FSDH Initial Reaction: Seplat 2Q23 results 
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July 28, 2023/FSDH

Key Performance Highlights:

• Seplat Energy reported muted top-line growth in 2Q23, with revenues growing a mere 6.5% YoY, after a blockbuster 37.6% growth in FY22 and a 51.1% spurt in 1Q23. The net profit was down by 42.5% YoY to N15.6 billion in 2Q23 versus a net profit of N27.1 billion in 2Q22. The revenue growth in 2Q23 was primarily supported by a 28.8% YoY rise in gas revenue to N17.2 billion (2Q22: N13.4 billion). Moreover, oil revenue grew 3.7% YoY to N109.1 billion (2Q22: N105.2 billion).
   
• Oil prices have experienced a steady downward trend since the highs of 2022, primarily due to mounting concerns about the global economy and its potential impact on crude oil demand. Consequently, the average realised oil price for the first six months of 2023 declined by 25.9% to $79.54/bbl compared to the $107.35/bbl achieved during the same period in 2022. Crude oil revenue was up 3.0% in 6M 2023 compared to the same period in the previous year. The total volume of crude lifted during the period amounted to 6.1 million barrels, a 38.6% increase from the 4.4 million barrels lifted in the first half of 2022. A reconciliation loss of 3.3% was recorded for the period. Similarly, gas revenue experienced a 10.2% increase, attributed to increased realised gas prices and a rise in sales volume. The average realised gas price rose by 4.4% to $2.87/Mscf, while gas production saw a moderate 1.4% increase to 21.6 Bscf during the same period (compared to 21.3 Bscf in 6M 2022). The average realised gas price improvement reflects the impact of upward gas price revisions implemented in the period.
   
• Gross profit declined 24.1% YoY to N76.8 billion due to higher cost of sales (up by 44.1% over 2Q22). The company reported other income of negative N12.3 billion in 1Q23. Moreover, the company recorded a 111.9% YoY rise in general and administrative expenses to N24 billion in 2Q23 against N11.3 billion in 2Q22. In 1Q23, the company’s fair value loss increased marginally by 1.4% YoY to N578 million, compared to N570 million in 2Q22. Resultantly, the company’s operating profit fell 78.9% YoY to N12.6 billion in 2Q23 versus N59.3 billion in 2Q22.
   
• The net finance cost for the year expanded 22.8% YoY to N8.7 billion in 2Q23, resulting from higher interest expenses and majorly offset by increased finance income. Seplat Energy reported a net profit of N15.6 billion in 2Q23, down 42.5% YoY versus a net profit of N27.1 billion in 2Q22. Consequently, the basic EPS was reported at a negative N7.78 in 2Q23 versus N46.43 in 2Q22. However, it is worth noting that the company has recorded the 2Q23 foreign currency translation difference of N519.5 billion in the income statement. Including the FX income, Seplat’s profit attributable to equity holders of the parent jumped to N514.9 billion in 2Q23 versus N24.7 billion in 2Q22.
   
• On 28 July 2023, Seplat Energy announced an interim dividend at a rate of US3 cents (United States Three Cents) per Ordinary Share to be paid to Seplat shareholders whose names appear in the Register of Members as at the close of business on 17 August 2023.

Market Reaction: The investor reaction to the 2Q23 performance was muted as the stock closed unchanged at N1,693.60 versus a 0.65% fall for the All-Share Index (28/7).

Seplat Energy Earnings Highlight 2Q23

Source: Company Financials, FSDH