Mar 6 (Lagos) -
SEPLAT FY’17 earnings showed strong performances across all line items, buoyed by continued militancy ceasefire in the Niger-Delta region leading to the lifting of the force majeure on Forcados Terminal on June 6.
Backed by the stability, oil volumes in H2’17 (26,062 bpd) climbed towards pre-attack levels, propping up FY’17 working interest average production to 17,853 bpd (9M’17: 15,183 bpd). Gas production also remained robust with FY’17 readings improving to a record level of 114 MMscfd (9M’17: 104 MMscfd).
Total FY’17 hydrocarbon production rose 43% to 37k boed, slightly behind our 38k estimate, and translating to FY’17 revenue of $452 million (up 78% y/y). With stability maintained in Q4, FY’17 operating profit printed at $113 million (FY’16: $158 million loss), in line with our $112 million estimate.
FY’17 PBT also turned positive to $45 million from a loss position in FY’16. However, the number came in 30% lower than our estimate due to higher than expected net finance charges. The biggest deviation in the full year numbers however came from the recognition of net tax credit of US$224 million in Q4, lifting reported net profit to $266 million
Record production start to FY’18
Continued production stability and stronger oil price outlook (up 26% ytd) should see
SEPLAT recover further from recent earnings slump. According to management, year-to-date (as at Feb 22) WI production stood at 55.9k boe (29.0k bpd, 161 MMscfd).
The figures are record highs as far as data shows and indicate that FY’18 is already on course for strong earnings. Analysts at Vetiva Capital Management Ltd in Victoria Island highlight that the increase in gas sales is on the back of supply of commissioning gas to the Azura power plant (started Dec’17) in advance of commencement of full operations due in H1’18.
Overall, analysts' raise their FY’18 hydrocarbon production forecast to 55.9k boe (Previous: 52.7k boe), largely on the back of higher gas volume. We also raise our oil price assumption to $55/bbl (Previous: $53.50/bbl) amidst a more optimistic outlook on the commodity.
Overall, analyst estimated FY’18 revenue is revised higher to $759 million (Previous: $730 million). With most of our erstwhile cost assumptions maintained, they forecast FY’18 operating profit at $304 million (Previous: $264 million).
Valuation revised higher on reserves accretion, improved cash flow
For us (analysts at Vetiva Capital Management Ltd in Victoria Island), one of the biggest positives is the reported 3% y/y increase in the company’s FY’17 2P reserves to 477 MMboe – implying that 140% of FY’17 hydrocarbons production has been effectively replaced.
The main driver of the revision is increased oil reserves in Sapele Shallow field at OML 4 and an increase in gas reserves at OML 53 more than offsetting volumes produced in the year. Buoyed by this and significant improvement in cash position, our risked NAV/Target Price (considering 2P assets only) has increased to $2.38 (Previous: $1.60).
At current NAFEX rate of NGN360.41/USD, our NAV translates to ?977.22. Meanwhile,
SEPLAT announced the launch of a 5 or 7 year U.S. dollar denominated Regulation S/144 A senior notes offering, the proceeds of which will be used to refinance existing debts and general corporate purposes. Analyst would be on the lookout for pricing on the bond to unlock yet more value for equity holders.
reporting for easykobo.com on Tuesday, March 6 2018 from Lagos, Nigeria
Source - analysts at Vetiva Capital Management Ltd in Victoria Island. All views, targets, opinions and forecast expressed in this article are those of analysts at Vetiva Capital Management ltd in Victoria Island, Lagos. Easykobo does not endorse or oppose any views/forecast expressed in this article.