EUR 56.22 For Business Accounts Only

SEPLAT PLC 9M'16 - Improved outlook on Forcados resumption

• SEPLAT extended losses in 9M’16 results to $98 million as the force majeure on Forcados exports continues to constrain condensate volumes. 9M’16 revenue was down 52% y/y to $202 million with realized oil price of $42.82/bbl compared to $49.30 realized in 9M’15. Over the 9 months, Working Interest (WI) production averaged 26k boed (in line with our average 2016 estimate of 27k boed); production was down 44% from a year ago. The performance does show improved gas production, up 22% y/y at 93 mmscfd as a result of the capacity expansion at the Oben gas processing plant and implementation of the alternative evacuation route in Warri Refinery jetty which de-constrained production. We calculate SEPLAT’s 9M’16 production cost of $20.11/boe (9M’15: $26.49) with netback at $19.88/boe (9M’15: $29.07).

• SEPLAT reported that although the Forcados terminal remains under force majeure, a part cargo of SEPLAT’s equity crude oil was lifted from the terminal recently, underscoring optimism for a lifting of the force majeure on Forcados exports. Following from this, we have raised our production uptime factor and 2017 production outlook from 37k boed to 41k boed. Management has guided that the Oben Phase II gas expansion which comprises the installation of 3 x 75 mmscfd new processing modules is scheduled for completion by Q1 2017. On completion, the expansion would add 225 mmscfd aggregate processing capacity and raise SEPLAT’s gross capacity from 300 mmscfd to 525 mmscfd. Following from these key events, we have raised our target price on SEPLAT from N216.15 to N289.03. Whilst the outlook is improved, we highlight risks to production from militant attacks on export pipelines.