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Seplat overcome by oil crash

The write-down wiped out profits but the oil and gas company is focused on 2021, when gas production will ramp up
July 31, 2020

Despite adding almost 50 per cent in oil production in the first half, oil and gas company Seplat Petroleum (SEPL) could not escape the effects of the price crash. 

IC TIP: Hold at 57p

The Nigeria-focused company’s average realised price for its almost-35,000 barrels of oil per day (bopd) was $36 (£27) a barrel, down $29 on the first half of 2019. That hit saw Seplat fall to an operating loss of $113m, compared to a $139m profit a year ago, because of a $146m non-cash impairment. 

Gas was a brighter spot for the company. A 15-day maintenance shutdown at the Oben plant saw production fall by more than a third on last year, but the average price was up 5 per cent.

Incoming Seplat chief executive Roger Brown said two development wells were on track to be in operation by the end of the year.

He also said the major development project on the cards, the ANOH gas processing plant, would still meet its end-of-2021 completion date. “We are above our base case [in terms of progress],” he said. 

The next milestone for the $700m project for Seplat is taking on $320m of debt. Mr Brown said the terms offered by banks had not changed significantly despite the rough half for the company. Seplat expects signoff from lenders on this in August. 

This will take the company’s debt up further. It moved from net cash a year ago to net debt at the December year-end thanks to the $457m Eland acquisition. Although net debt remained stable during the half.

Consensus estimates compiled by FactSet see Seplat’s 2020 cash profits falling by over 50 per cent from 2019, at $199m. 

SEPLAT PETROLEUM (SEPL)  
ORD PRICE:57pMARKET VALUE:£ 335m
TOUCH:54.4-57.6p12-MONTH HIGH:130pLOW: 37p
DIVIDEND YIELD:5.8%PE RATIO:12
NET ASSET VALUE:275¢NET DEBT:27%
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)*
201935512021.05.0
2020234-145-19.0na
% change-34---
Ex-div:na    
Payment:na    
£1=$1.30 *Half-year dividend announced in Q4