Oil & Gas firms looking to bonds to fund growth and acquisitions

Nigerian exploration and production firms in the oil and gas industry are looking beyond bank loans and syndicated loans to fund asset acquisitions and growth.

“We are looking to get at least ten-year bonds at competitive rates”, said Layi Fatona, MD, Niger Delta Exploration and Production, at the FBN Capital 2014 Investor Conference. “The five-year term we get from banks is not  fit for our infrastructural investments”.

According to Fatona, investment in gas infrastructure is different from conventional investment in oil and gas firms.

As indigenous players in the oil and gas sector move into building infrastructure to supply gas to fertilizer plants, petrochemical plants, power plants, and the West African gas pipeline, five year bank loans will be unsustainable for their funding needs, he points out.

“Moving forward, Seplat is looking at issuing bonds”, said Benson Oghenerovo, who represented Seplat CEO, Austin Avuru at the event.

Seplat’s dual listing, was quoted both on the Nigerian Stock Exchange and the London Stock Exchange. Of the $500 million raised by the dual listing, about 52 percent was raised from the Nigerian Stock Exchange; indicating there is adequate latent liquidity in the local investment scene, contrary to popular opinion.

This is inspite of the bearish mood prevalent in the stock market for the most part of the year.

Gas contracts are long term in nature, at fixed prices, much unlike crude oil supply, he explains further.

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Apart from the bond market, more oil and gas firms would also be looking to the local equity market to raise long-term funding.

Fatona revealed that Niger Delta Exploration and Production would be listing on the local stock exchange in the near future.

Already, their shareholder base includes a wide array of people, such as teachers, widows and executives, he revealed.

Haruna Jalo-Waziri, Director at the NSE said, “We are looking to make the Nigerian Stock Exchange the energy hub for Africa. For mining stocks, people look at South Africa, we want people to look to the NSE for energy listings”.

“Other sectors are important, however with the PIB, the power sector and further reforms in the energy sector, we are at a comparative advantage to be the energy hub for Africa”, he adds.

Corporate financing through alternative capital market means is becoming an increasingly viable option for firms, as yields on government T-bills are seen falling on the back of increased liquidity from the SDF fund.

Just recently, Stanbic IBTC got admitted into the FMDQ platform for trading its Commercial Papers.

YINKA ABRAHAM & DOZIE IFEBI