During a recent discussion, analysts unanimously issued a buy rating, citing the company’s expanding gas potential, quarterly dividend payouts, and significant upside in production.
The discussion took place on the “Drinks and Mics” podcast, featuring Ugo Obi-Chukwu, CEO of Nairametrics; Samson Esemuede of Zrosk Capital; Tunji Andrew, CEO of Awabah; and Arnold Dublin Green of Cordros Capital.
Watch the full video here:
Strong growth trajectory
Ugo inquired whether there were any concerns or “staking” against Seplat, and the discussants unanimously said no. Samson Esemuede went further, stating that Seplat is on track to becoming one of the world’s largest independent oil producers.
Ugo questioned this assertion, looking at it from the global angle, but Samson insisted and emphasised the great potential.
In fact, he described Seplat’s gas reserves as “insane,” noting that MPUN’s gas reserve has remained largely unexplored.
While acknowledging that Seplat’s core revenue still comes from oil (about 80%), Samson pointed out that the ANOH gas project, expected to come on stream in Q2 2024, could quadruple gas output at full capacity.
He also noted that Seplat is poised to become a dominant player in Nigeria’s power sector by supplying gas to electricity generation companies (GenCos).
Seplat’s production figures further reinforce this growth narrative. Following the acquisition of MPUN, the company’s production capacity increased. According to the company’s 2024 financial report:
- The integration of SEPNU contributed an annualized average of 4,329 kboepd, pushing total production to 52,947 boepd, 11% higher than 2023.
- Seplat’s onshore assets averaged 48,618 barrels of oil equivalent per day (boepd) in 2024, a 2% increase from 47,758 boepd recorded in 2023.
- Independently audited 2P reserves rose by 85% to 886 million barrels of oil equivalent (MMboe), up from 478 MMboe in 2023.
- The company’s total 2P+2C reserves also increased by 125% to 1,217 MMboe, reinforcing its position as a leading player in Nigeria’s energy sector.
Arnold further noted that NNPC’s implementation of the Petroleum Industry Act (PIA) and the subsequent reduction in effective tax rates could be a game changer.
Ugo asked if they were long on Seplat, to which they responded affirmatively. Samson posited that it would be difficult not to go long on a business that pays a quarterly dividend of 3 cents, offers a final dividend, and has a massive upside in production and exploration.
He further emphasized that the core business rewards investors handsomely with a dividend yield of 10% to 12%. Ugo added that a dividend yield of about 10% suggests significant capital appreciation.
However, he raised concerns about Seplat’s high price at N5,700. In response, Samson argued that it’s more appropriate to assess the stock based on its price-to-net asset value (P/NAV) rather than just its absolute price, as failing to do so could lead to an undervaluation of its acquired assets.
Examining Seplat’s financials, its net asset value (NAV) increased from N2.741 billion in 2023 to N4.808 billion in 2024, translating to a P/NAV of 1.19.
This suggests that despite the stock’s high price, its valuation remains reasonable in relation to its asset base, potentially supporting Samson’s bullish stance.
The four market experts affirmed this view and issued a consensus BUY rating on the stock, despite its share price remaining flat since December 4, 2024.
