Seplat Petroleum Development Company Plc has established seven subsidiaries and transferred all its assets to them. Although Seplat said the new development will not affect its commercial operation, shareholder value and tax revenue, however, it has transformed the oil firm into a holding company.
The subsidiaries were formed following the transfer of assets of OMLs 4, 38 and 41 from the new holding company, Seplat Group (formerly Seplat Plc), to its subsidiary, Seplat West Limited - to which it also moved its business activities to. The business transfer was backed by regulatory and partner approvals and took effect from January 1, 2020.
The Seven Subsidiaries Formed From Seplat Restructuring
According to a statement submitted to the Nigerian Stock Exchange (NSE), the seven wholly-owned subsidiaries are; Newton Energy Limited, Seplat Petroleum Development Company UK Limited, Seplat East Onshore Limited, Seplat East Swamp Company Limted, Seplat Gas Company Limited, Eland Oil and Gas Limited and Seplat West Limited.
The segregation had been in the works for awhile now, and according to the statement, the restructuring will not affect Seplat's commercial activities even though it will no longer hold operating oil and gas assets directly as a holding company. AllNews, however, learnt that under the Joint Operating Agreement (‘JOA’), operatorship of these assets still remains with Seplat.
This is because the terms of the JOA permitted asset transfer to an affiliate of Seplat.
The Impact Of The Restructuring
Meanwhile, the restructuring is expected to have some impact on the general business. It was revealed that despite the current business strategy of the assets expected to remain, the changes will reduce operational risk, cost and business complexity. It will also simplify the business management and reporting framework for the Seplat Group.
The statement also assured that the transfer of assets will not affect shareholders' value; Seplat is listed on the NSE and the London Stock Exchange (LSE). Part of its assurance included the credit ratings of Seplat Group will remain intact as confirmed by Credit Rating agencies.
Is Seplat Taking Advantage Of Finance Act?
Seplat Group also clarified that the change in assets holdings will not lead to tax revenue loss for the government, neither will it result in evasion of liabilities. Some companies usually breakdown or split their company into subsidiaries or smaller companies in order to reduce their tax burden.
This is because company income tax is usually determined by the annual revenue of the company. The higher the revenue, the more tax to pay. So in order to reduce their tax payment, some companies transfer their assets or split their services into new subsidiaries, thereby, reducing their parent company annual revenue, leading to a decline in tax revenue as well.
AllNews recall that the Finance Act signed into law by President Muhammadu Buhari in January 2020, exempted small businesses with less than N25 million as annual revenue from Companies Income Tax payment.