SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC Q1'21 Earnings Release - The calm after the storm
| According to its earnings report for the first three months of the year, Seplat’s revenue rose 17% y/y to $152 million (Vetiva: $161 million) on stronger oil prices and increased sales volume of gas. With further improvements on some line items such as operating expenses and finance costs, Seplat posted an after-tax profit of $25 million (Vetiva: $24 million). After adjusting our model for the misses in Q1, we value Seplat at a one-year target price of ₦680.41 and reiterate our BUY rating on the counter. | ||||||
| Seplat is still riding on high crude prices and we expect this trend to be sustained for the rest of the year, as OPEC+ cuts and improving global economy will continue to keep Brent price north of $60/bbl. Meanwhile, with MV Harcourt now replaced with another storage vessel, we see Seplat’s oil output gradually reverting to Q4’20 run rate of 2.5 mbbls in subsequent quarters. This drives our expectation of $559 million (2020: $418 million) for oil revenue in 2021. regard to the gas business, we expect to see an 8% growth in output to 42.4 Bscf, driving gas turnover 6% higher to $119 million in 2021. Seplat recently refinanced a large chunk of its debt by issuing a $650 million Eurobond, which carries a much cheaper rate of 7.75% vs 9.25% on the previous Eurobond that had been redeemed. Based on this, we see net finance costs declining 9% to $46 million, which brings our projection for net income to $127 million in 2021, contrasting with an after-tax loss of $85 million last year. As a side note, the Board of Seplat has approved the payment of quarterly dividends, starting with an interim dividend of 2.5 cents per share for Q1’21. |
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