Wednesday, March 06, 2019 10.20AM / NSE With Additional Notes From FBNQuest Research
Seplat’s FY 2018 PBT of US$263m was broadly in line with consensus forecast, therefore we expect a neutral reaction by the market. Q4 PBT growth of 9% y/y to US$51m was driven by a double-digit decline in operating expenses and a modest rise of 3% y/y in sales to US$178m. Oil sales were up 5% y/y to US$150m with strong oil prices (up +39% y/y to US$70.1b/d) more than offsetting a slight contraction (-3%) in total working interest oil production to 25,669 barrels of oil per day (bpd). Total combined hydrocarbon production of 49,867 barrels of oil equivalent per day (boepd) which came in flattish y/y was however in line with management’s 2018 production guidance.
Q4 sales up 3% y/y to US$178m while PBT of US$51m advanced by 9% y/y. Realised oil prices were also up 39% y/y to US$70.1/barrel. Seplat proposed a final dividend of US$0.05 per share (vs. our US$0.03 est.) which implies a dividend yield of around 3%. This is in addition to the US$0.05 interims paid for Q2 and Q3 2018 as management bids to normalise returns to shareholders after the board had suspended dividends for 2016 and 2017. On the just concluded conference call, management announce that FID has been reached on the ANOH gas project with all its partners. Predictably, this project is set to monetise around 4 trillion cubic feet (tcf) of gas and is projected to come on stream within two years. Management also highlighted steps taken to mitigate potential risks such as evacuation of gas and condensate. Although several timelines have been missed over the past year, we are now more confident about the completion of the Amukpe-Escravos in H1 2019. Management guides to around 40,000bpd of production evacuated via this route with the balance exported via the TransForcados pipeline.
Q4 PAT of US$55m declined by -80% because of a significantly lower tax credit of US$4m taken in Q4 which compares with a tax credit of US$224m posted in Q4 2017.
Year to date, Seplat shares have shed -3.3% which compares with the broad index gain of around +2.4%. We rate the stock Outperform.