Q12024 Seplat Unaudited Financial Result | Elevated Tax Expense Drives Net Loss
Elevated Tax Expense Drives Net Loss
In Q1:2024, Seplat Energy’s revenue grew by a remarkable 76.73% year-on-year (YoY) to reach NGN268.62bn. This exceptional performance was fueled by substantial growth in both crude oil (up 64.72% YoY) and gas (up 184.84 % YoY) revenue streams. Average production slowed down by 4.8% YoY to 49,258 barrels of oil and equivalent per day (boepd) compared to 51,720 boepd. However, higher oil (USD86.17pb in Q1:2024 vs USD82.32pb in Q1:2023) and gas (USD3.11/Mscf in Q1:2023 vs. USD2.88/Mscf in Q1:2024) prices over the period supported the surge observed in total earnings.
Operating profit remained strong during the period, experiencing a robust growth of 156.86% YoY to reach NGN122.38bn. This was primarily driven by a strong revenue performance over the period, offsetting a significant increase in administrative expenses which increased by 281.27% YoY, totaling NGN359.31bn. Furthermore, Other income came in at NGN97.17bn in Q1:2024 (compared to a loss of NGN33.87bn in Q1:2023), which further bolstered Operating profits. Net finance costs increased by 184.25% YoY to NGN23.04bn. Despite these challenges, profit before tax (PBT) showed strong growth as it rose by 161.90% YoY to NGN103.51bn. However, profit after tax (PAT) for the period came in negative as it declined by 110.88% YoY noting a loss at NGN2.87bn. This was driven by a substantial surge in the company’s Income Tax expense (+712.11% to NGN106.39bn).
We remain positive on the prospects of Seplat. The signing of an Executive Order in March 2024 offering fiscal incentives for gas and midstream businesses, coupled with the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA's) upward revision of domestic gas prices to USD 2.42/Mscf, are expected to boost Seplat’s revenue generation, overall business efficiency, and growth trajectory. Further bolstering our optimism, the long-awaited approval of Seplat's acquisition of Exxon Mobil's share capital in Mobil Producing Nigeria Unlimited (MPNU) appears to be imminent. This acquisition is expected to expand Seplat's production capacity and market share. Consequently, we maintain our target price of NGN3,790.80, representing a 12.49% upside potential from the current closing price of NGN3,370 as of May 7th, 2024. Consequently, we maintain an Overweight rating on this stock.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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