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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.
Big move up today for here. 12 month high & 5 year intra day high. Have to go back to 2015 to beat 155.
I suspect the 158 prints are buys. Probably an order called for as we are up on relatively little volume.
I think the double divi works out to about 4.6p in my ISA so something else must surely be causing the rise.
Re the arbitrage. I am not aware that the shares are transferable. They are dual listed with a quantity on each exchange.
Usual caveats
Trek
Arbitration opportunity
sell at Nigeria priced at 3334 which works out to 2.16 gbp
does anyione know how to play this
buy in uk and sell in Nigeria?
any ideas please?
Mele Kyari, CEO of NNPC, is the blockage to this Seplat-MPNU acquisition. With the weight of political statements expectant of immediate sign-off, it is about time he folds or is fired. These people are the worst face of corruption, pursuing self-enrichment at the expense of the Nigerian people, it really is despicable. About time he is fired.
Very interesting diversification proposed by the Co.
In the meantime, given the announcement this week from the Oil Minister re SEPL, I suspect no one wants loss of face and we can expect a swift conclusion to the Mobile deal, almost 2 years and 2 months ago.
This will thrust SEPL into a veritable force in both Nigeria and London markets, oil production will leap overnight, the SP might take a week or more to catchup to the RNS announcement that the deal is finally signed off, I expect the SP will rise over subsequent sessions towards 220p+ initially, but I think we will be over 300p by year end.
Tick tock, we are almost there.
Drive for clean energy
https://leadership.ng/seplat-plans-investment-initiative-around-clean-energy/
Trek
Some interesting points in the video:
• All issues relating to the acquisition have been resolved (at least that is what I heard).
• Nigeria will encourage other companies to emulate Seplat. Seems that Nigeria has accepted divestments are inevitable and that local companies will need to make further acquisitions. This is good news for Seplat for future acquisitions.
• Seplat will be a flagship for future investment and production, and will be assisted by the government.
• Nigeria is looking to access funds from capital markets for O&G investments. To attract such funds, stakes owned by national companies will need to be limited. NNPC already owns 60% in the MPNU related assets and therefore, unlikely to be awarded any additional ownership but let’s see what happens. For now, just speculation on my part.
• Seplat will likely benefit from being first mover in the race to make acquisition(s) and increase production.
Thanks 'Surprised' - it was that video link I tried to publish here, but I guess it was redacted because I'm a new user.
Very interesting and somewhat unique to see a ten minute long praise by an actual Oil Minister aimed at a single company. Mr. Brown hinted at deep offshore and bolt-on acquisitions (small wells) and Mr. Heineken hinted that there will be a lot more inactive wells for sell in the future. Not a difficult puzzle to make...
Good luck ahead everyone, cheers.
.''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''
(Speech by Oil minister link in tweet)
https://twitter.com/surprised_trade/status/1780971881551532044
A good summary on Twitter of why this could now finally get the final push https://twitter.com/OpeBee/status/1780982312915829220?t=0I9FQM_nNkvZh47Gub37gQ&s=19
Hi Alex,
LSE don’t seem to allow your links.
I think a few of us have a consensus 220-240 on divestment and a 6c per quarter divi. Both those figures are extremely conservative which reflects the market.
Likewise I have been following the media and have now made SEPL my largest position after adding the last yesterday. Looking forward to results on 29th with a double divi and a special divi all in quick succession!
Ops wise there is so much news in H2 to underpin the SP without the divestment which I see as just upside risk.
And as I have posted before this is as good as it gets to invest macro wise. Esp with election just over and business friendly government. We don’t have to worry about electioneering for a while the govt should be delivering now.
Usual caveats
Trek
It seems as a couple of local newspapers have snapped up that Mr. Heineken (Oil Minister) essentially promised that the MPNU acquisition will be sealed within short.
The full YouTube clip, however, I doubt a lot of people have seen. It currently has 152 views (can be double views from single users) and the Oil Minister not only double downs on the deal to be completed within soon, he holds a ten minute speach as to why companies explicitly as Seplat are the role model of the Nigerian oil industry, and should act as a lead in the roll-up of inactive wells from "majors". I see none of the news agencies mentioning that Mr Heineken also mentioned that the actual country president is committed to seal the acquisition.
Link: [LINK REMOVED]
With that commitment in mind, I'm sharing to you my sheet with my numbers. I'm making very conservative MPNU production numbers and I also make safety margins on ANOH and Sapele. I assume the low range on guided legacy production as well. However we look at it, I see +150% to +200% upside when MPNU is sealed and ANOH is active. I do see another $100m in dividends from AGPC in a couple of years, but it's not in my model currently.
Take a look at it, and let me know what you guys think. Link: [LINK REMOVED]
Disclosure: Holding 330 000 shares, of which 50 000 was acquired this morning. 280 000 shares with an average entry of 79p (dividends deducted).
MPNU production is around 70k bopd I hear, the difference being the natural decline rate of wells when there is no new/replacement production capex. That is what Lokpobiri is referring to.
The terms of the deal remain the same as originally agreed, as far as I know/have read
Lokpobiri's statements certainly suggest a higher likelihood of imminent closure, as he already has egg on face from his comments at Davos in January, so I don't see why he would make such a statement again and one so clear if he felt the delays could continue much longer - it would just make him look even more impotent