Seplat’s Half-Year Net Income Falls 45% on Higher Tax Burden

Seplat Energy, a Nigerian independent oil company, saw its profit after tax for the first half of the year decline to $27.4 million (N42.5 billion) from $49.9 million (N68.1 billion) a year earlier.

Its pretax profit rose 64 percent to $292.9 million as revenue jumped 231 percent to $1.39 billion (N2.17 trillion), according to its earnings report released on Wednesday.

The company said its average daily working interest production was 134,492 barrels of oil equivalent per day (boepd), up from 48,407 boepd in the same period of last year, above the midpoint of its production guidance of 120,000-140,000 boepd.

“The profits after tax this period have been impacted significantly by taxes,” Seplat said, adding that its income tax expense rose to $265.5 million from $129.0 million, representing an interim effective tax rate (ETR) of 91 percent compared to 72 percent a year earlier.

It said the ETR has been determined in accordance with IAS 34 Interim Financial Reporting, which requires the income tax expense recognised in the interim income statement to reflect the estimated full-year effective tax rate, applied to year-to-date profits.

“The high ETR reflects the front-loaded tax burden typically observed in our fiscal profile and the current estimate of full-year taxable profit. Looking ahead to the second half of the year, we expect a lower tax burden driven,” it said.

Initiatives expected to reduce the tax burden include increased capital allowances in our offshore business arising from planned capital investments in the second half and the outcome of an updated competent persons report that is expected to support a potential reduction in the unit-of-production depreciation rate.

Seplat said: “Progress on the Petroleum Industry Act conversion for our onshore assets, which could shift our tax regime from the legacy 85% Petroleum Profits Tax framework to a more favourable combined 60% rate (30% Hydrocarbon Tax + 30% Corporate Income Tax

“While these initiatives are still in progress, our current projection is that the full-year 2025 effective tax rate is expected to range between 70% and 80%, subject to the finalisation of the above matters.”