gross profit
Depreciation and amortisation expenses
Other operating expenses
Restructuring expenses
Administrative expenses
Operating profit/(loss)
Investment revenue
Finance costs
Foreign exchange gains/(losses) - realised
- unrealised
Loss before tax
Tax credit
Loss per share ($ per share)
Basic
Diluted
10
4
5
7
8
All operations relate to continuing operations in 2016 and 2015.
1
Seven Energy International Limited
Condensed consolidated balance sheet
Note
Non-current assets
Interest in joint arrangements
Intangible assets
Property, plant and equipment
Other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
9
10
12
11
12
Total assets
Current liabilities
Trade and other payables
Borrowings – scheduled payments within one year
– scheduled payments after more than one year
Deferred revenue
Current tax liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Deferred revenue
13
14
14
Total liabilities
Net assets
30 June 2016
Unaudited
$000
31 December 2015
Audited
$000
11,528
105,616
1,707,378
7,817
52,728
11,528
104,714
1,725,303
8,641
46,938
1,885,067
1,897,124
317,680
100,552
33,354
228,988
119,015
30,473
451,586
378,476
2,336,653
2,275,600
(572,445)
(96,748)
(303,205)
(23,243)
(720)
(585,055)
(70,111)
(354,542)
(720)
(996,361)
(1,010,428)
(422,607)
(132,105)
(52,372)
(55,520)
(420,818)
(128,371)
(50,945)
(79,316)
(662,604)
(679,450)
(1,658,965)
(1,689,878)
677,688
585,722
5
96,111
1,019,567
(501,765)
44,145
5
96,111
920,909
(497,176)
46,324
658,063
566,173
19,625
19,549
677,688
585,722
Equity
Share capital
Share premium
Irredeemable convertible loan notes (“ICLNs”)
Retained deficit
Equity reserves
Equity attributable to owners of the Company
Non-controlling interests
Total equity
16
The condensed financial statements were approved by the Board of Directors and authorised for issue on
26 August 2016.
Phillip Ihenacho
Director
2
Seven Energy International Limited
Condensed consolidated statement of changes in equity
Share
capital
$000
1 January 2015
Credit to equity for
share-based payments
Issuance of shares
Issuance of ICLNs
Total comprehensive
expense for the period
30 June 2015
(unaudited)
Credit to equity for
share-based payments
Expenses on issuance of
ICLNs
Total comprehensive
expense for the period
31 December 2015
(audited)
Credit to equity for
share-based payments
Treasury shares
Issuance of ICLNs
Expenses on issuance of
ICLNs
Total comprehensive
expense for the period
30 June 2016
(unaudited)
Irredeemable
convertible
Share
loan notes
premium
(“ICLNs”)
$000
$000
Retained
deficit
$000
Equity
reserves
$000
Total
$000
Noncontrolling
interest
$000
Total
Equity
$000
5
95,710
895,442
(316,183)
41,738
716,712
20,642
737,354
-
401
-
25,650
-
2,738
(401)
-
2,738
25,650
-
2,738
25,650
-
-
-
(52,050)
-
(52,050)
(857)
(52,907)
5
96,111
921,092
(368,233)
44,075
693,050
19,785
712,835
-
-
-
-
2,249
2,249
-
2,249
-
-
(183)
-
-
(183)
-
(183)
-
-
-
(128,943)
- (128,986)
(236)
(129,179)
5
96,111
920,909
(497,176)
46,324
566,173
19,549
585,722
-
-
100,000
-
145
(2,324)
-
145
(2,324)
100,000
-
145
(2,324)
100,000
-
-
(1,342)
-
-
(1,342)
-
(1,342)
-
-
-
(4,589)
-
(4,589)
76
(4,513)
5
96,111
1,019,567
(501,765)
44,145
658,063
19,625
677,688
3
Seven Energy International Limited
Condensed consolidated cash flow statement
Note
Net cash provided by operating activities
41,039
83,271
82
(71,582)
39
(72,450)
-
(1,323)
Net cash used in investing activities
(71,500)
(73,734)
Financing activities
Interest and financing fees paid
Net financing deposits paid
Repayments of borrowings
Proceeds from borrowings
Proceeds from the issue of ICLNs
(49,803)
(29)
(14,012)
100,000
(57,198)
(5,405)
(6,495)
81,810
-
Net cash from financing activities
36,156
12,712
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of foreign exchange rate changes
5,695
30,473
(2,814)
22,249
38,454
(868)
Cash and cash equivalents at the end of the period
33,354
59,835
Investing activities
Interest received
Purchases of property, plant and equipment and intangible
assets
Acquisition of subsidiaries, net of cash acquired
15
Six months ended Six months ended
30 June 2016
30 June 2015
Unaudited
Unaudited
$000
$000
4
Seven Energy International Limited
Notes to the Interim Report
1.
General information
Seven Energy International Limited (“the Company”) is incorporated in Mauritius under the Companies Act, 2001 (Act
No. 15 of 2001). The address of the registered office is Cim Global Management, Les Cascades, Edith Cavell Street,
Port Louis, Republic of Mauritius. The Company is the parent company of a group of companies (“the Group”) whose
principal activities are the exploration, development, production and distribution of oil and gas in Nigeria.
2.
Significant accounting policies
Basis of accounting
The annual financial statements of Seven Energy International Limited are prepared in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the European Union. These condensed set of financial
statements included in this interim report have been prepared in accordance with International Accounting Standard
34 ‘Interim Financial Reporting’, as adopted by the European Union and are unaudited and not reviewed, as defined
by the International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by
the Independent Auditor of the Entity. These condensed interim financial statements as of 30 June 2016, and for the
six months then ended, have been prepared by management as required following the issuance of senior secured
notes on the Irish Stock Exchange by the Group’s subsidiary, Seven Energy Finance Limited.
Going concern
The Group closely monitors and manages its liquidity risk. The Group aims to maintain adequate liquid reserves, by
continuously reviewing forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities. Cash forecasts are regularly produced and sensitivities run for different scenarios including, but not limited
to: changes in commodity prices, different production rates from the Group’s portfolio of producing fields and delays
in development projects. In addition, the Group regularly monitors its utilised and unutilised debt facilities. The Group
is funded by a combination of operating cash flows, debt facilities (see note 14) and equity.
On 15 April 2016, Accugas Limited, (a subsidiary of the Group), was successful in obtaining a temporary waiver to
30 June 2016 with respect to not fully funding the minimum balance of the Debt Service Reserve Account (“DSRA”) as
required under the Accugas IV Facility, for the periods ended 31 December 2015 and 31 March 2016. As at
30 June 2016, Accugas Limited continued not to fund the minimum balance of the DSRA and also not to fund the Ratio
Reserve Account (“RRA”). No further waiver renewal was sought or received before this date and therefore
Accugas Limited was not in full compliance with its loan obligations, and as a result the outstanding balance of the
loan has been disclosed within Current borrowings (note 14). The reason for not funding the DSRA and RRA and for
not seeking a waiver renewal, was a result of the near finalisation of the optimisation strategy of our midstream debt
facilities including:
(i) an Amendment Request to the Accugas IV lenders to:
o amend the terms of the DSRA and RRA funding requirements;
o amend certain Facility covenants; and
o re-sculpt the principal repayments.
(ii) ongoing discussions with various Development Finance Institutions to replace a portion (up to
$200 million) of the Accugas IV Facility with longer tenor debt, with the remaining balance amortising in years
2018 and 2019;
(iii) replacing the DSRA requirement with a third party Debt Service Guarantee (“DSG”); and
(iv) increasing the Naira working capital facility by a further $15 million (USD equivalent).
5
Seven Energy International Limited
Notes to the Interim Report
2.
Significant accounting policies (continued)
Going concern (continued)
Taking into account the challenging macro-environment effecting the Group’s operations and in the absence of
progress on the various initiatives identified above, the Directors acknowledge that material uncertainties exist which
may cast significant doubt on the Company and the Group’s ability to continue as a going concern. Nevertheless,
after making enquiries, the Directors are satisfied that the Group has sufficient resources to continue in operation for
the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue
to adopt the going concern basis in preparing these condensed financial statements.
Changes in accounting policies
In the current financial period, the Group has adopted the following amendments to accounting standards:
Disclosure Initiative (amendments to IAS 1)
Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
IAS 19 (amended): Defined Benefit Plans: Employee Contributions
Clarification of acceptable methods of Depreciation and Amortisation (amendments to IAS 16 & IAS 38)
Agriculture: Bearer Plants (Amendments to IAS 16 & IAS 41)
Equity Method in Separate Financial Statements (amendments to IAS 27)
Annual improvements: 2010–2012 cycle
Annual improvements: 2012–2014 cycle
Adoption has had no impact on these condensed consolidated financial statements. Otherwise, the same accounting
policies, presentation and methods of computation are followed in these condensed consolidated financial
statements as applied in the Group’s latest audited consolidated financial statements for the year ended 31 December
2015 except where noted below.
With respect to presenting the movement in overlift and underlift in relation to production entitlement in the
statement of comprehensive income, this has now been disclosed as a single line item in deriving gross profit rather
than as an adjustment to Cost of sales. As a result, the comparative period has been re-presented accordingly. This
adjustment has no impact on gross profit as it is a presentational reclassification. The combination of Revenue and
change in overlift/underlift equates to the Group’s net production entitlement.
6
Seven Energy International Limited
Notes to the Interim Report
3.
Revenue
Oil sales
Gas sales
Six months ended Six months ended
30 June 2016
30 June 2015
Unaudited
Unaudited
$000
$000
7,234
105,377
59,304
39,421
Revenue
66,538
144,798
Revenue from oil sales relates to the Group’s sale of oil lifted from the Strategic Alliance Agreement (“SAA”) with the
National Petroleum Development Company (“NPDC”) with respect to OMLs 4, 38 and 41 and oil sales from the south
east Niger Delta’s Uquo and Stubb Creek fields. The reduction in oil sales during the period was principally due to the
shut-down of the Trans Forcados pipeline preventing liftings under the SAA. This has been partially offset by an
increase in gas sales during the period relating to the additional volumes delivered in the south east Niger Delta to
Calabar NIPP and Alaoji NIPP power stations, compared to the prior period.
4.
Restructuring expenses
During the period, the Group made a net $8.5 million provision for expenses in connection with the ongoing
reorganisation of the Group in order to reduce the cost base. The amount mainly relates to staff redundancy costs
and termination payments.
5.
Foreign exchange gains and losses
During the period the Group recorded foreign exchange gains as summarised below.
Realised gains/(losses)
Unrealised gains
Total foreign exchange gains
Six months ended
30 June 2016
Unaudited
$000
11,363
28,356
Six months ended
30 June 2015
Unaudited
$000
(224)
6,277
39,719
6,053
The realised gain in the period related mainly to the purchase of Naira with US Dollars at a more favourable rate
compared to the central bank rate due to the dual exchange rate market in Nigeria. Of the total realised gain, $8.8m
was realised on currency exchanges on a total of $32.5m worth of transactions. The balance of the realised gain
resulted from the normal settlement of non-USD invoices. The unrealised gain in the period principally related to the
devaluation of the Naira to the US Dollar that took place in June 2016 and resulted in significant unrealised gains on
Naira denominated borrowings and working capital liabilities.
7
Seven Energy International Limited
Notes to the Interim Report
6.
Business and geographical segments
In the opinion of the Directors, the operations of the Group comprise three geographically distinguishable segments in
Nigeria involved in oil and gas exploration, development, production and distribution, supported by corporate and
administrative activities in the UK.
Segment results represent the profit or loss incurred by each segment without allocation of the share of central
administration costs, investment revenue, finance costs, and income tax expense. This reflects the information
provided to the Board for the purpose of resource allocation and assessment of segment performance. There has been
no change in the basis of segmentation or in the basis of measurement of segment profit or loss in the period.
Segment revenues and results
The following is an analysis of the Group’s revenue and results by reportable segment for the six months
30 June 2016:
Six months ended 30 June 2016
(unaudited)
Anambra
North west
South east
basin
Corporate
$000
$000
$000
$000
Revenue
66,538
Change in underlift
89,031
(337)
Production expenses
(46,211)
(20,526)
Depletion
(32,282)
(27,009)
-
ended
Total
$000
66,538
88,694
(66,737)
(59,291)
Gross profit
Depreciation and amortisation expenses
Other operating costs
Restructuring expenses
Administrative expenses
10,538
(6)
(79)
18,666
(830)
(1,147)
(5,910)
(6,918)
(5)
(107)
(349)
(2,556)
(6,124)
29,204
(1,184)
(1,153)
(8,466)
(13,228)
Segment operating result
Investment revenue
Finance costs
Foreign exchange gains/(losses) - realised
- unrealised
10,453
(25,318)
235
20
3,861
7
(30,488)
8,270
28,663
(112)
1
(176)
(9,029)
319
4,020
2,857
(151)
5,173
326
(51,786)
11,363
28,356
Profit/(loss) before tax
(14,610)
10,313
(287)
(1,984)
(6,568)
Tax credit
2,055
Loss for the period
Capital investment
Capital additions
Acquisition
(4,513)
14,197
-
28,179
-
904
-
382
-
43,662
-
14,197
28,179
904
382
43,662
8
Seven Energy International Limited
Notes to the Interim Report
6.
Business and geographical segments (continued)
The following is an analysis of the Group’s revenue and results, and capital investment by reportable segment for the
six months ended 30 June 2015:
Six months ended 30 June 2015
(unaudited)
Anambra
North west
South east
basin
Corporate
Total
$000
$000
$000
$000
$000
Revenue
100,027
44,771
144,798
Change in underlift
57,430
916
58,346
Production expenses
(92,472)
(16,550)
(109,022)
Depletion
(46,839)
(31,261)
(78,100)
Gross profit/(loss)
Depreciation and amortisation expenses
Other operating costs
Administrative expenses
Segment operating result
Investment revenue
Finance costs
Foreign exchange gains/(losses) - realised
- unrealised
Loss before tax
18,146
(27)
(1,081)
(2,124)
(1,264)
(2,357)
(14,977)
(10)
(73)
(369)
(9,549)
16,022
(1,643)
(2,384)
(25,680)
17,038
(22,870)
9
2
(20,722)
5
(25,299)
(205)
6,315
(83)
(64)
(9,918)
34
727
(28)
24
(13,685)
39
(47,442)
(224)
6,277
(5,821)
(39,906)
(147)
(9,161)
(55,035)
Tax credit
2,128
Loss for the period
Capital investment
Capital additions
Acquisition(i)
(i)
(52,907)
62,200
-
29,429
-
45,397
662
-
92,291
45,397
62,200
29,429
45,397
662
137,688
On 27 February 2015, the Company acquired a further 50% licence interest in OPL 905 via its acquisition of
the entire share capital of Gas Transmission and Power Limited. The provisional fair value of the assets
acquired was $45.4 million. This was later revised in the audited Financial Statements for the year ended
31 December 2015 to $38.7 million (note 9).
9
Seven Energy International Limited
Notes to the Interim Report
7.
Tax
The credit for the period is as follows:
Current tax
Deferred tax credit
Six months ended
30 June 2016
Unaudited
$000
2,055
Total tax credit
2,055
Six months ended
30 June 2015
Unaudited
$000
2,128
2,128
There is no liability to Corporate Income Tax or Petroleum Profits Tax for either period because of current or prior
year losses or because profits are sheltered by pioneer relief. The deferred tax credit of $2.1 million (2015: $2.1 million
credit) principally relates to the recognition of future tax relief for losses and capital allowances.
8.
Loss per share
The calculation of the basic and diluted loss per share is based on the following data:
Loss for the purposes of basic loss earnings per share ($000)
Profit effect of dilutive potential ordinary shares ($’000)
Loss for the purposes of diluted loss earnings per share ($’000)
Weighted average number of ordinary shares for the purposes of
basic loss earnings per share(i)
Weighted average number of ordinary shares for the purposes of
diluted loss per share(ii)
Basic loss per ordinary share ($)
Diluted loss per ordinary share ($)
Six months ended
30 June 2016
Unaudited
(4,589)
(4,589)
Six months ended
30 June 2015
Unaudited
(52,050)
(52,050)
4,338,390
3,934,931
4,338,390
(1.06)
(1.06)
3,934,931
(13.23)
(13.23)
(i)
The calculation of weighted average number of ordinary shares includes the weighted average number of shares
convertible during 2016 and 2015 from the issuance of the ICLNs as the ICLNs represent equity instruments of the
Company.
(ii)
As there was a loss for the six months ended 30 June 2016 (2015: loss) there is no difference between basic and
diluted loss per share as the potentially dilutive instruments (being share options and warrants) were anti-dilutive for
the six months ended 30 June 2016. The denominators used for this period are therefore the same as those detailed
above for both basic and diluted loss per share.
10
Seven Energy International Limited
Notes to the Interim Report
9.
Intangible assets
At 1 January 2015 (audited)
Additions
Transfers to Property, plant and equipment
Acquisitions
Total
$000
73,896
19,741
(27,601)
38,678
At 31 December 2015 (audited)
Additions
104,714
904
At 30 June 2016 (unaudited)
105,618
In 2015, expenditure primarily related to exploration well expenditure on Uquo-NE1 prospect which was drilled in late
2014/early 2015 which successfully identified commercial quantities of oil and gas such that $27.6 million of costs were
transferred to Upstream assets in Property, plant and equipment.
On 27 February 2015, the Company acquired a further 50% licence interest in OPL 905 via its acquisition of the entire
share capital of Gas Transmission and Power Limited.
11
Seven Energy International Limited
Notes to the Interim Report
10.
Property, plant and equipment
Cost
At 1 January 2015 (audited)
Additions
Revisions to prior year SAA cost estimates
Transfer from Intangible assets (note 9)
Acquisitions
Disposals
Upstream
assets
$000
1,383,790
125,294
(139,054)
27,601
-
At 31 December 2015 (audited)
1,397,631
1,003,098
15,417
-
26,959
-
1,413,048
1,030,057
Accumulated depreciation, depletion and
impairment
At 1 January 2015 (audited)
Charge for the year
Impairment
Disposals
(329,873)
(79,948)
(90,381)
-
(145,619)
(34,486)
-
(10,687)
(3,320)
2,918
(486,179)
(117,754)
(90,381)
2,918
At 31 December 2015 (audited)
(500,202)
(180,105)
(11,089)
(691,396)
(44,371)
-
(14,920)
-
(1,184)
305
(60,475)
305
(544,573)
(195,025)
(11,968)
(751,566)
Carrying amount
At 31 December 2015 (audited)
897,429
822,993
4,881
1,725,303
At 30 June 2016 (unaudited)
868,475
835,032
3,871
1,707,378
Additions
Disposals
At 30 June 2016 (unaudited)
Charge for the period
Disposals
At 30 June 2016 (unaudited)
Infrastructure
assets Other PP&E
$000
$000
949,194
17,203
53,904
1,756
24
(3,013)
15,970
382
(513)
15,839
Total
$000
2,350,187
180,954
(139,054)
27,601
24
(3,013)
2,416,699
42,758
(513)
2,458,944
12
Seven Energy International Limited
Notes to the Interim Report
11.
Inventories
Underlift
Gas inventories
Spare parts
Total inventories
12.
30 June 2016 31 December 2015
Unaudited
Audited
$000
$000
311,766
223,072
134
531
5,780
5,385
317,680
228,988
Trade and other receivables
30 June 2016 31 December 2015
Unaudited
Audited
$000
$000
Trade receivables
Receivables from sales
Amounts receivable from joint venture partners
56,849
7,796
79,572
4,945
Total trade receivables
64,645
84,517
Other receivables
Deposits
VAT receivables
Other receivables
Rental prepayments
Other prepayments
411
5,555
19,403
3,316
7,222
456
3,811
19,729
4,565
5,937
100,552
119,015
$000
1,277
4,960
1,580
$000
1,445
4,956
2,240
7,817
8,641
Non-current other receivables
Other receivables
Debt service reserve account for Group borrowings
Stamp duty escrow reserve for Group borrowings
13
Seven Energy International Limited
Notes to the Interim Report
13.
Trade and other payables
Trade payables
Accruals
Other payables
PAYE and social security
WHT and VAT payable
Interest payable
30 June 2016 31 December 2015
Unaudited
Audited
$000
$000
287,070
80,447
243,195
456,875
15,027
13,888
1,900
1,860
13,182
18,858
12,071
13,127
572,445
585,055
Trade payables and accruals principally comprise amounts outstanding to the Group’s joint venture partners, for
capital expenditures associated with the Group’s capital projects, ongoing operational and corporate costs and
amounts cash called under the Strategic Alliance Agreement. Trade payables and accruals primarily contain amounts
owing to NPDC under the Strategic Alliance Agreement which amounted to $420.0 million (31 December 2015: $417.0
million) for both approved and unapproved operator expenditures.
14.
Borrowings
Secured borrowings at amortised cost
Bank loans (i)
Loans from non-related parties
Other loans (ii)
Loans from non-related parties
Loans from related parties
30 June 2016 31 December 2015
Unaudited
Audited
$000
$000
405,882
433,407
407,810
50,000
401,810
50,000
5,371
6,000
7,800
Total gross borrowings
Unamortised finance costs incurred on raising debt
869,063
(46,503)
899,017
(53,546)
Total borrowings (net of unamortised finance costs)
822,560
845,471
Analysed as:
Current borrowings – scheduled repayments within one year
Current borrowings – scheduled repayments after more than one year
Non-current borrowings
96,748
303,205
422,607
70,111
354,542
420,818
Total borrowings (net of unamortised finance costs)
822,560
845,471
Unsecured borrowings at amortised cost (iii)
Loans from non-related parties
Loans from related parties
14
Seven Energy International Limited
Notes to the Interim Report
14.
Borrowings (continued)
(i) Bank loans
Accugas IV facility
The Group has a $445.0 million facility, of which the outstanding principal at 30 June 2016 was $376.5 million
(31 December 2015: $385.0 million). The facility bears interest at US LIBOR plus 10.0% per annum and is repayable in
quarterly instalments from 31 March 2016 to 30 September 2019. As at 30 June 2016, Accugas Limited had not fully
funded the minimum balance on both the Debt Service Reserve Account and Ratio Reserve Account. Therefore,
Accugas Limited was not in full compliance with its loan obligations and as a result the long term balance of the
outstanding loan has been disclosed within Current borrowings – scheduled repayments after more than one year.
This is discussed in more detail at Note 2, “Significant accounting policies – Going concern”.
Bank of Industry loan facility
At 30 June 2016, the outstanding loan principal on the Naira denominated Bank of Industry Loan Facility, held by the
Group’s subsidiary East Horizon Gas Company Limited (“EHGC”), was $8.0 million (31 December 2015: $18.2 million).
At the time of its acquisition on 31 March 2014, and continuing to 30 June 2016, EHGC was not in compliance with
certain financial covenants under the provisions of the facility. As a consequence, the long term balance of the loan
has been disclosed within Current borrowings – scheduled repayments after more than one year. The Group has an
informal waiver of these non-compliant covenants from the lenders and continues to meet its ongoing debt service
obligations. There is no expectation that the lenders intend to demand immediate repayment of the amounts due.
Naira working capital facility
The Group has a four-year, 6.0 Billion Naira denominated working capital facility with FBN Merchant Bank. As at
30 June 2016, the USD equivalent amount drawn down on the facility was $21.3 million (31 December 2015: $30.2
million). The facility bears interest at NIBOR plus 4% per annum and requires a mandatory full repayment of
outstanding principal annually until 2019.
(ii) Other loans
Senior secured loan notes
The Group has Senior Secured Loan Notes listed on the Irish Stock Exchange. The total principal outstanding at
30 June 2016 was $300.0 million (31 December 2015: $300.0 million). $50.0 million of loan notes were issued to the
International Finance Corporation, a security holder and related party of the Group. The notes, issued at a discount,
mature in 2021 and have a fixed coupon of 10.25%, paid semi-annually.
Private bond
The Group has a Private Bond issued to the Nigeria Sovereign Investment Authority. The total principal outstanding
at 30 June 2016 was $100.0 million (31 December 2015: $100.0 million). The Bond, issued at par, matures in 2021 and
has a fixed coupon of 10.5%, paid semi-annually.
15
Seven Energy International Limited
Notes to the Interim Report
14.
Borrowings (continued)
Senior secured term loans
The Group has two additional senior secured term loan facilities which are pari passu with the Senior Secured Loan
Notes and Private Bond, and have similar covenant requirements. These facilities are described below:
Senior Secured Term Loan Facility I – $25.0 million loan commitment for a term of four and a half years, with an option
to extend for a further 18 months, subject to further approval. The repayment of any outstanding balance is due at
the end of December 2019. During the term, amounts can be redrawn or repaid at any time. Interest accrues on the
principal at US LIBOR plus 10.25% per annum and is payable quarterly. As at 30 June 2016, $25.0 million was
outstanding (31 December 2015: $25.0 million).
Senior Secured Term Loan Facility II - $26.8 million loan commitment with a term of five years. Loan repayments
commence annually from December 2016 at approximately 10.0% of the total commitment until 2019, with the
remaining balance due by June 2020. Interest accrues on the principal at US LIBOR plus 10.25% per annum for the
first 18 months, increasing by 0.5% per annum every six months thereafter. Interest is payable semi-annually. As at
30 June 2016, $26.8 million was outstanding (31 December 2015: $26.8 million).
Promissory note
The Group has a remaining $6.0 million promissory note (31 December 2015: $6.0 million) issued as part consideration
for the acquisition of Afren Global Energy Resources Limited in 2014. The initial note was interest bearing at US LIBOR
plus 10.0% per annum (payable semi-annually) and was repayable on 12 June 2016. Prior to this date the Company
agreed with the lender to increase the note to $12.0 million such that a further $6.0 million is available to be drawn.
The revised terms of the note include interest at 3-month US LIBOR plus 11.25% per annum (payable quarterly in
arrears), and repayable within 12 months from the date of the further drawdown: $6.0 million payable six months
from the date of the of the further drawdown and thereafter six monthly repayments of $1.0 million each. The further
drawdown of $6.0 million was received on 19 July 2016.
(iii) Unsecured borrowings at amortised cost
Loans from related parties
The Group, through its subsidiary Universal Energy, holds a 1.5 Billion Naira denominated loan due to Akwa Ibom
Investment and Industrial Promotion Council (a minority shareholder in Universal Energy) for $5.4 million
(31 December 2015: $7.8 million). The outstanding balance is disclosed within Current borrowings as Universal
Energy’s management continue to discuss with the lender the terms of a new agreement.
16
Seven Energy International Limited
Notes to the Interim Report
15.
Note to the cash flow statement
Loss for the period
Adjustments for:
Investment revenues
Financing costs
Depreciation and amortisation
Depletion
Loss on disposal of property, plant and equipment
Tax credit
Share-based payment expense
Unrealised foreign exchange gains
Operating cash flows before movements in working capital
Increase in inventories
Decrease/(increase) in receivables
Increase in payables
Deferred revenue (decrease)/increase
Net cash provided by operating activities
16.
Six months ended Six months ended
30 June 2016
30 June 2015
Unaudited
Unaudited
$000
$000
(4,513)
(52,907)
(326)
51,786
1,184
59,291
24
(2,055)
145
(28,356)
(39)
47,442
1,643
78,100
(2,128)
2,738
(6,277)
77,180
(88,692)
18,628
34,477
(554)
68,572
(58,358)
(44,187)
104,389
12,855
41,039
83,271
ICLN’s
On 16 February 2016 the Company issued $100.0 million of ICLNs convertible into 500,001 shares at a conversion
price of $200.00 per share. The movement in the value of ICLNs issued is set out in the Condensed consolidated
statement of changes in equity.
17.
Business combinations
No acquisitions occurred during the six months ended 30 June 2016. Details of acquisitions made during the year
ended 31 December 2015 can be found in the Group’s audited 2015 Financial Statements.
18.
Financial risk management
The Group’s activities expose it to a variety of financial risks including commodity price risk, foreign currency risk,
credit risk, interest rate risk and liquidity risk. The condensed consolidated financial statements do not include all
financial risk management information and disclosures required in the annual financial statements; they should be
read in conjunction with the Group’s audited consolidated financial statements for the year ended 31 December 2015.
There have been no significant changes to the Group’s risk management policies since the year end.
19.
Events after the reporting period
There were no significant events after the balance sheet date which could have a material effect on the financial
position of the Group as at 30 June 2016 and on the statement of comprehensive income for the six months ended
on that date, which have not been adequately provided for or disclosed in these financial statements.
17