Shares of major oil companies were heavily sought after on the nation’s bourse as bargain hunters take advantage of the relatively low prices of these stocks to increase their stake in the currently undervalued stocks for future growth and dividend.
The oil & gas index, an index that comprises the most capitalized and liquid companies in oil and gas marketing gained 6.43percent the highest recorded since April 2015.
Shares of Seplat, the most capitalised company in the oil & gas index recorded a 10percent gain (the highest possible gain in daily trading) two days in a row last week to close trading at N556.60 on Friday.
Seplat had earlier in the week announced the transfer of shares 8.16million shares held by Vitol Energy Limited back to Shebah BVI.
Total another major player also recorded 10 percent gain on Thursday it, however, recorded a 9.09percent gain on Friday to end trading for the week at N120.
Gbolahan Ologunro equity analyst said the recent bullish sentiment is not driven by any fundamental factor adding that no major event has occurred to warrant a change in the outlook in the oil & gas space.
“It is not a broad-based demand from investors which could mean renewed investors’ interest” he said.
In his view Fola Abimbola, equity research at FBN Quest noted the outlook for the crude oil prices is positive based on what is happening in the global market adding that it is also an opportunity for bargain hunting.
Moody’s, global rating agency said its outlook for integrated oil & gas companies globally for the coming 12 to 18 months remains stable.
According to Moody’s in its annual outlook report noted that the key driver of the stable outlook is an expected increase in earnings by around 5percent in 2020 driven by production increases and higher refining margins.
Sven Reinke, a Moody’s Senior Vice President said after two years in the black, free cash flow will fall to zero in 2019-20 driven by a combination of lower funds from operations (FFO), gradually rising capital investments and higher dividend payments.
“Production costs and capital spending are likely to tick up after bottoming out in 2018, but the sector will remain leaner and more capital efficient than it was before the 2015 oil price crash,” he said
Investments in low-carbon energy businesses will continue to rise with Royal Dutch Shell Plc (Shell, Aa2 stable), Total S.A. (Aa3 positive), BP plc (A1 stable), Equinor ASA (Aa2 stable) and Repsol S.A. (Baa1 stable) leading the way
OLUFIKAYO OWOEYE
