We would love to hear your thoughts about our site and services, please take our survey here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Damofarl yes some great insight by seatank etc, it’s always welcome information to read, so Thankyou all who have replied. Also interesting to see that the opec quotas may be forefilled by August, that in itself maybe hints on when any deal could be met, good find. I also spotted that there is a meeting pencilled in for the July 21st maybe something will come to light then. So it’s doldram time I think, if the share price tips much lower I will have to re dip my toes again for a further top up. As lawyers good luck to those who hold regards H
herminator; i think, your thinking behind your questions is spot on.
I too see that, as seatank has so excellently suggested, that bar the local politics, and maybe palms not being greased in the historical way, that the NNPC are actually supportive. SEPLAT do appear to have excellent relations, and as i pointed out before, the boss of the boss of NNPC said, AFTER the 'referral/refusal' of Mobil deal, that he was happy at Seplat's stewardship and acquisition of Mobil assets into a Nigerian champion. Once the people have been greased Nigerian style, and i do feel with some adjustments, Mobil will happen.
If it doesn't, and the SP doesn't include even the possibility of it happening, the fundamentals (again thanks top seatank for frequently outlining such) are still top draw.
Note this from, oilprice.com, which only shows the trajectory and potential here:
"The lowering of crude oil surplus projections comes as the OPEC+ group continues to produce under its quota. OPEC+ agreed to increase its production in May by 432,000 bpd. The group was unable to reach this target, undershooting it by 2.7 million bpd. For June, the OPEC+ group again agreed to lift its production by another 432,000 bpd, but the general consensus in the industry is that they will be unable to meet that quota too.
For July and August, the OPEC+ group got even more ambitious, raising their output targets by an even greater extent, essentially rolling the September increase that they had planned into July and August.
But OPEC+’s continued underproduction will shrink any anticipated market surplus, if indeed OPEC+ is using these production figures in their estimates.
One of the biggest OPEC laggards in the production cut deal all along has been Nigeria, which actually had its production decrease in May instead of increase per the quota. The result was a half a million barrel a day shortfall in its actual production vs. its quota. But Nigeria’s oil minister last week said that it would be able to meet its OPEC production quota by the end of August."
Filling my boots today.
GLA
Indeed this is a ‘cash machine’ with imo less of the baggage of BP with Rosneft and UKCS tax changes!
Whilst Nigeria is difficult it seems to be improving.
Our divi metrics are compelling!
These are the numbers for 3 months to March
$242m Revs
Ebitda of $147m
Cash generation of $179m, capex $26m
$312m cash on the balance sheet and debt of $443m
The annual $58.4m divi in excess of 2x cover from a quarters cashflow! The quarterly divi is only $14.6m!
So on a downside you could factor in a 50% reduction in POO and the divi is still well covered.
Near term upside -
Amukpe-Escravos pipeline End Q3
Additional 2 wells to come on line near term and an ongoing drilling program
Additional gas off take for new GSA’s + always chance if new sales
ANOH gas plant Q1 23
Imo nothing in sp MPNU acquisition. All risk to upside pretty much based on the Sp pullback from 130p to 100p following press comments.
Medium term outlook for HC’s looking reasonably positive even with recessionary storm clouds due to supply constraints, most of opec on max, under investment and geopolitical issues. Of course macro can change in a blink and there is always ops risk!
But 8% yield payed quarterly. Good chance of divi increase. Imo a reasonable place to invest for quarterly income to battle inflation.
Usual caveats
Trek
I'm not close to any of the participants however I know Nigeria quite well. This is obviously a big corporate move that very much crosses the boundary between private and public sectors. As we all know well, almost all public sector leaders in Nigeria are on the lookout for personal gain in some shape or form. It had to be expected that someone in government or the NNPC would leverage the sale agreement between SEPL and Exxon to extract some kind of rent or benefit. Horse trading is standard practice in this place; even if the event benefits Nigeria and Nigerians. There's never an easy journey doing anything that involves government in Nigeria. So on the one hand this should have been expected; on the other it is quite likely that a compromise or adjusted agreement will be found; it could be as simple as paying off the right people. In my view there is a very good chance this deal will happen, since Exxon want to leave Nigeria and only want SEPL to have operational control of the asset; the question is at what additional cost, hidden or otherwise?
I presume the $125m is refundable, as a non-refundable deposit wouldn't make any sense given the background politics in Nigeria. If that is returned, SEPL will be debt free, more or less, by end Q3, certainly by end of the year, and management have said that they intend to increase the dividend substantially once ANOH has been commissioned.
The board won't horde cash, in my view, as it's not in any of the major shareholders' interests to do so. They'll be on the lookout for other deals I'm sure, as well as investing in green energy, but organic investments alone won't soak up the cash flow. ANOH was itself a monster project and has taken years - still, the capital investment by SEPL was around $200m by memory....a fraction of the company's current annual free cash flow. We know the former Chairman is in financial trouble and will surely want a raised dividend. So I don't see what should stop SEPL raising it's dividend substantially, at least by double, perhaps triple, possibly quadrouple if oil stays >$100 and special dividends are paid. The current dividend costs the company around $50m annually, which is really nothing in the context of oil at $100 and annual EBITDA >$600m.
A couple of questions that have been in my head this morning, I would appreciate any opinion on them.
1. If the acquisition does not go through, will the initial $125 million be returned to the share holders in the way of a divi, will seplat re invest or pay some of its debt off.
2. In all of the press releases and media coverage nnpc always seem to be in favour and not once hinted about interfering with the sale of Exxon’s asset. In fact they always cheer seplat in what they are doing, so that makes me sway that they may meet seplat half way and agree a j.v. Type of deal.
3. This has been rumbling on for what seems an age now, surely Exxon must know what’s happening, so there must still be a deal on the table.
Any thoughts on my questions would be great or has anyone else have any other thoughts?
Thanks and regards H.
Another top up.
Bouncing up now with POO. Cramer on Bloomberg saying oil entered bear market! POO driven down by recessionary fears. Meanwhile the broker targets are bullish based on supply constraints and underinvestment.
Note Warren Buffet has increased his Occidental stake!
I guess its pick a narrative and take a position.
With Putin now winding down the energy taps to Europe and China lockdowns the squeeze seems targeted at the wests economies.
I doubt China has a covid problem.
My view is their vaccine program was as good as the wests and having watched the impact of their previuos lockdowns on the west they are now locking down to force inflation higher and reduce further the flow of goods to the west.
Russia and China are playing the long game as they know no amount of rate rises will address supply side constraints. You gotta do that by making stuff, we don’t make enough. And ramping up/creating production needs more energy!
Low gas reserves in the winter and a slow down of commerce is looking more likely.
There will be huge discontent. Hyper inflation historically results in civil unrest.
China and Russia know that full well, their populations are controlled and they can grind it out feeding ‘the zombies’ with more disinformation. It will be all the Wests fault!
Pretty grim I know.
Can only think that oil and gold producers are the place to be and that’s assuming the demand is there for oil!
Health will do ok but even food will likely see reductions in volume.
8% yield from SEPL looks one of the safer havens and some of Africa may prove a safer investment than Europe which are heading for huge debt issues!
Interesting times ahead.
Usual caveats
Trek
Thank you Sea
NGN is not a floating currency. Black market rates give a truer indication of the fair value of NGN, around 750 per GBP, but this is overvaluing the NGN too I suspect. SEPL's Nigerian line is a hard currency safe haven for investors. Also there is a back door FX channel by switching local shares for LSE shares, only open to institutions and HNW investors, basically buy locals and switch to London line. All this drives demand for local stock. Also, the local line is illiquid as nobody wants to sell it. It's the best place to put NGN to protect from inflation. Bottom line is, this situation places some pressure on the LSE line as creates additional sales in London; but the more stock that switches to the LSE the higher the LSE float, which will hopefully ultimately trigger FTSE index inclusion, as we're not far away from the 25% free float required, in my view. But this can't be taken for granted, so in my opinion long term holders should just focus on the long term and fundamentals, namely big cash generation and growth, which will ultimately drive the re-rating, and not worry about all this.
Thanks doom
So helpful !!
"Can anyone explain this anomaly???" Old discussion scroll back a couple of years to when Seplat was 55p.
Too the NGN price makes no sense ??
1 pound = 473.54 NGN
1.01 price on ftse = 1290 NGN
Can anyone explain this anomaly???