Caverton seeks magic wand to offset losses with NNPC deal

Caverton Offshore Support Group, through its subsidiary Caverton Shipping, has signed an agreement with NNPC’s maritime arm, NNPC Shipping. The deal, which also includes Swedish shipping firm Stena Bulk, aims to establish a new shipping line.

Signed in London in mid-February, the agreement paves the way for the establishment of a shipping tanker operation. The venture will focus on transporting crude oil, refined petroleum products, and liquefied natural gas (LNG).

With N58.9 billion retained losses, and a negative net asset position of N49.7 billion, is this joint venture the magic wand for Caverton’s financials?

Caverton Offshore Support Group is a company that provides logistical support for maritime and offshore operations in Nigeria. The company is more prominent for its helicopter services, which generated N36.5 billion, or 80 percent of its N45.6 billion revenue in 2024. Its marine division posted a N2.16 billion revenue in 2024.

In 2024, Caverton recorded a net loss of N50.5 billion, about 111 percent of its revenue. This led to a further decline in its net assets position to negative N49.7 billion. Although the group’s revenue grew by 43 percent from 2023 to 2024, a net exchange loss of N43.5 billion led to an operating loss of N41.7 billion.

During the year, the group’s total assets declined to N54.8 billion, from 2023’s N79.3 billion. This was driven by the drop in its cash assets to N2.3 billion from N20.4 billion at the end of 2023.

Since 2021, Caverton has been on a run of losses that has impacted its standing with shareholders. After closing 2020 with a share price of N2.05, the stock lost 16 percent in 2021, declining by 42 percent in 2022 to close at N0.99. Ultimately, it lost 52 percent of its value between 2021 and 2022.

A major area of struggle with the group’s financials over the past five years has been the reliance on debt. In 2020, the group had a debt-to-equity ratio (D/E) of 2.07, and this increased to 3.61 in 2021. Between 2022 and 2024, the group’s D/E was 5.13, -107.09, and –2.1.

Read also: Caverton, NNPC Shipping, Stena Bulk move to transform maritime transportation

The debt-to-equity (D/E) ratio compares a company’s total liabilities to its equity, indicating its reliance on debt financing. While the acceptable benchmark varies across industries, capital-intensive sectors like Caverton’s require a more nuanced approach. In this context, the cash ratio serves as a key indicator of financial stability, as stable cash flow can justify an increased debt profile.

In Caverton’s case, the company reported a cash ratio of 0.045 in 2020, 0.12 in 2021, 0.03 in 2022, -0.016 in 2023, and 0.029 in 2024. This results in an average cash ratio of 0.042 over the five-year period, highlighting its consistently low liquidity position. Coupled with its extremely high D/E position, Caverton is in dire straits financially, and will this joint venture be able to pull them out?

None of the parties involved in the venture have disclosed significant details regarding its structure or operational framework. However, one of the ways the deal can benefit Caverton is by significant cash injection either as debt or equity. Currently, Aderemi Makanjuola owns a 73.76 percent stake in Caverton.

The group currently operates about 12 vessels including platform supply vessels, anchor handling tug vessels, and a tug boat.