July 29, 2022/FSDH Research

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Key Performance Highlights:

• Seplat Energy reported impressive 2Q22 results with revenues jumping 89.7% YoY to N118.6 billion, while the company reported a net profit of N27.2 billion in 2Q22 compared to a net profit of N4.7 billion in 2Q21. Total revenue in 2Q22 was N118.6 billion versus N62.5 billion reported in 2Q21. The oil revenue spurted 117.7% YoY to N105.2 billion in 2Q22 versus N48.3 billion in 2Q21, reflecting higher realized oil prices and higher production volume, while the gas revenue edged 5.6% lower to N13.4 billion (2Q21: N14.2 billion) due to lower gas sales volumes as a result of lower customer offtake, production stoppages, as well as outages on the Trans Forcados Pipeline, coupled with lower average realised gas price.
   
• The rise in oil revenue reflects higher realised oil prices of $107.35/bbl. for the period (6M 2021: $64.69/bbl.), attributable to the impact of the Ukraine conflict on global energy prices. The total volume of crude lifted in the year was 4.4 MMbbls, higher than the 3.9 MMbbls lifted in 6M 2021. In addition, the company’s 6M 2022 produced liquid volumes were subject to reconciliation losses of 12.2%. The company produced an average of 52,385 bopd in 2Q22, up 88.4% against 27,804 during the last period. The higher overall production in 2Q22 was from higher oil and gas volumes, up 4.3% and 19.1%, respectively, because of an improvement in overall uptime. Oil production in the second quarter was affected due to outages in the Trans Forcados System, exacerbated by scheduled and unscheduled maintenance activities leading to a total downtime of 23%. Following the successful conclusion of price renegotiation with customers and the installation of a new burner at the Oben Gas Plant, gas production improved significantly to 127.9 MMscfd in 2Q22.
   
• Gross profit shot up 346.4% YoY to N65.3 billion due to higher realised oil prices and a less than proportionate increase in the cost of sales (up 11.3% 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 40.3% YoY to N11.9 billion, resulting from a 40.2% YoY decline in underlift (shortfall of crude lifted below the share of production, which is priced at the date of lifting) to N12.1billion in 2Q22 compared to N20.2 billion in 2Q21, coupled with a N5.4 billion loss on disposal of oil and gas asset. The company recorded a massive 55.8% YoY rise in general and administrative expenses to N11.4 billion in 2Q22 against N7.3 billion in 2Q21, driven by higher travel and training costs following the relaxation of travel restrictions. Accordingly, the company reported an operating profit of N59.5 billion versus an operating profit of N25.8 billion in 2Q22.
   
• The net finance cost for the quarter reduced by 41.7% YoY to N7.1 billion in 2Q22, resulting from a 43.2% YoY decline in interest on bank loans to N6.9 billion from N12.1 billion in 2Q21. Seplat Energy charged an effective tax rate of 48.4% in 2Q22 compared to the effective tax rate of 65.6% in 2Q21, resulting from a deferred tax expense of N17.7 billion charged against revenues in the second quarter for FY22. The increased deferred tax charge was due to the unwinding of previously unutilised capital allowances and a higher underlift in the current quarter. Seplat Energy reported a net profit of N27.2 billion compared to N4.7 billion in 2Q21. The basic EPS soared by 217.6% YoY to N46.43/share in 2Q22 versus N14.62/ share in 2Q21.
   
• On 19 May 2022, Seplat Energy announced the appointment of Mr. Basil Omiyi, CON, as the company’s new Independent NonExecutive Chairman, effective immediately, along with Dr. Charles Okeahalam as the Senior Independent Non-Executive Director.
   
• On 30 June 2022, the company announced the appointment of Mr. Samson Chibogwu Ezugworie as the new Chief Operating Officer and Executive Director on the Board of the Company, effective 1 July 2022.
   
• On 11 July 2022, Seplat Energy PLC announced that on 5 July 2022, the Nigerian National Petroleum Company Limited (“NNPC”) commenced an action at the State High Court of the Federal Capital Territory in Abuja, Nigeria (“State High Court”) concerning the acquisition of the entire shares of Mobil Producing Nigeria Unlimited (“MPNU”). On 6 July 2022, the State High Court made an ex-parte order of interim injunction restraining the NNPC from completing any divestment in MPNU, including the Share Sale and Purchase Agreement signed with Seplat Energy Offshore Limited (the “SPA”). Neither Seplat Energy PLC nor Seplat Energy Offshore Limited is a party in the suit. Seplat Energy reiterated that the Sales & Purchase Agreement (SPA) signed on 25 February 2022 to acquire Exxon’s shallow water operations in Nigeria, MPNU remains valid, and the company remains confident that the proposed acquisition will be brought to a successful conclusion in accordance with the law.
   
• On 28 July 2022, Seplat announced an interim dividend of US2.5 cents. The final dividend will be paid on or around 9 September 2022, subject to appropriate withholding tax, to all shareholders registered in the company’s books at the close of business on 12 August 2022.

Market Reaction: The investor reaction to the solid 2Q22 performance was subdued as the stock closed unchanged at N1,430.50 versus a 1.04 % fall for the All-Share Index (28/7). However, the stock has maintained its upward trajectory, recording a 30% gain (versus a 3.3% rise in the All Share Index) since the last quarterly results on April 27, 2022.

Seplat Energy Earnings Highlight 2Q22

Source: Company Financials, FSDH