Roger Brown- Seplat's New Boss on The Block

Tuesday, November 19,2019 / 09.40PM / Teslim Shitta-Bey, Managing Editor/ Header Image Credit: @seplatpetroleum

One of Nigeriaâ€™s largest indigenous oil and gascompany, Seplat Petroleum Development Company Plc , is about to see a strategic shift in its operations as itappoints a new chief executive officer, Mr. Roger Brown to replace its outgoingboss, Mr. Austin Avuru. The charge of guards at the company will likely resultin a charge of corporate direction and empasise as a change in the global oiland gas markets puts pressure on global corporate margins.

The New Boss on The Block

The new Seplat boss, Brown, may be fresh to corporate boardroomplayers in Nigeria, but he is not new to the oil and gas business. Brown joinedSeplat in 2013 as the CFO and played a key role in the successful dual listingof the Company in 2014 on both the London and Nigerian Stock Exchanges.Similarly, since joining the Company, he appears to have played significantroles in various asset acquisitions by the Company.

Brown brings to the leadership of the company, a deepknowledge of its critical operating and financial cashflows being chieffinancial officer (CFO) of the business for the last six years. Seplat's in-coming CEO is likely to lead a major corporate reengineering campaign leveraginghis strong financial, commercial and Mergers and Acquisition (M&A)experience as well as his, according to company officers, 'people skills.'

The CFO turned CEO is quite familiar with the localand international business environments, which should help him navigate atrying period with global oil prices dipping and margins thinning down. WithShale Oil enthusiasm waning and global oil demand flattening, Seplat will needto reconsider its present business model and prepare for a gas-dominated futurewith a whole new set of pricing, sales and marketing templates. Brown should becomfortable with the emerging local and global industry scenarios as he playedcritical roles in the company's successful landmark transactions, IPO andfinancial structure of debt and acquisitions, as well as the company's abilityto sustain competitive shareholder returns.

Before joining Seplat, Brown has since 2010, been anadvisor to the Company, especially when he was the Managing Director and headof EMEA Oil and Gas at Standard Bank Group. During his time at the BankingGroup, he was instrumental to providing advice and deploying capital across theAfrican continent in the Oil & Gas, Power & Infrastructure and therenewable energy sectors, providing him privileged insight into the oil and gasand energy businesses in different global markets.

Brown: A Portrait

Seplat is likely to see a slight twist of style overthe next few years, with Brown bringing a more aggressive financialoptimization approach to Seplat's business model. Seplat's incoming CEO is a CharteredAccountant from the Institute of Chartered Accountants of Scotland. Brown holdsan MSc in Finance from University of Ulster; BSc (Hons) in Finance fromUniversity of Dundee and he also attended Belfast Royal Academy.

The Numbers Man

In the last few years, a major role for Brown at Seplat has been to navigate the company passed difficult financial situations,particularly at periods when international oil prices plummeted. He led thefiscal charge during eighteen months when the company was not producing oil asa result of a shut-in of its major oil pipeline.

The Art of Structuring

While at Standard Bank Group Brown put in place a totalof $1.75billion of financing, which included an inaugural $350million Eurobondas well as bringing in some top tier banks into the syndicate. He isresponsible for reporting, corporate finance, investor relations, enterpriserisk management, internal audit, commercial negotiations/contracts and businessdevelopment. He currently runs a team of 55 people.

TheGlobal group had some 70 professionals focused on oil and gas. Brown headed the CEEMEA teambased in London, focusing on Debt, Mezzanine and Equity investments in thesector. In addition to capital, the group also provided structuringadvice and M&A services to both buy side and sell side clients.

Brown was a senior originator and structured all forms of financingfor industry clients such as Project Finance, Structured Commodity Finance,Acquisition Finance, Corporate Lending and Debt Capital Markets.

Seplat's new CEOsother keyachievements included up-tiering the banks positioning in the marketswith clients and also originating and closing some high-profile transactions.

Beforefocusing on the Oil and Gas sector, Brown previously led StandardBank's Renewable Energy and Power and Infrastructure teams based in London.

AsSenior Manager in the Project Finance Department at Price Waterhouse Coopers,London focusing on providing advice to governments and private sectordevelopers in the UK and Middle East. At Coopers & Lybrand, he served asManager in the corporate finance department, focusing on servicing ofmultinational companies with offices in Singapore. At the Coopers & LybrandEdinburgh, Brown was the Manager in the audit department, focusing onmanufacturing and industrial companies.

The Oil Man Cometh

Beyond broad multinational finance transactions Brown has had majorfootprints in the oil and gas business including a few big ticket transactionssuch as Tullow Oil: $2.5 million RBL and $600 million corporate loan facilityfor Uganda - Mandated Lead Arranger; Afren: $450 million RBL - Mandated LeadArranger; Seplat: Lead advisor for Seplat's IPO, one of the largest IPO's insub-Saharan Africa.

Also lead a $250 million pre-IPO share disposal andvarious other advisory mandates; FHN: $180 million acquisition and developmentfacility for the acquisition of OML 26 from Shell; Neconde: $470 milliondevelopment facility for the refinancing of the acquisition of OML 42 fromShell; BP: $1.5 billion - managing the global account and responsible forvarious credit facilities; Socar - $250 million credit facilities for SocarTrading - Mandated Lead Arranger; Shoreline Natural Resources: $765 millionguarantee and a $550 million bridge facility to acquire OML 30 from Shell - Lead Advisor and Arranger; Heritage Oil and Gas - Financial Advisor for sale ofMiran Block to Genel; Ophir - syndicate member for the listing of Ophir on theMain Board of the London Stock Exchange; Heritage Oil and Gas - Sell sideadvisor.

Approximate deal size $2billion; Confidential: Sellside advisor to a private oil and Gas company in a merger with a major stockexchange listed Oil and Gas company; PUMA - $300 million acquisition of BP'sdownstream assets in African - Mandated Lead Arranger; West African GasPipeline - $600 million adviser to the government of Ghana on its investment inthe West African Gas Pipeline project and negotiation on the Gas SalesAgreement between WAPCO and VRA; and Adviser and Arranger on a 550km gaspipeline in Brazil.

Beyond Finance

Seplat's new bossis undoubtedly an accomplished finance man, but running a good business goesbeyond having a good head for numbers. Seplat will have to cope with a changingworld with growing trade uncertainty, increasing economic nationalism andfalling global commodity prices, the combination of these factors speak to a troubledinternational business environment in months ahead.

Information by the company's management suggest that lookingforward, Seplat plans to position itself for a next phase growth ambition,which would see the expansion of its footprint in terms of energy businessactivities, as well as a plan to pursue offshore assets as well as opportunity-drivenentry into different geographies.

Seplat's managementin its recent press release notes that the Company "believes that such acorporate transition would require a different kind of organisationalstructure, people skills set, and mentality to compete well in the expandedspace. Given this, Seplat will be reviewing its current organisational andsystems structure."

The company's Q3 2019 results saw the oil Group's topline earnings slide by -12.57% from N173.71bn inQ3 2018 to N151.88bn in Q3 2019. Profit before tax equally fell -12.81% from N65.05bn in Q3 2018 to N56.71bn in Q32019. Tax optimization, however, saw the company grow a strong bottom lineposition over the period with profit after tax rising by +102.55% from N27.98bnin Q3 2018 to N56.65bn in Q3 2019. The tax optimization is one-off and is notexpected to re-occur, so Brown will have to come to terms with growing top lineincome to sustain an attractive equity return in 2020 (see Table 2below).

Table 2 Seplat Petroleum Development Company Q3 2019 Result

Source: Proshare Market

Apparently ambivalence about thecompanies underlying profit outcome for 2019 has resulted in high variabilityin the oil and gas company's stock price movement over the last year with pricecrawling along a bearish tunnel in the first seven months to July beforerenewed optimism in September began to to push prices back up to their Apriland May 2019 values (see chart 2 below).

Chart 2 Seplat PetroleumDevelopment Company's Price and Volume movement 2019

Source: Proshare Market

Cutting A New Path

If Seplat is to sustainits premier status as an oil and gas major, it must begin to rethink paststrategies and reimagine a new world with oil prices being more of a buyers marketthan a sellers. The new oil market power balance means that the company wouldneed to look for fresh markets at prevailing or lower prices to retain marketshare or break into new product lines that provide higher margins. Whicheverway things turn out in the domestic and global markets, Brown is taking overthe helms at Seplat at a challengingbut very interesting time.