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Seplat Petroleum: Nigeria’s Top Indigenous E&P is coming of age

SEPLAT’s 2018FY revenue expanded by 65.16% to NGN228.39bn. This strong performance was underpinned by an 80.09% increase in crude oil receipts, which accounted for 79.14% (NGN180.75bn) of overall revenue.

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Seplat Petroleum Development Company, Environmental pollution, Industrial flares, Seplat Petroleum 2018 2018 result

Revenue growth buoyed by production ramp-up: SEPLAT’s 2018FY revenue expanded by 65.16% to NGN228.39bn. This strong performance was underpinned by an 80.09% increase in crude oil receipts, which accounted for 79.14% (NGN180.75bn) of overall revenue. An attractive oil price environment alongside an evident production ramp up, (particularly in OMLs 4, 38 & 41) combined to great effect to set the company on the path of full recovery following 2017 woes when the company could not operate from the Forcados Terminal for more than six months.

While average oil price realization was USD70.10pb (vs. USD50.38pb in 2017FY), Working Interest (W.I) production was at 49,867boepd (made up of 25,669bpd of oil and 145MMscfd of gas), a marked improvement on the 36,923boepd (17,853bpd of oil and 114MMscfd of gas) recorded in 2017 due to production downtimes on the Trans-Forcados Pipeline – the main evacuation route for SEPLAT’s crude. With completion of the Warri evacuation route (30,000bopd capacity) and near-term completion of the 160,000bopd Amukpe-Escravos pipeline, the company has successfully increased evacuation redundancies and de-risked its crude exports. The gas business remained a vital source of revenue growth, contributing 20.86% to revenue in 2018FY.

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Cost discipline sustains operational efficiency, as deferred tax drags bottomline: Cost of Sales was at NGN108.64bn (vs. NGN73.41bn in 2017FY), nevertheless, Cost-to-Sales ratio settled lower at 47.57% (vs. 53.09% in 2017FY). Consequently, Gross profit improved by 84.60% to NGN119.75bn (vs. NGN64.87bn in 2017FY), with gross margin at 52.43%. Meanwhile, operating expenses declined by 0.64% while operating income grew by 175.97% to settle at NGN94.88bn. As a direct result of improved operational performance, increased finance income and relatively slower pace of growth in finance cost, SEPLAT grew PBT significantly from NGN13.45bn in 2017FY to NGN80.62bn (499.41% increase) in 2018FY. However, PAT (NGN44.87bn) declined by 44.68%, due to recognition of deferred taxes. In 2017FY, there were tax credits to the tune of NGN67.66bn, which were not available in 2018.

Balance Sheet deleveraged, enhanced value accretion to Shareholders: Post period-end 2018, the company paid down USD100mn (NGN30.7bn) on its Revolving Credit Facility (RCF), easing debt levels to only the USD350mn bond issued during the year. Cash position as at year end was NGN179.51bn (USD585mn), from which the company plans to finance about USD200mn in capital expenditure this year (2017: USD88mn) to drive the next phase of the ANOH Gas project and drill 7 new oil production wells. After paying a special dividend of USD0.05 in April 2018 to compensate for the no-show in 2017, the company declared interim and final dividends of USD0.05 in October 2018 and March 2019 respectively, bringing total dividends for 2018 to USD0.10/share. This implies a payout ratio of 39.02% and a dividend yield of 5.35% for the year.

Outlook and Recommendation: Given the company’s guidance for 2019FY which includes a WI target range of 49,000 – 55,000boepd, a Liquid Treatment Facility to enhance export grade dry crude that should save c.USD30 –USD40mn in charges, we believe it is well positioned to achieve its long-term objective of becoming the largest indigenous E&P Company. However, in 2019FY, we expect average oil price realization to settle lower at c.USD65pb, with marginal production growth and more barrels (4.0MMbbls) hedged at a lower price of USD50pb, causing revenue to deteriorate by 7.46% to NGN211.35bn. Lower taxes should however buffer earnings to the level of NGN54.50bn while current expansion efforts should spur topline and earnings growth over the medium term. Our target price for SEPLAT was reviewed downwards and the Target PE was also revised to 6.50x. We applied this to an expected EPS of NGN95.87 to arrive at a target price of NGN623.16, an upside potential of 9.33% to the current share price of NGN570.00.

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1 Comment

1 Comment

  1. Amadi Aleruchi

    May 14, 2019 at 12:25 pm

    Good company to work for

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Around the World

Buhari nominates Okonjo-Iweala as DG World Trade Organization

President Muhammadu Buhari nominated the former Minister of Finance and Coordinating Minister of the economy, Ngozi Okonjo Iweala, as the Director-General of the World Trade Organization (WTO).

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Nigeria’s former finance minister, Okonjo-Iweala, gets IMF appointment

President Muhammadu Buhari has nominated the former Minister of Finance and Coordinating Minister of the Economy, Ngozi Okonjo Iweala, as the Director-General of the World Trade Organization (WTO).

This was seen in a tweet posted by the Presidential aide on Digital and New Media, Tolu Ogunlesi, in the early hours of Friday, June 5, 2020.

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In the statement, Ogunlesi said that the current Director-General of the intergovernmental organization, Roberto Azevedo, is stepping down from his position on August 2020, a year ahead of the end of his tenure.

Azevedo, who has been the head of the WTO since 2013, is stepping down at this critical period of global economic crisis and the trade war between the United States of America and China.

This means that the election that was earlier scheduled for 2021 when his tenure was supposed to expire might be coming up much earlier for a new four-year term.

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Tolu Ogunlesi in his statement said, ”President Muhammadu Buhari has nominated Okonji-Iweala as Nigeria’s candidate for the position of the Director-General of World Trade Organization. DG Azevedo is stepping down in August 2020, a year earlier, so the election of the new DG, originally scheduled for 2021, may take place much earlier”.

Details later…

 

 

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Just-in: AfDB board agrees to an independent probe of Akinwumi Adesina

The independent review shall be conducted by a neutral high calibre individual with unquestionable experience, high international reputation and integrity within a short time period of not more than two to four weeks maximum, taking the Bank group’s electoral calendar into account.

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Dr. Akinwnmi Adesina, Lutoyilex Construct Ltd, Fraud, AfDB

The Bureau of the Board of Governors of the African Development Bank (AfDB), has agreed to authorize an independent review of the report of the ethics committee of the bank’s board of directors on the allegations levied against the President of the Bank, Akinwumi Adesina.

This was contained in a communique which was released and signed by the Chairperson of the Bureau of Board of Governors, Ms Niale Kaba, after the meeting of the bureau board of governors on June 4, 2020, with respect to the complaints against the President of the bank.

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In taking the decision, the Bureau agreed that the ethics committee performed its role on this matter in accordance with the applicable rule under resolution B/BG/2008/11 of the board of governors and that the Chairperson of the Bureau of Board of Governors performed her role in accepting the findings of the ethics committee in accordance with the said resolution.

The bank’s board of governors in its statement said, ‘’Based on the views of some Governors on the matter and the need to carry every Governor along in resolving it, the Bureau agrees to authorize an independent review of the report of the ethics committee of the board of governors relative to the allegations considered by the ethics committee and the submissions made by the President of the Bank Group thereto in the interest of due process.

‘’The independent review shall be conducted by a neutral high calibre individual with unquestionable experience, high international reputation and integrity within a short time period of not more than two to four weeks maximum, taking the Bank group’s electoral calendar into account.

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‘’The Bureau agrees that, within a three to six months period and following the independent review of the ethics committee report, an independent comprehensive review of the implementation of the bank’s group whistleblowing and complaints handling policy should be conducted with a view to ensuring that the policy is properly implemented, and revising it where necessary, to avoid situations of this nature in the future.’’

Following the allegations of unethical conducts, questionable appointments and contract awards by a group of whistleblowers and the subsequent clearance of all charges by the bank’s ethics committee, the United States Government, who is the largest shareholder outside Africa, asked for an independent probe of those allegations.

The US treasury secretary questioned the integrity of the committee’s process as well as the internal processes of the bank.

Adesina, a few days ago, met with President Muhammadu Buhari, where he assured of the country’s support towards his travails and his second term bid for the Presidency of the multilateral institution.

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FG removes cap on petrol price, allows marketers to fix price

The price cap per liter in respect of Premium Motor Spirit (PMS) is removed from the commencement of these Regulations.

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Subsidy and PIB

The Federal Government has removed the cap on Premium Motor Spirit (PMS) price, popularly known as petrol.

This was disclosed by the Petroleum Products Pricing Regulatory Agency (PPPRA) via a memo, which was dated March 30, 2020, but realised on May 4, 2020, titled ‘Market Based  Pricing Regime for Premium Motor Spirit (PMS) Regulations, 2020.

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What it means: With the new development, marketers now have the freedom to fix the price of the commodity and sell above the price given by the agency.

Executive Secretary, PPPRA, Abdulkadir Saidu, explained that the agency would continue to monitor trends in the crude oil market and advise the Nigerian National Petroleum Corporation (NNPC) and oil marketers on the monthly guiding price for the commodity.

“The price cap per litre in respect of Premium Motor Spirit (PMS) is removed from the commencement of these Regulations. From the commencement of these Regulations, a market-based pricing regime for PMS shall take effect,” he said.

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Meanwhile, Nairametrics had reported that the agency announced a new retail price band for oil marketers.

In a circular dated May 31st, as seen by Nairametrics, the downstream regulator said oil marketers are now expected to sell petrol within the price range of N121.50 and N123.50. Part of the circular said:

“Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.”

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