SEPLAT: Global Dynamics Support Medium Term Growth Expectations

FY’21 saw a significant uptick in revenue as revenue was up 54% YoY (from #191bn in 2020 to #294bn in 2021). This growth was driven majorly by the crude oil segment of the business which contributed 84% to the total revenue generated during the fiscal year. Revenue from the oil segment of the business grew by 64% YoY driven majorly by a rebound in crude oil prices from an average of $39 in FY’20 to $71 in 2021 following the ease of lockdown and reopening of economic activities globally after the COVID-19 pandemic hit in 2020. Although crude oil production volumes dropped by 14% YoY from 33kbopd in FY’20 to 29kbopd in FY’21 owing to suspension of export activities at the Forcados export terminal.

On the Gas section of the business, Gas revenue contributed 16% to total revenue for the year and grew by 14% YoY on the back of a marginal increase in gas production (from 101Mmscf in 2020 to 108Mmscf in 2021) reflecting new gas wells coming onboard (Oben-50 and Oben-51). However, average gas price for the year was slightly lower (from $2.87 in 2020 to $2.85 in 2021) due to the impact of Government’s policy on the reduction of gas price on gas for power generation (Domestic Supply Obligation) from $2.5/Mscf to $2.18/Mscf.

We expect topline to grow at a CAGR of 17% over the next 5 years (FY’22-FY’26) with the oil segment being the major driver, contributing an average of 86% to total revenue and the Gas segment contributing the remaining 14% on an average through the forecast period.

We estimate oil revenue to grow at a CAGR of 18% whilst gas revenue grow at a CAGR of 12% over the forecast period. In 2022, we expect topline to grow by 26% YoY and on an average of 17% beyond 2022.  We expect overall growth to be driven by;

1.Increasing demand in energy sources, majorly crude oil by non-OECD nations reflecting increasing populaton growth and stronger economic activities following the recovery from COVID-19 pandemic;

2.Increasing price of the commodity on the back of undersupply of crude oil in the oil market due to underinvestment and divestment in the upstream oil and gas sector as a result of ESG activism;

3.Undersupply to be further escarbated by Russian-Ukraine war;

4.Increased production activities (production guidance between 50kboepd- 60kboepd for FY’22 compared to 48kboepd-55kboepd for FY’21) by the company to meet up ever growing demand as the company intends drilling more oil and gas wells.

5.Availability of new export route (Amukpe-Escravos pipeline) to derisk crude oil transportation to export terminal bottlenecks which affects production output

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