Retail Investors pondering over which stocks to invest in next year may have to start looking in the direction of Seplat Petroleum Development Company Plc. (SPDC) .
This is because one of the major impediments affecting revenue growth has been removed. Nigeria’s leading export terminal Forcados, which Seplat relies on for its exports is expected to start operations after several months of being shut down due to militant attacks on pipe lines.
The leading indigenous Nigerian oil and gas exploration and Production Company said in a July 28 note to its financial statement that suspension of exports at the Forcados terminal and consequently lower oil sales together with lower oil prices in the period has offset the year-on-year increase in gas production rates.
Seplat’s half year results showed sales dropped by 42.20 percent to $143.02 million while a net loss of $61.16 million was recorded.
The company’s share price has risen at a year-to-date +90.18 percent while share price climbed 5 percent to N386.40 at the close of trading, making market capitalization move to N216.60 billion. Spelt currently trades at a Price to earnings ratio of 10x. Oando, which is the only other upstream oil and gas firm on the exchange reported a loss last year, making it impossible to determine an earnings per share for the company. Seplat’s forward earnings per share will likely trend higher as analysts believe it could report weaker results for the year ended December 2016, if it does not even report a a net loss.
However, some oil and gas analysts are bullish about the company’s outlook.
“This is positive for them and we have also seen some uptick in Seplat’s share price,” said Tajudeen Ibrahim, head of research at Chapel Hill Denham Limited, in a recent interview at the Guardian TV.
With Forcados terminals starting production, Seplat will likely earn enough the cash flows to settle interest on borrowing and reduce reduction loans or debt to equity ratio, minimize the weighted average cost of capital (WACC) and maximize the value of the firm.
“We agreed the resumption of production at Forcados will help bolster revenue and enable firms that owed assets along the Forcados rig pay some of the debt owed,” said Dolapo Oni, head of head Energy research Ecobank group
“While it is difficult to obtain individual figures from these companies because most of them are private institution, the approximate export figure for the Forcados terminal is c250, 000bopd,” said Oni.