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Vetiva pegs Seplat shares for sell over production disruption in Niger Delta

 

  • Net loss rises to $61 million as Forcados remains shut
  • Working Interest gas production up y/y
  • Alternative crude evacuation route gathering some momentum
  • 41k-48k boed production no longer feasible; Vetiva estimate 27k boed
  • Earnings revised lower, TP cut to N216.15 (Prev: N264.77)

Seplat reported wider losses in first half of 2016 as Force Majeure on main evacuation route Forcados terminal continues to constrain condensate volumes. Revenue for the half was down 42 per cent year-on-year (y/y) to $143 million.

Whilst the six   months W.I. oil volumes were down by 40 per cent y/y, gas volumes rose by 61 per cent y/y as sales continued to rise in the domestic market.

The quarter on quarter (q/q) performance reveals the significant production constraint in second quarter (Q2) with W.I. condensate volumes down 64 per cent q/q to just 400k bbls (Q1:1.1million bbls) whilst gas production for the quarter was down 39 per cent to 5.9 mmscf (Q1: 9.6 mmscf).

Management did not give a firm guidance on when they think the Force Majeure on Forcados exports will be lifted, thus creating uncertainty around volume recovery in H2.

Nonetheless, we note attempts at boosting alternative evacuation route via the Warri refinery jetty increased condensate storage and trucking which will allow production continue but at constrained levels. Vetiva said.

At the end of June, a net volume of 389k bbls had been monetised via this route. SEPLAT plans to export an average 30k bopd on a gross basis and is setting up infrastructure in Warri refinery to enable it achieve this.

Vetiva noted further, “ despite Seplat’s efforts at de-risking exports, we think volumes in FY’16 will be considerably lower. Management says its production guidance of 41k-48k boed is no longer feasible given the longer than expected downtime at Forcados and will provide revised guidance when the Force Majeure is lifted.

“Thus, we have further cut our full year 2016 (FY’16) production estimates from 34k boed to 27k boed. As a result, our FY’16 Oil and Gas revenue estimates are lower at $186 million (Previous: $318 million) and $118 million (Previous: $128 million) respectively to deliver combined revenue of $304 million (Previous: $446 million).

“Following from this, we estimate FY’16 net loss of $69 million (Previous: $36 million profit). Our TP is cut to N216.15 (Previous: N264.77) – SELL rating maintained”.

 

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  • Today, while I was at work, my cousin stole my iphone and tested to see if it can survive a 30 foot drop, just so she can be a youtube sensation. My apple ipad is now destroyed and she has 83 views. I know this is totally off topic but I had to share it with someone!

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