FSDH Initial Reaction: Seplat 1Q23 results 
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May 2, 2023/FSDH Research

Key Performance Highlights:

• Seplat Energy reported robust 1Q23 results, with revenues surging 51.1% YoY to N152.0 billion, while the net profit jumped 218.7% YoY to N26.4 billion in 1Q23 versus a net profit of N8.3 billion in 1Q22. The revenue growth in 1Q23 was primarily supported by a 52.1% YoY rise in oil revenue to N136.8 billion (1Q23: N90.0 billion), driven by increased liquids production, limiting the impact of lower oil prices. Moreover, Gas revenue grew 42.5% YoY to N15.2 billion (1Q23: N10.7 billion) due to higher realised gas prices and sales volume.
   
• The rise in oil revenue reflects the increased total crude volume lifted for the period: 3.6 MMbbls in 1Q23, up 63.6% YoY from the 2.2 MMbbls lifted in 1Q22. However, it was partially offset by lower realised oil prices of $82.06/bbl for the period (1Q22: $97.53/bbl) due to the rising concerns about the global economy and any consequent impact on demand for crude oil. The company produced an average of 30,331 bopd in 1Q23, up 4.2%, against 29,105 bopd during the prior period. Similarly, gas revenue growth reflects increased gas prices and sales volume. The average realised gas price was higher at $2.88/Mscf (1Q22: $2.76/Mscf), while gas production increased by 15.5% YoY to 11.2 Bscf (1Q22: 9.7 Bscf). It is worth noting that the improved production across gas and liquids reflects the positive impact of the Amukpe-Escravos Pipeline (AEP), which has reduced downtime and enabled stronger liquids and associated gas production. Additionally, the completed Oben-34 gas well further boosted gas production in 1Q23.
   
• Gross profit climbed 86.5% YoY to N91.1 billion due to higher revenues and less than a proportionate increase in the cost of sales (up 17.7% YoY). The company reported other income of negative N33.9 billion in 1Q23, resulting from an overlift of N36.6 billion compared to N5.7 billion underlift in 1Q22 (overlift/underlift are surplus/shortfall of crude lifted above/below the share of production, which is priced at the date of lifting). The company recorded a 19.1% YoY rise in general and administrative expenses to N9.4 billion in 1Q23 against N7.9 billion in 1Q22, primarily driven by higher employee benefits. In 1Q23, the company’s fair value loss declined 68.1% YoY to N5 billion, compared to N1.6 billion in 1Q22. Ultimately, the company’s operating profit increased 12.1% YoY to N47.6 billion in 1Q23 versus N42.5 billion in 1Q23.
   
• The net finance cost for the year expanded 5.0% YoY to N8.1 billion in 1Q23, resulting from higher interest expenses, partially offset by increased finance income. In 1Q23, the Group’s tax expense for 1Q23 declined 50.4% YoY to N13.1 billion compared to N26.4 billion in 1Q22, as the effective tax rate for 1Q23 was 33.1% (1Q22: 76.1%). Seplat Energy reported a net profit of N26.4 billion in 1Q23, up 218.7% YoY versus a net profit of N8.3 billion in 1Q22. Consequently, the basic EPS was reported at N45.38 in 1Q23 versus N11.76 in 1Q22.
   
• Sequentially, the revenue grew 4.7% QoQ higher to N152.0 billion in 1Q23 from N145.2 billion in 4Q22. With the increased revenues and lower cost of sales (down 8.7% QoQ), the gross profit also jumped 15.7% QoQ to N91.1 billion in 1Q23 against N78.7 billion in 4Q22. The General and administrative expenses dropped 62.4% QoQ to N9.4 billion in 1Q23, while fair value loss declined 62.4% QoQ to N0.5 billion compared to N1.5 billion in 4Q22. This resulted in an operating profit climbing 165.5% QoQ to N47.6 billion in 1Q23. Consequently, the company reported a 149.9% QoQ surge in the net profit to N26.4 billion in 1Q23 (4Q22: N10.6 billion), despite a 12.5 QoQ rise in net finance cost.
   
• On 27 April 2023, Seplat raised its core annual dividend by 20% to US12 cents (FY22: US10 cents) to be payable to shareholders as four quarterly dividends of US3 cents per share. As a result, a dividend of US3 cents per share (subject to appropriate Withholding taxes) will be paid to shareholders on 16 June 2023.
   
• On 23 March 2023, Seplat Energy Plc announced the termination of the Consultancy Agreement between the company’s wholly owned subsidiary and its co-founder, Dr. A.B.C Orjiako, acting through Amaze Limited, with immediate effect.
   
• On 20 April 2023, Seplat Energy announced the retirement of the Chairman, Mr. Basil Omiyi, CON and the Senior Independent Non-Executive Director (SINED), Dr. Charles Okeahalam, from the Board before the May 2024 Annual General Meeting. Moreover, the Board also announced the resignation of an Independent Non-executive Director, Professor. Fabian Ajogwu, SAN, OFR, w.e.f. 21 October 2023.
   
• On 28 April 2023, the company announced that the Federal High Court in Abuja formally struck out the criminal charge brought by the Nigeria Immigration Service against the company and some of its Officers. The Court fully discharged all named defendants. The Nigerian Immigration Service had earlier withdrawn the charge on 20 April 2023. It was about the immigration status of Mr. Roger Brown and the withdrawal of his immigration visa by the Ministry of Interior. Moreover, Seplat noted that it is focused on engagements with the Minister of Interior to bring closure to all outstanding issues.

Market Reaction: The investor reaction to the robust 1Q23 performance was subdued as the stock closed unchanged at N1,15.30 versus a 0.27% gain for the All-Share Index (27/4). Moreover, the stock remained flat at N1,15.30 versus a 0.32% gain for the All-Share Index on 28/4.

Seplat Energy Earnings Highlight 1Q23

Source: Company Financials, FSDH