notably the transformative acquisition of Mobil Producing Nigeria Unlimited (MPNU), now Seplat Energy Producing Nigeria Unlimited (SEPNU). Total revenue for FY:2024 increased significantly by 136.99% to NGN1.65trn from NGN696.90bn in FY:2023, driven by higher oil production volumes and contributions from the newly integrated SEPNU assets. Excluding SEPNU and adjusting for overlift/underlift effects, underlying revenue demonstrated operational stability.

Gross profit for FY:2024 grew significantly by 103.32% YoY to NGN710.10bn compared to NGN349.30bn in FY:2023, reflecting enhanced operational scale post-acquisition. However, excluding contributions from SEPNU, gross profit experienced a decline due to lower oil volumes and elevated production costs related to regulatory expenses.

EBITDA for FY:2024 increased substantially by 171.73% YoY, reaching NGN796.40bn compared to NGN293.10bn in FY:2023. This notable rise was primarily driven by the gain on the bargain purchase of MPNU and favorable foreign exchange impacts.

Operating profit saw a significant increase of 295.78% YoY, totaling NGN647.93bn from NGN163.73bn in the prior year, benefiting from the strategic acquisition, operational efficiency improvements, and favorable foreign exchange conditions.

Profit before tax soared by 347.33% YoY, amounting to NGN561.42bn compared to NGN125.54bn in FY:2023. However, total income tax expenses rose significantly by 248.73% to NGN347.24bn (FY:2023:

NGN99.56bn), driven by higher taxable profits and significant deferred tax liabilities arising primarily from the acquisition of SEPNU. Consequently, the income tax expense significantly impacted net profitability, resulting in an income tax expense rate of approximately 61.85% for FY:2024, markedly higher compared to previous years.

Net profit for FY:2024 rose significantly by 70.65% to NGN 214.16 billion compared to NGN 125.50 billion in FY:2023, driven by the substantial increase in profit before tax despite higher tax expenses. Additionally, profit attributable to equity holders of the parent company increased notably to NGN 226.91 billion for FY:2024. Consequently, Earnings per Share (EPS) was NGN 385.61. EPS witnessed significant growth of approximately 84.49% YoY, primarily attributable to enhanced operational efficiencies, increased production volumes from the integration of SEPNU assets, and effective cost management strategies.

Cash generated from operations declined by 26.20% to NGN 567.50 billion from NGN 768.42 billion in FY:2023, impacted by acquisition-related transaction costs and working capital adjustments. Nevertheless, year-end cash at bank remained healthy at NGN 695.60 billion compared to NGN 677.95 billion in FY:2023.

Operationally, average working interest production, including SEPNU, significantly improved by 10.86% to 52,947 barrels of oil equivalent per day (boepd) from 47,758 boepd in FY:2023. This notable increase was primarily due to enhancements in evacuation infrastructure, including the resumption of 24-hour operations on the Trans Niger Pipeline (TNP), which significantly reduced downtime and deferments.

Additionally, successful drilling outcomes, particularly in OMLs 4, 38, and 41, and the increased output from OML 53, following improved export logistics, substantially contributed to the production growth. The integration of SEPNU assets also provided incremental production, further bolstering overall production volumes.

Outlook: Seplat Energy projects a robust operational performance for FY:2025, targeting an average production range of 120-140 kboepd. This anticipated growth is expected through strategic initiatives, including reactivating previously idle wells, executing an extensive drilling program with 13 new wells planned, and investing significantly in targeted maintenance to enhance operational reliability and integrity. Capital expenditure for FY:2025 is projected to be between NGN 385.00-475.00 billion (USD 260-320 million), focusing primarily on infrastructure improvements, operational reliability, and sustainability-driven projects aimed at reducing carbon intensity and eliminating routine gas flaring.

We expect the company to sustain its positive performance trajectory in FY:2025, supported by increased operational efficiencies and the successful integration of SEPNU. However, the overall performance may be influenced by external factors such as fluctuations in global oil prices, tensions affecting crude export routes, especially in the Niger Delta region, and domestic economic policies impacting currency stability and regulatory costs. The effective implementation of the Petroleum Industry Act (PIA) could further shape the operational and financial landscape positively. Consequently, we place an OVERWIGHT recommendation on Seplat Energy Plc.

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