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Market Views

Apple market capitalization nears $2 trillion, as Apple’s CEO becomes a billionaire

Tim Cook has now joined the elite club of CEOs who didn’t actually create companies they run.

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U.S stock futures trade flat, Apple regains $2 trillion market value, Apple iPhone 11, Tax battle: Apple challenges $14 billion court case , Apple to pay $500 million settlement in lawsuit over slow iPhones, Apple supplier Foxconn to reopen manufacturing base in China, Apple donates 10 million face masks to healthcare workers, App developers can now challenge Apple store guidelines 

Almost a decade after Apple’s founder Steve Jobs stepped down and passed the leadership baton to Tim Cook, the new CEO has been leading the world’s most valuable company to astronomical highs.

Last week, the tech firm’s share price gained almost 5% last week. This has caused Apple (which Jobs co-founded about five decades ago at his parents’ California home) to reach a milestone market value of nearly $2 trillion. As at the time Jobs died, the company’s market valuation was around $350 billion.

Meanwhile, Apple’s current CEO, Tim Cook has now joined one of the most elite clubs for CEOs who didn’t actually create companies they run. His net worth has now reached $1 billion, according to calculations by the Bloomberg billionaires index.

Cook’s net worth estimates are calculated on analysis of regulatory filings and apply the market performance of a typical wealthy investor to his proceeds from share sales.

Why is Apple’s valuation surging?

The era of high quantitative easing in 2020 has helped global stock traders raise funds, for placing more bets in growth stocks like Apple, thereby resulting in their astronomical rise in valuations in spite of COVID-19. These companies also have good macros in their businesses, partly due to low debts, high-profit margins, and the fact that more people are isolated and mostly working remotely on their iPhones and Macbooks.

Cook, 59, disclosed five years ago that he plans to give most of his fortune away. Already, he has gifted millions of dollars’ worth of Apple shares. His wealth could be lower if he has made other undisclosed charitable gifts.

“This tech cycle has been way bigger and longer than I thought,” said Hussein Kanji, a partner at venture capital firm Hoxton Ventures who had expressed caution about Apple’s long-term outlook after Jobs left the company. “Out of all these stocks, Apple has become the greatest cash generation machine in history.”

Recall that about two weeks ago, Nairametrics reported about how Apple recorded a major feat recently by becoming the biggest publicly listed company in the world. This feat was recorded when Apple’s shares gained over 10% to a record high on Friday after reporting impressive quarterly results.

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Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Message Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

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Market Views

Seplat incurs N41.1 billion loss from OML 55, blames fall in oil prices

Seplat Petroleum reported it took an impairment loss of N41.1 billion ($114.4 million) from its interest in OML 55.

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Seplat Petroleum and NNPC gas project, Nigerian National Petroleum Corporation, Seplat Petroleum Development Company Plc, Economic diversification in Nigeria, Crude oil in Nigeria, OPEC

Nigeria’s leading upstream oil company, Seplat Petroleum reported it took an impairment loss of N41.1 billion ($114.4 million) from its interest in OML 55, a contentious Oil block it currently shares with Belemaoil under a management contract signed in 2017.

The losses contributed significantly to the company’s full-year loss of N30.7 billion in 2020, one of its highest on record and only topped in the last 5 years by the N45.3 billion incurred in 2016.

The company explained the impairment loss was “primarily as a result of re-assessment of future cash flows from the Group’s oil and gas properties due to significant fall in oil prices” during the year. This was contained in notes 12.2 of its 2020 audited accounts which it recently released.

Seplat received total proceeds of $4.8 million under the “revised OML55 commercial arrangement with Belemaoil for the monetization of 67.5 kbbls” part of the agreement it reached with the Rivers State-based Belemaoil. It claimed the recovery was “impacted by OPEC+ production cuts and low oil prices” leading to an impairment of $114.4 million.

READ: Seplat: Why the buzz around Nigeria’s foremost oil exploration company?

OML 55

In 2015, Seplat announced it had entered an agreement with Balemaoil to acquire about 56.25% of the share capital of Belemaoil Producing Limited. This was after Belemaoil completed the acquisition of a 40 percent interest in OML 55 from Chevron Nigeria Limited. NNPC holds the remaining 60 percent interest in OML 55.

Seplat at the time claimed its “effective working interest in OML 55 as a result of the Acquisition is 22.5 percent” a claim that will be disputed years later by Belemaoil.

Seplat also claimed it paid $132.2 million to acquire the 22.5% “effective working interest in OML 55” and also revealed it “advanced certain loans of $132.9 million to the other shareholders of Belemaoil to meet their share of investments and costs associated with Belemaoil” bringing the total up-front cash outlay after adjustments to about $265.1 million.

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READ: Access Bank vs. Seplat: Of subterfuge and corporate brutality

Seplat also announced the following when it acquired the asset:

“The adjustments to the up-front acquisition cost include a deferred payment of $20.6 million contingent on oil prices averaging $90 a barrel or above for 12 consecutive months over the next five years. Under the agreed terms Seplat will recover the loaned amounts, together with an uplift premium of $20.6 million and annual interest of 10 percent, from 80 percent of the other shareholders’ oil lifting entitlements.

The Company estimates net recoverable hydrocarbon volumes attributable to its 22.5 percent effective working interest to be approximately 20 million barrels of oil and condensate and 156 Bscf of gas (total 46 MMboe). Current gross production at OML 55 is approximately 8,000 bopd (1,800 bopd on a 22.5 percent working interest basis). Pursuant to the Joint Operating Model approved by the Honorable Nigerian Minister of Petroleum Resources, Seplat has been designated operator of OML 55. The Company will also act as technical services provider to Belemaoil.”

These claims ended up being disputed by Belemaoil until the NNPC/NAPIMS waded in to reach a truce in 2017. Before the truce, Belamaoil claimed Seplat did not meet its commitment by not completing “certain agreed payment” which was required to purchase 40% stake in OML 55 then owned by Chevron.

Stanbic 728 x 90

READ: Will the recovery in the oil market be shortlived?

Losses mount despite the agreement

Despite the agreement reached with Balema, Seplat had no choice but to make provisions for the N41 billion losses in its 2020 financial year. They provided the following explanation;

“In accordance with the revised commercial arrangement that was agreed in July 2016, which provides for a discharge sum of $330 million to be paid to Seplat over a six-year period through allocation of crude oil volumes produced from OML 55, Seplat received payments amounting to $4.8 million in 2020. Total payments received from inception to the end of 2020 stood at $124.8 million and the outstanding discharge sum to be paid to Seplat is $205.2 million. Recovery during the year was impacted by OPEC+ production cuts and low oil prices.”

Seplat also explained that it has put plans in motion to address other issues affecting production from the oil block.

“In a bid to sustain production from this block, Seplat’s Asset Management Team has received the field data for technical evaluation to resolve production challenges that have delayed target recovery of the investment. In 2021, Seplat will continue to monetize liftings towards full recovery of the $330 million discharge sum.”

Why this matters

An operating OML 55 will be strategic to Seplat in 2021 and could determine how well it recovers from the losses of 2020. Their share price could skyrocket by the end of the year if the asset produces as expected.

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Market Views

Nigerian stocks end slightly red amid strong gains from GUINNESS, PRESTIGE

The market breadth closed positive as GUINNESS led 20 Gainers, as against 13 Losers topped by SOVRENINS.

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SEPLAT, OANDO post losses, All Share Index down by 0.03%

Nigerian bourse ended Friday’s trading session on a slightly negative note, The All Share Index dipped by 0.20% to close at 39,216.20 index points as against the +0.53% surge recorded on Thursday.

  • Nigerian Stock Exchange market value currently stands at N20.51 Trillion. Its Year-to-Date (YTD) returns currently stand at -2.62%.
  • Nigerian bourse trading turnover ended high as volume ticked up by 9.37% as against 36.61% drop posted on Thursday.
  • The market breadth closed positive as GUINNESS led 20 Gainers, as against 13 Losers topped by SOVRENINS at the end of today’s session – an unimproved performance when compared with the previous outlook.

Top gainers

  1. GUINNESS up 9.89% to close at N30
  2. PRESTIGE up 9.76% to close at N0.45
  3. SOVRENINS up 9.09% to close at N0.24
  4. UACN up 8.75% to close at N8.7
  5. ABCTRANS up 7.14% to close at N0.3

Top losers

  1. FTNCOCOA down 9.80% to close at N0.46
  2. JAIZBANK down 9.23% to close at N0.59
  3. ROYALEX down 7.69% to close at N0.24
  4. WAPIC down 7.27% to close at N0.51
  5. AFRINSURE down 4.76% to close at N0.2

Outlook

Nigerian Stocks ended the last trading session of the week on a slightly bearish note amid soaring oil prices. Trading turnover at Friday’s trading session was boosted by Zenith Bank, Union Bank, and GTBank.

  • Nairametrics, however, envisages cautious buying, amid rising concerns for the third wave of COVID-19 pandemic in Nigeria’s key international market, particularly Europe.

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