Seplat’s superlative outlook is sending its share price to the moon

Seplat Energy’s share price is on the tear gaining

Seplat, one of Nigeria’s indigenous oil companies reported revenue of $241.8 million in the first quarter of 2022 higher than the $152.4 million reported same period in 2021. This represents a 58.6% rise in revenues one of the best quarters in the company’s history.

In its interim report, Seplat explains it was able to sell barrels of oil and equivalent (boepd) of 47,603 (2021 Q1: 48,239). It also realized an oil price of $97.53 compared to $60.76 and a gas price of $2.76. In total Seplat sold 29, 078 bopd and 107.4 Gas compared to 28, 541 and 114 respectively.

Seplat explained the increase is “attributable to the impact of the Ukraine conflict on global energy prices” a major factor that has worked in favour of oil companies.

Outlook for the year

  • Seplat also provided an update on its acquisition of Exxon’s shallow water operations in Nigeria, represented by MobilProducing Unlimited (MPNU).
  • According to its CEO “Our proposed acquisition of MPNU remains on course. We are awaiting the necessary approvals from government and regulators and expect the transaction to complete in the second half of this year.”
  • Seplat also plans to operate the new company as a standalone subsidiary estimating that it will “trebble” its production and “double” its reserves on a “pro forma” 2020 basis.
  • Seplat also announced it was divesting from its interest in Ubima Marginal field for a consideration of $55million, which marginally reduces the company’s 2P reserves by 2 MMboe to 455 MMboe.
  • The company’s board approved the exit of the asset in April 2022 and expects to receive payment in “due course.”
  • Seplat explained it was exiting the asset because it was located in a high operating environment which causes “major evacuation” challenges. It is therefore diverting the amount it would have used in creating alternative exits into other areas of its business.

Impact on Seplat Shares 

  • Seplat’s share price has surged over the last few weeks hitting a 52-week high of N1,348 per share after gaining 10% on Tuesday, May 17th.
  • Seplat has gained over 100% year to date and has opened the year at a share price of N660 per share.
  • While trading at a price-to-earnings ratio of 15x on Naira terms, investors appear to be valuing the stock relative to its dollar price to earnings multiple which is currently around 6x.
  • Seplat latest Q1 results saw earnings per share dip to $0.03 per share compared to $0.06 per share same period last year.
  • The reason for the dip was due to the company’s decision to unwind previously unutilized capital allowances and higher under-lift in the current year. The effective tax rate is currently a whopping 76% compared to 11% a year earlier.
  • Seplat Co-founder, ABC Orjiakor also announced he was exiting the company as its pioneer Chairman.

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