Economy

Seplat Plc: Upbeat Outlook in 2018 But Risk Persists

Published

9 years ago

30/06/2017

By Dipo Olowookere

Analysts at ARM Research have disclosed that beyond 2017, they expect a more improved performance by Seplat Petroleum Development Company Plc (Seplat).

In its report released yesterday titled ‘Seplat Plc – In the clear,’ ARM research noted that starting off in 2018, it expects the company’s exports to rise largely reflecting the planned completion of the Escravos pipeline which offer a third export route for the company.

ARM Research said it revised its estimates for Seplat and increased its fair value estimate (FVE) to N518.74/share (previously N346/share) after the lifting of the force majeure on the TransForcados Pipeline (TFP) alongside upgrade at the alternative route (Warri refinery).

In the report obtained by Business Post, ARM Research said, “We see substantial upside in earnings in 2018F where we expect weighty ramp-up in exports, benign cost, and earnings derisk (opening 2 additional evacuation routes) to drive a stellar performance. On basis of valuation, Seplat trades on 2018F P/E of 8.6x which is at 30% discount to its EMEA peers.”

Earlier this month, Seplat’s management reported it has received notification from the operator of TPS (SPDC) on the lifting of the force majeure on the pipeline at the end of May 2017.

The company further stated that it has successfully reinstated production levels at the OMLs 4, 38 and 41 to net working interest production levels of 56kboep/d. Also, Seplat informed that upgrade at the Warri refinery will be completed by Q2 17, the report said.

“Our cautious view with regards to project completion and ramp up in export guides our 180 days downtime forecast for 2017E (previously 280 days).

“Consequently, we revise working interest production for 2017E to 39.27bopd (+52% YoY) to drive revenue 48% higher YoY to $376.6million – Oil revenue (+50% YoY to $222.7million) and Gas revenue (+46% YoY to $153.8million).

“We recall from our FY 16 earnings update ‘Striking FY 16 loss: is Seplat off the hook?’ where we noted that Seplat will need its working interest production to cross 32kbopd before the company can post a profit.

“Thus, given the earlier than expected re-opening of TFP to drive higher production, our estimate implies PAT of $27.3million for FY 17E (2016: loss after tax of $166million),” the report said.

Management has indicated it was working with the FG to complete the Escravos pipeline where it expects to export circa. 160kbpd.

Though Seplat expects this to be operational in H2 17, the report said it is less sanguine about the target completion time of the Escravos pipeline owing to government’s delayed completion on similar projects, and therefore see 2018 as a more realistic date for the project.

The combination of an upgrade at the Warri refinery as well as fully operational Trans-Forcados and Escravos pipelines drive its forecast of a 90-day downtime in 2018 with working interest production forecast of 44.8bopd (+14% YoY) and over four-fold increase in PAT to $84.1million, the research report stated.

“Farther out (2019-2022F), Seplat’s intention to make the Escravos pipeline its primary route guides to lower reconciliation cost.

“Consequently, we forecast an average working interest production of 50kbopd and mean PAT of $95million over our forecast period. Another catalyst to earnings is Seplat’s operated $1.3bilion ANOH gas and condensate project which a final investment decision (FID) for the upstream and midstream elements is expected in H2 2017 and should guide a revision to forecast. Irrespective, downside risk to earnings persist.

“Ongoing national security concerns with recurrent threat by new militant groups in the Niger delta region pose risk to production and export volumes from pipeline attacks.

“To add, oil prices below our $40/bbl. Estimate would result in a downward revision to our estimate.

“The stock currently trades at an FY 17E and FY 18F P/E of 22x and 8.6x compared to 15.4x and 12x for its EMEA peers. We forecast a sturdy 5-year earnings CAGR of 55%. Cumulative impact of the adjustments results in an attractive valuation with NAV per share of its oil and gas assets at $2.19 and $0.43 respectively having applied 35% discount to asset values to reflect our risk to future earnings.

“The foregoing, combined with our exchange rate forecast of N360/$ for 2017, drives our FVE higher to N518.74 (previously N346).

“Our FVE is at a 13% premium to the last closing price of N460. We have an OVERWEIGHT rating on the stock,” ARM Research stated in the report.

ARM Securities Limited

Economy

Four Securities Erase N51.17bn from NASD Exchange

Published

7 hours ago

27/06/2026

Adedapo Adesanya

By Adedapo Adesanya

Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.

In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.

The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.

During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.

Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.

GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.

Economy

Cautious Trading, Profit-taking Weaken Nigeria’s Stock Exchange by 0.66%

Published

8 hours ago

27/06/2026

Dipo Olowookere

By Dipo Olowookere

The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.

This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.

Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.

At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.

Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.

The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.

As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.

Economy

Official FX Market Sees Naira Dip to N1,380.93/$1

Published

8 hours ago

27/06/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.

Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.

At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.

Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.

Also, a stronger greenback has generally put significant pressure on emerging-market currencies.

Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).

The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.

If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.

At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.

On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.