The last time we wrote about Seplat Petroleum (SEPL), midway through 2015, the oil price had just crashed below $60 (£43) a barrel and was on its way to $27. The highly-indebted Nigerian producer’s future looked bleak. Now, after a challenging interim period and with Brent crude back above $65, prospects for the London and Lagos-listed company are on much stronger footing.
Three things went very well for the company in 2017. In June, the Forcados terminal reopened more than a year after operator Royal Dutch Shell declared force majeure, following a spate of pipeline attacks. In turn, this allowed Seplat to quickly resume full production, well timed for a second-half rise in prices. Finally, and thanks to the Forcados restart, money owed by state-owned NPDC finally started to appear.
Investors have much to cheer, but one miscellaneous point in the notes stands out. While general and administrative costs fell 28 per cent to $81.9m due to lower impairment charges and no “business development expenses”, professional and consulting fees remain startlingly high for a company of Seplat’s size at $21.1m – or just under 5 per cent of revenue. That’s below a four-year average of 6.5 per cent, but a drain on cash that is hard to square with the increase in company-level contingent liabilities, given that management and solicitors are one in their belief that the claims will lead to no losses.
Investec expects pre-tax profit of $196m and EPS of 28.8¢ this year, compared with $44m and 46¢ in 2017.
| SEPLAT PETROLEUM (SEPL) | ||||
| ORD PRICE: | 127p | MARKET VALUE: | £747m | |
| TOUCH: | 127-128.5p | 12-MONTH HIGH: | 134p | LOW: 70p |
| DIVIDEND YIELD: | nil | PE RATIO: | 4 | |
| NET ASSET VALUE: | 255¢ | NET DEBT: | 9% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2013* | 880 | 458 | 137.0 | nil |
| 2014 | 775 | 252 | 50.0 | nil |
| 2015 | 570 | 87.1 | 12.0 | nil |
| 2016 | 254 | -173 | -29.0 | nil |
| 2017 | 452 | 44.0 | 47.0 | nil |
| % change | +78 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=$1.38. *Pre-IPO figures | ||||
