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    Categories: Company AnalysisOn the Go

Seplat Petroleum reaps from rising oil price, volume

Seplat Petroleum Development Company is holding forth the turnaround momentum that saw it back into profit last year.

The oil producing company achieved a big leap in sales revenue at the end of its half-year operations in June 2018 with gains in both sales volume and average prices for oil and gas.

The company’s chief executive officer, Austin Avuru, said his company is on track to deliver the 2018 production guidance in both oil and gas, with gas accounting for a growing share of the bottom line.

“The second half of this year will see us accelerate field development activities across the existing portfolio as we start to drill the first wells on our OML 53 asset”, he said.

The company is moving in a new trend of recovery and growth after a strong rebound last year from a big loss at the end of 2016. Despite a strong year-on-year performance, however, the full year outlook for the company indicates a sharp drop in profit.

A deferred tax credit windfall had contributed 84% of the company’s last year’s net profit of N81.11 billion. This year, tax expense is on a reversed growth – consuming 60% of pre-tax profit at the end of half-year operations.

The company’s key strength for the year so far is an exceptional growth of 160% in sales revenue year-on-year at the end of June. It closed the period with sales revenue of N104.79 billion with gas sales contributing 25% of the earnings. The strength for the revenue growth came from increases in product output and average prices of oil and gas.

The group realised an average oil price of $69.1 per barrel over the first six months of the current year against $45.0 per barrel in the same period last year. The average gas price also increased from $2.97/mscf to $3.04/mscf over the same period. Crude oil and condensate lifting for the period grew by 118% to 3.7 million barrels while gas volume grew by 53% to 28.0 bscf.

Based on the half-year performance, sales revenue is headed for the highest mark since 2013.

The company grew sales revenue by 118% to N138.28 billion at the end of 2017 – the first revenue growth since 2014.

Significant cost savings alongside the strong growth in sales revenue is being maintained for the second year. Cost of sales is growing at a considerably slower pace than sales revenue just as happened last year. That resulted in a 225% advance in gross profit to over N53 billion.

Gross profit margin has continued to increase from 27.5% at the end of 2016 to 47% in 2017 and further to 51% at the end of June 2018.

Administrative expenses recorded a moderate increase of 6% to N11.77 billion while net fair value loss dropped by over 24% to N2.13 billion.  That lifted operating profit from only N2.21 billion in the same period in 2017 to over N48 billion at the end of half-year operations.

Net finance cost increased moderately to N11.34 billion over the review period, which again increased profit capacity. Net profit margin recovered from a negative figure in the same period last year to 14.2% at the end of half-year trading. There is a moderate reduction in balance sheet debts – which still remains large at over N166 billion.

The after-tax profit amounted to N14.84 billion at the end of June, rising from a loss of N8.43 billion over the review period. A sharp increase in tax expenses to over N22 billion claimed 60% of pre-tax profit, which slowed down the growth rate of the bottom line.

The company earned N25.59 per share at the end of June 2018, rising from loss per share of N14.98 in the prior year.