FSDH Initial Reaction: Seplat FY22 results
Kindly click here to download the report.
March 2, 2023/FSDH Research
Key Performance Highlights:
- Seplat Energy reported FY22 results, with revenues jumping 37.6% YoY to N403.9 billion, while the net profit declined marginally 5.3% YoY to N44.4 billion in FY22 versus a net profit of N46.9 billion in FY21. The revenue growth in FY22 was primarily supported by a 43.8% YoY increase in oil revenue to N356.2 billion (FY21: N247.7 billion), driven by higher realised oil prices despite lower production. Moreover, Gas revenue marginally increased by 3.8% YoY to N47.7 billion (FY21: N46.0 billion) due to slightly lower average gas pricing following pricing revisions earlier in the year.
- The rise in oil revenue reflects higher realised oil prices of $101.67/bbl for the period (FY21: $70.54/bbl). The total volume of crude lifted in the year was 8.3 MMbbls, lower than the 8.9 MMbbls lifted in FY21. The company produced an average of 44,104 bopd in FY22, down 7.5%, as against 47,693 bopd during the last year, as the production was impacted by outages of key infrastructure predominantly in 3Q22. However, Seplat made significant improvements in 4Q22 as the company began to evacuate the bulk of crude through the newly operational Amukpe-Escravos underground pipeline.
- Gross profit vaulted 72.7% YoY to N197.2 billion due to higher revenues and less than a proportionate increase in the cost of sales (up 15.2% YoY). The company reported other income of negative N15.3 billion in FY22, resulting from an overlift of N11.5 billion compared to N5.6 billion underlift in FY21 (overlift/underlift are surplus/shortfall of crude lifted above/below the share of production, which is priced at the date of lifting) and loss on disposal of Ubima field assets, partially offset by lower tariffs and loss on foreign exchange. The company recorded a massive 81.8% YoY rise in general and administrative expenses to N58.3 billion in FY22 against N32.1 billion in FY21, primarily driven by the impact of global inflationary trends on expenses. Ultimately, the company’s operating profit increased 16.1% YoY to N116.6 billion in FY22 versus N100.4 billion in FY21.
- The net finance cost for the year declined 6.5% YoY to N28.4 billion in FY22, resulting from lower interest expenses and increased finance income. The Group’s tax expense for FY22 jumped to N42.3 billion compared to N24.1 billion in FY21, mainly due to a deferred tax expense of N13.6 billion. Seplat Energy reported a net profit of N44.4 billion versus a net profit of N47.0 billion in FY21. However, the profit attributable to shareholders of the company came in at N26.5 billion versus N56.8 billion in FY21. Consequently, the basic EPS declined 5.3% YoY and was reported at N45.00 in FY22 versus N97.63 in FY21.
- On 28 February 2023, Seplat announced a final dividend of US2.5 cents and a special dividend of US5 cents subject to the appropriate withholding tax and Shareholder’s approval which will be payable to all shareholders registered in the company’s books at the close of business on 18 April 2023. This brings the total dividend declared for FY22 to US15 cents per share (FY21: US10 cents per share).
- Seplat Energy provided a positive long-term outlook, with the Amukpe to Escravos Pipeline (AEP) operating as expected and the ANOH gas processing plant coming onstream in 4Q23. FY23 production guidance is set at 45,000 – 55,000 boepd on a working interest basis, excluding any expected contribution from MPNU or ANOH. Capital expenditure for FY23 is expected to be around $160 million, and Seplat plans to drill 18 new wells across its operated and non-operated assets. Furthermore, the company is working towards separating its Midstream Gas business from the Upstream unit to unlock new shareholder value.
- On 28 February 2023, the Board of Directors of Seplat Energy Plc announced the appointment of Ms. Koosum P. Kalyan as an Independent Non-Executive Director of the company with immediate effect.
Market Reaction: The investor reaction to the FY22 performance was subdued as the stock closed unchanged at N1,325.00 versus a 0.86% gain for the All-Share Index (28/2). Moreover, the stock remained flat at N1,325.00 versus a 0.53% loss for the All-Share Index on 1/3.
Seplat Energy Earnings Highlight FY22