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Company Update

Seplat Petroleum Development Corporation

Equity Research

25 January 2016

Analyst:
Damilola Lawal*
Damilola.Lawal@cardinalstone.com
Team lead:
Oluwatosin Ojo, CFA*
Tosin.Ojo@cardinalstone.com

Trading and Operational Update


Following the release of the companys trading and operational update for the year ended
st
31 December, 2015, kindly see our update on the company below;

SEPLAT:NL

Market Price (N)

156.71

Shares Outs (Mn)

563.44

Market cap (NBn)

114.38

Price
Performance

SEPLAT

NSE

12-month (%)

-47.8

19.9

3-month (%)

-33.2

-21.1

YTD (%)

-22.8

-16.8

2014A

2015F

2016F

P/E (x)

2.3

7.2

5.6

P/BV (x)

0.4

0.4

0.4

10.3%

9.3%

10.3%

Valuation

Div. Yield (%)

YTD Price Performance (rebased)


1.4

SEPLAT

1.2

ASI

1.0
0.8
0.6
0.4
Jan-16

Nov-15

0.2
Sep-15

2015 was a period of notable growth and progress for Seplat's gas business.
Following the completion of the 150 mmscfd Oben gas expansion project
effectively doubling gas processing capacity, SEPLATs gas business is beginning
to contribute meaningfully with gas revenue as at 9M15 up by 220% YoY to
US$53 million. At current capacity, SEPLAT can supply a third of Nigeria's
estimated current active power generation. In the update, management
announced that engineering designs and procurement for the second phase of
gas plant expansion has commenced which will increase overall processing
capacity to a minimum of 525 mmscfd. Commissioning date is scheduled for the
final quarter of 2016 and we are confident that management should deliver on
this target judging by their antecedents. Gas prices in Nigeria are de-linked to oil
price and this segment should continue to cushion the more volatile oil business.

Bloomberg Ticker:

Jul-15

Revenue for 2015 is expected to be range between US$550 million to US$600


million on average oil and gas realized prices of approximately US$47/bbl and
US$2.6/Mscf respectively. Managements guidance is significantly below the
US$775 million recorded in 2014 and above CSPs estimate of US$527 million for
FY15.

Stock Data

May-15

The company reported full year 2015 working interest production of 43,372
boepd (up 41% YoY) and ahead of managements guidance of average working
interest guidance of 32,000 to 36,000 boepd for the full year. This is noteworthy
considering that the Trans-Forcados System was shut down for significant
periods of time, particularly in the first half of the year (H1 uptime: 65%). The
second half of the year recorded a marked improvement, with uptime at 94%,
restoring good production momentum to the business and bringing the average
for the year to 79%.

TP: N312.79

Mar-15

Key take-aways

BUY

Dec-14

Event
This morning, Seplat Petroleum Development Company Plc ("Seplat") released a
trading statement and operations update in respect of its performance for the year
ended 31st December 2015. The information within this announcement has not
been audited and is subject to further review and amendment.

Source: NSE

Contact Information

research@cardinalstone.com
+234 809 0415 178

sales@cardinalstone.com
+234 809 945 3062

Please see page one hundred and nine (109) for additional important disclosures. CardinalStone Partners Ltd (CardinalStone) is a foreign broker-dealer
unregistered in the USA. CardinalStone research reports are prepared by research analysts who are not registered in the USA. CardinalStone Research is distributed
in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.

Company Update
Seplat Petroleum Development Corporation

Equity Research

In 2015, SEPLAT hedged 4.4 mmbbls of liquids at a strike price of US$52/bbl.


Given much uncertainty in the early parts of 2015 and the higher levels at
which oil traded at this time, exploration and production companies were
able to strike, with the benefit of hindsight, what seemed to be good deals.
With oil prices hovering around 12 year lows, it is unlikely SEPLAT would get
a deal close to the 2015 hedge, more so as futures continue to point far
below the US$50/bbl mark (see graph below). The Company has put in place
deferred premium puts covering a volume of 3.3 mmbbls over the first six
months of 2016 at a strike price of US$45/bbl. In our view, limiting the
hedge to six months is a very good approach especially as oil prices may firm
up in H2 during which management should be able to get better pricing for
their hedge.

2016 Brent Futures ($/bbl) as at 22 January


36
34
32
30

30.54

30.99

31.6

32.18

32.75

33.34

33.98

34.58

35.03

35.49

28
26

27.98

24
22
Cash Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source: Barchart.com

Management has set no targets for 2016 yet considering difficult macro
conditions and in particular oil price uncertainty. There inevitably remains a
high level of contingency around budgets and potential work programmes
for the year ahead. The company intends to provide full year 2016 guidance
at its preliminary results scheduled for release in March 2016.

Company Update
Seplat Petroleum Development Corporation

Equity Research

IMPORTANT DISCLOSURES FOR U.S. PERSONS


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Company Update
Seplat Petroleum Development Corporation

Equity Research

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Disclosure
Analyst Certification
The research analyst(s) denoted by an * on the cover of this report certifies (or, where multiple research analysts are primarily responsible for
this report, the research analysts denoted by an * on the cover or within the document individually certifies, with respect to each security or
issuer that the research analyst(s) cover in this research) that: (1) all of the views expressed in this report accurately articulate the research
analyst(s) independent views/opinions, based on public information regarding the companies, securities, industries or markets discussed in this
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Analysts Compensation: The research analyst(s) responsible for the preparation of this report receive compensation based upon various factors,
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among other business units, Investment Banking and Asset Management.
Investment Ratings
CardinalStone employs a 3-step rating system for equities under coverage: Buy, Hold, and Sell.
Buy +15.00% expected share price performance
Hold +0.00% to +14.99% expected share price performance
Sell < 0.00% expected share price performance
A BUY rating is given to equities with strong fundamentals, which have the potential to rise by at least +15.00% between the current price and the
analysts target price.
An HOLD rating is given to equities with good fundamentals, which have upside potential within a range of +0.00% and +14.99%,
A SELL rating is given to equities that are highly overvalued or with weak fundamentals, where potential returns of less than 0.00% is expected,
between the current price and analysts target price.
CardinalStone Research distribution of ratings/Investment banking relationships as of August 25, 2015

Rating

Buy

% of total recommendations

56%

19%

19%

6%

% with investment banking


relationships

50%

0%

33%

17%

Sell

Hold

Negative Watch

Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on any
security recommended herein. You can contact the analyst named on the front of this note for further details.
Frequency of Next Update: An update of our view on the company (ies) would be provided when next there are substantial
developments/financial news on the company.
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CardinalStone) that research analysts may not be involved in activities that suggest that they are representing the interests of Cardinal Stone in
a way likely to appear to be inconsistent with providing independent investment research. In addition, research analysts reporting lines are

Company Update
Seplat Petroleum Development Corporation

Equity Research

structured to avoid any conflict of interests. For example, research analysts are not subject to the supervision or control of anyone in
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However, such sales and trading departments may trade, as principal, based on the research analysts published research. Therefore, the
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affect the objectivity of this report. Material interests, which CardinalStone has with companies or in securities discussed in this report, are
disclosed hereunder:
Company

Disclosure

Seplat Petroleum Development Corporation

a.
The analyst holds personal positions (directly or indirectly) in a class of the common equity securities of the company
b.
The analyst responsible for this report as indicated on the front page is a board member, officer or director of the Company
c.
CardinalStone is a market maker in the publicly traded equities of the Company
d.
CardinalStone has been lead arranger or co-lead arranger over the past 12 months of any publicly disclosed offer of securities of
the Company
e.
CardinalStone beneficially own 1% or more of the equity securities of the Company
f.
CardinalStone holds a major interest in the debt of the Company
g.
CardinalStone has received compensation for investment banking activities from the Company within the last 12 months
h.
CardinalStone intends to seek, or anticipates to receive compensation for investment banking services from the Company in the
next 3 months
i.
The content of this research report has been communicated with the Company, following which this research report has been
materially amended before its distribution
j.
The Company is a client of CardinalStone
k.
The Company owns more than 5% of the issued share capital of CardinalStone
l.
CardinalStone has other financial or other material interest in the Company
Important Regional Disclosures
The analyst(s) involved in the preparation of this report may not have visited the material operations of the subject Company (ies) within the past
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communications with a subject company, public appearances and trading securities held by a research analyst account. Each analyst (denoted by
an *) is a Non-U.S. Analyst and is currently employed by Cardinal Stone.
Legal Entities
Legal entity disclosures: CardinalStone Partners is authorized and regulated by the Securities and Exchange Commission (SEC) to conduct
investment business in Nigeria.

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