Seplat Energy Plc (SEPLAT) reported a revenue decline of 22.9% YoY in its H1'24 unaudited results due to lower crude lifted (-30.7% YoY to 4.2MMbbls) and lower gas production volumes (-8.5% YoY to 19.8MMscf) during the period, after adjusting for the impact of the timing of liftings, which was exacerbated by the over-lift ($75.0 million) recorded in Q1'23. Nevertheless, we maintain confidence that SEPLAT will achieve Working Interest (WI) production levels of 50,000 boepd for FY 2024, supported by the growth in the company's assets. Notably, the Sibiri 1 & 2 wells were delivered during the first half of the year, contributing a combined production rate of approximately 3,000 boepd, with further increases anticipated throughout the year. Additionally, the reopening of the Trans Niger Pipeline for the eastern assets is expected to reduce deferments and enhance output.
On gas assets, the company expects to double working interest in gas production with the first gas from the ANOH plant anticipated by the end of Q3'24. Furthermore, ongoing upgrades at the Sapele gas plant, which is 88.0% completed, will likely increase production capacity.
However, we note increased bottom-line pressure from an adjustment in income tax charges. The company expects its FY'24E projected effective tax rate (ETR) to stand at c.72.0% in line with the provisions of IAS 34 30c on interim period reporting. Overall, we have updated our 12-month target price (TP) to N4,038.74 (vs N4,187.20 previously communicated) and a HOLD rating on the counter. Our TP implies a potential upside of 8.3% relative to the current market price of N3,730.10.
