The combined half-year profits(PAT) of the 6 listed oil and gas firms in Nigeria for the period ended 30 June 2018 jumped by 435 percent to N42.9 billion as against N8.02 billion made in comparable period in 2017, as sustained rise in crude oil prices occasioned by increasing global demand and payment of subsidies to oil marketers helped oil and gas firms surpassed analysts’ projections at half year. The Brent crude closed last Friday at $73.49 a barrel.
The oil and gas firms in question are Seplat, Forte Oil, 11 Plc(Mobil), Total, MRS and Oando. The aggregate revenue for the period rose on the average by 22 percent from N625.7 billion in June 2017 to N766.4 billion as the end of June 2018. Seplat, Forte Oil and 11 Plc surpassed the industry revenue growth of 22 percent. Seplat’s revenue grew by 160 percent from N40.3 billion in June 2017 to N104.8 billion as at June 2018.
Forte Oil’s half year gross earnings increased by 32 percent to N61.8 billion in contrast to N46.7 billion same period last year. 11 Plc’s (Mobil) half year revenue rose by 49. 3 percent, implying that the firm made N83.9 billion compared with N56.2 billion realised same period last year.
Total, MRS and Oando’s growth in gross revenue fell below industry average. At N156.3 billion in June 2018, Total’s gross revenue rose marginally by 2.2 percent over N153 billion made same period last year. Oando’s gross earnings rose by 11 percent from N267 billion in June 2017 to N297.3 billion in June this year. MRS’s gross earnings remained flat at -0.3 percent.
“Based on available evidence which is supported by developments in the global oil and gas market, the Nigerian oil and gas firms have the wherewithal to sustain their impressive performance in the second half of the year”, Saheed Bashir, senior analyst at Meristem Securities, said.
Cost of sales for the industry rose 15 percent from N541.9 billion in June 2017 to N624.5 billion by June 2018. However, the cost of sales relative to gross earnings fell from 87 percent in June last year to 81 percent same period this year. Seplat recorded the highest increase in cost of sales over the period under review, as it rose from N23.9 billion to N51.5 billion by June 2018. However, the firm was able to reduce the cost of sales relative to gross earnings from 59 percent in June 2017 to 49 percent this year.
Total Nigeria’s cost of sales expressed as a percentage of revenue also fell from 89 percent to 86 percent during the period. Similarly, Oando’s cost of sales relative to revenue fell to 83 percent from 87 percent last year June.
On the contrary, Forte Oil, 11 Plc and MRS spent more to generate a naira revenue by this June as against what they expended last year June. Forte Oil’s cost oil sales to revenue rose from 87 percent last year June to 91 percent this year’s June. 11 Plc’s cost of sales to revenue rose to 91 percent from 88 percent last year. Further, MRS’s cost of sales to revenue rose to 95 percent as at June 2018 compared with 93 percent last year June.
Profit margin for the oil and gas industry trended upward at half year 2018 as it moved from 1 percent last year June to 6 percent by June 2018. Upward movement in profit margin was impressive for Seplat and Forte Oil. The former had its profit margin rise from -21 percent last year June to 14 percent by the end of June 2018 while Forte Oil’s profit margin was up from 9 percent to 13 percent within the same period.
In spite of the impressive half year results, the share prices of the six oil and gas firms recorded mixed results year to date. Seplat appreciated by 13.4 percent year to date to close at N710 per share; Forte Oil declined by -46.2 percent YTD to close at N23.4 per share; 11 Plc’s share price fell by -7.6 percent YTD to close the week at N180; MRS appreciated by 4.6 percent YTD to close at N28.55; Total Nigeria shed -15.2 percent YTD to close at N195; while Oando’s share price shed -6.5 percent YTD to close at N5.60per share.
Consequently, the rally in the second half of the year is expected to be driven by strong macroeconomic indicators and stable electioneering programs.
“In the second half of the year, market rally will be driven by macroeconomic indicators as investors are now looking at what is happening in the economy as against stocks fundamentals”, Fola Abimbola, an analyst with CSL Stockbrokers said.
“ The uncertainty around the forthcoming elections is key because most of the foreign investors execute more of sell transactions than buy transactions”, Abimbola added.
At the close of business last week Friday, the All Share Index (ASI) closed in the red at -4.56 percent year to date. This compares with 39.26 percent same period in 2017. Only the NSE Insurance Index closed in the positive territory at 4.25 percent year to date.
