EUR 53.02 For Business Accounts Only

SEPLAT PLC - Still reeling from production disruption

• SEPLAT reported wider losses in H1’16 as Force Majeure on main evacuation route Forcados terminal continues to constrain condensate volumes. Revenue for the half was down 42%y/y to $143 million. Whilst the 6 months W.I. oil volumes were down 40% y/y, gas volumes rose 61% y/y as sales continued to the domestic market. The q/q performance reveals the significant production constraint in Q2 with W.I. condensate volumes down 64% q/q to just 400k bbls (Q1:1.1m bbls) whilst gas production for the quarter was down 39% to 5.9 mmscf (Q1: 9.6 mmscf). Management did not give a firm guidance on when they think the Force Majeure on Forcados exports will be lifted, thus creating uncertainty around volume recovery in H2. Nonetheless, we note attempts at boosting alternative evacuation route via the Warri refinery jetty increased condensate storage and trucking which will allow production continue but at constrained levels. At the end of June, a net volume of 389k bbls had been monetised via this route. SEPLAT plans to export an average 30k bopd on a gross basis and is setting up infrastructure in Warri refinery to enable it achieve this.
• Despite SEPLAT’s efforts at de-risking exports, we think volumes in FY’16 will be considerably lower. Management says its production guidance of 41k-48k boed is no longer feasible given the longer than expected downtime at Forcados and will provide revised guidance when the Force Majeure is lifted. Thus, we have further cut our FY’16 production estimates from 34k boed to 27k boed. As a result, our FY’16 Oil and Gas revenue estimates are lower at $186 million (Previous: $318 million) and $118 million (Previous: $128 million) respectively to deliver combined revenue of $304 million (Previous: $446 million). Following from this, we estimate FY’16 net loss of $69 million (Previous: $36 million profit). Our TP is cut to N216.15 (Previous: N264.77) – SELL rating maintained.

• SEPLAT is an independent Oil and Gas Exploration and Production (E&P) company formed in 2009 by Shebah Petroleum and Platform Exploration & Production, following which, French exploration company Maurel & Prom (MPI) purchased a 45% stake. In July 2010, SEPLAT acquired OMLs 4, 38 and 41 from Royal Dutch Shell’s Nigeria Division (SPDC), attainning a 45% stake and operator status. In April 2014, SEPLAT floated around 38% of its shares in a successful IPO on the main market of the London Stock Exchange and Nigerian Stock Exchange.