Member Info for SeaTank8300

I look at Total Funds Required to be Segregated. I believe this is a form of margin held on account by clients. Margin will rise or fall with volatility, and it says nothing about trading velocity, but a higher number suggests higher volume of trading, all else equal. The growth of this number represents an expression of growth in revenues in the US. PLUS will be providing more see-through on US business when they report full year results, I hope.

Higher VIX is beneficial for PLUS. VIX has not moved much since last week, fallen just slightly. My main point is that the US business has grown significantly in terms of customer capacity to trade since last week. In my view, the US business is the core driver of the equity story for PLUS. This business is growing fast, has lower regulatory risk, and will justify a listing on NASDAQ at much higher valuation multiple. If you ask me, the core investment thesis for PLUS today is growth of the US business which will catalyse a material rerating of the stock. Happy days.

Customer segregated funds held by their US business have swelled this week - VIX has fallen so this must reflect rising trading activity and therefore revenue in the US. Very good sign.

https://financialservices.plus500.com/firm-financial-information.html

EBITDA in line with forecasts while customer acquisition appears to have accelerated, and two new licences which can only mean incremental products, revenue and EBITDA. PLUS is still in excellent form.

Annual results should bring more transparency with geographic segmentation of its business and a timeline for listing in the US. For those that are not on this train, it is not too late. Valuation wise, PLUS has barely beaten previous peaks in market cap terms over the past five years.

Interesting that the local Lagos line of the stock has been trading around the 247p mark the last few weeks using black market GBPNGN FX rates. On 4 December around GBP3.5m value of shares changed hands at this level, which indicates functional price discovery. This is a 27% premium to the LSE share. Indeed using official FX rates, the price level is around 270p or 40% premium. I venture to suggest that this price level discount (of the LSE listing) is a result of the tourists exiting post deal, but that flow will peter out and then we should see this gap steadily close, as fresh money into the name starts to outweigh exits, potentially supported by arbitrage players. Also remember, management are now actively meeting investors about MPNU and the upside case, which is highly likely to drive further interest. In my view we should be back closer to 250p within weeks.

There's an element of Buy the rumour, Sell the news here too. SEPL has always been a very lightly followed name but earlier this year a number of fresh investors entered without probably knowing a lot about the business and were looking to profit on the rise of the share price into completion of the deal. Obviously the prospectus needed reasonable understanding of the business and financial literacy otherwise could be interpreted negatively. I would say that's exactly what happened and a bunch of investors left.

The story is very much intact though, in my view. There are multiple drivers and also the share should see more investor participation by institutions over time as liquidity improves and that should also help the valuation.

I don't think a move to the PIA tax regime matters in the short term, investment in restoring production will drive the cash tax shield without it and I expect to see some impact in the numbers within a couple of quarters. In the meantime I expect the bond to be refinanced and the limitiation on dividends to be removed, so either by full year results (end February I believe) or Q1 (end April) there will be another hike in the dividend, hopefully.

I'm working through some very rough figures for an implied valuation, based on 1H pro-forma financials, therefore preceeding positive operational interventions to raise productivity, which as we know there are many to come.

Pre-deal EV: $1.8bn (current market cap + net debt)

Deal cost: $0.9bn

Deferred payment in event of higher oil price: $0.3bn

Post-deal EV: $3.0bn

Post-deal pro-forma pre-tax 1H CFFO $648m; full year pre-tax CFFO: $1.3bn

Estimated pro-forma post-tax cash flow at 30% cash tax rate: $900m

Estimated annual capex: $510mn (3x SEPL alone)

Estimated interest costs: $120m (10% on $1.2bn)

Free cash flow: $270m

Market cap: $1,500m

Free cash flow yeild: 18%

EV/FCF: 11x

EV/EBITDA: 1.9x

Underscore: this is prior to cost synergies and revitalisation of production.

SEPL's bond will be refinanced in the coming couple of months, which will release covenant limitations on dividend payments to shareholders, so in all likelihood the dividend will be raised significantly during the 1H 2025. There is no reason why SEPL shouldn't be paying a 10% dividend yield at the current share price level. In my view that will become the new baseline.

Moving beyond 1H 2025, production recovery at MPNU will drive profitabilty and free cash flow, which, alongside commercialisation of ANOH, will provide ample scope to raise the dividend significantly in 2026, in my view at least another 15c/share.

It was confirmed on the call, unambiguously.

CFO Eleanor Adaralegbe and CEO Roger Brown both said that SEPL's cash tax rate is around 27% today and MPNU's will converge with this level alongside increases in capex spend. And not just capitalised capex; expensed workover costs, for example, can be set against tax in the same year, so the cash flow impact is almost immediate. Both entities operate under the same tax regime. That's before any conversion to PIA.

Frankly, those that have strenuously claimed a cash flow problem with MPNU on this board and on X are either incompetent or malicious.

Anyway, hardly matters, the short term cash flow and dividend outlook for SEPL is phenomenal - very much looking forward to what 2025 brings.

This is a great opportunity for those that don't own SEPL or haven't much of a position. The transaction is as good as done and the economic valuation shows a massive NPV under 2P and 3P scenarios, which is exactly what we all wanted to see. I am literally sorry for all those selling the stock right now because they don't understand the nuances - they are throwing money away.

"Another oil and gas tourist" has done a disservice to followers of SEPL, no doubt for his own profit. SEPL is currently producing under the petroleum profit tax regime (not PIA), and therefore settles tax under the same conditions as MPNU. As I have been pointing out numerous times, the difference regarding cash taxes is related to capex; SEPL has an active capex programme which creates a cash tax shield, but this will also apply to MPNU when capex rises again. MPNU capex fell to zero the last several years, as MPNU was running down the assets. Once the sale agreement was struck with SEPL, there was doubly no incentive to invest in the assets as the cash flow benefit would accrue to SEPL not MPNU.

If you want to estimate cash taxes for MPNU going forwards, look at what SEPL pays and attribute the same to MPNU. I have assumed a 25% cash tax on pre-tax cash flow, but you can use a 30% rate if you like to be conservative. The economic valuation was not permitted to do this, as all assumptions had to be based on the current state of play.

As importantly, the economic valuation of 1P reflects a very short life of the assets (i.e. production dwindles rapidly) given the very limited capex, thus decommissioning, depreciation and amortisation cost becomes an outsize cost factor and heavily impacts the pre-tax NPV; underscore, very severely indeed! Look at the 1P valuation; it is a big negative figure. The 1P valuation is therefore nonsense, frankly. The purchase of MPNU would never be happen under such a scenario! However, develop 2P and suddenly a huge amount of additional production is assumed over many more years and the pre-tax NPV rises from a negative figure to over $7bn. There is absolutely no doubt at all that 2P is accessible to SEPL and that is the whole point of the acquisition.

If you want a conservative post-tax NPV figure to weigh this deal up, I suggest you take 2P pre-tax NPV with 10% or 15% discount rate, then discount by 25% or even 30% for a post-tax NPV. At worst, that gives a $3,000m NPV for MPNU, versus just over $1,000m being paid for the asset.

Personally, I am looking towards the 3P figure, as this is the upside for SEPL, and under the same assumptions above the post-tax NPV = $6,590m. This is 4x the current market cap of SEPL.

This is why the management and major shareholders, fully aligned with us in terms of skin in the game, are so excited about this acquisition.

My rough guess, under the PIA and fully investing in the assets, is a post-tax 2P NPV at 10% discount rate of $3,920m, which is a 25% discount from the pre-tax 2P NPV of $5,227m. This is multiples of the market cap. Some smart people will make good money today :)

Adding to my earlier comment, I see from the prospectus that combined net debt is around $1.1bn so adding market cap of $1.5bn = EV of $2.6bn, versus combined 2023 EBITDA of $1.9bn = EV/EBITDA multiple of 1.4x. Wow that is low a low multiple.

Pro-forma adjusted EBITDA was $800m in 1H24. Frankly, the first half's EBITDA is enough to justify the current EV alone!

The final consideration amount post adjustments is not very transparent but what we do know is that it's a meager sum to be paying. Obviously this is just the start - there are plenty of synergies and additional revenue streams to exploit going forwards.

Note also the Pro-forma pre-tax cash flow of $648m in the first half alone. Once MPNU is brought to a similar level of tax efficiency as Seplat, combined cash flow post tax should be several hundred million dollars annually.

I'm looking forward to hearing more on 12 December.

I have pointed out the reason twice, as I see it

I believe this is due to the sudden reduction in drilling capex to zero, which is obviously not reflective of normal operations.

Https://www.londonstockexchange.com/news-article/SEPL/publication-of-prospectus-mpnu-acquisition/16802829

Timing is much quicker than I expected, which is great - all done and dusted by year end!

I haven't had time to properly study the detail but the final cash consideration looks high than many of us hoped, but I venture to guess this is because MPNU has not been drilling the past three years so there has been no tax shield, but once MPNU resumes drilling then post-tax cash generation will be significant.

Adjusted EBITDA of MPNU for the first six months was US$533m, which is enormous. That's well north of US$1bn annually in EBITDA.

The share price should rise on this once the market absorbs the detail

The offer undervalues the company, which the founder and management team understand so they are rolling their shares into the new company. The board never found the right balance between growth, cash flow and dividends, which is why the shares never performed. Now us long suffering shareholders are ejected at a low ball price and suffer the consequences.

Finishing my thoughts... at the current share price, dividend yield will be back >10% in as little as 24 months, which is a very attractive prospect in the context of the various growth levers at MPNU and long life of reserves.

Agree with all that's been said. The dividend increase is a meaningful positive surprise and suggests the new annual level + special is 18c as I see it. That's a 20% higher level than before. As pointed out, this is funded by the core business not including ANOH or MPNU. In my view, MPNU will allow a further 10c at the minimum, then ANOH will offer another 10c during the next couple of years. Putting that together, dividends should be around 28c as soon as next year (8.4% yield) rising to as perhaps 38c in 2026 potentially (

The prospectus is the primary hurdle it appears, no updated ETA for that, but the original intention was to have it published before year end.

Let's hope it is as simple as this Trek, but I suspect it is. Seplat would have been required to notify shareholders by now had the ownership terms been altered. I am trying to find out what the next steps are and timeline for the prospectus - hopefully within the calendar year.