The inability of the Nigerian National Petroleum Corporation (NNPC) to operate as a fully integrated oil company is short-changing Nigeria as Brazilian state-run oil firm Petrobras, the most indebted listed company reported a 20 fold increase in profits compared to the profit for the same quarter last year on the back of higher oil prices.
Petrobras is rising from its self-created pit of hell as the New York Stock Exchange listed firm, recorded its best result since 2011 with a net income of $6.3 billion in nine month 2018, which is a growth of 371 percent compared to nine month 2017 thanks to higher margins in sales and exports, cost control discipline, reduction of interest expenses due to the decrease in indebtedness and lower general and administrative expenses.
Battling the world’s largest oil industry debt, Petrobras managed to reduce its net debt by 14 percent at end-September 2018 to $72.8 billion compared to end-2017, and down from the $73.6 billion net debt at end-June 2018. The current debt of $72.8 billion is the smallest amount in eight years as net debt surpassed $100 billion in 2015.
Free Cash Flow remained positive for the 14 consecutive quarter, reaching $9.98 million (R$37,481 million) in nine month 2018, same level as in the previous year, due to the increase in operating cash generation, despite the payments related to the Class Action agreement, and higher investments.
The results represented progress for Petrobras which is striving under Chief Executive Pedro Parente to move past the fallout from a probe, begun in 2014, that showed construction firms bribed Petrobras officials and politicians to win inflated contracts.
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During nine months 2018, the Brazilian oil company lifted its investments by 10percent year on year to $8.59 billion (R$32.3 billion) with exploration and production accounting for 89percent of total spending.
Due to assets divestment, mainly because of Lapa and Roncador fields, production in the nine months fell by 200,000 barrels of oil-equivalent per day (boepd) while total output was down 6 percent Year on Year to 2.61 million boepd.
Despite lower crude-oil output, Petrobras continued to increase refinery out for a second consecutive quarter in Q3. Domestic demand picked up during the quarter after Brazil implemented a Real 0.30/liter (8 cents/liter) subsidy on diesel prices in June after a 10-day strike by independent truckers, although activity slowed slightly in September ahead of presidential elections in October.
Petrobras’ refineries produced 1.8 million bpd of oil products in Q3, which was up 0.2 percent year on year but down 2.1percent from Q2.
Refined-product sales grew in Q3, especially diesel sales after the subsidy took effect, Petrobras said. The company sold an average of 1.941 million bpd of refined products in Q3, up 2.9percent on the year and 8.4percent from Q2.
Also, another state owned oil corporation Norway’s Equinor, formerly known as Statoil with an average production capacity of 1.8 million bpd kicked off third-quarter results for the energy majors with a slightly lower-than-expected jump in underlying earnings, while cutting its guidance on capital expenditure to around $10billion for the year from $11billion previously, in a move that is likely to soothe investor fears that costs will start to head substantially higher following the oil price recovery to above $75 a barrel.
Adjusted earnings before interest and taxes almost doubled to $4.8 billion in the quarter from $2.35billion a year ago, but this was slightly below market expectations of $4.9billion.
The company highlighted “capital discipline and efficient project execution” for the reduction. Cash flow from operating activities reached $5.3billion, marginally ahead of analyst expectations.
Like other oil producers including Norway’s Equinor and Mexico’s Pemexv, who all saw improved financial results in 2018 and made operating profits, Petrobras is reaping the benefits higher oil prices coupled with more transparency and accountability in the sector once saddled with corruption; the reverse is the case for Nigeria.
BusinessDay investigations into the latest August report of NNPC showed modest gains of N70.2million made by NNPCs upstream and gas processing subsidiaries such as the Nigerian Petroleum Development Company (NPDC), RETAIL, Integrated Data Services Limited (IDSL), Nigerian Gas Marketing Company (NGMC), and Nigerian Gas Processing and Transportation Company (NGPTC) were wiped off largely by its downstream subsidiary operations which recorded deficits north of N216.6 million according to figures from the organization’s operations and financial report for 2018 actual.
Dolapo Ashiru managing partner at Nirvana Consultants said NNPC is a government agency that will always absorb the losses, but on the long run the citizen will feel the impact of the burden more.
“However, Deregulation and privatization is the way forward,” Ashiru said.
The combined value of output by the three refineries (at import parity price) for the month of August 2018 amounted to N8.67billion while the associated Crude plus freight costs and operational expenses were N9.78billion and N9.68billion respectively which resulted to an operating deficit of N10.79 billion by the refineries.
The 37th edition of the report also indicated a trading deficit of N3.90Billion which is 179.87 percent lower than the previous month’s surplus of N4.88Billion.
“This drop in performance month-on-month is principally attributable to the drop in performance of NPDC owing largely to revenue decrease and higher expenditure level when compared to previous month in July 2018,” NNPC said in its August monthly.
DIPO OLADEHINDE
