Seplat Petroleum Development Company Plc
The affirmation of the B2 CFR rating reflects the affirmation of the sovereign rating at the same level. The CFR on Seplat, an indigenous exploration and production company in Nigeria, is constrained by the Government of Nigeria’s sovereign rating. The company’s ratings also factor in a requirement that proceeds from the sales of oil and gas have to pass through the Nigerian banking system for 24 hours before they are allowed to be moved offshore. Seplat’s production is derived entirely from Nigeria’s Niger Delta, an area with a history of militancy. Seplat is also reliant upon Nigerian government-owned entities, the Nigerian Petroleum Development Company and the Nigerian Gas Marketing Company, for timely payment when it comes to cash calls for meeting both operating and capital expenditures.
Environmental considerations incorporated into Moody’s credit analysis for Seplat are primarily related to potential carbon dioxide regulations, but also include natural and man-made hazards. Seplat meets flaring requirements imposed by the Nigerian government. Future laws and regulations that could accelerate the pace of energy transition or changes in technology that affect demand for hydrocarbons represent a material and growing risk for Seplat.
Community engagement is an important consideration when it comes to a license to operate in the Niger Delta. Under the terms of a Global Memorandum of Understanding entered into with the local communities, Seplat undertakes and adheres to social investment programmes.
Seplat’s strong liquidity position and low financial leverage are important characteristics for managing these environmental and social risks.
eplat Petroleum Development Company Plc
Given the negative outlook on the Nigerian sovereign, an upgrade is unlikely in the near-term. The outlook could be changed to stable if the Government of Nigeria’s rating outlook is changed to stable.
Seplat could be upgraded if it were to materially diversify production away from Nigeria towards an operating jurisdiction which carries a higher sovereign rating.
Subject to an upgrade of the Nigerian government bond rating, an upgrade could be considered if: