After a dramatic improvement in its operating environment in 2017, Nigerian oil and gas driller Seplat Petroleum (SEPL) has strong prices for another surge in its half-year headline results. This, together with higher production and a sharp fall in unit costs, meant gross margins climbed 10 percentage points to 51 per cent in the first six months of 2018.
Such profitability comes with a price tag from Nigeria’s treasury, and its “invest-or-pay-up” philosophy. Seplat recognised $72.8m (£55.6m) of “non-cash corporate taxes and non-cash deferred tax” in the period – a 60 per cent blended tax rate, and reflective of the 85 per cent levy applied to some crude oil output.
At 30 per cent, the government’s take from gas production provides a big signpost for Seplat’s growth priorities. Encouragingly, gas revenues of $85m were 57 per cent up on the first half of 2017, while output is forecast to more than double from the 155m cubic feet per day (mmscfd) average in 2018 so far.
Investors will therefore be disappointed by a delay in the final investment decision for the ANOH gas condensate project until “later this year”, while slower-than-anticipated construction of a 160,000 barrel-a-day oil pipeline also extends the risks of Seplat’s routes to market.
On average, analysts expect full year adjusted pre-tax profits of $221m and EPS of 34.6¢, rising to $285m and 42.7¢ in 2019.
| SEPLAT PETROLEUM (SEPL) | ||||
| ORD PRICE: | 144p | MARKET VALUE: | £ 847m | |
| TOUCH: | 144-146p | 12-MONTH HIGH: | 156p | LOW: 94p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 3 | |
| NET ASSET VALUE: | 259¢ | NET DEBT: | 3% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 | 132 | -26.5 | -5.0 | nil |
| 2018 | 343 | 121 | 8.0 | nil |
| % change | +160 | - | - | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.31 | ||||
