Nigeria unexpectedly cut its Monetary Policy Rate (MPR) by 100 basis points from 12.50% to 11.50% in an attempt to boost the economy by providing cheaper credits. Analysts, who see the rate cut as suppressing bond yields, aren’t exactly confident this will work.
Nigeria: Major oil companies see drop in revenue
Seplat and others' revenues have plunged by N85.2bn ($224.5m) in half-year 2020.
Some major oil and gas companies listed on the Nigerian Stock Exchange (NSE) including Seplat, Total, and 11 Plc (Mobil) are continuing to feel the effects of the global coronavirus pandemic as their half-year financial statements for the year 2020 show. Collectively, the companies’ revenue plunged by N85.2 billion in the first six months of the year, according to financial data sourced from the NSE.
Following the International Energy Agency (IEA) prediction that the global oil demand would further decline in 2020 due to the spread of COVID-19 that constrained travel as well as other economic activities, the half-year financial results from the companies show a significant dip in revenue as a result of the waned appetite for products such as fuel, diesel, and lubricants.
Seplat Petroleum Development Company (SEPLAT), an independent indigenous Nigerian upstream exploration and production company listed on both the London and Nigerian stock exchanges, suffered a revenue dip by as much as 34.2% y/y to N80.1bn ($233.5m) in H1 2020 from N108.9bn ($355.1m) in H1 2019, “due to lower crude and gas prices as well as lower demand for oil and gas,” according to the company’s financial statement.
The company’s gross profit margin slumped by 81.8% y/y to N12.9bn ($37.7m) in the first six months of 2020 from N63.5bn ($207.0m) the year before, on accelerated cost of sales which rose to 32.3% y/y to $195.9m.
Despite an unimpressive half-year result, Seplat said its outlook for 2020 remains confident of market recovery in the coming months, as the “business is hedged against low oil prices using put options and a significant proportion of our revenues now come from gas, which offers additional protection from oil price volatility,” adding: “Seplat has been tested in previous adverse conditions, including a lengthy shut-in, and we are confident that the stronger and more diverse business we operate today will be even more resilient against the unprecedented market events of 2020.”
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Total Nigeria posted a half-year loss of N537.2m, as revenue declined by 29%, according to the company’s unaudited financial statement. H1 2020 revenue dropped to N106.7bn from N150.8bn the year prior, while the company’s loss rose by 513% against N129.9m posted in H1 2019.
11 Plc (Mobil) says it is unable to determine the financial impact of coronavirus on its company “given the lack of visibility on the end date of the pandemic or how long it would continue to impact the Nigerian economy” as the company’s revenue dipped by 13%, from N92.8bn in H1 2019 to N80.5bn in H1 2020, according to the unaudited half-year financial statement seen on the Nigerian Stock Exchange.
Despite challenges in the sector in the first half of 2020, Lagos state-based Ardova Plc (formerly Forte Oil PLC) saw a 5.5% growth in revenue in its first six months of the year. Ardova’s revenue grew from N82.7bn in H1 2019 to N87.3bn a year after, according to the company’s unaudited results for the six-month period ended 30 June 2020. Profit before tax, however, declined to N1.2bn this year, from N6.3bn in June 2019. In the same way, profit after tax dropped to N1.0bn in H1 2020 from N5.5bn a year prior.
“The first half of 2020 was quite challenging globally as world economies dealt with the twin impact of COVID -19 and declining oil prices in the international market. Despite these challenges, we maintained a healthy working capital position, increased our top-line revenue, and effectively reined in cost, resulting in a 20% reduction in operating expenses,” says the company’s CEO Olumide Adeosun, in a note to investors.
He continues: “Similarly, our operating expense ratio improved to 5.1% with a normalized growth in profitability. Our consistently improved financial performance over the last two quarters shows that we are underway to building a formidable integrated downstream energy company.”
“As the lockdown on economic activities gradually eases, we will continue to adopt precautionary steps to ensure the safety and health of our employees and various stakeholders while growing our market share responsibly across all products at attractive margins. Our resolve to investing in new streams of non-fuels revenue remains firm and is expected to yield sustainable returns in the short to medium term,” says Adeosun.