Business Overview

Seplat Energy PLC is a leading independent African energy company, dual-listed in London and on the Nigerian Exchange, with a diversified portfolio of onshore and shallow-water oil and gas production Assets in Nigeria. Following the transformational Acquisition of Mobil Producing Nigeria Unlimited from ExxonMobil, Seplat has materially scaled its production base, reserves and infrastructure footprint, becoming one of the largest indigenous independents in the country. The portfolio combines mature, infrastructure-rich oil and gas fields with significant gas-processing infrastructure and a growing Midstream presence, anchored by the Oben gas-processing Facility and connectivity to the domestic gas grid.

Seplat plays a strategic role in Nigerian energy Supply, both through oil exports and through the supply of Natural Gas to the domestic power and industrial sectors. The combination of Upstream production, midstream gas infrastructure and a focused development pipeline positions Seplat as a key participant in Africa’s ongoing energy transition. The company’s scale, infrastructure and local expertise provide a competitive moat that supports our positive view on the Equity.

Sector Backdrop

The African energy sector is at an interesting inflection point. Demand for oil and gas across the continent continues to grow, driven by population growth, urbanisation and industrialisation, while supply has been hampered by years of underinvestment, regulatory uncertainty and the strategic re-orientation of international majors away from onshore Nigerian assets. This is creating significant opportunity for indigenous and independent operators to acquire, optimise and develop high-quality assets at attractive valuations. The structural growth in Nigerian gas demand, in particular, supports the long-term outlook for gas-focused producers like Seplat.

Globally, oil markets remain supported by OPEC+ supply discipline and demand resilience, while gas markets are characterised by structurally tight supply outside North America. For Nigerian producers, the combination of supportive global oil prices and growing domestic gas demand creates a constructive cash-generation environment. The recent reforms to Nigerian fiscal and regulatory frameworks, including the Petroleum Industry Act, have provided a more predictable operating environment and supported Investment in the sector.

Investment Thesis

Our Buy view on Seplat Energy is built on four pillars. First, the company is one of the leading independents operating in Nigeria, with a high-quality production base now significantly expanded through the Mobil Producing Nigeria acquisition. Second, Seplat’s growing exposure to domestic natural gas provides a Long-term Growth platform tied to Nigerian economic development and the broader African energy transition. Third, the company has a clear Capital-returns policy supported by strong free Cash Flow generation, with a US dollar Dividend that provides a meaningful and growing income stream. Fourth, valuation remains compelling relative to underlying free cash flow.

Combined, these factors create an attractive setup for investors seeking African energy exposure with a strong income profile. The increased production scale following the Mobil acquisition supports Operating Leverage and cost efficiency, while the gas business provides a long-life, growth-oriented complement to the oil portfolio. With Nigeria’s strategic importance to global energy supply and Seplat’s position as a leading indigenous operator, we believe the equity is well positioned to deliver attractive returns over the medium term.

Energy Market Exposure

Seplat’s Earnings are exposed to global oil prices through Brent-linked crude sales, primarily exported through the Forcados terminal, and to Nigerian domestic gas prices through long-term supply contracts to power and industrial customers. The oil business captures global Commodity price upside, while the gas business provides a more stable, contracted Revenue stream that grows with Nigerian gas demand. Following the Mobil acquisition, the balance between oil and gas in the portfolio has tilted further toward production scale, with significant additional crude output and infrastructure included in the package. This Diversification supports a robust through-cycle cash-generation profile.

Growth Drivers and Strategic Initiatives

Several growth drivers underpin our positive view. Near term, integration of the Mobil Producing Nigeria assets is the key value-creation lever, with significant opportunities for cost synergies, operational improvements and reserve uplift. Medium term, the gas business is expected to grow as Nigerian power and industrial demand increases, supported by Seplat’s investments in gas-processing infrastructure and pipeline connectivity. The ANOH gas project, a joint venture, represents a significant additional growth opportunity that, when ramped up, will materially expand gas production capacity.

Beyond organic growth, Seplat continues to evaluate selective bolt-on opportunities in Nigeria as international majors continue to high-grade their portfolios. Successful pursuit of additional acquisitions could further expand the production base. The company’s commitment to ESG improvements, including reduction of flaring and investment in renewables, supports its licence to operate and broadens its appeal to global investors. Together, these growth platforms provide multiple avenues for value creation over the medium term.

The strategic logic behind growing Seplat’s gas business is particularly compelling. Nigeria’s power sector remains structurally short of reliable generation capacity, with a significant portion of electricity demand currently met through diesel-fuelled self-generation. Domestic gas supply offers a more affordable, lower-emission alternative, and the Nigerian government has been actively encouraging the displacement of diesel through gas-to-power initiatives. Seplat’s position as one of the leading domestic gas suppliers gives it the opportunity to grow alongside this structural shift, supported by long-term contracts with creditworthy customers.

On the oil side, the integrated infrastructure included in the Mobil Producing Nigeria acquisition – including offshore terminals, processing facilities and export logistics – provides Seplat with a more reliable evacuation route for its crude production and reduces exposure to the pipeline disruptions that have historically affected Niger Delta producers. This combination of asset quality, infrastructure ownership and operational expertise positions Seplat as a particularly well-placed indigenous operator in the Basin.

Operational Highlights

Seplat has been focused on operational delivery across its expanded portfolio, with significant progress on production stability, infrastructure reliability and cost control. The integration of the Mobil Producing Nigeria assets has been progressing in line with expectations, and the company has been working to capture identified synergies. Production has scaled materially, and the company has guided to continued strong operational performance from its enlarged portfolio. Capital Expenditure remains focused on high-return investments in existing infrastructure and incremental gas-development opportunities.

On the security and reliability side, Seplat has continued to invest in pipeline protection, alternative evacuation routes and stakeholder engagement to mitigate the risks associated with the Nigerian operating environment. The diversification of the production base across multiple onshore and shallow-water assets reduces single-point-of-failure risk. Overall, the operational profile supports the strong cash-generation thesis.

Financial Performance

Seplat’s financial performance has reflected the impact of supportive oil prices, growing gas revenues and ongoing operational improvements. Revenues have grown materially following the Mobil acquisition, EBITDAX has expanded and free cash flow has been strong. The company has used surplus cash to fund a US dollar dividend, reduce Debt and continue investing in growth projects. Net debt has remained well within management’s target range, supported by the cash-flow strength of the enlarged portfolio.

Importantly, the company’s revenue base is largely dollar-denominated, which provides natural protection against Nigerian currency Volatility and supports the Credit profile. The capital framework targets a balanced approach to growth, debt reduction and Shareholder returns. For an investor focused on emerging-market energy exposure with strong income characteristics, Seplat offers a differentiated financial profile.

Reserve metrics have also strengthened significantly following the Mobil transaction, with proved and Probable Reserves expanding materially and reserve life lengthening. The cost of acquired reserves on a per-barrel basis was attractive in our view, supporting the value-creation potential of the deal as integration progresses and synergies are captured. Combined with continued investment in the gas business and selective bolt-on opportunities, this provides a solid foundation for continued shareholder value creation.

Outlook

Looking ahead, Seplat’s near-term focus is on executing the integration of Mobil Producing Nigeria, capturing synergies and delivering on production guidance. Beyond integration, the ramp-up of ANOH and growth in domestic gas sales provide additional medium-term drivers. The combination of operational delivery, gas growth and balance-sheet improvement should support continued cash returns to shareholders. With Nigeria’s strategic importance to global energy supply, growing domestic gas demand and the company’s position as a leading indigenous operator, we believe the equity is well placed to deliver attractive total returns over the medium term.

Dividend and Yield Appeal

Capital returns are an important part of the Seplat investment case. The company pays a US dollar dividend that has been growing over time, supported by free cash flow generation from the enlarged portfolio. The Dividend Yield ranks among the most attractive in the African energy space and is supplemented by occasional special distributions when conditions allow. For UK-listed investors seeking dollar-denominated income from an African energy producer, Seplat offers a distinctive proposition. With cash flow comfortably exceeding capital expenditure and distributions, the sustainability of the dividend looks well supported.

The dollar denomination of the dividend is particularly valuable in the context of Nigerian and emerging-market currency dynamics, providing investors with a hard-currency income stream that is insulated from naira volatility. Combined with the dual listing in London and Lagos, this enables Seplat to appeal to a broad international investor base while remaining anchored in its home market. As cash flow from the integrated portfolio scales and debt reduction continues, the policy capacity for further dividend growth or supplementary returns increases.

Valuation Perspective

Seplat trades at undemanding multiples relative to its underlying earnings, cash flow and reserves. On free-cash-flow yield, EV-to-EBITDAX and price-to-NAV bases, the equity screens attractively against international E&Amp;P peers. The valuation discount reflects general market caution toward Nigerian and emerging-market energy investments, as well as the digestion period following the Mobil acquisition. As integration delivery becomes evident, gas growth materialises and dividend payments continue, we expect the discount to narrow.

Even on conservative oil-price assumptions, the equity continues to offer an attractive free-cash-flow yield, providing a Margin of safety on valuation. The gas business, in particular, is likely underappreciated by the market and could become more visible as production grows and contracted revenues expand.

Key Risks

Risks include sustained weakness in oil prices, which would compress earnings; operational disruption at key onshore and pipeline infrastructure; security incidents in the Niger Delta region; regulatory and fiscal changes in Nigeria; currency volatility, particularly relating to the naira and dollar conversion; execution risk on the integration of Mobil Producing Nigeria and on the ANOH gas project; counterparty risk on gas supply contracts to domestic customers; and the broader risk that the pace of the energy transition leads to a more pronounced decline in long-term hydrocarbon demand. The diversified portfolio, dollar revenue base and disciplined capital framework help mitigate these risks but do not eliminate them.

Conclusion

Seplat Energy PLC combines a leading indigenous Nigerian production base, significant gas growth optionality, a clear focus on shareholder returns and a compelling valuation. The shares offer a combination of dollar-denominated income, resilient free cash flow and growth optionality that is, in our view, attractive for investors seeking differentiated African energy exposure. We assign a Buy rating, reflecting our confidence in Seplat’s ability to deliver sustained cash returns, integrate its enlarged portfolio successfully and continue rewarding shareholders with meaningful and sustainable distributions.