Shareholders okay Forte Oil’s restructuring plans
May 29, 2018 | 2:08 am| | | Start Conversation
Shareholders of Forte Oil Plc have given a nod to the proposal of the board of directors to restructure the business by divesting its upstream services , power generating businesses in Nigeria and downstream business in Ghana.
The approval was given by the shareholders at its annual general meeting held Lagos, saying the proceeds from the divestment be used to fund the downstream marketing business.
Forte Oil Plc had said its decision to focus on divests from upstream services and power generating businesses will boost its distributable earnings for the benefit of shareholders.
The Nigerian energy firm has utilized each Naira invested in sales in generating higher profit as margins improved amid a tough and unpredictable macroeconomic environment.
For the first three months through March 2018, net margins increased t0 7.43 percent from 5.69 percent the previous year.
Despite the huge receivables due from the Nigeria Bulk Electricity Trading Plc, the company is able to utilize a significant portion of its distributable earnings in servicing the acquisition of debt finance.
The above strategy has yielded fruit as leverage ratios has improved, signaling a healthy balance sheet.
Debt to equity ratio fell to 55 percent in March 2018 from 61.93 percent as at March 2017. This means Forte Oil’s liabilities are 22.80 percent of shareholders’ equity, which is very low and favorable.
Interest coverage ratio is 3.61 times earnings, which means Forte Oil has the financial strength to meet interest expenses as at when due.
Finance costs reduced by 22.92 percent to N1.21 billion in March 2018 from N1.57 billion as at March 2017. Total debt dipped by 5.39 percent to N32.01 billion in March 2018 from N33.93 billion the previous year.
“Subject to the approval of regulatory authorities, the directors of the company be and hereby authorised to restructure the company by divesting its upstream services business(Forte Upstream Services Limited); its power generating business(Amperion Power Distribution Limited and its downstream business in Ghana(AP Oil & Gas Ghana Limited) at such time and such terms and condition as may be determined by directors of the company,” said Akin Olagbende, General Counsel of Forte Oil, while commenting on the resolution of shareholders.
According to Forte Oil Plc, following the significant changes in the oil and gas industry in recent years, it believed that only downstream operators with huge investments in both storage and distribution infrastructures can remain competitive and operationally efficient in the long run.
The company said despite the significant resources deployed the upstream services business has consistently contributed less than seven to the Group earnings in the last three financial years.
Similarly, its downstream subsidiary in Ghana has consistently declared losses after tax in the last three years and has substantial bad and uncollectable trade debts in the business as a result of negative economic conditions and currency devaluation in prior years.
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