• Saturday, June 22, 2024
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Seplat: Weak topline, higher tax expense drive Q1 loss

7 takeaways from Seplat Energy’s 11th AGM

Seplat Energy Plc’s first quarter (Q1) 2024 unaudited results showed a loss of $1.93 million (verus a profit of $57.5 million in Q1’23), driven by a lower topline performance and a higher tax charge for the period.

The company reported a 45.7percent YoY revenue decline, driven by lower crude oil (-49.4percent YoY to $150.8 million) and gas (-12.4percent YoY to $29 million) revenues. While the average realised crude oil price (+4.7percent YoY to $86.17/bbl) and the average realised gas price (+8percent YoY to $3.11/Mscf) were higher, the company recorded weaker volumes.

Specifically, for oil, the decline was attributed to the timing of lifting (i.e., extracted and sold), which was worsened by the overlift reported in Q1’23. Over-lifts/under-lifts are surplus/shortfalls of crude lifted above/below the share of production. The surplus/shortfall is initially measured at the market price of oil at the date of lifting and recognised as other loss/income. For gas, the lower volumes were due to delays in two new gas wells coming onstream. Overall, the total working interest production declined by 4.8percent YoY to 49,258 boepd. After adjusting for under-lift and over-lift oil volumes, Q1’24 and Q1’23 adjusted revenues are $236.3 million and $255.6 million, respectively.

The cost of sales grew by 3.3percent YoY as the moderation in operational & maintenance expenses (-17.8percent YoY) helped offset increases in royalties, crude handling fees and depreciation, depletion, and amortisation in the period. The company noted that export route availability remained stable during the period with minor repairs on the Trans Forcados Pipeline (“TFP”) route. However, an operational challenge at the Escravos Oil Terminal (EOT) caused a one-day downtime on the Amukpe to Escravos Pipeline (AEP) in February. Given the topline performance, gross profits declined by 78.5percent YoY, culminating in a 23.8percent gross margin (vs Q1’23: 59.9percent).

Operating profits declined by 21percent YoY, largely due to other income emanating from higher underlifts during the period. The company noted that net under-lift volumes in Q1’24 were valued at $73.8 million and subsequently adjusted to $56.4 million to reflect the impact on the value of overlift volumes brought forward from the prior reporting period. The company also recorded a net foreign exchange gain of $6.0 million (vs $0.5 million in Q1’23). Consequently, the operating margin stood at 45.6percent (vs Q1’23: 31.3percent).

Meanwhile, net finance cost moderated (-12.6 percent YoY) due to offsets from strong interest income. In addition, the company recorded JV earnings of $2.80 million to support the bottom line. Consequently, the PBT margin rose to 38.5percent (versus Q1’23: 26.0percent).

Further down, the company recorded a higher effective tax rate of 102.8percent (versus Q1’23: 33.2percent) due to the significant increase in deferred tax charge owing to the sizable under-lift position and unrealised FX gains recorded during the period, resulting in an after-tax loss of $1.93 million.

The company has maintained its quarterly dividend payout with an interim dividend of $0.03/share to be paid to shareholders on 14 June 2024. The qualification date is May 31, 2024.