Sopuruchi Onwuka

The board crisis that currently rocks Nigeria’s leading indigenous petroleum exploration and production company, Seplat Energy Plc, fits into the caste of Nigerian business partnerships. Perhaps the only difference is that the prevailing board dispute is totally unexpected, coming from a company that people comfortably present as a symbol of indigenous partnership success.

It is normal that partners especially in growing and successful business enterprise jostle for control of the management, and that informs the need for broad and transparent governing boards that provide investors clear view on the operations of the company. The board of directors provide the platform for different interests in the company to address issues and grease off friction in the system. Things become even smoother when partners are friends.

Seplat is generally perceived as a prime symbol of friendship and compatibility between the two founding partners, Dr Ambrose Orjiakor and Mr Austin Avuru. The two partners have since floating the company on the back of operating stakes in brownfield assets acquired from Shell, Total and Eni displayed striking harmony in establishing, nurturing, grooming and growing the company from a local indigenous upstart to an international energy independent.

With different backgrounds in medical and geological sciences respectively, Dr Orjiakor and Mr Avuru have convincingly displayed common understanding of how to spy out business opportunities, brave daunting investment challenges and run efficient business process on the templates of international corporate governance standards.

The dividends of their common commitments to the growth of the company abound. Seplat, a name that draws its etymology from Sheba Exploration and Production Company along with Platform Petroleum respectively, stands eminent among the league of indigenous petroleum producers. The company has not only driven organic and inorganic growth programmes in expanding its operated resource base, it has also woven a network of new equity partnerships with investments in a number of non operated assets.

By 2020, Seplat’s full year average daily production stood at 113,689 barrels of oil equivalents per day (boed). Its working interests reached 51,183 boed.

The company, in the period, had a record of 20.5 million man hours of operational activity without fatality or lost time on incident (LTI) at its western assets.

Seplat is currently the biggest indigenous supplier to the domestic gas market; with growing investments that would soon position the company as clear leader in feeding the local market with all specifications of fuel and industrial gas.

With operated Oben Gas Processing Plant, Sapele Gas Processing Plant and ANOH Gas Processing Plant, Seplat boasts about providing significant 30 percent of processed gas used for electricity in Nigeria, promising that its contribution to the local market supply would significantly rise to consolidate its market supply leadership with new capacity expected to come on stream in 2022.

Besides gas supply, Seplat posts solid hope for local petroleum refiners with promises of crude feedstock to refineries that are not integrated with upstream crude oil production. It forms the bedrock of exiting plans by WalterSmith’s Ibigwe refinery to expand from 5,000 barrels per day modular refining plant to 40,000 barrels per day.

From all shades of value, Seplat posts the promises of delivering the prime national aspiration of building strong local technical capability and efficient managerial competence for full value optimization in the petroleum industry. It is the first indigenous exploration and production company to operate a significant asset portfolio under a joint venture with the Nigerian National Petroleum Company (NNPC) Limited. No other indigenous company has been accorded any recognition and trust of that scale.

The company has also brightly indicated a vibrant outlook for diversification into green renewable energy by taking an indigenous lead in gas processing and supply. It is also evolving strong portfolios in non fossil energy production and supply.

Within the bloc of Indigenous Petroleum Producers Group (IPPG), Seplat provides a model operational excellence and governance integrity. It is the only indigenous international energy firm to be listed in the main bourse of the London Stock Exchange (LSE). It also leads equity value in the energy sector at the Nigerian Stock Exchange (NSE). The company is the symbol of Nigerian Content development. It represents the future of the Nigerian petroleum industry.

It is therefore in the foreground of the following that the entire Nigerian petroleum industry, the local financial sector and the regulatory system are shaken by the board crisis that threatens to dent the hard earned integrity and reputation of the company.

Granular details of the issues that have been mismanaged into public domain are not the main concern of stakeholders, the bulk of anxiety borders on the damage potential of the raging crisis on the reputation of the company which is accountable to a broad range of local and international shareholders, exposed to global financial institutions and debts markets, and in the middle to delivering big ticket loan financed projects.

It is natural for a fast growing business with diverse shareholders and complex governance structure to experience internal seismic turbulence intermittently. Such structures normally have preinstalled internal mechanisms in their articles of association and corporate governance structure to mediate, settle and arrest disputes before they escalate to crisis.

Managing internal board disputes usually calls for hushed meetings and highly confidential internal communications strategy. It is in such times that corporate communications and external relations measures are at their best value.

For a company that is listed in the biggest equity trading platforms in Nigeria and the United Kingdom, erosion of confidence in the managers of the business can easily lead to dumping of shares and consequent fatal effect on the company. At a time of crisis like this, every piece of information that drops into the public space comes with absolute weight.

Whereas information gate keeping and management are crucial, controlling public reactions and arbitration measures by third parties are beyond efficient control of internal flow strictures.

Things started rolling downhill with desperate measures by lenders seeking to alleviate damages impinging on their businesses from alleged debts from borrowers associated with the Chairman of Seplat, Dr ABC Orjiakor.

Dr Orjiakor, a medical doctor by training, has risen to become a prolific investor across multiple sectors and industries. He also holds significant equity stakes in a number of ventures some of which are also in the upstream petroleum industry.

Therefore, Dr Orjiakor’s exposure to loans taken by companies associated with him is neither unusual, a crime nor a misdeed as wrongly portrayed in multiple reports floating the media. Business ventures across the world form the basis of risks and rewards to the financial services sector.

People familiar with deep pocket investments and businesses understand how common it is for investors to finance enterprises with commercial debts. Lenders are protected by collateral guarantees. And managing the delicate line of relationships in debt transactions could become complicated as in the prevailing case between Dr Orjiakor and some banks.

With multiple court injunctions that proved disruptive on the operations of the company, it was not a surprise when Dr Orjiakor elected to step down from the board of Seplat by the end of second quarter of the year.

With the move, Dr Orjiakor honourably relieved other investors in the board of Seplat the embarrassment associated with his debt exposures. He also saved Seplat the constant dent in its reputation repeated incursions from financial institutions.

Without any attempt at absolve any party from blame in any of the debt crises affecting Dr Orjiakor, it must be acknowledged that it is common practice in the Nigerian financial sector to target any credible associate of a defaulting borrower. Smart lawyers are fine at creating a credible nexus to any financially stable entity to which a defaulting debtor is beneficial in order to execute a legal garnishee order.

In sum, this is the ordeal of Dr Ojiakor’s position as a Chairman of Seplat. And such embarrassing orders against other companies to which he is personally exposed have severally impacted on Seplat, including a siege that forced the company to relocate its corporate head office from Dr Orjiakor’s property.

Therefore stepping down from Seplat’s board, and selling its debt to the company in terms of asset ownership transfer, appears to have addressed a critical part of the board crisis at the company. By second half of the year, all debt issues relating to Dr Orjiakor’s position as Chairman of Seplat would have resolved.

The other end of the crisis which stakeholders consider unnecessarily stoked is the requirement that Mr Austim Avuru who had meritoriously served and retired into the board as founding Managing Director and eminent investor in the company should also step down as non-executive director.

The Board of Seplat had required Platform Petroleum to nominate another person other than Mr Avuru to its reserved position of non executive director in the company’s board. And it is highly debatable if Seplat holds the prerogative to determine who represents Platform, an eminent investor, in its board.  

According corporate boardroom pundits, it should be the exclusive right of Platform Petroleum to nominate a non executive director to Seplat or recall same at will. They argue that it would be difficult for Seplat to determine who represents a parent company and shareholder in its board.

Ordinarily, the position of non-executive director is an earned entitlement of investors with substantial equity in the company. They are different from executive directors who participate in the management of the company.

On the other hand, independent executive directors are credible business managers with unassailable credentials who are co-opted into the board to broaden and guarantee efficient and accountable management system that protects the interests of minority shareholders and broader stakeholders who are not eligible to appoint representatives into the board.

Mr Avuru whose Platform Petroleum Limited partnered Dr Orjiakor’s Shebah Exploration and Production Company Limited to form Seplat, represents not just an investment bloc but also a founding shareholder. Those who have the background of events know that it is difficult to define Platform Petroleum and Mr Avuru as different and separable entities. The requirement from Seplat implies that Mr Avuru replaces himself with no other person.

Whereas it is left for Mr Avuru and Platform to respond to the request for replacement, feelers from the bloc show that the requirement from Seplat is interpreted as not just contempt and inferred indictment, but also as huge dent on the integrity and reputation of the eminent industry veteran who currently sits on the board of several other companies as chairman or director accordingly.

The requirement of Seplat’s board on Mr Avuru, industry sources insist, is made worse by mode of communication which made it public information even before further engagements on the matter could be exhausted.

“You don’t ask a man of Mr Avuru’s status to give up his rights. Yes, it is a right because we all witnessed and admired how the two fellows staked everything in forming the company. Even if it becomes necessary that he puts another person in his position, you must engage him and give him the opportunity to initiate the process. The public statement removing him from board was the problem,” a Managing Director of a company and member of the IPPG told The Oracle Today at a recent event in Lagos.  

“We don’t like what is going on there. I hope they manage the company back from the slope. That is how small problems escalate. I don’t have any share there but I don’t want anything to happen to that company,” another indigenous industry captain said on phone.

Sources close to Mr Avuru declined comments on the crisis, saying that Platform Petroleum and Mr Avuru’s lawyers are already engaging Seplat on the matter. He said both Mr Avuru and Platform Petroleum would not make further public statements.

The Oracle Today reports that board crises have remained a regular feature that has stalled the rapid growth of older indigenous companies including Oando, Forte and Afren.

A principal official in the Ministry of Petroleum Resources deplored the board crisis at Seplat, lamenting the seeming inability of indigenous business partners in the petroleum industry to sustain harmonious relationships. This, according to him, has led proliferation of small indigenous independent companies with lean assets.

“Until they learn to work together, it might be a mirage to have the size of indigenous independent companies we aspire for the future of the industry. Seplat has made a good effort at creative growth. I hope this control crisis doesn’t derail it,” he said.     

All the people who commented on the matters warn the management and board of the company to take cautious steps in resolving the raging board crisis and avert the fate of other indigenous companies that took the same route.