Member Info for SeaTank8300

Thanks for sharing. Very non specific about ANOH's value contribution, which could blow the doors off if the oil price stays >$100, and v conservative on the oil price assumption (long term $70). Still, puts Seplat on not far from 3x PE in future years. No mention of probable ramp of dividend either.

The Saudi announcement/interview yesterday suggests $100 might be the new floor level for Brent, according to OPEC+. If that's the case, the next few years will be extremely rewarding, bar a major change on the global capex/supply front (unlikely at present)

This is a great find, thank you for sharing. It's not clear how the feedstock supply is attributed, or not at first glance. It's a complex set-up and needs some study to understand. Presumably, the wet gas sold to ANOH has a value even if it is a byproduct from the extraction of oil. Anyway slide 30 provides some financial expectations and the figures are MASSIVE. $556m in annual revenue, approximately split 50% gas and 50% crude, but this was calcualted back in 2019 when the oil price was less than $60. OPEX is estimated at just $30m annually, with EBTIDA at $225m (which is a whisker from my assumption below of $100m to SEPL), which suggests COGS of around $300m, of which the wet gas input must be a part. Most importantly FCFE (free cash flow to equity) of $107m! That's free cash flow to SEPL of $50m! But at a brent price of $90, liquids revenue will be 50% higher, and most of that will flow to the bottom line, so ANOH's EBITDA could be up to $100m greater than this, call it $300m, and there would be a meaningful flow through to FCFE too (+$70m?!). Is ANOH really going to be a $180m FCF beast?!

This free cash flow is likely to be paid out to shareholders in my view, whatever it is. It could be circa $80m annually at the current brent oil price (10% yield on SEPL's market cap) according to the above. None (zero) of this is in the share price or analyst forecasts - I don't know why.

I've been trying to determine the economics of the ANOH gas processing facility JV that will commence operations in 2023 (hopefully in 1H, not 2H). I wish SEPL would be more forthcoming with project economics and commercial arrangemnents, but I guess local stock exchange regulations prevent them discussing it in too much detail. Anyway, we know it's a 300mmscfd gas processing facility with output of liquid condensate equivalent to 20kboed. Unless I'm mistaken, which I might well be, this JV will generate gas reveneues of approximately $125m (50% share of 300mmscfd x 365 x $2.3) and liquids revenues of $290m (50% share of 20kboed x 365 x $80) at an oil price of circa $95. Assuming an EBITDA margin of 25%, this equates to an EBITDA attributable to Seplat of $100m. FCF should be a large proportion of this, as all the investment has been upfront, and there have been substantial tax breaks. This alone could fund a doubling of the dividend.

https://www.google.com/url?sa=t&source=web&rct=j&url=https://dmarketforces.com/seplat-no-rating-impact-from-delay-to-purchase-exxons-nigerian-asset-fitch/%3Famp&ved=2ahUKEwjMnJaKpsn5AhUKZMAKHTLwB5UQFnoECDkQAQ&usg=AOvVaw02VYwPF_kTU9M5cAnko7OV

https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.bloomberg.com/news/articles/2022-08-15/buhari-s-exxon-sale-flip-flop-risks-nigeria-s-oil-reform&ved=2ahUKEwjAhs7ep8n5AhXNilwKHXRcATk4ChAWegQIARAB&usg=AOvVaw2ij9o6iLZJ0g8jHxVs6xjc

Good interview, thanks for sharing. The deal will likely muddle through eventually, once all the government actors thrash out their points of view. Good point made that Seplat has a credible track record in gas infrastructure, which is the sector priority, so better placed than most to leverage Exxon's shallow water assets to drive the domestic gas agenda.

I don't see possibility of Exxon being prevented from selling their shallow water business to whom they want - they are too important an investor in the country to mess with outside of the law. Seplat have this business in my view, it's just a matter of time, and that is also in Seplat's favour because the transaction date was agreed at as 1 Jan 2021. Thus as time passes the transaction value simply falls to nothing and possibily even becomes a net payment to Seplat. Seplat and Exxon saw this drawn out process coming. I have no doubt the terms of the deal were agreed by handshake at the beginning of 2001 and it took a whole year to do the legal preparation and government lobbying before a formal announcement. So it's already been 20 months in the making. If this takes another year so be it, and the final transaction price will be heading towards zero. I'm not sure the market has fully understood this.

Agree damofarl, that is what is likely being sought. Seplat may end up taking operational control but much less economic ownership.

The amount is so absurd it's obviously wicked slander. These corrupt and discriminatory politicians are getting desperate to take their pound of flesh, but they won't get away with it. Exxon won't sell to them. Seplat won't pay bribes.

NNPC is going to get nowhere with this. Exxon won't sell to them. It's not about the money. Exxon simply want the asset off their balance sheet. But Exxon owe it to their stakeholders, particularly the local organisation itself, to deliver it into competent ownership. Many of the execs have been with the company a lifetime - they won't work for NNPC, which as you alluded to is an inept and corrupt state organisation. Seplat is the only buyer, period. Just a matter of time IMHO.

https://nairametrics.com/2022/08/08/confusion-as-nuprc-rejects-approval-of-seplat-and-mobil-deal/
"Contradicting laws:

In approving the deal, President Buhari cited the Petroleum Act of 1969 which was a basis for its own “Ministers” consent. However, the NUPRC cited the PIA as the source of its own powers suggesting that the PIA was the reference act for the transaction.

A legal expert who spoke to Nairametrics suggests the Presidency may have been correct as the PIA mostly addresses oil-producing licenses while oil mining licenses rely on the Petroleum Act of 1969.
Another lawyer suggested this transaction brings to the fore the deficiencies of the PIA as it allows for several interpretations which are often exploited by players in the sector depending on which one suits their needs."

Underlying this, however, is the sad possibility that the sticking point is that the founder and former Chairman is from the Igbo tribe, and Seplat hasn't greased palms to placate those against it.

But I still believe the deal must ultimately come to pass as Exxon won't sell to anyone else and it sends the wrong message to the international oil community, so the rightful outcome will ultimately prevail.

Tribal politics and money. Both are at play here. But in my view this is one rare example of a large and clean deal on both counts that will ultimately be consummated despite tribal politics and (lack of) bribes, because 1. Exxon won't sell to anyone else, and 2. the O&G sector needs FDI and can't afford another stink bomb.

The regulator is complaining bitterly that the office of the President has stepped onto their jurisdiction with this approval. Will this really become a court and constitutional wrangle - I really can't see that happening. This announcement with written approval is definitive. There may be a delay as egos are stroked and moved to one side, but in my view this is almost a done deal.

Meanwhile...today Seplat received presidential approval for its acquisition of Exxon Mobil's shallow water assets. Sometimes slow and steady wins in the end.

Agree Trek, this is pretty damn exciting stuff now the political hurdle has been deftly negotiated. Yes, with this deal cemented shortly (we all hope), £2/share will be deep value, and even £2 the stock will be high yield if only a fraction of the cash flow is paid out to shareholders.

RNS has landed:
"In the letter, the President as HMPR directed that the HMSPR shall convey Ministerial Consent to all relevant parties, including but not limited to the Nigerian Upstream Petroleum Regulatory Commission ("NUPRC"), the Nigerian National Petroleum Company Limited ("NNPC"), the ExxonMobil companies, the Federal Competition and Consumer Protection Commission ("FCCPC"), and Seplat Energy/Seplat Energy Offshore Limited. The President further directed that the HMSPR shall ensure that the ExxonMobil/Seplat Energy operating entity (being MPNU) carries out operatorship of all the OMLs in the related shallow water assets to optimise production in support of Nigeria's OPEC quota in the short term as well as ensure accelerated development and monetisation of the gas resources in the assets for the Nigerian economy."

That's sounds clear and final to me.

Back of a fag packet: the combined entity could generate $800m+ of annual free cash flow at $100 oil by my rough calculation. The market cap is $800m. Annual EBITDA of the combination will be not that far from $2bn at $100 oil, against an EV of <$2bn. The current dividend costs the company circa $55m - no reason at all why the dividend shouldn't be 4x the current level in my view; would still leave plenty for capex into renewables.

https://www.reuters.com/markets/deals/nigerias-buhari-grants-consent-seplats-buy-exxonmobils-nigeria-unit-2022-08-08/

This is splendid news indeed. I'd like to see the company's RNS confirming that approval has been received in writing. There may be twists and turns in this journey yet, but this certainly looks like an important validation.

Bizarre stock price actions, presumably forced selling from fund redemptions

Actually I made an error - their bond coupon pays semi-annually, so I checked the cash flow ladder again and see that the presentation buddled interest payments with dividends and called it "interest & finance". So the free cash generation at circa 100 dollar oil is closer to $160m every six months, not $200m. Still, adjusting for the Exxon downpayment, net debt will be down to circa 100m by year end, and debt free by end of 2H next year at the current oil price. In any case, SEPL has plenty of room to raise the dividend; at the current level it costs them around $56m, against capacity to pay almost 4x that assuming all free cash is directed so.