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In Q1:2024, Seplat Energy’s revenue grew by a remarkable 76.73% year-on-year (YoY) to reach NGN268.62bn. This exceptional performance was fueled by substantial growth in both crude oil (up 64.72% YoY) and gas (up 184.84 % YoY) revenue streams. Average production slowed down by 4.8% YoY to 49,258 barrels of oil and equivalent per day (boepd) compared to 51,720 boepd. However, higher oil (USD86.17pb in Q1:2024 vs USD82.32pb in Q1:2023) and gas (USD3.11/Mscf in Q1:2023 vs. USD2.88/Mscf in Q1:2024) prices over the period supported the surge observed in total earnings.
Operating profit remained strong during the period, experiencing a robust growth of 156.86% YoY to reach NGN122.38bn. This was primarily driven by a strong revenue performance over the period, offsetting a significant increase in administrative expenses which increased by 281.27% YoY, totaling NGN359.31bn. Furthermore, Other income came in at NGN97.17bn in Q1:2024 (compared to a loss of NGN33.87bn in Q1:2023), which further bolstered Operating profits. Net finance costs increased by 184.25% YoY to NGN23.04bn. Despite these challenges, profit before tax (PBT) showed strong growth as it rose by 161.90% YoY to NGN103.51bn. However, profit after tax (PAT) for the period came in negative as it declined by 110.88% YoY noting a loss at NGN2.87bn. This was driven by a substantial surge in the company’s Income Tax expense (+712.11% to NGN106.39bn).

We remain positive on the prospects of Seplat. The signing of an Executive Order in March 2024 offering fiscal incentives for gas and midstream businesses, coupled with the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA’s) upward revision of domestic gas prices to USD 2.42/Mscf, are expected to boost Seplat’s revenue generation, overall business efficiency, and growth trajectory. Further bolstering our optimism, the long-awaited approval of Seplat’s acquisition of Exxon Mobil’s share capital in Mobil Producing Nigeria Unlimited (MPNU) appears to be imminent. This acquisition is expected to expand Seplat’s production capacity and market share. Consequently, we maintain our target price of NGN3,790.80, representing a 12.49% upside potential from the current closing price of NGN3,370 as of May 7th, 2024. Consequently, we maintain an Overweight rating on this stock.

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