We will be taking a holistic view of quoted firms in the Nigeria oil and gas sector. This will encapsulate their performance in the six months through June 2014.
The eight firms that will be analysed are: Oando Nigeria plc, Seplat Petroleum Development plc, Total Nigeria plc, Conoil Nigeria plc, Forte Nigeria plc, Mobil Nigeria plc, Eternal Nigeria plc, and MRS Nigeria plc.
It should be noted that these firms operate in both the upstream and downstream sectors of the oil and gas industry.
For the first six months through June 2014, cumulative revenue of the eight firms plummeted by 13.38 percent to N636.43 billion from N734.81 billion the same period of the corresponding year (HY), 2013.
In terms of drop in revenue, Oando was the most hit with 31 percent decline, while Seplat followed with a 7 percent fall and Conoil with 1.43 percent dip (see table 1).
At the bottomline level, these firms fared well with Oando, Forte and Mobil growing profit above 100 percent year-on-year, despite environmental challenges, while Seplat fell the most by 48 percent.
However, cumulative net income of the eight quoted firms fell by double digit 23.07 percent to N45.63 billion in HY 2014, compared with N59.32 billion as of HY 2013.
In terms of efficiency, profitability and the ability to control input costs through the savvy management of direct costs attributable to projects, Seplat outperformed the rest with a gross margin, net margin and cost-of-sales margin of 64 percent, 40 percent and 36 percent, respectively.
The Nigeria environment has been indeed challenging for firms in the industry as they are under intense cost pressure as shown by their average cost-of-sales margin of 79.36 percent (see figure 1 also).
Conclusion
A lot of firms in this sector are however tapping into the robust Nigerian economy with staggering and overwhelming market penetration and expansion through the mechanism of acquisitions.
Oando plc, one the largest indigenous oil firms in Nigeria, acquired ConocoPhillips for a $1.5 billion, a move analysts say will usher in cornucopia of investment opportunities for the company; furthermore, it will maximise shareholders’ value.
To reposition the sector for better performance and efficiency, and putting it on a growth trajectory, analysts are calling for the speedy passage of the Petroleum Industry Bill (PIB). The reforms are expected to form the nucleus of Nigeria’s aspiration to become one of the most industrialised nations in the world by the year 2020.
Patrick Atuanya and Bala Augie
