Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
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Nigeria needs to accept that fuel prices fluctuate; is it such a hard lesson to learn? The beneficiaries of subsidised fuel are black market traders who suck up all the supply and export it.
Reuters exclusive via power up email. Worth signing up for its free.
https://www.reuters.com/business/energy/nigerias-nnpc-faces-3-billion-backlog-petrol-payments-sources-say-2024-04-08/?utm_source=Sailthru&utm_medium=Newsletter&utm_campaign=Power-Up&utm_term=040824&user_email=b2e8c97ccc6ddb76107c5b8c6d401963987d41317d2787d216d506bcf903729b
Trek
I meant to say "insufficient traded liquidity"
Anyway, with the MPNU deal, ANOH, and the resultant the scaling up of the business in US$ revenue and profit terms, we hope more institutionals to be drawn to the stock which will support re-rating and improved liquidity and a virtuous circle in that regard.
I'm repeating myself but the fact the local line of Seplat is at >40% premium to SEPL (see here: https://afx.kwayisi.org/ngx/seplat.html) is so very telling. Presumably the locals see a valid reason for valuing Seplat at circa 210p/share. As I also mentioned before, exchange controls are no longer a factor in this discrepancy since the central bank of Nigeria cleared the FX backlog and basically released the currency to market forces. So this discrepancy is purely a market inefficiency, in my view. The challenge for SEPL has always been sufficient traded liquidity to draw in Institutional investors. But right now, that is a market mispricing opportunity for small investors.
Looks like the POO penny has dropped, I guess that’s a start!
Trek
Back to 150! Should be min. 200p excluding MPNU and 300p. including MPNU.
POO just has to be a factor the market will wake up to soon.
Not just driven by ME tensions but also now Ukraine being able to strike deep into Russia.
Russia don’t have the air defences to cover all their assets. Once some of these targets are taken off line then the pipes freeze and have to be re-drilled. That all takes time esp in Russia.
India and China will have to fill the gaps from elsewhere and OPEC have the taps cracked shut atm!
On a macro basis rates are coming down so economies will turn as USD pulls back.
Short of all out conflict the case for oil is quite bullish atm and SEPl are in a political and geographical sweet spot!
Ironically this narrative is being echoed in the gold price driving to knew highs!
SP here makes no sense atm. It’ll have to correct soon!
Usual caveats
Trek
The final and special dividends for 2023 have an Ex-date of 25 April, USD0.06 in total, or 4.3p in the pocket (net of withholding tax). Then we have the Q1 dividend with Ex-date of around 23 May, minimum USD0.03 or 2.25p in the pocket.
This is 6.45p of dividends (net) to shareholders within the coming 7 weeks - a 4.4% yield, just for sitting on the stock while we await the commercial launch of ANOH and formal sign-off of the MPNU acquisition.
Pretty sweet!
Https://techeconomy.ng/recovery-of-naira-linked-to-7bn-fx-backlog-clearance-bdcs-react/
In case you missed it, the CBN has cleared the forex backlog (first time in around ten years), which has resulted in the Naira appreciating the last two weeks. The Naira has appreciated more than 20%.
The local Naira share is still trading at NGN3370, which is a GBP equivalent of 210p.
That is a 44% PREMIUM to the London share.
I have tried to summarize the public comments about the deal in this sheet (link): https://i.imgur.com/Ct7oPZp.png
From what I can tell, there are no major objections in either 2023 and 2024 against the deal. It was also somewhat of a relief to read the paragraphs of the Exxon/NNPC JOA as it explicitly only states participating interests . Here's a link to that article: https://www.thisdaylive.com/index.php/2022/08/12/exxonmobil-seplat-deal-when-a-regulator-misinterprets-the-law
Friendly reminder that a +10% in Brent increases the profits with approx. $93m i.e. almost +70% YoY, based on 2023 numbers.
Link: https://i.imgur.com/xZ7sHW3.png
This does not included Abiele field, Sibir field, ANOH, MPNU or Sapele that all are coming online late 2024.
Somewhat a relief reading Bloomberg today, that all majors having issues finalizing their deals. Nigerian regulator gave a final assuring comment in the end.
(I would be more worried if it was only Seplat)
Bloomberg:
Oil Majors Frustrated by Slow Progress of Nigerian Asset Sales
Exxon Mobil Corp. agreed to sell its shallow-water oil assets to Seplat Energy Plc almost two years ago, but the transaction has yet to complete amid objections from state-owned Nigerian National Petroleum Co. Eni SpA and Equinor ASA are also waiting for regulatory approval to finalize the sale of Nigerian assets.
There is an “urgent need to conclude these transactions,” Osagie Okunbor, managing director of Shell Nigeria, said at a conference in Abuja this week.
Abdulrazaq Isa, chairman of Waltersmith Petroman Oil Ltd. — which is part of the Renaissance consortium acquiring Shell’s assets — said that approving the deals would help revive Nigeria’s flagging oil industry.
“This remains the most realistic and successful avenue to bolster national crude oil production by the turn of the decade,” said Isa, speaking as head of an association of indigenous oil producers.
Exxon said delays in approving the sale of its assets to London-listed Seplat were causing uncertainty for the communities and contractors that depend on those operations.
“It’s imperative that it’s concluded and that clarity is provided to everyone involved,” Exxon Nigeria Chief Executive Officer Shane Harris said at the same conference. “What’s really important is it helps resolve a significant amount of uncertainty that currently clouds thousands of people.”
Oando Plc’s acquisition of Eni’s Nigerian unit, which has interests in onshore oil and gas blocks and power generation, has been challenged by NNPC over the failure to obtain prior authorization.
“We do need the reviews, consent to come quickly,” said Oando Executive Director Ainojie Alex Irume. “We do need to get on these assets and start working on them.”
The departure of international oil majors from onshore operations in Nigeria has coincided with years of declining investment in the industry. The regulator said there was no lack of urgency on its part in approving deals.
“So let the message be taken home that the regulator is in no way trying to be a show-stopper in this respect,” said Gbenga Kommolafe, CEO of the National Upstream Regulatory Agency.
Ie,who has first refusal on the assets put up for sale.
Agree SeplW,that's why the wait very frustrating .
Although I note in Guyana, Exxon is trying to stop Chevron' s takeover of Hess using the same argument that the Nigerian state oil company used to stop our deal.
I've expanded some more on the sheet, and you can find it here: https://1drv.ms/x/s!ApeYQTMwoUrPpF83mGOuuHxsSkOJ
I'm taking huge margin of safety's on both production levels and costs, but it still trades at approx. 2x next years earnings, assuming MPNU acquisition. Without my reservations on all these lines, 1.5x is probably closer to the truth.
Am I the only one seeing +100% upside here?
That's why the signing is dragging out,too many envious/jealous/greedy types wanting the 'fat' envelope before they let the prize fall to Seplat.
I produced a quick sketch on how the MPNU acquisition will impact the P&L.
https://i.imgur.com/VKYjIRQ.png
This is not an all-encompassing sheet (obviously), but it's fair to say the end-result will be absolutely massive.
Cash at bank $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)
Broker notes 'a number of catalysts noted that offer upside between 32% & 90%+ (excluding the very likely transformational MPNU deal or conversion to PIA terms that offers further upside from it's forward valuation) a current divi around 7%. We calculate NAV at 169p at a 15% discount rate rising to 244p at a 10% discount rate'
https://twitter.com/surprised_trade/status/1773337210860798270
That
Mobil will pull the sale of assets now there’s a sensible government in power 😝
Even in Nigerian time this is wrong
Thoughts
Still holding though !!
NNPC was in Houston (US) last week and, among other things, presented Nigeras new three point plan for the O&G sector.
Here's the meeting with, among others, Exxonmobil:
https://twitter.com/nnpclimited/status/1770546141777580042
We now have more details regarding the new three point plan for the O&G sector: point 1.(a) should be substantial for Seplat if the MPNU acquisition gets approved, as it explicitly targes shallow offshore;
https://strenandblan.com/2024/03/15/sbp-energy-market-update-highlights-and-analysis-on-the-executive-orders-signed-by-president-tinubu-to-revamp-the-oil-and-gas-sector/
NNPC aims to be listed within 3 years: https://www.thisdaylive.com/index.php/2024/03/21/nnpc-says-processes-for-public-ownership-of-its-shares-to-begin-soon
For a deal that's 99% done, the last percentage is taking forever .
Or is this just a "Nigerian Percentage" ?
SW, it’s falling on thin volumes and most likely investors are looking to book profits before the end of the tax year. Any falls make it a compelling buy with a forward dividend yield of ~10%. Further falls? Yes, please!!!
Most global O&G stocks are currently going vertical, and we're approaching $90 brent. Any insights to why Seplat goes down everyday? Any local news that I've missed?
Yeah damofarl, some years ago I was chatting to an African who was working for one of my customers and he explained the concept of "African time" to me!