Member Info for SeaTank8300

SEPLAT NL rose a further 7.3% today, now equivalent to 176p using the black market FX rate.

GBP equivalent 164p using black market FX rate

Agree, Trek, this is going through 140. Hell, it should already by above 140, on the basis of the other catalysts alone.

While the deal is certainly going to be signed off, we lack clarity on the terms, both with NPCC as well as Exxon. We need this formally signed off, then release of the Prospectus. The Prospectus will confirm what the cost of acquisition is, net of all the adjustments, what MPNU’s cash flow and profitability has been, and reveal all the optionalities, including I hope the development of gas export infrastructure in order that SEPL can export directly to Europe.

“But I can also tell you that the Seplat-Mobil transaction, which was truncated in the last administration has been 99 per cent resolved. I brought the parties together. We have had a series of meetings. We have agreed on the terms.“It’s just for the NNPC board to sit and approve the terms of the settlement and Seplat board sits and approves the terms of the settlement. It was a big disincentive to the IOCs to make further investments. And so, I brought them together, we have resolved, we have disagreed to agree. So, that matter is resolved.

“Under my watch, I will do whatever I can to see how that kind of situation does not arise again. NNPC had every reason to invoke the right of first refusal. But I have also told them to indicate it on time, so you don’t allow parties to negotiate up to the final point before you say you are interested.“We have to do things differently. And this government is willing to do things differently so that we can get the results that we deserve as a country,” he stated.

https://www.thisdaylive.com/index.php/2024/01/19/lokpobiri-fg-ready-to-immediately-approve-shells-2-8bn-deal-with-oil-consortium

GBP equivalent of 156p, using the black market exchange rate.

Good news around the corner?

Https://www.contractsfinder.service.gov.uk

Since 16 December and into January including today TPX has won several contracts, some alongside major service providers. Great to see them on NHS projects now.

Https://vimeo.com/901996645/dc6caf2abe?share=copy

Easier to access and worth the minutes spent

3 months until their next ex-dividend, 5.7p in the pocket :)

I was thinking about how SEPL will trade following regulatory approval of the acquisition of MPNU and I think it will probably gap up a fair bit but not a huge amount as the stock has a very limited following among institutional shareholders and nil following from hedge funds. So for those of you who don't yet have a large position in the context of your portfolio, I think you'll have an opportunity to raise your positions once the news has been confirmed. Once the prospectus is published, we'll have clarity about MPNU's financial position and a lot more to go on. Hopefully at that time more institutionals will be sniffing around, starting to understand the potential yield and growth implications. Still, I think it will be a stead crawl upwards in the share price, not a huge jump. That's my view, we'll see what actually happens. I guess what i'm saying is, patience will continue to reward here.

I found the video v hard to access

This is another link:

https://www.lsegissuerservices.com/spark/SeplatPetroleumDevelopmentCo/events/fb275527-e7da-49aa-bdd6-35196a1364ca

The website is wwwDOTlsegissuerservices.com

Why don't they make it easier for investors to access?

Anyway, fantastic summary from Roger, who reiterated their plan to raise the dividend and that MPNU will be completed very soon

I don't think the agreement has an expiry, but the longer the wait the closer the cash cost to Seplat falls towards zero, which presents a potential issue as there will be some influential people on Exxon's side that won't want to see the business given to Seplat for what amounts to a peppercorn.

The next dividends goes ex in mid April and it will be either 4.2p GBP equivalent net of withholding tax or 5.7p. My view is that the 5 cent special will be repeated, so our cheque will be 5.7p in total. Then one month later, there will be another 3 cent or 2.1p net. That's almost 8p/share of dividends (6% yield) for just 4 months of holding - that's some carry. We are being paid very well for sitting on our hands while catalysts mount.

Sounds like the US futures business is starting to make headway

Since the low in 2020 there is a clear trendline with higher highs and higher lows, with drawdowns of up to -35% until mid 2022 but since then much less at -21%, and these drawdowns have nearly always been followed by higher highs. The chart trend is a good one and does not suggest it will fall again much below 110p unless there is a material oil price correction. It reflects the de-risking of the business from an evacuation point of view (the AEP) and more recently expectations for MPNU. SEPL still trades at around the same level as it was in 2019 when Brent oil was much lower, albeit similar in real terms, and yet it is a much de-risked business with AEP plus ANOH and MPNU around the corner. Figure that.

The bulk of my holdings have an average of 97.8p. I bought some higher than this in 2019 but made a significant commitment at lower levels (mostly in 2020) to bring the average down, and I have held since then reaping the dividends and waiting for this to valued properly by the market. In my view we are nowhere near fair value. Even if the share price flatlines for the next two years, I expect the dividend to move up and beyond $0.20/share, so the carry more than compensates for the wait for capital gain. This is a very misunderstood stock. If you are looking for others, I would point you in the direction of PLUS and JET2!

Sorry for the long posts. I needed to run through this report in detail as I have an epic position in SEPL, so it was just as much for me as you.

The peer group multiple comparison is interesting, pointing out that on an EV/boe basis Seplat has by far the lowest valuation against peers operating in similar jurisdictions. Considering the low-risk nature of Seplat's onshore reserves (putting security risks aside, which in my mind are relatively minimal these days), this low multiple stands out. Also, the sheer longevity of their reserve base is special (27 years of production).

The dividend/yield forecasts are much too low. The report makes plenty of caveats that the dividend could rise, but frankly this is 100% fact assuming oil prices remain >$70. The dividend is clearly going to be $0.15 minimum for the full year as there is no argument for it not being in line with last year’s. Then there is ANOH’s cash generation – this will drive dividends higher for 2024.

MPNU, the elephant in the room. Firstly, they point out that MPNU’s free cash generation has been around US$800m, thus substantially reducing the cash cost. Secondly, depletion forecasts are much worse than I expected, so FCF is estimated at US$159m at $75 oil in 2024. This is disappointing…and highlights how cost inefficient MPNU operations are too, but also highlights the heavy tax burden that MPNU is suffering (85% tax rate) given the entity is no longer investing and therefore no longer reaping tax incentives. MPNU’s cost base is clearly bloated. I have two points to make: 1. SEPL will invest to raise production back to original levels, 2. Investment to raise production = lower cash tax rate, and 3. there will be significant cost synergies to extract. I would expect SEPL to drive FCF above US$300m annually, at the very least, within a year or two. That’s my view. The acquisition will cost SEPL US$500m (+ US$300m potentially in overperformance) for US$300m+ free cash flow. Wow.

Finally, the comments on the PIA (Petroleum Industry Act) are noteworthy as Wood Mackenzie gives a figure of 50% uplift to NAV potentially from what I believe are tax incentives to maintain and grow production, particularly favouring smaller production blocks. This is new to me and suggests further hidden value.

I would like to make some comments in response to certain points made in the report. Regarding ANOH: "Given the lack of broker coverage, we do not believe the market fully understands the value of the ANOH project to Seplat. On our estimates, at plateau, ANOH should add over US$50m to Upstream gross profit and generate operating cash flow of over US$70m. In addition, we forecast a dividend to Seplat from the AGPC JV of US$12m in 2025 rising to over US$80m by the end of the decade. Overall, we estimate ANOH will add up to cUS$100m pa in additional operating cash flow to the group from 2026 rising to cUS$150m towards the end of the decade." - this is an interesting paragraph as I don't believe SEPL has ever given an estimate of the value of upstream operations of OML 53 that feeds into ANOH. According to the figures given, the upstream part will generate US$70m in annual cash flow at plateau (from 2025), which is a considerable sum. Then there is the midstream AGPC JV (what I have often previously referred to as ANOH) which will begin paying dividends in 2025, which the report estimates as rising from US$26m in 2026 to US$83m in 2030. i.e. combined, the cash flows are very considerable from 2025, around US$100m.

I want to highlight that there are two key assumptions here which are very conservative and likely to present upside surprise: 1. 30% downtime, and 2. a US$60 Brent oil price assumption for the liquids from the plant. More likely in my view, both assumptions will be beaten, and annual cash generation will be materially greater than the assumption of US$100m from ANOH. I think US$120-130m is more likely. And in my view a lot of this will flow through to the dividend, as has previously been suggested by management (hence I think the dividend will ultimately double from this alone).

I also want to point out the 11.75% interest on borrowings for ANOH. For those worried about the cost of debt in Nigeria, this is a timely reminder that dollar-earning projects such as this achieve much lower financing costs than local NGN-earning projects for the domestic economy. It might also prompt questions about what the correct discount rate is for the DCF. I would argue that 15% is too conservative for the group given its diversified and low risk onshore operations and underground pipelines for evacuation. Seplat’s bonds also trade too cheap at 11.5% yield. When ANOH comes online, I should hope we see discount rates for both fall by 200bps at least, which will take the fair value of the equity to around 200p.

Https://www.seplatenergy.com/media/q1cgd5dp/seplat-energy-valuation-catalysts.pdf

Just posting this link again, in case anyone missed it. SEPL pay Access Capital for investment research and have obviously provided most if not all of the insight they report.

As this is “paid for” marketing communication, obviously they strike a positive tone, but it is also clear that assumptions are conservative, outlining what SEPL management are confident in delivering without disappointment, and prefers not to overly trumpet the potential value accretion of MPNU which has not yet been given regulatory approval.

Management: PPHE benefits from having a very experienced management

team, led by the two founders, Eli Papouchado (Non-Executive Chairman) and

Boris Ivesha (President & CEO) who both have decades of successfully

developing and operating hotels and still collectively own 43% of the equity, fully

aligning themselves with shareholders.

▪ Recent trading; results have shown a considerable improvement since Covid,

with a number of consensus upgrades across this year. We still see upside

though, especially in terms of occupancy levels and the EBITDA margin

▪ Next event; PPHE usually issues a year-end trading update in January. PPHE’s

Q3 trading update, issued in October, was positive saying that “trading

momentum seen in Q3 has continued into the final quarter, supported by

capacity for further growth in occupancy”. Trading comments from other

European hotel companies since the Q3 statement have been encouraging.

▪ Valuation: PPHE’s share price of £12.55 is half the value of the FY22 European

Real Estate Association (EPRA) Net Reinstatement Value (NRV) of £25.17,

which itself does not include other assets such as undeveloped land and the

profits from the management platform. Our illustrative fair value model

suggests a fair value of £25.66 per share. The Group trades on a FY25 PER of

just 9.1x, the cheapest of the European hotel peers, despite a materially better

upgrade trend. The shares have recovered in recent weeks and we note the

recent inclusion in the FTSE 250 index, which will aid liquidity.

Perhaps under the radar, hidden in the RNS