Monday, October 23, 2017 10:58 AM / FBNQuest Research
Implications: Neutral to slightly positive reaction
from the market likely
Positives: Sales of US$147m up 146% y/y and 74% q/q, boosted by a significant (+292% y/y) rise in
Negatives: Net finance costs up 10%
y/y to US$20m
This morning, Seplat
Petroleum Development Company (Seplat) reported Q3
2017 results which, to a large extent, reflected positives from the resumption of exports via the
TransForcados System (TFS). Seplat’s sales came in at US$147m, up 146% y/y, and delivered PBT and PAT of
US$26m and US$24m respectively. This is the first quarter since the end of 2015
that Seplat has posted a profit.
driven primarily by improved production, were a big contributor to the improved
perfomance, up +292% y/y to US$115m. Q3 working interest oil production, up
+146% y/y to 26,351 barrels of oil per day (26.4kbpd), is line with
management’s full year guidance of 17/19kbpd and compares with c.9.5kbpd
delivered in H1 2017. Realised oil prices were up 9% y/y to US$46.5/b.
According to management statements, uptime on the TFS in Q3 was around 84%, with average reconciliation losses below 3%, compared with a previous average of 10%. Gas sales were up
by just 4% y/y to US$32m. Similar to oil production, gas output of 111MMscf/d
came in firmly within management’s guidance of between 105 and 115MMscf/d, peaking at c.158MMscf/d during the period.
topline growth, significant gross margin expansion and a double-digit decline
in operating expenses led to the improved profitability. Net
finance costs which rose by 10% y/y were the only negative in these results. Sequentially, as stated above, Seplat’s
numbers are moving in the right direction. Sales grew 74% q/q while the firm’s
Q3 PBT and PAT of US$26m and US$24m compare with losses before and after tax of
around –US$10m. The q/q trend was driven
primarily by superior Q3 sales and a marked improvement in gross margin. Opex
came in flattish q/q.
with our estimates, while sales beat our US$130m forecast by 13%, PAT was ahead by around 7%. The earnings
variation was driven by positive surprises on the topline and in net finance
charges. On an annualised basis, Seplat’s 9M sales and loss before tax are tracking behind consensus
sales and PBT estimates of US$469m and US$63m respectively.
forward, management has maintained
its production guidance of 17-19kbpd and 105-115MMscfd, for oil and gas respectively,
or 35-38kboepd. Although, there have been kidnappings in the Niger Delta
recently, we do not anticipate a rapid escalation of disruptions to oil &
gas facilities in the near term.
To our minds, there are
no leading catalysts for such events. We believe that efforts made by the
federal government, IOCs and indigenous companies are more than enough to
curtail, for now, large scale disruptions that we witnessed last year.
Management notes also
point to progress in formalising an incorporated joint venture between Seplat
and the government which could see FID taken on the 300MMscf/d ANOH gas
processing plant within six months. The ANOH project
underpins the next phase of growth for the gas business.
We note that there have
been slight delays on the delivery of the Amukpe-Escravos export pipeline,
which is now expected to be commissioned in H1 2018.
Year to date, Seplat shares have gained +26.3% compared with the ASI’s 36.1%. We rate the stock
FBN Quest estimates are under
Seplat Q3 2017 results: actual vs. FBNQuest Research estimates
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