FSDH Initial Reaction: Seplat 1Q24 results 
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April 29, 2024/FSDH Research

Key Performance Highlights:

• Seplat’s revenue was up 76.7% YoY to N268.6 billion in 1Q24, by a 64.7% YoY rise in Crude Oil sales to N225.3 billion, followed by an 184.8% YoY jump in Gas revenues to N43.3 billion. The revenue growth was particularly visible across Italy, the Bahamas, and Nigeria. However, it is worth noting that revenue in dollar terms slumped 45.7% YoY to USD 179.8 million in 1Q24. Moreover, the Cost of Sales steeply increased from N60.9 billion to N204.8 billion in 1Q24, resulting in a 29.9% YoY decline in the Gross Profit to N63.8 billion. The Gross margin drastically declined to 23.8% in 1Q24 from 59.9% in 1Q23.
   
• The Company’s Other Income came in at N97.2 billion in 1Q24 versus N33.9 billion loss in 1Q23, mainly due to Underlift (surplus of crude lifted above the share of production). Further, General and Administrative expenses surged 281.3% YoY to N35.9 billion, primarily reflected by higher employee benefit expenses. Fair Value Loss increased to N3.6 billion from N523 million in 1Q23 due to higher Hedge premium expenses and Fair value loss on derivatives. Seplat reported an Operating Profit of N122.4 billion, Vs. N47.6 billion in 1Q23. Operating margin expanded 1421 bps YoY to 45.6% in 1Q24 (1Q23: 31.3%). The Oil segment’s Operating Profit jumped to N164.9 billion from N36.7 billion in 1Q23, whereas the Gas segment reported an N42.5 billion loss in 1Q24 versus N11.0 billion profit in the prior-year quarter.
   
• Finance Income increased to N7.0 billion, compared to 750 million in 1Q23, while Finance costs soared 239.2% YoY to N30.0 billion, mainly due to higher interest on bank loans and the Unwinding of discounts on provision for decommissioning. Consequently, Net Finance Cost increased 184.2% YoY to N23.0 billion in 1Q24 (1Q23: N8.1 billion). Further, the share of profits from the Joint Venture increased to N4.2 billion during the quarter, Vs. a small 12 million loss in 1Q23. Note that the Company posted significantly higher income tax expense of N106.4 billion, compared to just N13.1 billion charged during 1Q23. The significant increase in deferred tax charge for the quarter was due to both the sizable underlift position and unrealized FX gains recorded in 1Q24. Subsequently, the Company reported a Net loss of N2.9 billion, Vs. a profit of N26.4 billion recorded in 1Q23. The Company reported a profit attributable to owners of N1,570 million in 1Q24, a 94.1% YoY drop. Seplat’s Earnings per share drastically declined to N2.67 in 1Q24 from N45.38 in 1Q23.
   
• Although Revenues increased on a QoQ basis by 22.8%, Gross Profit declined 38.5% QoQ to N63.8 billion. While the Operating Profit increased 69.0% QoQ, the last Quarter’s Net Profit of N34.4 billion turned into a loss of N2.9 billion in 1Q24.
   
• The board approved a dividend of US3 cents per share in 1Q24 (subject to appropriate withholding tax) to be paid to shareholders whose names appear in the Register of Members as at the close of business on May 31, 2024 (1Q23: US3 cents per share). 
   
• On April 1, 2024, Mr. Udoma Udo Udoma became Independent Non-Executive Chairman, and Mr. Bello Rabiu became Senior Independent Non-Executive Director of the Seplat Energy Board. On  May 1, 2024, Mrs. Eleanor Adaralegbe will join the Board of Seplat as an Executive Director and will succeed Mr. Emeka Onwuka as Chief Financial Officer on May 21, 2024.

Market Reaction: The investor reaction to the 1Q24 performance was muted as the stock closed unchanged at 3,291.40 versus a 0.19% decline in the All-Share Index (29/4).

Seplat Energy Earnings Highlight 1Q24

Source: Company Financials, FSDH