Q3’20 Earnings Preview: Seplat – Oil price recoveries to cushion Q3 turnover


Seplat’s Q2 performance was largely dragged by the steep drop in oil prices, despite the surge in crude output. In Q3, we see crude output slowing 8% q/q to 2.6 mbbls, as the company was advised to cut output by 20%-30% across its assets in July and August, in a bid to comply with OPEC+ cuts.

However, we expect the demand-induced improvement in oil prices (realised oil price: Q3’20E: $41/bbI, Q2’20: $25/bbI) to lift Q3 oil revenue to $108 million (up 48% q/q).

On the gas front, we see output increasing 5% q/q to 11.1 Bscf, supported by improved demand from industrial manufacturers — a result of softer lockdown measures. As such, we expect gas revenue to come in at $32 million (up 5% q/q) in Q3, with average price remaining flat q/q at $2.9/Mscf.

Meanwhile, we project a 32% y/y surge in finance charges to $15 million in Q3, although flat q/q. The anticipated y/y jump in finance expenses is largely a reflection of the $350 million revolving credit facility the company raised in December for Eland acquisition, which lifted the company’s total debt to $790 million.

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All in, we expect Seplat to turn in a net income of $10 million in Q3, an improvement from a loss after tax reported in the first two quarters of the year.

Q3'20 Earnings Preview brandspurng Seplat - Oil price recoveries to cushion Q3 turnover
Source: Company Fillings, Vetiva Research

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