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SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC H1'19 - One-off income drives turnover growth

One-off income drives turnover growth 

‘Gas tolling’ boosts top line 
In its recently released Q2’19 results, Seplat’s revenue from gas operations declined 27% q/q and 34% y/y to $30 million, underperforming our estimate of $54 million. The decline in gas income was majorly due to lower average realised gas price (Q2’19: $2.28/Mscf, Q1’19: $3.24/Mscf, Q2’18: $3.04/Mscf), as average gas production improved from 143 MMscfd in Q1’19 to 147 MMscfd in Q2’19. Meanwhile, Seplat surprisingly recorded an unusual revenue of $67 million tagged as ‘gas tolling’ in Q2’19, accounting for 19% of the Group’s total revenue. Stripping out the gas tolling, Seplat’s turnover would have fallen 19% q/q. According to management, gas tolling is the revenue received from NPDC for processing its share of the gas extracted from OMLs 4, 38 and 41 from 2015 to 2018. Seplat did not recognise the related income or receivable in prior periods because the basis for computing the fees was yet to be established with NPDC. Management has, however, advised that gas tolling would not occur in the coming years. Taking a cue from H1’19 performance, we have revised our projection for FY’19 gas revenue to $155 million (previous estimate: $177 million), following the cut in our gas price projection to $2.90/Mscf (previous estimate: $3.20/Mscf). We have also trimmed our FY’19 gas output forecast to 146 MMscfd (previous estimate: 152 MMscfd).