Seplat Petroleum Development Co : The indigenous gold standard

Outperform rating on account of recent strong sell-off

We are initiating coverage on Seplat Petroleum Development Company (Seplat) with an Outperform rating and a price target of N368.3, implying a potential upside of 81.4% from current levels. We value Seplat’s oil assets at US$8.0/bbl and gas assets at US$1.9/boe. Seplat shares have declined by around -64.8% and -45.3% since listing in April 2014 and year-to-date respectively, primarily due to a sharp decline in global oil prices. We believe that the recent sell-off is overdone despite a relatively weak outlook for global oil prices in the near term. We estimate a PBT growth of around 84% over the 2015-17E period, primarily boosted by a strong (42% y/y) rise in oil & gas production during the corresponding period. The shares are trading on a 2016E P/E multiple of 5.2x for EPS growth of 83.1% over the 2015-17E period.


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