Despite notable challenges in H1'23, SEPLAT appears set to achieve production levels above the midpoint of management's 45,000 to 55,000 barrels of oil equivalents per day (boepd) guidance for the current financial year. This view is supported by the de-risking of evacuation at OMLs 4, 38, & 41 and ongoing efforts to leverage Edo Refinery to arrest third-party evacuation concerns. We recall that H1'23 production was primarily supported by OML 40, wherein volumes rose by 24.3% YoY to 10,803 barrels of oil per day (bopd) due to improvement in uptime and delivery of new wells. The gains from this asset masked the weaknesses in OMLs 4, 38, & 41 and the smaller Eastern operation (OML 53). According to management, the H1 set-backs across OMLs 4, 38, & 41 and OML 53 reflected delays in the on-streaming of new wells (meant to offset the impact of assets' deterioration) in the former and evacuation challenges due to the unavailability of key deliverable lines in the latter.

While OML 40 remains on a good run, resolving the issues around the other assets could provide a needed buffer and boost confidence in the 2023 volume outlook. A relatively weaker oil price outlook (EIA's 2023 Brent forecast: $82.62/bbl, YTD mean: $80.48/bbl, 2022 Average: $99.09/bbl) further underscores the need to resolve production issues. This weaker oil price outlook (driven by tamer global demand prospects) and delays in the drilling programme will likely keep revenue growth contained in 2023 despite the slight production recovery expected in the near to medium term. These expectations do not consider the impact of the Mobil Producing Nigeria Unlimited (MPNU) acquisition and the ANOH gas processing plant.