Oando Nigeria Plc and Seplat Petroleum Development Company, the two largest indigenous oil and gas firms are under strain as evidenced by information emanating from their full year financial statement.
Last year was horrendous for oil companies in Africa’s most populous nation as they grappled with the devaluation of the naira, incessant attacks on oil facilities by militant group in the oil rich Niger Delta region and the sudden drop in oil price.
Force majeure at the Forcados terminal materially affected oil production, resulting in loss of significant revenue.
Unrest in the Niger Delta forced a reduction in Oando’s production, specifically sabotage activities at OMLs 60 to 63 and a Force Majeure on the Qua Iboe terminal, resulting in losses estimated at 11,600bbl/d.
This means the upstream oil and gas giant has lost a total of N10.65 billion in revenue, based on BMI calculations.
Seplats felt the impact of interruptions and disruptions as it suffered a fall at the bottom line. Sales were down by 43.89 percent to N63.38 billion from N112.97 billion the previous year.
As a result of the adoption of a flexible exchange rate regime by the central bank that saw naira lose 36 percent of its value against the U.S currency exposed these firms to currency risk .
Seplat incurred an exchange loss of N28.68 billion while total net debts in the balance sheet increased by 15.53 percent to N153.86 billion as at December 2016. Debt to equity (D/E) ratio fell to 40.87 percent in the period under review from 47.89 percent as at December 2015.
Oando’s total net debt fell by 35 percent to N230.60 billion in the period under review while debt to equity ratio dipped to 119.15 percent in December 2016 from 400 percent the previous year.
Experts attribute lower gearing and reduced D/E ratio to the company’s strategy of leveraging the balance by divesting in downstream business.
As a result of the aforementioned macroeconomic challenges, the two oil and gas giant recorded combined operating losses of N52.63 billion as against an operating profit of N41.66 billion the previous year.
A tax credit of N37.03 billion and proceeds from sale of investment to a tune of N29.13 billion helped Oando revert to profitability as it recorded a net income of N3.50 billion.
Oil companies had borrowed money from banks to finance drilling and exploration projects when oil prices were above $100. However, a sudden drop in the price undermined expected cash flow expectations.
Analysts say oil and gas firms have various exports rout through the excravos terminal and NNPC.
PabinaYinkere head of research at Ventiva Capital Management in a recent interview with Channels TV said investors want to see these firms cut costs and that dividends are not a pressing issue to them.
Oando’s cost of sales or production costs spiked by 172.23 percent in the period under review while cost of sales ratio jumped to 172.23 percent in December 2016 from 77.23 percent the previous year.
Administrative expenses were up 56.56 percent to N109.23 billion.
BALA AUGIE
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