This is an Independent Financial Analysis on the performance of Seplat Petroleum Development Company from 2013 to 2014

1. SEPLAT:
An Analysis of Financial Performance 2013--2014
INTRODUCTION
SEPLAT is an Independent, Indigenous Nigerian Upstream Oil Exploration
Company with a focus in Nigeria. It is quoted in the London stock exchange and the
Nigerian Stock exchange.
This is an independent financial Analysis of Seplat Petroleum Development
Company. This analysis uses the key financial performance ratios, Horizontal and
Vertical Analysis in the measurement of financial progress/decline within between
these two periods but makes no judgment with respect to the results obtain thereof.
OBJECTIVE
The aim of this analysis is to make potential investors, existing shareholders’, the
general public understand the implications of the figures they see on Seplat’s
financial statements for easy investment decision making, public rating and further
analysis. It is worthy to note that the statements used in this analysis is basically that
of the Company, not that of the Group.
All data used in this analysis is culled from the Annual Reports of Seplat 2014, the only
alteration was the correction of error at the Statement of Cash-flows, where the
company wrote “Cash and cash equivalents at the beginning of the year”, instead of
“Cash and cash equivalents at the end of the year”, the last item on page 110 on the
Annual Reports 2014.
CONTENTS
1) Statement of Financial Position: A Vertical Analysis and Interpretation
2) Statement of Financial Position: A horizontal Analysis and Interpretation
3) Statement of Cash flows: A horizontal analysis and Interpretation.
4) Statement of Profit or loss and other Comprehensive Income: A horizontal
analysis and Interpretation.
5) Financial Ratios Analysis and Interpretation.
6) Summary.

2. STATEMENT OF FINANCIAL POSITION
A VERTICAL ANALYSIS
ASSETS % of Total Assets
Non-current
assets
2014 $’000 2013 $’000 2014 2013
Oil and Gas
properties
769,331 512,737 31.7% 39.7%
Other PPE’s 11,557 6,605 0.48% 0.51%
Intangible
assets
48 141 0.002% 0.01%
Deferred Tax
asset
- - - -
Prepayments 45,104 108,910 1.86% 8.44%
Investment in
subsidiaries
1,032 1,000 0.043% 0.08%
Total non-
current assets
827,042 629,393 34.2% 48.8%
Current Assets
Inventories 50,582 39,508 2.1% 3.06%
Trade and
other
receivables
1,257,579 471,792 52% 36.5%
Cash $ short-
term deposits
278,663 150,172 11.5% 11.6%
Other financial
assets
858 - 0.04% -
Financial
Instruments:
Derivatives not
designed as
hedges
5,432 - 0.22% -
Total current
assets
1,593,114 661,472 65.8% 51.2%
Total assets 2,420,156 1,290,865 100% 100%

3. INTERPRETATION
In 2014, the value of non-current assets in total assets was 34.2%, while in 2013,it was
48.8% showing a reduction by 14.6%.
In 2014, the value of current assets in total assets became 65.8% while in 2013 it was
51.2%, showing a reduction in 14.6%.
This implies that tactically, the Management of the Company sought for more
liquidity in its assets during 2014, may be because of the belief that “Cash is King”.
Thanks to the fact it did not hinder expansion and crucial capital expenditure, as
numerically Oil and Gas properties, other PPE’s increased. Excellent Management!
EQUITY % of Total Shareholder’s Equity
2014 $’000 2013 $’000 2014 2013
Issued share
capital
1,798 1,334 0.13% 0.18%
Share Premium 497,457 - 34.8% -
Capital
contribution
40,000 40,000 2.80% 5.46%
Retained
earnings
888,798 690,761 62.2% 94.4%
Foreign
exchange
reserve
- - - -
Total
Shareholder’s
equity
1,428,053 732,095 100% 100%
INTERPRETATION
In 2014, the % of retained earnings was 62.2% of total shareholder’s equity, as against
94.4% of 2013, a reduction of 32.2%.Capital contribution & Issued share capital value in
total shareholder’s equity also reduced by 2.66% and 0.05% respectively.

4. All these reductions was a consequence of the Company earning a Share Premium in
2014,which constituted 34.8%.This is a positive contribution to Shareholder’s wealth,
it simply shows how the Market values the Company, an A++ for the Management.
LIABILITIES
% of Total Liabilities
Non-current
liabilities
2014 $’000 2013 $’000 2014 2013
Interest bearing
loans and
borrowings
239,767 120,850 24.2% 21.6%
Contingent
considerations
- - - -
Provision for
decommissioning
obligation
9,838 14,578 1% 2.6%
Total Non-
current liabilities
249,605 135,428 25.2% 24.2%
Current liabilities
Interest bearing
loans and
borrowings
348,389 189,753 35% 33.9%
Trade and other
payables
394,109 233,589 39.7% 41.8%
Total current
liabilities
742,498 423,342 74.8% 75.8%
Total liabilities 992,103 558,770 100% 100%
INTERPRETATION
The % of current liability in the total liabilities is 74.8% and non-current liabilities were
25.2% in 2014. In 2013, current liabilities in total assets 75.8% and non-current assets
was 24.2%.The absence of contingent liabilities indicates that that the Management
has maintained hitch-free transactions and good relationship with vendors,
community, business partners, employees, agencies and stakeholders in the Industry.

5. A HORIZONTAL ANALYSIS.
STATEMENT OF FINANCIAL POSITION
Assets Variance Variance %
Non-current
assets
2014 $’000 2013 $’000 $’000
Oil and Gas
properties
769,331 512,737 256,594 50.0%
Other PPE’s 11,557 6,605 4,922 74.5%
Intangible
assets
48 141 (93) (66)%
Deferred Tax
asset
- - - -
Prepayments 45,104 108,910 (63806) (59)%
Investment in
subsidiaries
1,032 1,000 32 3.2%
Total non-
current assets
827,042 629,393 197,649 31.4%
Current Assets
Inventories 50,582 39,508 11,074 21.9%
Trade and
other
receivables
1,257,579 471,792 785,787 166.6%
Cash $ short-
term deposits
278,663 150,172 128,491 85.6%
Other financial
assets
858 - 858 ~
Financial
Instruments:
Derivatives not
designed as
hedges
5432 - 5432 ~

6. Total current
assets
1,593,114 661,472 931,642 140.8%
Total assets 2,420,156 1,290,865 1,129,291 87.5%
INTERPRETATION
In the balance sheet of Seplat, during the 2013 to 2014 financial year the total non-
current assets increased by 31.4%. This clearly indicates expansion of operational
activities, physical capital structure which is very vital in the Industry.
Also the increase in the current assets by 140.8%, indicates increase in business
activities/transactions (sales), liquid assets and inventories. The Total Assets
increasing by 87.5% indicates financial strength.
EQUITY Variance Variance %
2014 $’000 2013 $’000 $’000
Issued share
capital
1,798 1,334 464 34.8%
Share Premium 497,457 - 497,457 ~
Capital
contribution
40,000 40,000 0 0%
Retained
earnings
888,798 690,761 198,037 28.7%
Foreign
exchange
reserve
- - - -
Total
Shareholder’s
equity
1,428,053 732,095 695,958 95.1%
INTERPRETATION

7. Singularly, the percentage increase in share premium is indeterminable (~), due that
the fact that we don’t have a base value upon which to get a percentage.
Cumulatively Total Shareholder’s equity increased by 95.1%. This share is profitable in
the market. It sells.
LIABILITIES
Variance Variance %
Non-current
liabilities
2014 $’000 2013 $’000 $’000
Interest bearing
loans and
borrowings
239,767 120,850 118,917 98.4%
Contingent
considerations
- - - -
Provision for
decommissioning
obligation
9,838 14,578 (4740) (32.5)%
Total Non-
current liabilities
249,605 135,428 114,177 84.3%
Current liabilities
Interest bearing
loans and
borrowings
348,389 189,753 158,636 83.6%
Trade and other
payables
394,109 233,589 160,520 68.7%
Total current
liabilities
742,498 423,342 319,156 75.3%
Total liabilities 992,103 558,770 433,333 77.6%
Total
Shareholder’s
equity and
liabilities
2,420,156 1,290,865 1,129,291 87.5%

8. STATEMENT OF CASH FLOWS
Cash flows
from
Operating
activities.
2014 2013 Variance $’000 Variance%
Cash
generated
operations
22837 319696 (91,326) (29)%
Tax income
paid
(2874) (106,584) 103,710 97%
Net cash flow
from operating
activities
225,496 213,112 12384 5.8%
Cash flows
from investing
activities
Investment in
oil and gas
(294,875) (100,732) (194,143) 192.7%
Investment in
other PPE’s
(8,510) (3529) (4981) 141.1%
Proceeds from
sales of assets
- 85 (85) (1.0)%
Interest
received
14,784 3,375 11,409 338.0%
Deposits for
Investment
- -- -- --
Aborted
Acquisition
cost
-- -- -- --
Net cash flow
from investing
activities
(288,601) (100,801) (187,800) 186.3%
Cash flows
from Financing
activities
Proceeds from
issue of shares
534,987 - 534,987 ~
Expenses from (37,066) -- (37,066) ~

9. issue of shares
Proceeds from
bank financing
446,000 129,000 317,000 245%
Repayment of
bank financing
(119,034) (68,096) (50,938) 74.8%
Loan to
subsidiary
Undertaking
(479,256) (60,000) (419,256) 698.8%
Repayment of
Shareholder
Financing
(4800) -- (4800) ~
Dividends paid (73,199) - (73,199) ~
Interest paid (32,847) (18,776) (14,071) 74.9%
Net cash flow
from financing
activities
191,596 (17,872) 209,468 (1172)%
Net decrease
in cash
equivalents
128,491 94,439 34,052 36.1%
Cash and cash
equivalents at
the beginning
of the year.
150,172 56,332 93,840 166.6%
Foreign
translation
reserve
-- (599) 599 (100)%
Cash and cash
equivalents at
the end of the
year.
273,663 150,172 128,491 85.6%
INTERPRETATION
During the period 2013 to 2014, there was a 5.8% increase in the value of inflows into
the Company from Operating activities.
During the period 2013 to 2014, there was 186.3% increase in outflows from the
Company on investing activities.

10. During the period 2013 to 2014, there was a 1172% decrease in the outflows from the
company with respect to financing activities.
Cash and cash equivalents increased by 85.6% which depicts a good liquidity growth.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME.
2014 2013 Variance Variance%
Revenue 755,508 869,982 (114,474) (13.2)%
Cost of Sales (310,715) (328,368) 17,658 (5.4)%
Gross Profit 444,793 541,614 (96,816) (17.9)%
Other
Operating
Income
-- 404 (4040) (1)%
Other general
& Admin
expenses.
(118,643) (67,580) (51,063) 75.6%
Gain on foreign
exchange
(230,380) 1,469 (231,849) (15782.8)%
Fair value
movement in
Contingent
Consideration
--- ------ --- ---
Operating
Profit
305,770 475,907 (170,137) (35.8)%
Finance Income 14,784 3,375 11,409 338.0%
Finance Cost (49,319) (21,805) (27,514) 126.2%
Profit before
Taxation
271,236 457,477 (186,241) (40.7)%
Taxation ---- 92,745 (92,745) (1)%
Profit of the
Year
271,236 550,222 (278,986) (50.7)%
Other
Comprehensive
Income:
Other income
reclassified to
--- ----

11. profit or loss in
subsequent
periods.
Foreign
Translation
difference
- - - -
Total
Comprehensive
Income net of
Tax
271,236 550,222 (278,986) (50.7)%
Basic &
DILUTED
Earnings PER
SHARE
0.53 1.38 (0.85) (61.6)%
INTERPRETATION
Income and Profits were not favorable for Seplat in 2014, when compared to 2013.
Revenue fell by 13.2%, and even a fall in the cost of sales by 5.4% was not enough to
mitigate a fall in the Gross Profit (Net Sales),which fell by 17.9% and the Net Profit
further fell by 50.7%.
This may not be unconnected to the fall in the world oil price in 2014.
FINANCIAL RATIO ANALYSIS
1) WORKING CAPITAL (LIQUIDITY TEST)
Working Capital= Current Assets—Current Liabilities
For the year 2014, Working Capital for Seplat was: $1593114—
$742498=$850,616.
For the year 2013, Working Capital for Seplat was : $661472—
$423342=$238,130.

12. Percentage Increase in Working Capital: WC (2014)—WC
(2013)/WC(2013) X 100.
850616—238130/238130 X 100=257.2%
Interpretation
In 2013, Seplat had a working capital of $238,130,000 and in 2014,it had working
capital of $850,616,000. A difference of $612,486,000 and a percentage
increase of 257.2%. This shows financial growth and healthiness of the
company. In business, Cash is the king, this shows the amount of cash Seplat
holds to run its business. Given the capital intensive nature of exploration, it is
acceptable.
2) CURRENT RATIO(LIQUIDITY TEST)
Current ratio =current assets/current liabilities.
2014(Seplat’s current ratio)=1593114/742498=2.14
2013(Seplat’s current ratio)=661472/423342=1.56
Interpretation
This result means that in 2014, Seplat had,in every $1 of current liability,$2.14 of
current asset to back it up. In 2014,Seplat had twice more current assets than
current liabilities. It is a very comfortable liquidity position.
In 2013, the results show that Seplat had, in every $1 of current liability, a
corresponding $1.56 worth of current asset.
Summarily, Seplat is in a better financial position in 2014, than it was in 2013.
3) QUICK ASSETS (LIQUIDITY TEST)
Quick assets= current assets
Less: Inventories
Less: Prepayments.
In 2014(Seplat’s Quick assets)=1,593,114
(50,582)
(45,104)

13. 1,497,428.
In 2013( Seplat’s Quick Assets)=661,472—39,508—108,910=513,054.
Interpretation
Quick asset’s measures the number of assets that can be easily converted into cash.
This means that in 2014, Seplat had assets worth $1,497,428,000 that are readily
convertible to cash. In 2013 the quick assets were worth $513,054,000. This is robust
increase in liquidity.
4) DEBT-EQUITY RATIO(LEVERAGE TEST)
Debt-Equity ratio =Total liabilities/Total Shareholder’s Equity.
In 2014, Seplat debt-equity ratio =$992,103/$1,428,053=$0.69.
In 2013, Seplat’s debt-equity ratio=$423,342/$732,095=0.58.
Interpretation
The result for 2014 debt-equity ratio shows that in financing the company’s activities,
the company has been using $0.69 debt in every $1 of equity used. It has been using
more of equity capital to finance its business.
The result for 2013, the company used $0.58 debt in every $1 of equity it used. In
summary, 2013 results show that the company used more of equity financing than in
2014.
5) BOOK VALUE OF COMMON STOCK. (MARKET/INVESTMENT TEST)
Book Value of common stock is the amount of net assets that each share of
common stock represents.
Book value of common stock = Shareholders equity less intangible assets/Common
shares outstanding.
In 2014, Book value of common stock=$1,428,053—$48/$508,120=$2.8.

14. In 2013, Book value of common stock=$732,095—141/400,000=$1.82.
Interpretation
Given the results above 2014 favored the shareholders, in any case of liquidation, the
shareholders were to get $2.8 per share held in Seplat, but in 2013, it was lower at the
rate of $1.82 per share. There was a significant growth of the common stock within
the period.
6)GROSS MARGIN PERCENTAGE (PROFITABILITY)
The gross margin represents the percent of total sales revenue that the company
retains after incurring the direct costs associated with producing the goods and
services sold by a company.
Gross Margin Percentage=Revenue—Cost of sales/Revenue x 100.
For Seplat in 2014, Gross Margin Percentage= $444,793/$755,500 x 100=58.8%
In 2013, the gross margin percentage=$541614/$869,982 x 100=62%.
Interpretation
The gross margin in 2013 was greater than that of 2014. It also means that the
company retained $0.58 out of every $1 revenue made in 2014 and retained $0.62 out
of every $1 made in 2013.
This means that in 2013, the company had an opportunity of making higher if
overhead costs are kept at minimum. From the results of 2014, it is clear that
production cost increased weighing down on the gross margin % in 2014.

15. 7)NET PROFIT RATIO: (PROFITABILITY).
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the
remaining profit after all costs of production, administration, and financing have
been deducted from sales, and income taxes recognized
Net profit Ratio= Net Income/Net Sales.
In 2014, Net Income=Profit after Tax and Net Sales=Gross Profit.
Therefore in 2014, Net Profit Ratio=$271236/$444,793=$0.609
Net Profit in 2013=$ 550,222/$541,614=$1.01.
Interpretation
This ratio shows the ability of the company to continue as a going concern. This
result shows that in 2013, the company was very more profitable by this ratio than in
2014. This can only disputed by deflationary/inflationary concerns.
8)EARNINGS PER SHARE (MARKET/INVESTMENT TEST)
This, measures how many dollars of net income have been earned by each share of
common stock.
In 2014, the earnings per share= 0.53
In 2013, the earnings per share= 1.38
Interpretation
The results clearly show that Seplat was in a stronger financial position and had
higher earnings in 2013 than in 2014.
9)OPERATING CASH FLOW PER SHARE (MARKET/INVESTMENT TEST)

16. Operating cash flow per share= operating cash flow/number of shares used to
calculate EPS.
In 2014, Seplat’s Operating cash flow per share=225,496/508,120=0.44
In 2013, Seplat’s operating Cash flow per share=213,112/400,000=0.53
Interpretation
The earnings are very robust but not too high, because comparatively they are less
than the Earnings per share in both years.
This also means that the reported earnings did not understate the financial position
of the company.
10)RETURN ON ASSETS(ROA)
An indicator of how profitable a company is relative to its total assets. ROA gives an
idea as to how efficient management is at using its assets to generate earnings.
ROA= Net Income/Total Assets.
In 2014, ROA=271,236/2420,156=0.11
In 2013, ROA=550,222/1290865=0.43
Interpretation
In 2014, the company could only generate 11% of the amount of assets invested as
profit. In 2013 the company generated 43% of the amount of assets invested as
Income.
11)RETURN ON CAPITAL EMPLOYED (ROCE)
A financial ratio that measures a company's profitability and the efficiency with the
capital employed. Return on Capital Employed (ROCE) is calculated as:
ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed.

17. In the books of Seplat, EBIT=Profit before Tax(PBT) and Capital employed =Total
Assets--Current Liabilities.
In 2014, ROCE=271,236/1,677,658= 0.16
In 2013, ROCE= 457,477/867,523= 0.53
Interpretation
The return on capital employed in 2014 was 16%, while in 2013 it was 53%. All pointing
to the fact that profitability reduced in 2014.
SUMMARY
Based on the vertical examination of the Statement of Financial Position, I observed
that during 2014, Seplat was better-off when compared to 2013 in terms of Liquidity,
value of Shareholder’s equity with the earned share premium during the year, but on
the area of Liabilities there was no significant difference between both years.
On Horizontal Analysis, on the Statement of Financial Position, increase in non-
current assets is a sign of expansion and infrastructural growth. There was growth in
business activities, sales and financial activities and Shareholder’s equity increased by
95.1%.
On Cash flows statement, inflows from operating activities increased by 5.8%,
investing activities increased by 186.3%. On the other hand we had a decrease in
financing activities and liquidity grew by 85.6% (cash and cash equivalents). On

18. Statement of Profit or loss and Other Comprehensive Income, Revenue and Net
Profit fell by 13.2% and 50.7% respectively.
With respect to the Financial Ratios Analysis, I can authoritatively say that the year
2013 was better-off for Seplat in terms leverage, profitability and earnings. It did not
favor 2014 in these areas may be due to the fall in oil price, but 2014 was better-off
for Seplat in terms of liquidity, solvency, continuity, book value of common stock and
Shareholder’s equity.
From the data and analysis carried out, Seplat is a vibrant Company in the
development stage of Company life cycle as much as the Oil Exploration Industry,
with a bright financial future being quoted in both Nigerian and London Stock
exchange. I advise Investors to invest in Seplat, it is today’s leader and the future of
Nigerian Oil Industry.
Prepared by
Egege Justice
Internal Auditor
A-Z Petroleum Products Nigeria Ltd,
Plot 29, Block 68 Durosinmi-etti Drive,
Off Admiralty Close, Lekki Phase 1
Lagos, Nigeria.
+2348065122244, +2348177631932
justice.egege@gmail.com.