Economy

Seplat Plc: Upbeat Outlook in 2018 But Risk Persists

Published

8 years ago

30/06/2017

By Dipo Olowookere

Analysts at ARM Research have disclosed that beyond 2017, they expect a more improved performance by Seplat Petroleum Development Company Plc (Seplat).

In its report released yesterday titled ‘Seplat Plc – In the clear,’ ARM research noted that starting off in 2018, it expects the company’s exports to rise largely reflecting the planned completion of the Escravos pipeline which offer a third export route for the company.

ARM Research said it revised its estimates for Seplat and increased its fair value estimate (FVE) to N518.74/share (previously N346/share) after the lifting of the force majeure on the TransForcados Pipeline (TFP) alongside upgrade at the alternative route (Warri refinery).

In the report obtained by Business Post, ARM Research said, “We see substantial upside in earnings in 2018F where we expect weighty ramp-up in exports, benign cost, and earnings derisk (opening 2 additional evacuation routes) to drive a stellar performance. On basis of valuation, Seplat trades on 2018F P/E of 8.6x which is at 30% discount to its EMEA peers.”

Earlier this month, Seplat’s management reported it has received notification from the operator of TPS (SPDC) on the lifting of the force majeure on the pipeline at the end of May 2017.

The company further stated that it has successfully reinstated production levels at the OMLs 4, 38 and 41 to net working interest production levels of 56kboep/d. Also, Seplat informed that upgrade at the Warri refinery will be completed by Q2 17, the report said.

“Our cautious view with regards to project completion and ramp up in export guides our 180 days downtime forecast for 2017E (previously 280 days).

“Consequently, we revise working interest production for 2017E to 39.27bopd (+52% YoY) to drive revenue 48% higher YoY to $376.6million – Oil revenue (+50% YoY to $222.7million) and Gas revenue (+46% YoY to $153.8million).

“We recall from our FY 16 earnings update ‘Striking FY 16 loss: is Seplat off the hook?’ where we noted that Seplat will need its working interest production to cross 32kbopd before the company can post a profit.

“Thus, given the earlier than expected re-opening of TFP to drive higher production, our estimate implies PAT of $27.3million for FY 17E (2016: loss after tax of $166million),” the report said.

Management has indicated it was working with the FG to complete the Escravos pipeline where it expects to export circa. 160kbpd.

Though Seplat expects this to be operational in H2 17, the report said it is less sanguine about the target completion time of the Escravos pipeline owing to government’s delayed completion on similar projects, and therefore see 2018 as a more realistic date for the project.

The combination of an upgrade at the Warri refinery as well as fully operational Trans-Forcados and Escravos pipelines drive its forecast of a 90-day downtime in 2018 with working interest production forecast of 44.8bopd (+14% YoY) and over four-fold increase in PAT to $84.1million, the research report stated.

“Farther out (2019-2022F), Seplat’s intention to make the Escravos pipeline its primary route guides to lower reconciliation cost.

“Consequently, we forecast an average working interest production of 50kbopd and mean PAT of $95million over our forecast period. Another catalyst to earnings is Seplat’s operated $1.3bilion ANOH gas and condensate project which a final investment decision (FID) for the upstream and midstream elements is expected in H2 2017 and should guide a revision to forecast. Irrespective, downside risk to earnings persist.

“Ongoing national security concerns with recurrent threat by new militant groups in the Niger delta region pose risk to production and export volumes from pipeline attacks.

“To add, oil prices below our $40/bbl. Estimate would result in a downward revision to our estimate.

“The stock currently trades at an FY 17E and FY 18F P/E of 22x and 8.6x compared to 15.4x and 12x for its EMEA peers. We forecast a sturdy 5-year earnings CAGR of 55%. Cumulative impact of the adjustments results in an attractive valuation with NAV per share of its oil and gas assets at $2.19 and $0.43 respectively having applied 35% discount to asset values to reflect our risk to future earnings.

“The foregoing, combined with our exchange rate forecast of N360/$ for 2017, drives our FVE higher to N518.74 (previously N346).

“Our FVE is at a 13% premium to the last closing price of N460. We have an OVERWEIGHT rating on the stock,” ARM Research stated in the report.

ARM Securities Limited

Economy

Customs Street Chalks up 0.12% on Santa Claus Rally

Published

5 hours ago

25/12/2025

Dipo Olowookere

By Dipo Olowookere

The Nigerian Exchange (NGX) Limited witnessed Santa Claus rally on Wednesday after it closed higher by 0.12 per cent.

Strong demand for Nigerian stocks lifted the All-Share Index (ASI) by 185.70 points during the pre-Christmas trading session to 153,539.83 points from 153,354.13 points.

In the same vein, the market capitalisation expanded at midweek by N118 billion to N97.890 trillion from the preceding day’s N97.772 trillion.

Investor sentiment on Customs Street remained bullish after closing with 36 appreciating equities and 22 depreciating equities, indicating a positive market breadth index.

Guinness Nigeria chalked up 9.98 per cent to trade at N318.60, Austin Laz improved by 9.97 per cent to N3.20, International Breweries expanded by 9.85 per cent to N14.50, Transcorp Hotels rose by 9.83 per cent to N170.90, and Aluminium Extrusion grew by 9.73 per cent to N16.35.

On the flip side, Legend Internet lost 9.26 per cent to close at N4.90, AXA Mansard shrank by 7.14 per cent to N13.00, Jaiz Bank declined by 5.45 per cent to N4.51, MTN Nigeria weakened by 5.21 per cent to N504.00, and NEM Insurance crashed by 4.74 per cent to N24.10.

Yesterday, a total of 1.8 billion shares valued at N30.1 billion exchanged hands in 19,372 deals versus the 677.4 billion shares worth N20.8 billion traded in 27,589 deals in the previous session, implying a slump in the number of deals by 29.78 per cent, and a surge in the trading volume and value by 165.72 per cent and 44.71 per cent apiece.

Abbey Mortgage Bank was the most active equity for the day after it sold 1.1 billion units worth N7.1 billion, Sterling Holdings traded 127.1 million units valued at N895.9 million, Custodian Investment exchanged 115.0 million units for N4.5 billion, First Holdco transacted 40.9 million units valued at N2.2 billion, and Access Holdings traded 38.2 million units worth N783.3 million.

Economy

Yuletide: Rite Foods Reiterates Commitment to Quality, Innovation

Published

5 hours ago

25/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Nigerian food and beverage company, Rite Foods Limited, has extended warm Yuletide greetings to Nigerians as families and communities worldwide come together to celebrate the Christmas season and usher in a new year filled with hope and renewed possibilities.

In a statement, Rite Foods encouraged consumers to savour these special occasions with its wide range of quality brands, including the 13 variants of Bigi Carbonated Soft Drinks, premium Bigi Table Water, Sosa Fruit Drink in its refreshing flavours, the Fearless Energy Drink, and its tasty sausage rolls — all produced in a world-class facility with modern technology and global best practices.

Speaking on the season, the Managing Director of Rite Foods Limited, Mr Seleem Adegunwa, said the company remains deeply committed to enriching the lives of consumers beyond refreshment. According to him, the Yuletide period underscores the values of generosity, unity, and gratitude, which resonate strongly with the company’s philosophy.

“Christmas is a season that reminds us of the importance of giving, togetherness, and gratitude. At Rite Foods, we are thankful for the continued trust of Nigerians in our brands. This season strengthens our resolve to consistently deliver quality products that bring joy to everyday moments while contributing positively to society,” Mr Adegunwa stated.

He noted that the company’s steady progress in brand acceptance, operational excellence, and responsible business practices reflects a culture of continuous improvement, innovation, and responsiveness to consumer needs. These efforts, he said, have further strengthened Rite Foods’ position as a proudly Nigerian brand with growing relevance and impact across the country.

Mr Adegunwa reaffirmed that Rite Foods will continue to invest in research and development, efficient production processes, and initiatives that support communities, while maintaining quality standards across its product portfolio.

“As the year comes to a close, Rite Foods Limited wishes Nigerians a joyful Christmas celebration and a prosperous New Year filled with peace, progress, and shared success.”

Economy

Naira Appreciates to N1,443/$1 at Official FX Market

Published

5 hours ago

25/12/2025

Adedapo Adesanya

By Adedapo Adesanya

The Naira closed the pre-Christmas trading day positive after it gained N6.61 or 0.46 per cent against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Wednesday, December 24, trading at N1,443.38/$1 compared with the previous day’s N1,449.99/$1.

Equally, the Naira appreciated against the Pound Sterling in the same market segment by N1.30 to close at N1,949.57/£1 versus Tuesday’s closing price of N1,956.03/£1 and gained N2.94 on the Euro to finish at N1,701.31/€1 compared with the preceding day’s N1,707.65/€1.

At the parallel market, the local currency maintained stability against the greenback yesterday at N1,485/$1 and also traded flat at the GTBank forex counter at N1,465/$1.

Further support came as the Central Bank of Nigeria (CBN) funded international payments with additional $150 million sales to banks and authorised dealers at the official window.

This helped eased pressure on the local currency, reflecting a steep increase in imports. Market participants saw a sequence of exchange rate swings amidst limited FX inflows.

Last week, the apex bank led the pack in terms of FX supply into the market as total inflows fell by about 50 per cent week on week from $1.46 billion in the previous week.

Foreign portfolio investors’ inflows ranked behind exporters and the CBN supply, but there was support from non-bank corporate Dollar volume.

As for the cryptocurrency market, it witnessed a slight recovery as tokens struggled to attract either risk-on enthusiasm or defensive flows.

The inertia follows a sharp reversal earlier in the quarter. A heavy selloff in October pulled Bitcoin and other coins down from record levels, leaving BTC roughly down by 30 per cent since that period and on track for its weakest quarterly performance since the second quarter of 2022. But on Wednesday, its value went up by 0.9 per cent to $87,727.35.

Further, Ripple (XRP) appreciated by 1.7 per cent to $1.87, Cardano (ADA) expanded by 1.2 per cent to $0.3602, Dogecoin (DOGE) grew by 1.1 per cent to $0.1282, Litecoin (LTC) also increased by 1.1 per cent to $76.57, Solana (SOL) soared by 1.0 per cent to $122.31, Binance Coin (BNB) rose by 0.6 per cent to $842.37, and Ethereum (ETH) added 0.3 per cent to finish at $2,938.83, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.