Seplat Energy’s revenue grew significantly by 72.53% year-on-year (YoY) to NGN696.87bn in 2023FY. This exceptional performance was fueled by a substantial increase in crude oil production (72.90% YoY), which offset the decline in crude oil prices (Average of 82.71 in 2023FY vs Average of USD100.93pb in 2022FY). The company also saw significant growth in gas revenue stream (+69.74% YoY). The surge in earnings across these revenue streams can be attributed to an 8% rise in average production to 47,758 barrels of oil equivalent per day (boepd) compared to 44,104 boepd in 2022FY. This production boost was driven by the completion of 14 oil wells throughout 2023, resulting in a 77.13% YoY increase in gross earnings to NGN349.33bn. Operating profit remained strong during the period, experiencing a robust growth of 40.43% YoY to NGN163.73bn. This was primarily driven by a solid performance in revenue, despite facing increased costs. Specifically, administrative expenses saw a significant surge of 61.72% YoY, totaling NGN94.28bn, along with other operating activity losses, which rose by 423.24% YoY to NGN80.07bn. Net finance costs also increased by 37.77% YoY to NGN39.16bn. Despite these challenges, both profit before tax (PBT) and profit after tax (PAT) for the period showed strong growth, increasing by 44.75% YoY to NGN125.54bn and 83.04% YoY to NGN81.33bn, respectively.

We remain optimistic about Seplat Energy’s prospects barring any significant plunge in crude oil prices. The company’s recent investments, including 14 new oil wells that have boosted production across all revenue segments, and the recently approved full lifecycle field development plan (FDP) for the Sibiri oil discovery on OML 40, positions them well for sustained revenue growth. Furthermore, positive sentiment surrounds the potential approval of Seplat’s acquisition of Exxon Mobil’s share capital in Mobil Producing Nigeria Unlimited (MPNU). This acquisition is expected to significantly expand Seplat’s production capacity and market share.

Considering these positive developments, we have revised our target price upwards to NGN 3,790.80, representing a compelling 12.49% upside potential from the current closing price of NGN 3,370 as of March 4th, 2024. Consequently, we maintain an Overweight rating on this stock.