The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Eni sells what sound like onshore assets to Oando:
https://www.reuters.com/markets/deals/eni-sell-nigerian-oil-gas-unit-naoc-oando-2023-09-04/
Another indication that the government is supportive of such divestments again. Just a matter of time for Seplat.
Agree Tom111, the NIFTY 50 local index in Nigeria is near all time highs in US dollar terms, and SEPLAT NL closed at 193p equivalent last Friday. The locals know the local risks and opportunities better than anyone. I believe the discount of the LSE line will have to close. Seplat is steadily closing in on this MPNU acquisition + about to commercialise ANOH, which is probably why the local line of the share is trading at such a fat premium.
My final word was cut off: "ramp... yield"
Management have been explicit about passing on cash generation to shareholders. The dividend is going north fast from next year.
Hi Seplatwinner
A few things for you to consider:
1. oil production is really the key to their profitability and cash generation today, currently running at circa 30k bopd.
2. gas sales are worthwhile since they are under long term contract at fixed price levels and involve processing so this is a "mid-stream" business and hence annuity type cash flow, but are much less profitable - they need to scale this business, but it could be valued by the market at a higher multiple than the oil side, ultimately, as this is a less volatile cash flow stream compared to oil.
3. I believe reserve life is 25-30yr plus, but I don't have the figures at hand
4. $250m annual FCF seems fair at a circa ballpark $75 oil price level, but I'm going from memory
5. When you calculate EV/FCF, yes you are correct in your figures, however note that Elcrest (Eland acquisition) owes Seplat around $400m in financing for OML40, which is now due to be settled around 2027 I believe - it was a complex transaction, but assuming OML40 becomes more productive, this loan should get paid back to Seplat; hypothetically, this $400m will pay down debt or end up in cash reserves or be returned to shareholders between now and 2027.
6. Re MPNU, from what I hear the original deal terms remain in place and a reduced ownership of production is unlikely as NNPC does not have the financing to buy additional working interest from MPNU; it is even possible that Seplat increases their stake in MPNU as NNPC needs cash and the President is a market-friendly reformist.
7. MPNU operated assets produce 300k bopd, mostly in oil, of which 95k bopd is MPNU working interest - this is what Seplat is acquiring (95k bopd); i.e. on completion Seplat oil production will rise from 30k to 125k, which is +300%.
8. MPNU reserve life is more than 15 years as far as I remember
9. We don't know the profitability of MPNU and bear in mind that these are Exxon assets so the cost base will be bloated, plus they are shallow water so more expensive to operate. That said, I think it would be safe to assume MPNU FCF is at least $300m. It could be very much north of that. It could be $500m. We just don't know that detail yet.
10. You need to factor in the debt raised to acquire MPNU - namely the price tag of $1,600m minus cash deposit paid ($130m) minus FCF in the meantime since date of acquisition (1 Jan 2021), i.e. reducing the cash payment by $900m, so additional debt of $300m on completion + $300m additional payment in 2026 given the high oil price as per terms of the deal.
11. Factor in that one year from now FCF of the combined will have paid off the $300m debt for acquisition + generated additional $300m on top. So you should consider a 1-year forward EV/FCF target multiple (it changes the outcome a lot!)
All the above points to SEPL being ridiculously undervalued for what is a large, diversified, and I'd argue operational low risk producer with track record in dividends and explicit intention to ramp y
Namely $60m-$70m in annual free cash flow to Seplat, enough FCF to double the dividend, which has been the stated plan for at least three years. Yes, FCF from ANOH will be funneled to shareholders via dividends. This is literally months away. I've been holding for four years waiting for this.
Well there you go, Berenberg has just raised their EPS estimate for 2024 by +18% and 2025 by +10%. Did I not tell you so!
Thought I would point out that the near-term pipeline of hotel projects will deliver £25m of EBITDA as per the results release, which is equates to a 20% increase in 2023 guided EBITDA. On top of that, we can expect occupancy to continue to recover and RevPAR to grow at least in line with inflation, probably beyond inflation if current trends remain.
Consensus forecasts for EBITDA in 2024 and 2025 are £140m and £157m, respectively. Too pessimistic! A 10% yearly growth in EBITDA to 2025 + £25m EBITDA from new projects = £170m in EBITDA, which is a CAGR of 14%. Easily achievable in my view. The street will have to raise their forecasts.
The equity is currently being valued at £460m today. Such a low valuation on the stock doesn't make sense.
In my view, £170m of EBITDA @ a pessimistic cap rate or yield of 7.0% suggests a gross value of assets of £2.43bn. That is in line with the valuation under EPRA methodology, as it happens. Seems very fair to me, for growth assets with inflation protection. So the EPRA NRV per share number is absolutely FAIR and LEGITIMATE.
The realistic value for this stock is £25.
This is an asymmetric risk-reward opportunity in my view. With a diversified and high quality asset base, downside is basically minimal. That leaves >100% upside opportunity.
$313k value traded, which is meaningful enough. A good sign that locals are pushing the name higher.
The current share price level is 187p equivalent at the official exchange rate, or 158p adjusted for the black market FX rate, which is a 28% premium to the LSE line. That is how locals are seeing the fair value of SEPL today.
Sorry, this message I posted was not intended for the SEPL board - it was for the PPHE board,apologies.
Their return to dividends and/or other capital return is great news
This is great news - 3% yield if paid in dividends
Was it not just a change in major holdings?
I can see that Lombard Odier increased holdings by 1m shares yesterday.
As an aside, my data feed is showing me that Global Prime Partners added around 2m shares in July and Otus Capital Management purchased an initial position of 3.8m shares during April.
I also see that there have been significant increases by UBS trading accounts and Hargreaves Lansdown.
Oh well, hopefully LSE engineers are fixing this issue.
As I said, I own both. This is how I see it. I still own JSE because I have lost 65% of my investment and it'll probably recover, maybe. SEPL in my view has just as much upside with less risk of downside surprise. Lesson learnt here. But I still hold.
The LSE site has a bug this evening. I've moved from my mobile to my PC to post the full message...
The difference between JSE and SEPL:
JSE's operating assets are aged and relatively complex with little chance of any upside surprise; sadly only downside surprises. Their development projects are decent but development = unknowns and yet to produce cash flow.
SEPL's operating assets have 20+ years of life, are low risk onshore assets, with underground pipeline infrastructure to export with low risk of disruption, a large scale gas to liquids plant about to fire up, a 93k bopd acquisition at
At
The difference between JSE and SEPL:
JSE's operating assets are aged and relatively complex with little chance of any upside surprise; sadly only downside surprises. Their development projects are decent but development = unknowns and yet to produce cash flow.
SEPL's operating assets have 20+ years of life, are low risk onshore assets, with underground pipeline infrastructure to export with low risk of disruption, a large scale gas to liquids plant about to fire up, a 93k bopd acquisition at
The difference between JSE and SEPL:
JSE's operating assets are aged and relatively complex with little chance of any upside surprise; sadly only downside surprises. Their development projects are decent but development = unknowns and yet to produce cash flow.
SEPL's operating assets have 20+ years of life, are low risk onshore assets, with underground pipeline infrastructure to export with low risk of disruption, a large scale gas to liquids plant about to fire up, a 93k bopd acquisition at
i own a very small amount of jse, what a **** show it has been. i've learnt a lesson about low quality assets.
suggest folks take a look at sepl, a steady winner i have owned since 2019 - decades of reserve life, diversified across dozens of wells, low risk operations, with upside from a huge mid stream capacity addition in december and the acquisition of a major exxon asset early next year, plus a 10% yield aid quarterly.
Apologies I meant $3.2m in value traded today - which is the most in years
3.2m shares traded today and nudging upwards :)