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April 29, 2022/FSDH Report

Key Performance Highlights:

• Seplat Energy reported 1Q22 results with revenues jumping 73.7% YoY to N100.6 billion, while the company reported a net profit of N8.3 billion in 1Q22 compared to a net profit of N9.5 billion in 1Q21. Total revenue in 1Q22 was N100.6 billion versus N57.9 billion reported in 1Q21. The oil revenue spurted 90.8% YoY to N90.0 billion in 1Q22 versus N47.2 billion in 1Q21, reflecting higher realized oil prices and a marginally higher production volume, while the gas revenue edged 1.1% lower to N10.7 billion (1Q21: N10.8 billion) due to lower gas sales volumes as a result of lower customer offtake and production stoppages.
   
• The rise in oil revenue reflects higher realized oil prices of $97.53/bbl for the period (1Q21: $60.76/bbl) attributable to the impact of the Ukraine conflict on global energy prices. The total volume of crude lifted in the year was 2.2 MMbbls, marginally higher than the 2.1 MMbbls in 1Q21. In addition, the company’s 1Q22 produced liquid volumes were subject to reconciliation losses of 10.2%. The company produced an average of 29,078 bopd in 1Q22, up 1.9% against 28,541 during the last period. The Oil production in the first quarter charged higher as the four Gbetiokun wells drilled in the previous year came onstream in 1Q22.
   
• Gross profit shot up 143.4% YoY to N48.8 billion due to higher revenues and a less than proportionate increase in the cost of sales (up 36.7% YoY). The increase in the cost of sales was primarily due to higher royalties resulting from higher oil prices. Other income for the quarter tumbled 35.8% YoY to N3.7 billion, resulting from a N2.5 billion loss on foreign exchange. The company recorded a 14.4% YoY rise in general and administrative expenses to N7.9 billion in 1Q22 against N6.9 billion in 1Q21. Impairment loss on financial assets also vaulted 89.2% YoY to N509 million, compared to N269 million in 1Q21. The company’s operating profit charged 151.7% YoY higher to N42.5 billion versus N16.9 billion in 1Q21.
   
• The Group’s tax expense for 1Q22 was N26.4 billion compared to the N1.2 billion in 1Q21, resulting from a deferred tax expense of N19.0 billion charged against revenues in the first quarter for FY22. The increased deferred tax charge was mainly due to the unwinding of previously unutilised capital allowances and a higher under-lift in the current quarter. Seplat Energy reported a net profit of N8.3 billion compared to N9.5 billion in 1Q21. The basic EPS fell 49.5% YoY to N11.76/share in 1Q22, compared to N23.29/ share in 1Q21.
   
• Sequentially, the revenue slipped 9.3% QoQ lower to N100.6 billion in 1Q22 from N111.0 billion in 4Q21. Due to lower revenues, the gross profit also declined 12.9% QoQ to N48.8 billion in 1Q22. The General and administrative expenses dropped 26.0% QoQ to N7.9 billion in 1Q22, with the impairment loss on financial assets declining 91.9% QoQ to N509 million compared to N6.3 billion in 4Q21. This resulted in an operating profit climbing 12.4% QoQ to N42.5 billion in 1Q22. A 74.9% QoQ tumble in the profit to N8.3 billion in 1Q22 was driven by a 25.1 QoQ higher net finance cost.
   
• Seplat Energy has agreed to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from Exxon Mobil Corporation. The completion of the transaction is subject to ministerial consent and other required regulatory approvals. The acquisition is expected to complete in H2 2022, and MPNU will then operate as a standalone subsidiary. Separately, the company also announced the decision to divest the Group’s interest in the Ubima marginal field for $55 million, which marginally reduces the company’s 2P reserves by 2 MMboe to 455 MMboe.
   
• Seplat Energy has announced the appointment of Mrs. Bashirat Odunewu as an Independent Non-Executive Director, with Mr. Kazeem Raimi and Mr. Ernest Ebi as Non-Executive Directors. The three appointees will join the Seplat Board from 18th May 2022. 
   
• On 28 April 2022, Seplat announced an interim dividend of US2.5 cents, in line with Seplat Energy’s quarterly dividend distribution timetable. The final dividend will become payable on 24 June 2022, to all shareholders registered in the company’s books at the close of business on 30 May 2022.

Market Reaction: The investor reaction to the 1Q22 results was overwhelmingly positive as the stock popped 9.09% (28/4) versus a 0.55% gain for the All-Share Index (28/4).

Seplat Energy Earnings Highlight 1Q22

Source: Company Financials, FSDH