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I understand a lot of the folks on this board have found SEPL recently on the back of 1. oil being back in favour and 2. the Exxon transaction, but to give some perspective many of us have been invested in SEPL for months or even years prior to the announcement of this transaction. I do believe the transaction will be closed, ultimately, although it will likely become more messy than it's been so far, and even if it doesn't proceed there is a queue of majors looking for an exit from Nigeria so there will be alternative transactions in the wings at similar valuations, BUT...the baseline fundamentals of SEPL are enough for me, frankly.
SEPL is the only blue chip O&G organisation in the country, with as clean corporate governance credentials as one will find in a frontier market. The company has a broad portfolio of producing assets, thus operationally diversified. The intention to return capital to shareholders via a reliable dividend has been delivered in practice over many years, including 2020. The high oil price is great of course, which is now being reflected in analyst forecasts (albeit still overly conservative re forward looking oil prices, in my view). Consensus forecasts have net income showing at $253m and $275m for 2023 and 2024 respectively, placing the company on a forward PE of 2.8x, which is nothing. Capital expenditure reflects the growing business this is ($160m this year rising to $200m in 2024 as per forecasts, which corresponds to almost 25% of the market cap spent on investment annually). Two big capital projects are about to be commissioned, which are major projects in the Nigerian context and recognised so. Beyond 2023 there is huge demand for the gasification of the power system in Nigeria, which will be followed by investment in solar energy, a natural next step in Nigeria. Not to mention acquisitions in the oil space in the meantime. And by the end of this year the company will have no debt.
I've been invested in SEPL since 2019 on the basis of these fundamentals, particularly the prospect of dividend yield and growth in the dividend. I would love this transaction to complete of course, but if it doesn't I'm not going to lose sleep over it. SEPL is doing for me what I wanted back in 2019, which is steady growth of local operations with a quarterly dividend I can rely on. Fundamentals haven't altered.
"Seplat Chairman, Dr. A.B.C. Orjiako Steps Down, To Exit May 2022"
These guys don't like being pushed, and look to get even .... in my opinion,
Technicality always an issue .... Seplat should simply tear up its agreement to supply gas at a fixed price to local Nigerian folk in that case, and sell LNG to the EU.
No cherry picking ..... springs to mind.
Found this
https://twitter.com/mobilepunch/status/1527563976384602112?s=21&t=8UFAFU6v4c1r4C7qCcuSNA
Good post SeaTank. I wont be selling either. The SP reaction over yesterday / today also demonstrates how little is in the price for this deal.
A case of sell the rumor buy the fact .... 116 was the best I got today .... bought two lots back today GLA
Well said SeaTank,
I have bought back my first lot having seen the SP reaction, managed to get 114. Was hoping for lower but didn’t come.
Can’t buy now direct as NT.
Always intended to average back in.
Will see what next week brings!
Good luck with your investments
Trek
Shell was presumed to be the original acquisition for SEPL. No doubt the new Chairman, who previously ran Shell in Nigeria, was chosen for a reason.
Factors to consisder: Shell and Exxon are unable to sell their assets to shell companies without a solid operational and governance reputation, purely on governance grounds themselves. They owe it to all their stakeholders, including employees, but also anti corruption agencies will be all over this. It has to be to an indigenous company, as in the national interest that profits are reinvested locally, not just run for cash. The NNPC must be confident that, operationally, these assets go to a reliable partner, as they already produce the majority of revenues and profits for NNPC as a non-operational partner. Finally, the local pension funds have a stake in this success too.
It is in the overwhelming interest of all stakeholders that these assets go to SEPL.
SEPL is the national champion with the pedigree for these assets. Nobody else. This is all a lot of noise. Not sold a cent.
hedder; whilst a little old, great find that post link; i wasn't aware that SEPL was interested in Shell assets. No Company/RNS mention of that.
Interesting indeed....
trek; in sending a letter SEPL may have gone about it in the wrong order, which surprises me somewhat.
Anyone can err, but i think their 'acquisition' RNS, showed astuteness and awareness of the first rights obligations issue, specifically avoiding by declaring Mobil would remain a stand alone unit.
Bar news noise, and local grease palming, one has to consider that Mobil want out; they offered their product and SEPL won against punting shell companies. The govt didn't bid, but were aware of the bid process in plenty of time. The suggestion now that the govt will block, to enable pre-emptive rights requires the state partner is in a financial situation to do so. Notwithstanding the agreed price is an unbelievable bargain, the state partner isn't; so what happens next? it is reauctioned, to the same interested parties, who bar SEPL, have no local domain, no local interest, ergo no local contribution. So in the interests of the Nigerian people, the national interest, it is sold to a shell company indifferent toa the Govt's stated aims of national interest, a national champion. Whilst the local company, that could be the national champion, SEPL, is discarded to the side.
a cursory glance shows this is local politics (someone annoyed they missed a bung). A cursory glance shows this is in Nigerian's national interest, ergo, bar this noise, post payment of the inevitable 'established' bungs , it will happen.
The fundamentals haven't changed; this is accretive without Mobil
https://www.worldoil.com/news/2022/2/3/shell-nigeria-oil-field-sale-draws-bids-from-four-local-firms/
I would speculate that if the deal falls through then seplat would be able to at least afford another .....
Funny thing is, in the AGM a shareholder asked about the acquisition and was told the deal is still going ahead and is expected to close in h2, being the day before the news article and being the recipient of one of the letters from the petroleum industry, even though he didn't go into great detail, I just don't think he was lying. I honestly think, whatever happens, that the management here think they can still pull off the deal and indeed other deals. Note that another major wants to sell its deep water Nigerian assets and is also looking for a buyer.
"Seplat Energy is confident that the process to obtain all approvals on the acquisition of MPNU's entire share capital is being followed and will be achieved."
That clearly means the transaction is still ongoing. "will be achieved" seems fairly certain on seplats end?
And just the other day the news was out about the energy Minister being fine with the acquisition?
"Chief Timipre Sylva, Minister of State, Petroleum Resources has lauded Seplat Energy Plc on its recent acquisition of the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil Corporation, Delaware, United States of America."
Turned out to be a complete shambles,cant they get their act together for heavens sake
Agree Sea. And since the announcement of the acquisition, oil price has gone up $20 /bbl. Market didn't price anything for the acquisition anyway.
And Seplat deposited $125mn for the transaction in Q1. Net debt would be closer to $200mn end Q2 if not for the transaction. And another $55mn from the disposal coming in.
Wider markets being red and illiquidity driven shake out usually provides opportunities? Seplat is confident in closing the transaction. If no acquisition, a big sizable dividend bump is obvious as cash flow will chew through existing debt. Sepl is paying a sizable dividend to shareholders to wait anyway. All imo
Not unexpected in my view - but this doesn't mean the acquisition won't happen...far from it.
Government in Nigeria is a complex web of political agendas, tribal agendas and personal agendas, and no line of command or authority is ever clear-cut. At every level it's a hustle. As I said before somewhere, in my view the law is absolutely clear as written, which will have been crawled over by both Seplat's and Exxon's legal teams; what is more, the transaction has clearly been blessed at the highest level of government. Indeed only this last Tuesday the Minister of Petroleum and Chairman of the NPCC himself publicly stated so.
But, as ever, agendas everywhere have not been aligned, hence the recently appointed CEO of the Nigerian Upstream Regulatory Commission has rejected it. He or somebody else he's acting for wants the acquisition for themselves, or haven't felt remunerated enough to accept it quietly.
Just out on the Nigerian Stock Exchange: https://doclib.ngxgroup.com/Financial_NewsDocs/36052_SEPLAT_ENERGY_PLC%20CORPORATE_ANNOUNCEMENT_ON_AN_UPDATE_.pdf
"Under the terms of the Sale and Purchase Agreement ("SPA"), announced on 25 February 2022, which remains valid and
subsisting, the Company will further its engagement with all relevant stakeholders. Seplat Energy is confident that the process to obtain all approvals on the acquisition of MPNU’s entire share capital is being followed and will be achieved."
More to the point, locals didn't sell the share today - the price hasn't budged:
https://ngxgroup.com/exchange/data/company-profile/?symbol=SEPLAT&directory=companydirectory&tdate=2022-05-19T00:00:00
This is just typical Nigerian farce. My view is the transaction will be signed off, once the Nigerian Upstream Regulatory Commission has been "managed". Those who exited the stock today will have to buy back in at a cost. The cost of doing business in Nigeria.
Anyway, putting the Exxon transaction aside, this company is generating FCF of at least $180m yearly at high 90s oil (my calcs), which should increase to closer to $250m once the pipeline and ANOH are commissioned, whilst concurrently investing circa $160m annually in maintaining and growing volumes. It's a diversified asset base with a dead cheap valuation and if they don't make an acquisition they'll ramp the dividend. Seems to me very little downside, a solid yield, with huge optionality. I view that as an asymmetric risk-return profile. Not selling a cent.
118 UT Temple,
Would t be surprised if there is a scrapped together RNS tomorrow.
I am selfishly hoping to start again here around 100p. That knocks off around more than enough for the Exxon hope imo.
And if it’s all refuted in a RNS. This market will still likely give it a kicking purely because ‘it’, uncertainty, happened again in Nigeria.
Usual caveats
Trek
I agree I have now had time to read and absorb. It seems to me that basically SEPL have gone about it the wrong order. The requests need to come from MNPU. SEPL have therefore been told no or rather no go and submit it in the right order and by the way national interest (how ever that is defined) will have priority consideration.
My simplified take on it. But translated to investors it means delays, legals, jobsworths, etc etc.
Making an assumption that the SP has moved on the back of POO, improved ops and has factored in the Exxon opportunity then it seems sensible to assume it will pull back. If of course there is truth in this.
My guess is it looks credible and my money is on the side to average back in at a later date after all the argument for African HC’s/Russia etc still holds true.
All conjecture but as I see it.
Big thanks to CaneToad for sharing his/her excellent sleuthing. At least we were in the position to make a decision. Thank you.
Usual caveats
Trek
Damofari … You are probably correct …. But this is a market where selling first ask questions later prevails.
That said, I bought half what I tried to buy this morning at 120p rather than 122.5 … at the end of the day … £ is down 10% from last year, and oil up 20% … and if 120 support goes, then things become interesting.
GLA
thanks all for the news links; on the face of it, wow. But i'm willing to go out on a limb here, i think this is politicking/news talk.
On the face of it these are absolute statements. Refused. For me, if you read the very reasons they state refused, they are also the very reasons why i'm dubious, and even if true, subject to challenge...
"Even if the transaction has been between Seplat Energy Offshore Limited and the MPNU shareholders, responsibility to ensure compliance with Nigerian laws, rules and regulations always remain that of MPNU, the entity that was awarded the assets." - the entity hasn't changed, it is still MPNU.
"“Please be advised that even if the transaction in question were between parties who are not privy to the JOA, MPNU remains the leaseholder of the assets subject to the transaction and the focal point of contact with the federal government of Nigeria on any matter or dealings with the assets." Exactly, MPNU is still the leasholder and is still contacting the govt on dealings with the assets.
"“In this regard, you may wish to note that paragraph 3.1 of the Guidelines and Procedures for Obtaining Minister’s Consent to the Assignment of Interest in Oil and Gas Assets 2021 provides, in line with extant Nigerian law, that ‘an Assignment involves the transfer of an OPL, OML, MF or OGPL or an interest, power or right therein by any company or person with equity, participating, contractual or working interest in the said OPL, OML, MF or OGPL, through merger, acquisition, take-over, divestment or any such transaction that may alter the ownership, equity, rights or interest of the assigning company in question,". MPNU aren't assigning anything to anyone, it's business as usual.
As i said, willing to go out on a limb here, but don't believe the substantiality of this - it would have had to be RNS'd
Thanks for posting. I cashed some out.
Oil is holding up even though the narrative is now about slowing growth but Sepl having a bit of a dip today.
If this gets wider unanswered coverage then there could be a bigger dip even though it’s not fully priced in.
I would rather have some in cash as can always buy back in even if it means loosing a few shares.
Good luck with your investments
Usual caveats
Trek
"...although the market doesn't seem to care."
It could also be that the market does not yet know...
It could be fake - yes.
I don't know enough about it, but came across it by chance, when doing some more dul-diligence this morning.
...although the market doesn't seem to care.
If this isn't fake Nigerian news, why has SEPL not RNSd this decision by NURPC, the regulatory body responsible for signing off deals? The letter was sent out on May 12th. This is bad corporate governance.