ARM analysts place overweight ratings on Seplat

*See stock price of N518.74 in 2018….

Analysts at ARM Securities Limited have placed overweight ratings on the stock price of Seplat Petroluem Development Company Plc, which means the share price of the Nigerian oil and gas giant is better value for money than others.

Analysts at the equity research firm forecast a share price at N518.74 by 2018, from the N465 it currently trades as of 5:00pm close of trading on Thursday.

The company has a market capitalization of N259.18 billion with total shares outstanding of 563.44 million.

By giving an overweight rating, an analyst expressed the opinion that the stocks’ expected performance will be positive, and deserves a larger position than the specific benchmark it gives it.

The upward revision is subsequent to the lifting of Force Majeure on Trans Forcados Pipeline (TFP) along upgrade at the Route (Warri Refinery).

“We see substantial upside in earnings 2018 Full Year (FY) where we expect weighty ramp up in export, benign cost and earnings de-risk, (operating two additional evacuation route), said Kayode Omosebi, equity research analysts with ARM.

An incessant attack by militants in the oil-rich Niger Delta region affected the cash-flow of oil companies as they were unable to pay back money borrowed from banks.

Seplat’s finance costs increased by 16.67 percent to N5.25 billion in March 2017 while interest bearing on loans stood at N193.97 billion, tough lower than the N202.54 billion recorded the previous year.

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The Nigerian oil and gas giant recorded a loss after tax of N166.10 billion as at December 2016 but analysts at ARM Securities expects the company to turn a corner by posting a profit of N27.30 billion in December 2017 and N84.10 billion as at December 2018.

“Beyond 2017, we expect a well improved performance by the company.“Starting off in 2018 we expect the company exports to rise largely reflecting the planned completion Escravos pipeline which offers third export route for the company,” said analysts at ARM Securities.

Seplat said in a recent statement that since the recommencement of oil and condensate injection into the Forcados system at the end of May, the company has been able to successfully reinstate gross production at OMLs 4, 38 and 41 to pre-Force Majeure levels of around 75,000 bopd and 290 MMscfd, or 125,000 boepd.

“The resumption of exports at the Forcados terminal has enabled us to very quickly de-constrain production, and in doing so once again demonstrate Seplat’s strong underlying fundamentals. Our focus now is on restoring production and cash flow momentum whilst also establishing longer-term access to multiple export routes,” said the company in the statement.

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