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Seplat Recorded Loss Before Tax of $18.3m in Q1 2017

Proshare

Friday, April 28, 2017/ 4:39PM / FBNQuest Research

Event: Seplat Petroleum Development Company reports Q1 2017 results
Implications
: Slight negative-to-neutral reaction from the market likely
Positives
: No obvious positives
Negatives
: Seplat recorded a loss before tax of -US$18.3m in Q1 2017 vs. -US$15.0m in Q1 2016


This morning, Seplat Petroleum Development Company (Seplat) reported Q1 2017 results which showed that sales declined by -43% y/y to US$47m. Seplat also posted a loss before tax of –US$18m and loss after tax of -US$19m which compare with losses before and after tax of -US$15m and -US$26m respectively in Q1 2016.

For the first time since Q3 2014, gas sales declined, by -8% y/y to US$25m as gas production fell -6% y/y to 95 MMscfd.
Oil production declined -71% y/y to just 5,115bpd as repair work on Seplat’s major third-party operated export route, Trans Forcados System (TFS), continues. Seplat’s working interest production declined by around -39% y/y to 20,922boepd.


Management indicated that upgrade work on the Warri Refinery export route continues to progress as planned. The first jetty at the refinery is now operational while the second jetty is likely to be completed this quarter. Management maintains its H2 guidance for the completion of the Amukpe to Escravos pipeline which offers a third export alternative for the firm. Lower oil and gas production offset any benefits coming through from higher realised oil & gas prices.

Realised oil prices were up 37% y/y to US$48.3/b while gas prices were slightly up 2% y/y to US$3.05/MMscf. During the Q4 2016 conference call, management provided no production guidance for 2017, signaling that it prefered to wait for the restoration of evacuation routes. This is understandable given that production remains trapped.

Similar to Q4 2016, the topline decline offset any benefits coming through from a -22% y/y opex decline and led to Seplat posting a loss before tax of -US$18m. From an asset perspective, OMLs 4, 38 & 41 still account for a significant (92%) proportion of production at 19,284boepd. Production from OPL 283 and OML 53 were reported at 722boepd and 916boepd vs. 612boepd and 1,182boepd respectively in Q4 2016.

Q1 2017 sales came in 4% behind our sales forecast of US$49m while Seplat’s loss before tax was came in 11% worse than our –US$17m estimate. While Seplat’s PBT currently tracks behind consensus FY2017 PBT estimate of US$23m, this is explained by the market’s expectation that production is likely to normalise in H2. As such, we expect a neutral reaction by the market to today’s results.

Year to date, Seplat shares have gained +7.9%, outperforming the ASI by 12.1%. At current levels, on our published estimates, Seplat shares are trading on a 2017E P/E multiple of 8.3x for an EPS growth of around 23% in 2018E.

We rate the stock Outperform.

Our estimates are under review.

Seplat Q1 2017 results: actual vs. FBNQuest estimates (US$ millions) 

Q1 2017

 

Actual

Y/y

Q/q

FBNQuest est.

Act. vs FBNQuest est (%)

Sales

47

-43.3%

-8.2%

49

-4.1%

oil sales

22

-60.3%

-5.2%

25

-11.7%

gas sales

25

-8.3%

-10.7%

24

4.0%

cost of sales

-28

-47.6%

-47.5%

-30

-6.1%

Gross profit

19

-35.5%

n/a

19

-1.0%

-gross margin

40.4%

489bps

4462bps

39.1%

127bps

Operating expenses

-17

-21.9%

-54.9%

-21

-20.2%

Other operating income

-4

14.2%

-94.0%

-2

85.2%

Operating profit

-1

n/a

-98.7%

3

n/a

Net int. and similar chgs

-17

-14.9%

n/a

-20

-13.0%

PBT

-18

22.2%

-78.5%

-17

11.0%

-PBT margin

-38.7%

-2075bps

12647bps

-33.5%

-526bps

Tax

-1

-89.2%

-104.9%

0

n/a

Tax rate

-4.5%

4588bps

n/a

0.0%

-447bps

PAT ex-minorities

-19

-15.1%

-72.0%

-17

16.0%

-PAT margin

-40.5%

-1343bps

9213bps

-33.5%

-699bps

minority interest

0

n/a

n/a

0

n/a

PAT - ex OCI

-19

-27.1%

-72.0%

-17

16.0%

other comprehensive income

0

n/a

n/a

0

n/a

PAT

-19

-27.1%

-70.3%

-17

16.0%

Source: NSE, FBNQuest Research estimates

Related News

1.       SEPLAT Declares N5.85 billion Loss in Q1 2017 Results,(SP:N410.00k)

2.      Striking FY 16 Loss: Is Seplat Plc Off The Hook? Sell Recommendation

3.      SEPLAT Reports Q4 2016 Results - Records Loss Before Tax of $85.1m

4.      SEPLAT Board Approves 2016 Full Year Financial Results

5.      SEPLAT Declares N42.08 billion Loss in Q3 2016 Result,(SP:N375.00k)

6.      Heads Up On Forcados Terminal

7.      SEPLAT H1'16 results - Suspension of Exports at Forcados Cut Earnings

8.     SEPLAT Declares N12.81 billion Loss in Q2 2016 Result SP N297.83k

9.      SEPLAT Outperform Rating Maintained in Q1 2016

10.  SEPLAT Confirms Dividend Currency Exchange Rates for 2015 Final Dividend

11.   SEPLAT Records US 15m Loss Before Tax in Q1 16 Results Negative Market Reaction Likely

12.  SEPLAT Declares N4.48 billion Loss in Q1 2016 Result,(SP:N340.00k)

13.  Extension of repairs at Forcados, affects Seplat's production uptime

14.  SEPLAT Issues Notice of 2015 Final Dividend Currency Exchange Rates

15.   SEPLAT FY 15 earnings in line FY 16 production set back

16.  Seplat Plc FY 2015 - first tax charge in 3 years drives Q4 15 loss 

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