For investors who are looking for stocks that can create value –either through capital appreciation or dividend income – Seplat Petroleum Development Company Plc is one of them.
Seplat is an independent Oil and Gas Exploration and Production (E&P) company in the Niger Delta region of Nigeria. The company has a 45percent stake in OMLS 4, 38, 41 and 40 percent stake in OML 53 and OPL 283. The company’s focus is on maximizing hydrocarbon output from its existing assets and exploring new opportunities in the energy industry.
Read Also: Seplat taking bold step at achieving United Nations’ SDGs 4 target
The value some analysts attach to the stock has not changed lately as shown in its reoccurrence in their stock picks till date.
For instance, despite being priced at N 517 per share as at October 31, Lagos-based Vetiva research analysts in their market commentary following Seplat’s recently released third-quarter (Q3) results set a target price (TP) of N1, 188.65 per share for the stock. They also rated the stock a “Buy”.
Vetiva ‘buy’ rating refers to stock that they consider highly undervalued, but with strong fundamentals, and where potential return in excess of or equal to 15percent is expected to be realised between the current price and analysts’ target price.
Listed on both the Nigerian and London Stock Exchanges, Seplat recently announced its unaudited results for the nine months ended September 30, 2019, following which it declared a $29million interim dividend to shareholders and highlighted that its recent £382million cash acquisition of Eland Oil and Gas Plc would create more value opportunities for shareholders going forward.
In the review nine months period, Seplat working interest production averaged 47,163 barrels of oil equivalent per day (boepd) for the period (2018: 50,303 boepd) and reflects slippage to the intended production drilling programme as a result of rig mobilisation delays and availability.
Four drilling rigs are now operating across Seplat’s portfolio to drive liquids working interest production to an expected exit rate of 30,000 bopd. Production uptime stood at 91percent while average reconciliation losses for the first nine months stood at 13percent. This factor for the third quarter only, stands at 1percent while the factor for the first six month period is still under review and expected to be consistent with prior periods when finalised
Full year average working interest production guidance has consequently been revised downwards to 45,000 boepd to 48,000 boepd (from 49,000 boepd to 55,000 boepd), comprising 23,000 to 25,000 bopd liquids and 128 to 133 Million Standard Cubic Feet per Day (Mmscfd) gas.
The company’s 9M revenue of $495 million in 2019 (2018: $568 million) reflects lower production and sales year-on-year together with lower price realisations of $64.22 per barrel (/bbl) and $2.8/Mscf (2018: $71.14/bbl and $3.06/ Mscf ); gas tolling revenue of $67 million also recognised in relation to the processing of
Nigerian Petroleum Development Company (NPDC) gas at the Seplat sole risk funded Oben gas plant 375 Mmscfd expansion between June 2015 and end 2018.
Gross profit of $265 million (2018: $306 million) represents a 54percent gross profit margin; operating profit of $211 million (2018: $264 million) with $36 million recognised within Other Income (including a $31 million oil underlift position and $3 million income generated by third party usage of the Group’s Warri pipeline) and a $5 million net fair value gain offset by a $40 million impairment of NPDC receivables.
Profit for the period of $185 million (2018: $91 million) positively impacted by a 37percent year-on-year reduction in finance costs reflecting deleveraging of the balance sheet early in the year when the outstanding balance on the 2022 RCF was ultimately reduced to zero. Cash generated from operations stood at $306 million (2018: $386 million) versus capex incurred of $64 million (2018: $29 million). Full year 2019 capex spend expected to be around $120 million; gross debt of $350 million at 30 September consists solely of the 2023 senior notes with undrawn headroom of $225 million available through the 2022 Revolving Credit Facility (RCF).
