Oil and gas stocks have posted the highest gains in the Nigerian Exchange Group (NGX) since the end of 2020. According to data tracked by BusinessDay, the market capitalisations of the seven oil and gas companies listed on the NGX have appreciated by 959 percent since the end of 2020.
As of December 31, 2020, the seven companies namely, Seplat Energy, Oando Plc, Eterna Plc, MRS Oil Nigeria, TotalEnergies Marketing, Conoil, and Japaul Gold & Ventures posted a cumulative market capitalisation of N355.9 billion. However, as of September 13, 2024, these companies posted a cumulative market cap of N3.77 trillion, with Seplat Energy Plc posting the highest market cap of N2.19 trillion. This implies that the market cap of these firms grew more than 10 times over the period.
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The NGX All-Share Index has advanced by 142 percent since 2020, as the market closed 2020 with an All-Share Index of 40,270.72. However, among its constituent indices, the NGX Oil and Gas Index, which monitors the performance of oil and gas stocks listed on the exchange, has been the top-performing index on the NGX, advancing by a remarkable 752 percent since the end of 2020.
Within the same period, the NGX Consumer Goods Index advanced by 175.5 percent, with the NGX Banking Index following with 129.01 percent gain during the same period. NGX Insurance Index advanced by 117 percent, with the NGX Industrial Index gaining 88 percent during the same period.
An analysis of oil and gas stocks reveals that some of the sector’s gains are tied to key economic reforms such as the petroleum subsidy removal and the devaluation of the Naira that took centre stage in Nigeria in 2023. However, Oando stands out, with the majority of its surge occurring in 2024, where the stock has soared by over 700 percent this year.
In 2023, MRS Oil appreciated by 645 percent, as Seplat appreciated by 110 percent during the period. TotalEnergies Marketing Nigeria appreciated by 99 percent, and Eterna Plc gained 107 percent.
Adebayo Adebanjo, a senior analyst with CardinalStone Securities noted, “The allure of oil and gas stocks, amongst other reasons is that their earnings have the dollar component, especially upstream players who earn in dollars.
“As you know, in the event of a weaker domestic currency, they also benefit from currency volatility, which should result in higher than the average dividend payment.”
In the 2023 financial year, the upstream players, Oando Plc and Seplat Energy, were some of the top revenue earners in Nigeria. Oando reported a record-breaking N3.4 trillion in revenue, the highest by any listed company that year. Seplat also delivered a strong performance, posting N697 billion in revenue and distributing approximately N85.5 billion in dividends to its shareholders for the year.
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For downstream players, the story is not very different, with increased petrol prices due to subsidy removal significantly helping their bottom lines in 2023. Conoil posted a 99 percent year-on-year profit growth in 2023, as the company posted its best-ever earnings that year.
Adebanjo said, “Refined products also hold a significant global market value, particularly in deregulated sectors, where market dynamics largely influence pricing.”
“This has positively impacted the earnings of downstream players. The added value from the refining process gives refined products a higher price point compared to raw crude oil.”
In the analysis carried out by BusinessDay, there has not been any new listing of any oil and gas stock on the NGX since 2020. However, 11 Plc and Ardova delisted from the exchange with Rak Unity Petroleum undergoing liquidation. Oando Plc posted the highest gain among the seven oil and gas stocks under review, as its share price appreciated by about 2307 percent since the end of 2020.
MRS Oil Nigeria advanced by 986 percent, with the company’s share price moving from N13.75 at the end of 2020 to N132.70 as of September 13. Seplat Energy Plc, which is dual-listed, also recorded an 828 percent gain, as its share price moved from N402.3 to N3,730.1 as of September 13.
The advancement in Seplat’s share price is linked to currency conversion effects, amid Naira’s devaluation, considering that the stock is listed on the London Stock Exchange. In the LSE, Seplat advanced by 187 percent within the same period, with its share price moving from £0.65 at the end of 2020 to £1.865 on September 13.
Conoil, Eterna, and TotalEnergies advanced by 706 percent, 508 percent, and 418 percent respectively within the period under review.
However, the advancement of oil and gas stocks since 2020 has raised questions, considering the progressive decline in the country’s oil production in the same period.
Adebanjo, who is an oil and gas analyst with the stockbroker noted, “The challenge of declining production spans the entire oil and gas industry, affecting multiple players rather than a single entity. This decline is largely attributed to vandalism and the exit of international oil companies (IOCs) from onshore assets. However, there is optimism surrounding the potential for strong earnings as local players acquire these assets, as demonstrated by SEPLAT’s acquisition of MPNU and OANDO’s purchase of AGIP.”
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Further review of the exchange
Since 2020, about 14 firms have delisted from the NGX, with Portland Paints merging with Chemical and Allied Products. During the period under review, the exchange’s market capitalisation has appreciated by N34.94 trillion, with significant listings such as BUA Foods, Geregu Power, and Transcorp Power.
Other new listings within the period have also included: NGX Group, Mecure Industries, and Chapel Hill Denham’s NIDF, among others.
In terms of gains, other financial institutions are just behind the oil and gas stocks with United Capital leading this drive. The cumulative market capitalisation of Africa Prudential, Deap Capital, Royal Exchange, and United Capital has grown by about 730 percent since the end of 2020. United Capital’s market cap grew by about N28.3 billion to N382.5 billion during the period, while Royal Exchange advanced by 273 percent during the same period.
Conglomerates also appreciated by about 524 percent with Transnational Corporation (TRANSCORP) leading the charge, reporting a 1067 percent share price appreciation during the period. Transcorp is the parent company of large market cap stocks, Transcorp Hotel and Transcorp Power.
Another set of stocks worthy of mention are agriculture stocks, whose market capitalisation has cumulatively appreciated by 415 percent since the end of 2020.
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A review of the consumer goods sector shows that most of the gains recorded by the sector on the NGX is linked to the listing of BUA Foods, which is now the third largest stock on the exchange with a market cap of N7.1 trillion. Since listing on the NGX in 2022, BUA Foods has gained 798 percent in the exchange.
With the exclusion of BUA Foods, the cumulative market cap of consumer goods stocks appreciated by 2 percent since the end of 2020, from N1.70 trillion to N1.73 trillion.
Nestle Nigeria, which is one of the first Nigerian stocks to hit a trillion Naira market cap on the NGX, has declined by about 41 percent since the end of 2020, with its market cap moving from N1.19 trillion to 705.4 billion within the period. Northern Nigeria Flour Mills advanced by 545 percent, with its market cap moving from N1.2 billion to N7.75 billion during the period.
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