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Q1 results will be out Monday 29th April.
Seems like yesterday but it’s a year since the smear campaign court case! A well deserved gong for SEPL pioneering in country governance! Sets the divestment foundations perfectly!
Usual caveats
Trek
Gong!
“ Seplat Energy, which is Nigeria’s leading indigenous energy player, was recognised for its effective corporate governance framework and corporate governance standards.
Seplat Energy also got recognition for its exponential growth for the period, which had translated into the creation of significant shareholder value and national wealth.
Energy Times is a leading weekly newspaper based in Lagos, Nigeria, focusing on oil, gas, power, maritime and renewable energy reportage.“
https://blueprint.ng/seplat-energy-emerges-energy-times-corporate-governance-company-of-the-year/
It’s sure has been a long wait be we have been well paid to wait!
Trek
Happy days Trek, MR Market is finally realising that this is a very attractive income play with step-ups (plural) in income in the near-term, plus various growth avenues once MPNU closes. Frankly, when MPNU is sealed all bets are off regarding where this business could go. We've been invested in this name since 2019/2020 I believe and it's been a long wait but so good to see the stars aligning at last.
I expected 6p off Gav and then a further drop over the next few days. That’s typical of many uk xd stocks atm.
But this today is indeed something special!
SP at 5 year high and heading to the 260 highs of the 2014 IPO ‘bathtub chart’ by looks of it!
That spike up from 148 hasn’t even been threatened.
Volumes are still low and liquidity is poor indicating there is potentially a background buyer for the London stock.
They ain’t having mine!
Nice to have a growth income play of scale!
Usual caveats
Trek
I will give this a final go, to finish my sentence! The other related point I was trying to make refers to Alex's nod to the "integrated" E&P aspect, and MPNU's related opportunity in gas to Europe. Seplat's growing midstream business is a long term contract fixed price business, which deserves a higher valuation, and this business will multiply in scale if SEPL can install infrastructure to process and export MPNU's huge gas reserves to Europe, again under long term contract. All of this comes on top of the core oil business's prolific cash generation. When the MPNU deal is cemented, this "hidden" upside comes into play.
Very welcome. Not bad for ex-div day when a 4p/5p drop might be expected.
Deal news must be soon.
The environment in Nigeria now appears to be conducive for growth. Reading the annual report, it appears that the company is at least thinking, if not planning, further acquisitions and bidding for new offshore licenses. Below are extracts from pages 28 and 29:
“To address the shift of international oil companies (IOCs) from onshore and shallow water investments to deepwater, an important initiative was announced in December 2022. This initiative involves an upcoming bid round for seven new offshore blocks, covering a significant area in water depths ranging from 1,150 to 3,100 meters. It aims to attract experienced local and international offshore exploration and production investors, promote energy security, generate substantial revenue, and foster partnerships within a fair and well-defined legal and regulatory framework”.
“Seplat’s reputation as a reliable partner makes it a preferred choice for incumbent asset owners seeking to engage in various Nigerian oil and gas transactions. Their strategic positioning positions them well to capitalise on future opportunities, including asset divestments from the IOCs, participation in upcoming licensing rounds, and farm-in prospects”.
SeaTank,
I agree with you, it’s undervalued on many fronts, even if we ignore the MPNU acquisition. There’s so much potential ahead for the company. Roger Brown has a number of times made the following statement:
“I think this year will be truly transformational for us, as we bring the ANOH gas project onstream and, I hope, complete the MPNU transaction and develop the four blocks that are in much need of investment to realise their full potential in both liquids and developing a very significant gas resource”.
Roger’s past performance shows he has credibility.
Starting a new chat since the other seems to have a bug. Point being many very low multiple E&Ps deserve to trade at a low multiples as they have short reserve life, some
My post was also cut short! Some tech issue/bug. I was just saying that not all multiples are equal and many very low multiple E&Ps deserve to trade at a low multiples as they have short reserve life, some
Thanks Alex, interested in your further thoughts.
You mentioned that SEPL is one of the cheapest valuation integrated player in the world. I agree and would make two specific points that relate:
1. SEPL's valuation multiple is of course very low indeed, but it is even cheaper than it looks because SEPL has a solid life span of reserves (25 years+), whereas most of the other cheap names in the market have much shorter life reserves, say 10-15 years or even
Yes, please, alex. Would really like to see!!
Alex - it was a great start. A new attempt will be welcome : )
Thanks for attempting to write a long detailed post, i share your frustration
MEM
Wrote a huge post and LSE just cut out 75% of it. What a frustration. Trying again next week.
SeaTank8300,
Thanks for your insights. You're completely on-point that Seplat is perhaps the cheapest integrated (up- & midstream) oil- & gas company that is listed, world wide.
After a meeting with management last month, I'm delighted to share these news on the topic of MPNU:
Royalties for shallow water is 17% i.e. lower than onshore.
Seplat is a huge winner of PIA, when that get implemented the coming years:
- "smaller fields" onshore (
Today is the last chance to get the quarterly and special dividend. Last year the share price took just 8 days to recover the value of the dividend adjustment. Suspect something similar will happen this year too given the stock's positive momentum.
MPNU is producing at circa 70k bopd today, which is quite a bit lower than the 90k+ bopd when the acquisition was announced two years ago, which is a result of natural well decline as MPNU is not drilling new wells. The operation is obviously profitable and cash generative, but margins must be lower than SEPL’s onshore operations as MPNU is offshore and carries higher costs re Exxon parentage. We won’t know the details until the Prospectus is published. However we can safely speculate that cash generation is still significant, more than enough to cover capex to raise production back to previous levels whilst also upstreaming free cash flow to SEPL. As I see it, MPNU will justify another big increase in SEPL’s dividend. I would be surprised if an additional 10 cents of dividend is not possible from MPNU alone.
Do the math on conservative assumptions: 70k bopd @ $80 oil – 20% royalties - $25 opex - $15 capex = $16/bopd – 30% cash taxes = FCF circa $10/boe, or $250m in annual FCF on 70k bopd. An increase in dividend of 10c would cost SEPL around $60m. In my view, this is the least one should expect.
A year or two from now ANOH will be generating around $60m in FCF too, so that’s another 10 cents in dividend on top, taking total dividends to 35 cents or 25p net of withholding tax (16% dividend yield at today’s share price).
This would leave circa $200m/year free cash generation from MPNU alone for servicing and paying down the debt taken to acquire it. SEPL will likely be debt free within five years despite the leap in dividend payments to shareholders. Then there are SEPL’s current operations, which are also generating plenty of cash. Depending on whether additional investment opportunities can be found, SEPL’s current operations excess cash generation might also need to be passed to shareholders, which would present further upside to the dividend beyond the 35 cents. It becomes quite easy to make the case that SEPL should be trading closer to 300p in 1 or 2 years’ time alongside ongoing large dividend stream.
The stock is clearly completely misunderstood by the market. I see “Nigeria risk” being used liberally as a reason why it is trading in deep value territory, but as I’ve pointed out in many posts before, Nigeria risk is objectively lower than UK risk these days in E&P because the government is wholly committed to encouraging more investment in E&P not less. The UK North Sea operators face many more legal, tax and regulatory risks. The commitment of Nigeria to increasing oil production also means an improving security situation as one can’t have the second without the first, not to mention SEPL’s own advantages regarding impenetrable underground pipeline for evacuation and MPNU’s offshore operations which can’t be easily disrupted. Anyone who says the “country risk” is too high does not understand the landscape.
SEPL goes ex divi with added special 25.04.24 -
cash at bank 31.12.23 = $450m (2022: $404m),
Revenue $1,061.3 million up 12%,
Production averaged 47,758 boepd, up 8%,
special dividend of US 2.4p, in addition to Q4 23 declared dividend of 2.4p, confident will acquire transformational Exxon Mobil's (MPNU)
'Seplat are the role model of the Nigerian oil industry, Mr. Heineken (Oil Minister) assures that the MPNU acquisition will be sealed within a short time...
initial target 260p+
https://twitter.com/surprised_trade/status/1780971881551532044
I'm speculating that Seplat's cash position currently is extremely healthy., even around $600m.
On completion of the Exxon deal, are there any capital spending or infrastructure requirements that Seplat will need to undertake ? My question is how "oven ready" is the deal, as I'm assuming Exxon have been continually producing for the last two years, however they did announce last year there was no more spending plans in Nigeria.
Oil up 2% on slowing US manufacturing data = earlier rate rise.
Oil has held up well throughout period.
Chart on breakout. Experience says to buy shares that have reached highs. Even if they don’t go on right away they usual do to set several higher highs.
Then this divestments media noise is about!
Just seems like a perfect storm brewing here. I just don’t get why there are hardly any posters here.
For sure it’s not a ‘hot stock’ but it’s not done bad from 100p!
Usual caveats
Trek
Ps anyone looking for a small cap ‘hot stock’. Check out HEX. A US helium drilling outfit. Just IPO’d here, fully funded. Placing flip will finish soon then it should rerate. Just secured drill. V good punt IMO. Don’t see those that often.
Pesky predictive text
———————-
Counting down the days until a transformative RNS
MEM
Mem
thx I meant arbitrage
Arbitraging this is difficult unless you have a custodian relationship in both jurisdictions that can handle the share register switch, which is entirely possible but requires the custodian to action. Basically only institutional investors can do this. Once you have the Nigerian stock, you need to sell it and FX the proceeds back to GBP, which shouldn't be an issue now that currency controls have supposedly been lifted. Liquidity in the local share, the small volumes, and sheer admin hassle means few institutional shareholders are likely to bother. Hedge fund types might do it but they have to open local custody in Nigeria first and I'm not sure that is a priority for them or anyone! I do wonder if the investment banks might do it as a prop trade, but it is not really their business. More than anything, it is just a great signal that SEPL is mispriced here in the UK.
I think you mean ARBITRAGE
What Is Arbitrage?
Arbitrage is the simultaneous purchase and sale of the same or similar asset in different markets in order to profit from tiny differences in the asset’s listed price. It exploits short-lived variations in the price of identical or similar financial instruments in different markets or in different forms.
Find a broker with offices in London and Lagos as a first step.
I think we are on the very cusp of major price action with the Mobile deal agreed, just waiting final sign off, as promised by the oil Minister last week.