Member Info for alexeliasson

OIL MARKET:

@EIAgov sharply revises upward its May estimate for US oil demand.

Using new monthly data, it pegs May at 20.80 m b/d, a massive ~810,000 b/d higher than the old estimate using weekly data of 19.99m b/d.

The 20.8m b/d is the highest ever seasonally for May.

#OOTT

If we stay around $80 oil, Seplat is a legal money printing machine.

Solid improvement in Q2 over Q1. Considering current production, and Sapele + Abiala + ANOH all three coming online in Q3/Q4 (albeit incrementally); I would like to say with some confidence that we will either end up in the high range of production guidance, or even surpass it.

Also interesting to note that Seplat puts 40% share in the presentation (considering the rumors of it being slashed to 30%).

Another thing to note is that back in 2022 Seplat stated that they had a $850m facility in place for MPNU. Today, it's stated $350m. The lockbox in the works...

Dohers316,

I believe there's no conflict in our motives here, and your input has been helpful in the past.

I do have $743m in profit before tax for next year, which is somewhat aligned with your numbers, but I then assume a very substantial ETR for peace of mind.

If your forecast is closer to the truth, all the better for us. I'm rooting for it.

Bless

Let's keep in mind that there are 4 major international oil companies that are divesting their Nigerian assets:

- ExxonMobil

- ENI

- Shell

- Equinor

All of them, 100%, are on hold and the NURPC gave us the reason as to why earlier this spring. With that in mind, I find it difficult to argue that "length of time" is a clear proof that the deal has been materially changed.

Now, being a huge fan of 'Margin of Safety' I've used 30% in my sheet since that one anonymous article was posted. With ANOH, Sapele and MPNU all coming online Q4 - and ramping up in 2025 - I forecast we earn $425m in net profit in 2025 i.e. p/e 3.6x and 16% dividend.

I use an effective tax rate of 45%, which my partner think is insane, but - again - gives me a Margin of Safety.

If MPNU contains 30% W.I. and not 40% I forecast that the final consideration will be approx. $240m or less.

After talking to management and also industry experts on these fields, I feel ever more confident that in 2026-2027 Seplat can increase production substantially from current levels; as ExxonMobil essentially haven't invested anything the last 4 years. That will add another $110-120m on the bottom line from the MPNU (30%) assets alone.

The "impact" on Seplat will be huge, and I'd argue very little of it is priced in.

Forgot to mention that Brent hit $86 today, and my sheet assumes $78.

Bless

Two recent news that strengthen my belief that the original acquisition terms are still in play:

1. NNPC huge commitment to Golar which was announced last week.

2. Yesterday's news that NNPC commits to another big project with Total:

https://headtopics.com/ng/sources-nnpc-totalenergies-to-finalise-550m-investment-54470438

"TDF hails Nigeria’s recent pro- business approach in oil sector "

https://www.nationalaccordnewspaper.com/tdf-hails-nigerias-recent-pro-business-approach-in-oil-sector/

ST,

I'm delighted we see this the same way. I appreciate your input.

Am I the only one who still holds the possibility that the original terms, 40% of the fields, is still in play?

We had one (1) article stating that NNPC strong-armed it down to 30%, but no other sources have claimed those terms again.

Amazing deal at 30% - fantastic deal at 40%.

"

Based on 2020 pro forma working interest volumes for Seplat Energy and MPNU, the transaction

delivers:

o 186% increase in production from 51 kboepd to 146 kboepd

o 170% increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl

o 14% increase in 2P gas reserves from 1,501 Bscf to 1,712 Bscf, plus significant undeveloped

gas potential of 2,910 Bscf (JV: 7,275 Bscf)

o 89% increase in total 2P reserves from 499 MMboe to 945 MMboe1

o Includes offshore fields with dedicated, MPNU-operated export routes offering enhanced

security and reliability

"

Without any share dilution whatsoever.

Wow, there we have it gents!

NNPC withdraws its 2.5 year long arbitration claim against ExxonMobil. The last hurdle to finalize the MPNU acquisition.

What a relief...

Link:

https://www.thecable.ng/just-in-nnpc-seeks-withdrawal-of-suit-challenging-exxonmobil-seplat-deal/

Personally, my sheet is at $400m final consideration and I consider that a bargain of a lifetime. Anything better, I don't mind.

What gives me comfort here is that he (the Twitter profile) has been right on several cases previously, and he writes a good blog on O&G stocks. I'm delighted that our "hidden" stock gets more attention by the "pro's".

2024-06-10: "We expect that healthy consumers and solid summer demand for transportation and cooling will push the market in a sizable Q3 deficit of 1.3mb/d. We therefore expect Brent to rise to $86/bbl in Q3." - Goldman Sachs

Sending my sincere thanks (and congratulations) to all the helpful writers and investors on this Seplat-board. You have been most helpful.

Congrats!! :D

"Nigeria’s President Bola Tinubu has directed the Ministry of State for Petroleum Resources (Oil) and the Nigerian National Petroleum Company (NNPC) Limited to clear the way for Seplat Energy to purchase certain ExxonMobil assets."

“Mr. President has given a clear directive to the NNPC GCEO and I to resolve the issue of divestment, and we are doing whatever we can to achieve that,” the minister said.

https://www.thecable.ng/tinubu-directs-lokpobiri-nnpc-to-resolve-issues-delaying-seplat-exxonmobil-deal/amp/

FYI, withholding tax on dividends from Nigeria is 10%.

When talking about dividends, it's always gross. In my tax jurisdiction, for example, I'm able to deduct the aforementioned withholding tax against other income making it close to zero tax.

Notwithstanding, looking forward to another increase of dividends next year. Substantial.

Congrats to the share price today, gents.

Bless

A public statement carrying the insignia of Ministry of Oil (Iraq) stressing the reopening of exports - does align with the Turkey/Iraq MOU of the new Oil-for-water-fund (which is supposed to be funded by these exports), and all the other "clues" given recently. I'm also delighted to se AKIPUR publicly stated to make amendments in the contracts (which I expected, anyhow). We have approx. one dozen of private Turkey oil companies operating and/or shareholding in different licenses throughout Kurdistan. Not only are they not making any sizeable money at the moment, but their oil is illegally trucked to Iran - something I have difficult to see Turkey give their blessing for.

I'm keeping my call that the exports is restarted in H2. At the day of the announcement we will open trading above 200p, and at the day of the first sizeable dividend is due - above 300p.

Disclosure: Long since 90p.

"So is there not a risk that they will eventually take 100% from Seplat shareholders?"

Seplat has proven for +10 years, as a listed company, to grow its operational footprint and, most importantly, shareholder returns in form of of regular dividends and share price return.

Your question is quite cleverly put, as it somehow gives us the burden of proof for something that hasn't happened the last decades; it most certainly must be the other way around, in any reasonable discussion.

Corruption exists in Nigeria (and most countries in the world, mind you) but doesn't play out the way you paint it: that local politicians simply walk in and "take 100% of the profits". The royalties and tax levels are highly transparent. I don't doubt there's brown envelopes at different places to "ease" decision making (OPEX and perhaps some SG&A) - but it has been there for decades as well. Cost of doing business I guess... (hasn't altered the total return, as mentioned earlier).

Lastly, all the majors remain in Nigeria (mostly deep offshore nowadays), which also speaks of the ability to make profit in the country.

Nigeria is in no way perfect, but arguments that local politicians "could take 100% from Seplat shareholders" can be discarded in its entirety.

Attaching a total return comparison of your largest holding, Serica, and my largest holding, Seplat:

https://i.imgur.com/zhjL2Hk.png

I understand your frustration in regards to today's RNS that the deal has been extended. One should note, however, it's exactly 1 year since the last extension; one could reasonably assume it has been setup for one year at a time. With that in mind, I'd say it's a minor positive that Exxon extends the deal without any changes whatsoever. I also believe, as argued a couple of posts below, that the deal is really really close. (I'm obviously biased, bless).

Thanks for your numbers ST. Looks good!

250p a week or two after the market digested the full scope of the MPNU acquisition, would be my personal take; +300p late 2025.

Valuation post run-up: https://i.imgur.com/O9ENA7p.png

PUTUP,

"It would be bold to assume such a discount when, prior to closure the discount was about $32 a barrel. Good luck!"

First, GKP discount the last 6 years pre ITP shut-in has been $22 i.e. you misrepresented the facts with 40%.

Source: https://i.imgur.com/3KyC1Kg.png

Moreover, the discount to dated brent is not isolated to GKP low API gravity ("heavy oil"): Shamaran and the other IOCs with high API gravity ("light oil") also had a double digit discount to dated brent the last 6 years. The reason was that the oil that was sold was illegal and Turkey were only to take on this risk with a substantial risk premium. Something I'm confident will disappear when/if the contracts are approved by Baghdad.

You know all this, however, and I have some difficulties understanding your motivation as to why you misrepresent easily verifiable facts.

I do understand the cost oil component of the net profit, what I'm trying to say (for a couple of times now) is that I don't see that component fall to 0 next year, and stay there in perpetuity. Not only do we have a pool of +$200m currently, it will also not be depleted considering the growth ambitions ahead.

I appreciate your input that we will top out at $70m annually the coming years, and I guess we just to have to agree to disagree on that part. Thanks for your input.

GKP made $266m in net profit at 44k b/d @ $74 oil price in 2022, and $165m in net profit at 43k b/d @ $49 oil price in 2021. This is not "double counting" or minorities - it's net to GKP. (and it was all flexed out as dividends, remind you). Receipts and arrears can and will fluctuate.

Now, let's assume exports are restarted and we get a -$18 discount on brent i.e. $65 oil price @ 44k b/d (lets discard that they reached 55k b/d the weeks before closure); it's hard to envision net profit below $180-200m in 2025. Where the CRP currently stands. Will the profit fluctuate on a declining CRP? Sure - I'm just saying (or the analysts, rather) that the huge drop to $50-70m per year in perpetuity is very hard to model.