Tuesday, October 30, 2018 03.07PM / NSE
Initial Reaction - FBNQuest
Implications: Seplat’s Q3 earnings showed continued y/y improvements following the resumption of exports via third-party operated TransForcados System (TFS). While sales of US$225m grew 80% y/y, PBT of US$91m advanced by 66% y/y. Additionally, on an annualised basis, 9M PBT of US$213m is currently tracking ahead of FY 2018E consensus forecast of US$267m. Sales growth was primarily driven by a 56% y/y rise in oil sales which was boosted by a 53% y/y rise in average realised prices to US$71.14/barrel and a 12% y/y rise in working interest production to 50,303 barrels of oil equivalent. Production uptime during Q3 came in at 88% while average reconciliation came in at just 7%. Therefore, we expect a positive reaction from the market on the back of the solid Q3 performance.
Positives: Q3 sales up 80% y/y to US$225m while Q2 PBT of US$91m advanced by 66% y/y. Realised oil and gas prices were up 53% y/y and 2% y/y to US$71.1/barrel and US$3.01MMscf/d respectively. Seplat proposed an interim dividend of US$0.05 per share which implies a dividend yield of just below 3%. This is in addition to the US$0.05 interim paid for Q2 2018 as management bids to normalise returns to shareholders after the board had suspended dividends for 2016 and 2017. Management also maintained its expectation for the completion of the Amukpe-Escravos pipeline by year end.
Negatives: Q3 PAT of US$43m declined by -25% because of incurred taxes of US$48m which compares to a tax credit of US$1m posted in Q3 2017.
Year to date, Seplat shares have gained 3% which compares with the broad index decline of around -13%. We rate the stock Outperform.
Our estimates are under review.
Seplat Q3 2018 results: actual vs. FBNQuest Capital Research estimates (US$ millions)
Source: NSE; FBNQuest Capital estimates